UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1997
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
---- ----
******************************
Commission File Number 0-26806
SHERIDAN HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3252967
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
4651 Sheridan Street, Suite 400, Hollywood, Florida
33021 (Address of principal executive offices,
including zip code)
954/987-5822
(Registrant's telephone number, including area code)
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 12 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 90 days. Yes X No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of outstanding shares of the issuer's classes of common
stock as of the latest practicable date.
As of August 1, 1997, there were 6,417,998 shares of the Registrant's voting
Common Stock, $.01 par value, outstanding and 296,638 shares of the Registrant's
non-voting Class A Common Stock, $.01 par value, outstanding.
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................................... $ --- $ ---
Accounts receivable, net of allowances........................................ 20,494 18,717
Income tax refunds receivable................................................. --- 570
Deferred income taxes......................................................... 1,568 1,154
Other current assets.......................................................... 2,057 1,845
------------- -------------
Total current assets........................................................ 24,119 22,286
Property and equipment, net of accumulated depreciation.......................... 3,342 3,730
Goodwill, net of accumulated amortization........................................ 49,922 46,111
Intangible assets, net of accumulated amortization............................... 1,671 1,281
------------- -------------
Total assets.............................................................. $ 79,054 $ 73,408
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 363 $ 222
Amounts due for acquisitions.................................................. 553 558
Accrued salaries and benefits................................................. 2,698 2,798
Self-insurance accruals....................................................... 3,388 3,170
Refunds payable............................................................... 2,590 1,952
Accrued lease obligations..................................................... 704 971
Other accrued expenses........................................................ 4,019 3,090
Current portion of long-term debt............................................. 439 1,189
------------- -------------
Total current liabilities................................................... 14,754 13,950
Long-term debt................................................................... 24,057 21,367
Amounts due for acquisitions..................................................... 1,865 2,133
Stockholders' equity:
Preferred stock, par value $.01; 5,000 shares authorized, none issued......... --- ---
Common stock, par value $.01; 21,000 shares authorized:
Voting; 6,418 shares issued and outstanding................................. 64 64
Class A non-voting; 297 shares issued and outstanding...................... 3 3
Additional paid-in capital.................................................... 61,129 61,129
Excess purchase price distributed to management stockholders.................. (7,541) (7,541)
Retained earnings (deficit)................................................... (15,277) (17,697)
------------- -------------
Total stockholders' equity ................................................. 38,378 35,958
------------- -------------
Total liabilities and stockholders' equity................................ $ 79,054 $ 73,408
============= =============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<CAPTION>
Three Months Ended
June 30,
----------------------------
1997 1996
------------- ------------
<S> <C> <C>
Net revenue of consolidated and unconsolidated physician practices............... $ 24,605 $ 23,475
Less - amounts retained by unconsolidated practices.............................. (876) (275)
------------- ------------
Net revenue of the Company....................................................... 23,729 23,200
Operating expenses:
Direct facility expenses...................................................... 16,486 16,636
Provision for bad debts....................................................... 950 915
Salaries and benefits......................................................... 1,893 1,684
General and administrative.................................................... 1,289 1,086
Amortization.................................................................. 475 638
Depreciation.................................................................. 153 274
------------- -------------
Total operating expenses.................................................... 21,246 21,233
------------- -------------
Operating income................................................................. 2,483 1,967
Interest expense................................................................. 583 651
------------- -------------
Income before income taxes....................................................... 1,900 1,316
Income tax expense............................................................... 668 200
------------- -------------
Net income....................................................................... $ 1,232 $ 1,116
============= =============
Net income per share............................................................. $ .18 $ .16
Weighted average shares of common stock and
common stock equivalents outstanding.......................................... 6,934 6,831
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<CAPTION>
Six Months Ended
June 30,
----------------------------
1997 1996
------------- ------------
<S> <C> <C>
Net revenue of consolidated and unconsolidated physician practices............... $ 47,923 $ 43,569
Less - amounts retained by unconsolidated practices.............................. (1,289) (515)
------------- ------------
Net revenue of the Company....................................................... 46,634 43,054
Operating expenses:
Direct facility expenses...................................................... 32,485 31,082
Provision for bad debts....................................................... 1,875 1,590
Salaries and benefits......................................................... 3,723 3,234
General and administrative.................................................... 2,409 2,102
Amortization.................................................................. 912 1,189
Depreciation.................................................................. 296 484
------------- -------------
Total operating expenses.................................................... 41,700 39,681
------------- -------------
Operating income................................................................. 4,934 3,373
Interest expense................................................................. 1,184 1,204
------------- -------------
Income before income taxes....................................................... 3,750 2,169
Income tax expense............................................................... 1,330 200
------------- -------------
Net income....................................................................... $ 2,420 $ 1,969
============= =============
Net income per share............................................................. $ .35 $ .30
Weighted average shares of common stock and
common stock equivalents outstanding.......................................... 6,913 6,577
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $ 2,420 $ 1,969
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization................................................................ 912 1,189
Depreciation................................................................ 296 484
Provision for bad debts..................................................... 1,875 1,590
Deferred income taxes....................................................... (414) ---
Changes in operating assets and liabilities:
Accounts receivable......................................................... (4,622) (3,753)
Other current assets........................................................ 258 (1,368)
Other assets................................................................ (524) ---
Accounts payable............................................................ 141 (156)
Other accrued expenses...................................................... 1,265 841
------------- -------------
Net cash provided by operating activities................................. 1,607 796
------------- -------------
Cash flows from investing activities:
Acquisitions of physician practices........................................... (273) (10,933)
Investment in management agreements........................................... (6,258) ---
Sale of physician practices................................................... 3,282 ---
Capital expenditures.......................................................... (382) (939)
------------- -------------
Net cash (used) in investing activities................................... (3,631) (11,872)
------------- -------------
Cash flows from financing activities:
Borrowings on long-term debt.................................................. 3,018 12,559
Payments on long-term debt.................................................... (994) (1,287)
------------- -------------
Net cash provided by financing activities................................. 2,024 11,272
------------- -------------
Increase in cash and cash equivalents............................................ --- 196
Cash and cash equivalents:
Beginning of period........................................................... --- ---
------------- -------------
End of period................................................................. $ --- $ 196
============= =============
</TABLE>
See accompanying notes.
5
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(unaudited)
(1) BASIS OF PRESENTATION
---------------------
The interim consolidated financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to SEC rules and
regulations; nevertheless, management believes that the disclosures herein are
adequate to make the information presented not misleading. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the consolidated financial position of the Company at June 30,
1997, and the consolidated results of its operations and its consolidated cash
flows for the periods shown in the interim consolidated financial statements,
have been included herein. The results of operations for the interim periods are
not necessarily indicative of the results for the full years.
(2) GOODWILL
--------
Approximately $29.0 million of the total amount of goodwill, net of accumulated
amortization, at June 30, 1997 is related to the Company's acquisition of
Sheridan Healthcorp, Inc. (the "Predecessor") in November 1994. Such goodwill
represents the Company's market position and reputation, its relationships with
its customers and affiliated physicians, the relationships between its
affiliated physicians and their patients, and other similar intangible assets.
The remaining $20.9 million of the total amount of goodwill at June 30, 1997 is
related to several acquisitions of physician practices, and investments in
management agreements with physician practices, which were completed from
September 1994 to May 1997, some of which are included in the transactions
discussed in Note 6 below. Such goodwill represents the general reputation of
the practices in the communities they serve, the collective experience of the
management and other employees of certain practices in managing health care
services delivered under capitated arrangements, contracts with health
maintenance organizations, relationships between the physicians and their
patients, patient lists, and other similar intangible assets.
(3) INTANGIBLE ASSET
----------------
Intangible assets consist primarily of the physician employee workforce,
non-physician employee workforce, management team and computer software acquired
in the Company's acquisition of the Predecessor and deferred loan costs.
(4) AMOUNTS DUE FOR ACQUISITIONS
----------------------------
Amounts due for acquisitions includes obligations to the former stockholders of
certain office-based physician practices acquired by the Company, which are
being paid over the terms of the employment agreements between the Company and
the former stockholders, which range from three to five years. It also includes
termination benefits payable to the former stockholders of an acquired practice,
which are payable beginning in 2001 or upon termination of their employment by
the Company, whichever is later.
6
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(5) NET REVENUE
-----------
Since the beginning of 1996, the Company has entered into several long-term
management agreements with physician practices. Under the management agreements,
the Company recognizes net revenue equal to the management fees received from
the practices. Effective for the period ended June 30, 1997, the Company began
presenting the total net revenue of all of its owned and managed physician
practices and the net revenue of the company after deducting amounts retained by
the managed practices in its results of operations, as shown on the accompanying
consolidated statements of operations. The Company's management believes that
this data provides readers with additional useful information about its
operations.
(6) ACQUISITIONS AND DIVESTITURES
-----------------------------
During the period from January to October 1996, the Company made six
acquisitions of physician practices for an aggregate of $12.4 million in cash
and deferred payments and approximately 658,000 shares of the Company's common
stock. During the period from March 1997 to May 1997, the Company also entered
into long-term management agreements with three physician practices, in
connection with which it acquired certain assets from the practices, and options
to acquire the practices, for aggregate consideration of $6.2 million in cash.
These acquisitions and management agreements were accounted for as purchases,
and accordingly, the operations of each acquired practice, or the operations
under each management agreement, are included in the Company's consolidated
financial statements beginning on each respective date of acquisition, or the
effective date of the management agreement, as applicable. In each transaction,
the purchase price was allocated to the net assets acquired based on their
estimated fair market values.
The following table summarizes the pro forma consolidated results of operations
of the Company as though all of the transactions discussed above had occurred at
the beginning of the period presented. The pro forma consolidated results of
operations shown below do not necessarily represent what the consolidated
results of operations of the Company would have been if these transactions had
actually occurred at the beginning of the period presented, nor do they
represent a forecast of the consolidated results of operations of the Company
for any future period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Pro Forma Results of Operations:
Net revenue of the Company................ $ 23,994 $ 24,690 $ 47,783 $ 48,932
Income before income taxes................ 1,910 1,371 3,757 2,484
Net income................................ 1,236 1,133 2,408 2,089
Net income per share...................... .18 .17 .35 .32
</TABLE>
During the period from December 1996 to April 1997, the Company sold two primary
care practices and two rheumatology practices which had generated an aggregate
of $8.4 million of net revenue during the year ended December 31, 1996.
7
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(7) LONG-TERM DEBT
--------------
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Revolving credit facility, maturing in March 2000,
secured by substantially all assets of the Company.................... $ 23,000 $ ---
Revolving credit facility, maturing in February 1997,
secured by substantially all assets of the Company.................... --- 19,982
Capital lease obligations payable in various monthly
installments, maturing at various dates through 2001.................. 1,496 1,809
Note payable, maturing in January 1997.................................. --- 765
----------- -----------
Total................................................................ 24,496 22,556
Less current portion.................................................... (439) (1,189)
----------- -----------
Long-term debt...................................................... $ 24,057 $ 21,367
=========== ===========
</TABLE>
On March 12, 1997, the Company established a new $35 million revolving credit
facility, which was used to pay the outstanding balance under the previous
credit facility. There are no principal payments due under the new credit
facility until the maturity date of March 11, 2000. The new revolving credit
facility contains various restrictive covenants that include, among other
requirements, the maintenance of certain financial ratios, various restrictions
regarding acquisitions, sales of assets, liens and dividends, and limitations
regarding investments, additional indebtedness and guarantees. The Company was
in compliance with the loan covenants in the new credit facility as of June 30,
1997. The additional amount that could be borrowed under the credit facility is
potentially restricted by a leverage ratio defined in the credit agreement.
Based on the value of this leverage ratio at June 30, 1997, the Company had the
ability to borrow the entire unused portion of the credit facility, which was
$12.0 million at June 30, 1997.
(8) INCOME TAXES
------------
The Company's income tax expense was reduced by a loss carryforward from the
prior year for the three months and six months ended June 30, 1997 and the three
months and six months ended June 30, 1996. Without the loss carryforwards,
income tax expense for the three months ended June 30, 1997 and 1996 would have
been approximately $875,000 and $650,000, and income tax expense for the six
months ended June 30, 1997 and 1996 would have been approximately $1,750,000 and
$1,100,000. The Company had an unused loss carryforward of approximately $1.1
million for book purposes as of June 30, 1997. The tax effect of this loss
carryforward is being allocated evenly among all four quarters in the year
ending December 31, 1997. The Company had net deferred tax assets at June 30,
1997, which represent the tax effect of differences between the tax basis and
the financial reporting basis of assets and liabilities on the Company's balance
sheet.
(9) LITIGATION
----------
In October 1996, the Company and certain of its directors, officers and legal
advisors were named as defendants in a lawsuit filed in the Circuit Court of the
Seventeenth Judicial Circuit in and for Broward County, Florida by certain
former physician stockholders of the Predecessor, which was formerly named
Southeastern Anesthesia Management Associates, Inc. The claim alleges that the
defendants engaged in a conspiracy of fraud and deception for personal gain in
connection with inducing the plaintiffs to sell their stock in the Predecessor
to the Company, as well as legal malpractice and violations of Florida
securities laws. The claim seeks damages of at least $10 million and the
imposition of a constructive trust and disgorgement of stock and options held by
certain members of the Company's management. The Company believes the lawsuit is
without merit and intends to continue to vigorously defend against it.
8
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(10) NET INCOME PER SHARE
--------------------
Net income per share reflected in the accompanying consolidated statements of
operations represents both primary earnings per share and fully diluted earnings
per share, which are substantially the same for the Company. In February 1997,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," ("SFAS 128"), which is
effective for fiscal years ending after December 15, 1997. SFAS 128 simplifies
the calculation of earnings per share and provides for the reporting of basic
earnings per share and diluted earnings per share. Application of SFAS 128 to
the accompanying consolidated financial statements would not have a material
impact on the Company's earnings per share.
(11) STOCKHOLDERS' EQUITY
--------------------
In May 1997, the Company decreased the amount of its authorized common stock
from 31,000,000 shares to 21,000,000 shares, which is retroactively reflected in
the accompanying consolidated balance sheets.
(12) STOCK OPTIONS
-------------
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") in 1996. The Company has
elected to continue using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for employee stock
options. Each stock option has an exercise price equal to the market price on
the date of grant and, accordingly, no compensation expense has been recorded
for any stock option grants.
Stock option activity during the six months ended June 30, 1997 was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
--------- ---------
<S> <C> <C>
Balance, December 31, 1996................................................. 553,911 $ 5.73
Granted during period...................................................... 471,500 9.27
Forfeited during period.................................................... (6,975) 5.83
-----------
Balance, June 30, 1997..................................................... 1,018,436 $ 7.37
===========
</TABLE>
The following table summarizes the pro forma consolidated results of operations
of the Company as though the fair value based accounting method in SFAS 123 had
been used in accounting for stock options.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1997
-------------
(in thousands,
except per
share data)
<S> <C>
Pro forma results of operations:
Net income.............................................................................. $ 1,693
Net income per share.................................................................... .24
</TABLE>
9
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include the following: fluctuations in the volume of
services delivered by the Company's affiliated physicians, changes in the
reimbursement rates for those services, uncertainty about the ability to collect
the appropriate fees for those services, fluctuations in the cost and
utilization rates of referral services used by patients that are subject to
shared-risk capitation arrangements, the loss of significant hospital or
third-party payor relationships, and changes in the number of patients using the
Company's physician services.
GENERAL
The Company is a physician practice management company which provides specialist
physician services at hospitals and ambulatory surgical facilities in the areas
of anesthesia, neonatology, pediatrics, emergency services and obstetrics, and
which owns and operates, or manages, office-based primary care and obstetrical
practices. The Company derives substantially all of its revenue from the medical
services provided by the physicians who are employed by the Company or whose
practices are managed by the Company. The Company increased the number of
physicians affiliated with it from approximately 145 at December 31, 1995 to
approximately 210 at June 30, 1997 through several acquisitions of physician
practices, several long-term management agreements with physician practices, and
the addition of several new contracts for specialist physician services. The
Company made several acquisitions of physician practices and entered into
several long-term management agreements with physician practices, during the
period from January 1, 1996 to June 30, 1997, as described in Note 6 to the
accompanying consolidated financial statements. These transactions were
accounted for as purchases and accordingly, the operations of each acquired
practice, or the operations under each management agreement, are included in the
Company's consolidated financial statements beginning on each respective date of
acquisition, or the effective date of the management agreement, as applicable.
The Company also sold certain physician practices during the period from
December 1996 to April 1997, as described in Note 6 to the accompanying
consolidated financial statements.
RESULTS OF OPERATIONS
The following table shows certain statement of operations data expressed as
percentage of net revenue:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue of the Company........................... 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Direct facility expenses........................ 69.5 71.7 69.7 72.2
Provision for bad debts......................... 4.0 3.9 4.0 3.7
Salaries and benefits........................... 8.0 7.3 8.0 7.5
General and administrative...................... 5.4 4.7 5.2 4.9
Amortization.................................... 2.0 2.7 1.9 2.8
Depreciation.................................... 0.6 1.2 0.6 1.1
--------- --------- --------- --------
Total operating expenses................... 89.5 91.5 89.4 92.2
--------- --------- --------- --------
Operating income..................................... 10.5% 8.5% 10.6% 7.8%
========= ========= ========= ========
</TABLE>
10
<PAGE>
Three Months Ended June 30, 1997 Compared To Three Months Ended June 30, 1996
Net revenue increased $529,000, or 2.3%, from $23.2 million in 1996 to $23.7
million in 1997. Net revenue from hospital-based services increased by $1.3
million, from $16.1 million in 1996 to $17.4 million in 1997. This increase was
primarily due to the addition of several new contracts for hospital-based
services during the past year. Net revenue from office-based practices decreased
$800,000, from $7.1 million in 1996 to $6.3 million in 1997, primarily due to
the sale of two primary care practices and two rheumatology practices during the
period from December 1996 to April 1997.
Direct facility expenses decreased $150,000, or 0.9%, from $16.6 million in 1996
to $16.5 million in 1997. Direct facility expenses include all operating
expenses that are incurred at the location of the physician practice, including
salaries, employee benefits, referral claims (in the case of shared-risk
capitation business), office expenses, medical supplies, insurance and other
expenses. The decrease in direct facility expenses, in spite of a $529,000
increase in net revenue, was primarily due to an increase in the percentage of
the Company's total net revenue that is derived from hospital-based services,
from 69.3% in 1996 to 73.5% in 1997. The Company's hospital-based operations
have historically had a lower direct facility expense percentage than its
office-based operations. Direct facility expenses as a percentage of net revenue
("direct facility expense percentage") decreased from 71.7% in 1996 to 69.5% in
1997, primarily due to a favorable change in the mix of the Company's business,
as noted above.
The provision for bad debts increased $35,000, or 3.8%, from $915,000 in 1996 to
$950,000 in 1997. This increase was primarily due to a 2.3% increase in net
revenue, as discussed above. As a percentage of net revenue, the provision for
bad debts increased only slightly, from 3.9% in 1996 to 4.0% in 1997.
Salaries and benefits increased $209,000, or 12.4%, from $1.7 million in 1996 to
$1.9 million in 1997. Salaries and benefits includes salaries, payroll taxes and
employee benefits related to employees located at the Company's central office,
including employees related to hospital-based operations, office-based
operations and general corporate functions. The increase in salaries and
benefits was primarily due to employees added to various corporate functions to
support future growth of the Company, to employees added to support the new
contracts for hospital-based services noted above and to the accrual of
physician incentives. As a percentage of net revenue, salaries and benefits
increased from 7.3% in 1996 to 8.0% in 1997, primarily due to the increases
noted above.
General and administrative expense increased $203,000, or 18.7%, from $1.1
million in 1996 to $1.3 million in 1997. General and administrative expense
includes expenses incurred at the Company's central office, including office
expenses, accounting and legal fees, insurance, travel and other similar
expenses. The increase in general and administrative expense was primarily due
to an increase in legal fees due to the litigation discussed in Note 9 to the
accompanying consolidated financial statements, and increases in various
expenses to support the increase in the number of employees indicated in the
preceding paragraph. As a percentage of net revenue, general and administrative
expense increased from 4.7% in 1996 to 5.4% in 1997.
Amortization expense decreased $163,000, or 25.5%, from $638,000 in 1996 to
$475,000 in 1997. This decrease was primarily due to a decrease in amortization
expense related to goodwill and intangible assets that were written down to
their estimated realizable values during the fourth quarter of 1996, which was
partially offset by amortization of the goodwill related to several acquisitions
of physician practices, and management agreements with physician practices,
completed from July 1996 to May 1997, which are included in the transactions
discussed in Note 6 to the accompanying consolidated financial statements.
Operating income increased $516,000, or 26.2%, from $2.0 million in 1996 to $2.5
million in 1997. This increase was primarily due to a decrease in the direct
facility expense percentage from 71.7% in 1996 to 69.5% in 1997, which was
primarily due to a favorable shift in the Company's mix of hospital-based and
office-based operations, as discussed above.
11
<PAGE>
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996
Net revenue increased $3.5 million, or 8.3%, from $43.1 million in 1996 to $46.6
million in 1997. Net revenue from hospital-based services increased by $5.4
million, from $28.7 million in 1996 to $34.1 million in 1997. This increase was
primarily due to the acquisition of a 43-physician hospital-based neonatology
and pediatric practice in March 1996, and the addition of several new contracts
for hospital-based services during the past year. Net revenue from office-based
practices decreased $1.9 million, from $14.4 million in 1996 to $12.5 million in
1997, primarily due to the sale of two primary care practices and two
rheumatology practices during the period from December 1996 to April 1997.
Direct facility expenses increased $1.4 million, or 4.5%, from $31.1 million in
1996 to $32.5 million in 1997. The increase in direct facility expenses was
primarily due to an 8.3% increase in net revenue, as noted above. The direct
facility expense percentage decreased from 72.2% in 1996 to 69.7% in 1997,
primarily due to an increase in the percentage of the Company's total net
revenue that is derived from hospital-based services, from 66.7% in 1996 to
73.3% in 1997. The Company's hospital-based operations have historically had a
lower direct facility expense percentage than its office-based operations.
The provision for bad debts increased $285,000, or 17.9%, from $1.6 million in
1996 to $1.9 million in 1997. This increase was primarily due to an 8.3%
increase in net revenue, as discussed above. As a percentage of net revenue, the
provision for bad debts increased from 3.7% in 1996 to 4.0% in 1997. This
increase was primarily due to an increase in the percentage of the Company's
total net revenue that is derived from hospital-based services, which typically
have a higher bad debt expense as a percentage of net revenue than the Company's
office-based operations.
Salaries and benefits increased $489,000, or 15.1%, from $3.2 million in 1996 to
$3.7 million in 1997. The increase in salaries and benefits was primarily due to
employees added to various corporate functions to support future growth of the
Company, to additional employees to support the new contracts for hospital-based
services noted above and to the accrual of physician incentives. As a percentage
of net revenue, salaries and benefits increased from 7.5% in 1996 to 8.0% in
1997, primarily due to the increases noted above.
General and administrative expense increased $307,000, or 14.6%, from $2.1
million in 1996 to $2.4 million in 1997. The increase in general and
administrative expense was primarily due to an increase in legal fees due to the
litigation discussed in Note 9 to the accompanying consolidated financial
statements, and increases in various expenses to support the increase in the
number of employees indicated in the preceding paragraph. As a percentage of net
revenue, general and administrative expense increased from 4.9% in 1996 to 5.2%
in 1997.
Amortization expense decreased $277,000, or 23.3%, from $1.2 million in 1996 to
$912,000 in 1997. This decrease was primarily due to a decrease in amortization
expense related to goodwill and intangible assets that were written down to
their estimated realizable values during the fourth quarter of 1996, which was
partially offset by amortization of the goodwill related to several acquisitions
of physician practices, and management agreements with physician practices,
completed from July 1996 to May 1997, which are included in the transactions
discussed in Note 6 to the accompanying consolidated financial statements.
Operating income increased $1.5 million, or 46.3%, from $3.4 million in 1996 to
$4.9 million in 1997. This increase was primarily due to a decrease in the
direct facility expense percentage from 72.2% in 1996 to 69.7% in 1997, which
was primarily due to a favorable shift in the Company's mix of hospital-based
and office-based operations, as discussed above and the acquisition of a
hospital-based neonatology practice completed in March 1996.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash during the six months ended June 30, 1997
were to finance investments in management agreements with physician practices
($6.3 million) and to finance increases in accounts receivable ($2.7 million).
The Company met its cash needs during this period primarily through the sale of
certain physician practices ($3.3 million), its net income plus non-cash
expenses (amortization, depreciation and deferred income taxes) ($3.2 million),
and net borrowings on long-term debt ($2.0 million).
On March 12, 1997, the Company established a new $35 million revolving credit
facility with NationsBank, National Association (South) ("NationsBank"). The new
credit facility matures on March 11, 2000 and bears interest at the London
interbank offered rate plus an applicable margin which is subject to quarterly
adjustment based on a leverage ratio defined in the credit agreement. As of
August 1, 1997, the applicable margin was 1.63%. The Company was in compliance
with the loan covenants in the new credit facility as of June 30, 1997. There
are no principal payments due under the credit facility until the maturity date
of March 11, 2000.
The outstanding balance under the credit facility increased from $20.0 million
at December 31, 1996 to $23.0 million at June 30, 1997 primarily due to
investments in management agreements in 1997, as discussed above. The amount
that can be borrowed under the new credit facility is potentially restricted by
a leverage ratio defined in the credit agreement. Based on the value of this
leverage ratio at June 30, 1997, the Company had the ability to borrow the
entire unused portion of the credit facility, which was $12.0 million at June
30, 1997. Certain conditions must be met, including the maintenance of certain
financial ratios, and in certain circumstances, the approval of NationsBank must
be obtained, in order to use the credit facility to finance acquisitions of
physician practices or investments in management agreements. There can be no
assurance that the Company will be able to satisfy such conditions in order to
use its credit facility to finance any future acquisitions or investments in
management agreements.
In March 1996, the Company issued approximately 658,000 shares of its common
stock as partial consideration for an acquisition of a hospital-based
neonatology practice completed in March 1996, which is included in the
acquisitions discussed in Note 6 to the accompanying consolidated financial
statements.
In order to provide funds necessary for the Company's future expansion
strategies, it will be necessary for the Company to incur, from time to time,
additional long-term bank indebtedness and/or issue equity or debt securities,
depending on market and other conditions. There can be no assurance that such
additional financing will be available on terms acceptable to the Company.
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996
Net cash provided by operating activities increased from $796,000 in 1996 to
$1.6 million in 1997. This increase of $811,000 was due to several factors, the
largest of which was an increase in deferred income tax assets of only $414,000
in 1997, compared to an increase of $1.4 million in 1996.
Net cash used by investing activities decreased from $11.9 million in 1996 to
$3.6 million in 1997. This decrease was primarily due to a decrease in cash used
for physician practice acquisitions and investments in management agreements
from $10.9 million in 1996 to $6.5 million in 1997, and proceeds of $3.3 million
from the sale of physician practices in 1997.
Net cash provided by financing activities decreased from $11.3 million in 1996
to $2.0 million in 1997. This decrease was primarily due to a decrease in net
borrowings under the Company's revolving credit facility from $12.6 million in
1996 to $3.0 million in 1997, which is related to the decrease in cash used for
physician practice acquisitions and investments in management agreements, and
proceeds from the sale of physician practices, as discussed above.
13
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
From time to time, the Company is party to various claims,
suits, and complaints. Currently, there are no such claims,
suits or complaints which, in the opinion of management, would
have a material adverse effect on the Company's financial
position, liquidity or results of operations.
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 15,
1997. At the Annual Meeting, the Company's stockholders voted
(i) to re-elect Lewis D. Gold, M.D. and Henry E. Golembesky,
M.D. to serve as Class II Directors of the Company until the
2000 Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified; (ii) to approve an
amendment to the Company's Third Amended and Restated
Certificate of Incorporation to decrease the number of
authorized shares of common stock of the Company from 31,000,000
to 21,000,000; and (iii) to approve an amendment to the
Company's Second Amended and Restated 1995 Stock Option Plan to
increase the total number of shares of common stock of the
Company that may be issued thereunder from 750,000 to 1,350,000,
each as described in the Company's Proxy Statement distributed
to stockholders in connection with the Annual Meeting. Set forth
below are the results of the stockholder votes at the Annual
Meeting on the foregoing matters.
Election of Class II Directors
Nominee Votes in Favor Votes Withheld Broker Non-Votes
- ------- -------------- -------------- ----------------
Lewis D. Gold, M.D. 5,632,304 7,750 N/A
Henry E. Golembesky, M.D. 5,631,304 8,750 N/A
Approval of Amendment to the Company's Third
Amended and Restated Certificate of Incorporation
Votes in Favor Votes Against Abstentions Broker Non-Votes
- -------------- ------------- ----------- ----------------
5,582,664 41,775 15,615 N/A
Approval of Amendment to the Company's Second
Amended and Restated 1995 Stock Option Plan
Votes in Favor Votes Against Abstentions Broker Non-Votes
- -------------- ------------- ----------- ----------------
4,080,641 499,246 30,702 1,029,465
Item 6: Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
14
<PAGE>
Exhibit
Number Description
- ------- -----------
3.1 Third Amended and Restated Certificate of Incorporation of Sheridan
Healthcare, Inc., as amended effective May 27, 1997.
10.1 Sheridan Healthcare, Inc. Second Amended and Restated 1995 Stock
Option Plan, effective as of April 27, 1995, amended and restated as
of July 27, 1995 and further amended as of February 26, 1997 and as of
May 15, 1997.
11.1 Statement regarding computation of per share earnings.
27 Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
15
<PAGE>
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.
SHERIDAN HEALTHCARE, INC.
(Registrant)
Date: August 14, 1997 By: /s/ Michael F. Schundler
--------------------------- ------------------------
Michael F. Schundler
Chief Financial Officer
(principal financial officer)
16
<PAGE>
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SHERIDAN HEALTHCARE, INC.
Sheridan Healthcare, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Sheridan Healthcare, Inc. The date of the
filing of its original Certificate of Incorporation with the Secretary of State
of the State of Delaware was October 27, 1994. The name under which the
Corporation filed its original Certificate of Incorporation was SAMA Holdings,
Inc.
2. This Third Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Second Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on October 30, 1995, as heretofore amended (the
"Certificate of Incorporation"), and was duly adopted by the written consent of
the stockholders of the Corporation, with written notice thereof having been
given to all stockholders of the Corporation who have not given their written
consent, all in accordance with the applicable provisions of Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby amended and
restated in its
entirety to provide as herein set forth in full.
ARTICLE I
NAME
The name of the Corporation is Sheridan Healthcare, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
<PAGE>
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Thirty-Six Million (36,000,000) shares of which
(i) Thirty Million (30,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock"), (ii) One Million (1,000,000) shares shall be Class A
Common Stock, par value $.01 per share (the "Class A Common Stock" and together
with the Common Stock, the "Common Shares") and (iii) Five Million (5,000,000)
shares shall be Preferred Stock, par value $.01 per share (the "Preferred
Stock").
As set forth in this Article IV, the Board of Directors or any authorized
committee thereof is authorized from time to time to establish and designate one
or more series of Preferred Stock, to fix and determine the variations in the
relative rights and preferences as between the different series of Preferred
Stock in the manner hereinafter set forth in this Article IV, and to fix or
alter the number of shares comprising any such series and the designation
thereof to the extent permitted by law.
The number of authorized shares of the class of Preferred Stock may be
increased or decreased (but not below the number of shares outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below.
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Preferred Stock in one or more series of such stock, and by
filing a certificate pursuant to applicable law of the State of Delaware, to
establish or change from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and the
relative, participating, optional or other special rights of the shares of each
series and any qualifications, limitations and restrictions thereof. Any action
by the Board of Directors or any authorized committee thereof under this Article
IV to fix the designations, powers, preferences and the relative, participating,
optional or other special rights of the shares of a series of Preferred Stock
and any qualifications, limitations and restrictions thereof shall require the
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of the
following with respect to each series of Preferred Stock to the extent permitted
by law:
2
<PAGE>
(a) The distinctive serial designation and the number of shares
constituting such
series;
(b) The rights in respect of dividends or the amount of dividends to
be paid on the shares of such series, whether dividends shall be cumulative and,
if so, from which date or dates, the payment date or dates for dividends, and
the participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of
such series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall
be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Preferred Stock (or
series thereof) and whether such shares may be reissued as shares of the same or
any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
3
<PAGE>
A. COMMON SHARES
-------------
1. General. Except as herein otherwise expressly provided, all shares
of Common
Stock and Class A Common Stock shall be identical and shall entitle the
holders thereof to the
same rights and privileges.
2. Voting. Each holder of record shall be entitled to one vote for each
share of Common Stock standing in his name on the books of the Corporation. The
holders of Class A Common Stock shall not have any right to vote, except that,
as to any matter on which holders of Class A Common Stock are required to have a
vote under applicable law, (a) each holder of record shall be entitled to one
vote for each share of Class A Common Stock standing in his name on the books of
the Corporation and, (b) except as required by law, the holders of Common Stock
and Class A Common Stock shall vote together as a single class on all matters as
to which holders of Class A Common Stock are entitled to vote.
3. Dividends. Subject to applicable law, the holders of Common Shares shall
be entitled to receive dividends out of funds legally available therefor at such
times and in such amounts as the Board of Directors may determine in its sole
discretion, with each share of Common Stock and each share of Class A Common
Stock sharing equally, share for share, in such dividends, except that if
dividends are declared which are payable in shares of Common Stock or Class A
Common Stock, dividends shall be declared which are payable at the same rate in
both classes of stock and the dividends payable in shares of Common Stock shall
be payable to the holders of that class of stock and the dividends payable in
shares of Class A Common Stock shall be payable to the holders of that class of
stock.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), after the
payment or provision for payment of all debts and liabilities of the Corporation
and all preferential amounts to which the holders of preferred stock are
entitled with respect to the distribution of assets in liquidation, the holders
of Common Shares shall be entitled to share ratably in the remaining assets of
the Corporation available for distribution.
5. Conversion of Class A Common Stock.
(a) Right to Convert. Subject to and upon compliance with the
provisions of this Section 5, each share of Class A Common Stock which is
to be distributed, disposed of or sold in connection with a Class A
Conversion Event (as defined below) shall be convertible, at the option of
the holder thereof, into fully paid and non-assessable shares of Common
Stock, effective upon the occurrence of (or the expected occurrence of) a
Class A Conversion Event at the rate of one share of Common Stock for each
share of Class A Common Stock so converted (the "Class A Common Conversion
Rate"), subject to adjustment as provided in Section 7, provided that such
4
<PAGE>
holder has given the Corporation notice of its intent to exercise its
rights hereunder prior to the effectiveness of such Class A Conversion
Event. A "Class A Conversion Event" shall mean (i) any sale in connection
with any public offering or public sale of securities of the Corporation
(including a public offering registered under the Securities Act of 1933,
as amended (the "Securities Act")), and a sale pursuant to Rule 144 of the
Securities and Exchange Commission or any similar rule then in force), (ii)
any sale (including by way of a merger, consolidation or similar
transaction) of securities of the Corporation to a person or group of
persons (within the meaning of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) if, after such sale, such person or group of
persons in the aggregate would own or control securities which possess in
the aggregate the power to elect a majority of the Corporation's directors
(provided that such sale has been approved by the Corporation's Board of
Directors or a committee thereof), (iii) any sale (including by way of a
merger, consolidation or similar transaction) of securities of the
Corporation to a person or group of persons (within the meaning of the
Exchange Act) if, after such sale, such person or group of persons in the
aggregate would own or control securities of the Corporation (excluding any
being converted and disposed of in connection with such Class A Conversion
Event) which possess in the aggregate the power to elect a majority of the
Corporation's directors, and (iv) any sale of securities of the Corporation
to a person or group of persons (within the meaning of the Exchange Act)
if, after such sale, such person or group of persons in the aggregate would
not own, control or have the right to acquire more than two percent of the
outstanding securities of any class of voting securities of the
Corporation. The term, "person" shall include any natural person and any
corporation, partnership, joint venture, trust, unincorporated
organization, limited liability company, business association and any other
entity or organization.
(b) Notice of Conversion. Each holder of Class A Common Stock shall be
entitled to convert shares of Class A Common Stock which are to be
distributed, disposed of or sold in connection with a Class A Conversion
Event, if such holder reasonably believes that such Class A Conversion
Event will be consummated, and a written request for conversion from any
holder of Class A Common Stock to the Corporation stating such holder's
reasonable belief that a Class A Conversion Event shall occur shall be
conclusive and obligate the Corporation to effect such conversion in a
timely manner, so as to enable each such holder to participate in such
Class A Conversion Event. The Corporation will not cancel the shares of
Class A Common Stock so converted before the tenth day following such Class
5
<PAGE>
A Conversion Event and will reserve such shares until such tenth day for
reissuance in compliance with the next sentence. If any shares of Class A
Common Stock are converted into Common Stock in connection with a Class A
Conversion Event and such shares are not actually distributed, disposed of
or sold pursuant to such Class A Conversion Event, such shares of Common
Stock shall promptly be converted back into the same number of shares of
Class A Common Stock. No share or shares of the Class A Common Stock
acquired by the Corporation by reason of conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue. The
Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized number of shares of the Class A
Common Stock accordingly.
(c) Surrender of Certificates. Each conversion of shares of Class A
Common Stock into shares of Common Stock shall be effected by the surrender
of the certificate or certificates representing the shares of Class A
Common Stock to be converted, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating
thereto), at the principal executive office of the Corporation or the
offices of the transfer agent for the Common Shares or such office or
offices in the continental United States of an agent for conversion as may
from time to time be designated by notice to the holders of the Class A
Common Stock by the Corporation together with written notice by the holder
of such Class A Common Stock stating that such holder desires to convert
the shares, or a stated number of the shares, of Class A Common Stock
represented by such certificate, into Common Stock, which notice shall also
state the name or names (with addresses) and denominations in which the
certificate or certificates for Common Stock shall be issued and shall
include instructions for delivery thereof. Upon surrender of a certificate
representing Class A Common Stock for conversion, the Corporation shall
issue and send by hand delivery, by courier or by first class mail (postage
prepaid) to the holder thereof or to such holder's designee, at the address
designated by such holder, certificates for the number of shares of Common
Stock to which such holder shall be entitled upon conversion. In the event
that there shall have been surrendered a certificate or certificates
representing Class A Common Stock, only part of which are to be converted,
the Corporation shall issue and send to such holder or such holder's
designee, in the manner set forth in the preceding sentence, a new
certificate or certificates representing the number of shares of Class A
Common Stock which shall not have been converted. If the certificate or
certificates for Common Stock are to be issued in a name other than the
name of the registered holder of the stock surrendered for conversion, the
Corporation shall not be obligated to issue or deliver any certificate
unless and until the holder of the stock surrendered has paid to the
Corporation the amount of any tax that may be payable in respect of any
transfer involved in such issuance or shall establish to the satisfaction
of the Corporation that such tax has been paid. The issuance of
certificates for Common Stock upon conversion of Class A Common Stock will
be made without charge to the holders of such shares for any issuance tax
in respect thereof or other costs incurred by the Corporation in connection
with such conversion and the related issuance of such stock.
(d) Effective Date of Conversion. Such conversion shall be deemed to
have been effected as of the close of business on the date on which such
certificate or certificates shall have been surrendered and such notice
shall have been received by the Corporation and at such time the rights of
the holder of such Class A Common Stock (or specified portion thereof) as
to such converted shares shall cease and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock
are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Common Stock represented
thereby.
6
<PAGE>
(e) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon the conversion of the
Class A Common Stock, such number of shares of Common Stock issuable upon
the conversion of all outstanding shares of Class A Common Stock.
(f) No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of Common Shares in any manner which would
interfere with the timely conversion of any shares of Class A Common Stock.
6. Adjustments.
(a) Changes in Common Stock. In the event the Corporation shall (i)
pay a dividend in or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares of the
Corporation, the Class A Common Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of a share of Class A Common
Stock thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock which it would have owned or have been
entitled to receive after the happening of any of the events described
above had such share of Class A Common Stock been converted on or
immediately prior to the record date for such dividend or the effective
date of such subdivision, combination or reclassification, as the case may
be.
(b) Changes in Class A Common Stock. In the event that the Corporation
shall (i) pay a dividend in or make a distribution in shares of its Class A
Common Stock, (ii) subdivide its outstanding shares of Class A Common
Stock, (iii) combine its outstanding shares of Class A Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its shares
of Class A Common Stock any shares of the Corporation, the Class A Common
Conversion Rate in effect immediately prior thereto shall be adjusted so
that the holder of a share of Class A Common Stock thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common
Stock which it would have owned or have been entitled to receive after the
happening of any of the events described above had such share of Class A
Common Stock been converted on or immediately prior to the record date for
such dividend or the effective date of such subdivision, combination or
reclassification, as the case may be.
7
<PAGE>
(c) General. An adjustment made pursuant to this Section 6 shall
become effective immediately after the record date (in the case of a
dividend or distribution in shares of capital stock) and shall become
effective immediately after the effective date, (in the case of a
subdivision, combination or reclassification). No adjustment in accordance
with this Section 6 shall be required unless such adjustment would require
an increase or decrease in any conversion rate of at least 0.1%; provided,
however, that any adjustments which by reason of this clause are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. Any calculations under this Section 6 shall be made
to the nearest one-thousandth of a share.
7. Notices. In the event that the Corporation provides any notice, report
or statement to any holder of Common Shares, the Corporation shall at the same
time provide a copy of any such notice, report or statement to each holder of
outstanding Common Shares.
8. Reclassification.
(a) Effective November 3, 1995 (the "Effective Date"), each share of
the Corporation's Class A Voting Common Stock, par value $.01 per share (the
"Class A Voting Common Stock") issued and outstanding or held in treasury
immediately prior to the Effective Date shall, without any action on the part of
the respective holders thereof, be reclassified into one share of Common Stock,
and each stock certificate that, immediately prior to the Effective Date,
represented shares of Class A Voting Common Stock shall, from and after the
Effective Date and without the necessity of presenting the same for exchange,
represent one share of Common Stock.
(b) Effective upon the Effective Date, each share of the Corporation's
Class B Non-Voting Common Stock, par value $.01 per share (the "Class B
Non-Voting Common Stock"), issued and outstanding or held in treasury
immediately prior to the Effective Date shall, without any action on the part of
the respective holders thereof, be reclassified into one share of Class A Common
Stock, and each stock certificate that, immediately prior to the Effective Date,
represented shares of the Corporation's Class B Non-Voting Common Stock shall,
from and after the Effective Date and without the necessity of presenting the
same for exchange, represent one share of Class A Common Stock.
ARTICLE V
STOCKHOLDER ACTION
------------------
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
8
<PAGE>
ARTICLE VI
DIRECTORS
---------
Section 1. General.
--------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
----------------------------------
Election of Directors need not be by written ballot unless the By-laws of
the Corporation
shall so provide.
Section 3. Terms of Directors.
-------------------------------
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Preferred Stock of
the Corporation, shall be classified, with respect to the term for which they
severally hold office, into three classes, as nearly equal in number as
possible. The initial Class I Directors of the Corporation shall be Robert W.
Daly and Luis E. Lamela; the initial Class II Directors of the Corporation shall
be Lewis D. Gold and Henry E. Golembesky; and the initial Class III Directors of
the Corporation shall be Mitchel Eisenberg and Richard D. Tadler. The initial
Class I Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 1996, the initial Class II Directors shall serve for
a term expiring at the annual meeting of stockholders to be held in 1997, and
the initial Class III Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 1998. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting (other than Directors elected by any series of Preferred
Stock) shall be elected by a plurality of the votes cast at such meeting and
shall hold office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election. The Directors elected to
each class (other than Directors elected by any series of Preferred Stock) shall
hold office until their successors are duly elected and qualified or until their
earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Third Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other such series, to
elect Directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Third Amended and Restated Certificate of
Incorporation and any certificate of designations applicable thereto, and such
Directors so elected shall not be divided into classes pursuant to this Section
3.
9
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During any period when the holders of any series of Preferred Stock have
the right to elect additional Directors as provided for or fixed pursuant to the
provisions of Article IV hereof, then upon commencement and for the duration of
the period during which such right continues: (i) the then otherwise total
authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total and authorized number of
Directors of the Corporation shall be reduced accordingly.
Section 4. Vacancies.
---------------------
Subject to the rights, if any, of the holders of any series of Preferred
Stock to elect Directors and to fill vacancies in the Board of Directors
relating thereto, any and all vacancies in the Board of Directors, however
occurring, including, without limitation, by reason of an increase in size of
the Board of Directors, or the death, resignation, disqualification or removal
of a Director, shall be filled solely by the affirmative vote of a majority of
the remaining Directors then in office, even if less than a quorum of the Board
of Directors. Any Director appointed in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of Directors
in which the new directorship was created or the vacancy occurred and until such
Director's successor shall have been duly elected and qualified or until his or
her earlier resignation or removal. Subject to the rights, if any, of the
holders of any series of Preferred Stock to elect Directors, when the number of
Directors is increased or decreased, the Board of Directors shall determine the
class or classes to which the increased or decreased number of Directors shall
be apportioned; provided, however, that no decrease in the number of Directors
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
Section 5. Removal.
-------------------
Subject to the rights, if any, of any series of Preferred Stock to elect
Directors and to remove any Director whom the holders of any such stock have the
right to elect, any Director (including persons elected by Directors to fill
vacancies in the Board of Directors) may be removed from office (i) only with
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cause and (ii) only by the affirmative vote of at least two-thirds of the total
votes which would be eligible to be cast by stockholders in the election of such
Director. At least 30 days prior to any meeting of stockholders at which it is
proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of this Third Amended and Restated Certificate of
Incorporation, "cause," with respect to the removal of any Director shall
include (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this Third Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
---------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
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<PAGE>
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Third Amended
and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Third Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this Third Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required, and in addition to any other
vote of holders of voting stock that is required by this Third Amended and
Restated Certificate of Incorporation or by law, the affirmative vote of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal, voting together a single class, at a duly
constituted meeting of stockholders called expressly for such purpose shall be
required to amend or repeal any provisions of this Third Amended and Restated
Certificate of Incorporation; provided, however, that the affirmative vote of
not less than 80% of the total votes eligible to be cast by holders of voting
stock, voting together a single class, shall be required to amend or repeal any
of the provisions of Article VI or Article IX of this Third Amended and Restated
Certificate of Incorporation.
I, Mitchell Eisenberg, President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this 3rd day of November, 1995.
/s/ Mitchell Eisenberg
-----------------------------
Mitchell Eisenberg, President
12
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SHERIDAN HEALTHCARE, INC.
Sheridan Healthcare, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify as
follows:
1. The name of the Corporation is Sheridan Healthcare, Inc.
2. Article IV of the Third Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended and restated to read in its
entirety as follows:
ARTICLE IV
CAPITAL STOCK
-------------
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Twenty-Six Million (26,000,000) shares of which
(i) Twenty Million (20,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock"), (ii) One Million (1,000,000) shares shall be Class A
Common Stock, par value $.01 per share (the "Class A Common Stock" and together
with the Common Stock, the "Common Shares") and (iii) Five Million (5,000,000)
shares shall be Preferred Stock, par value $.01 per share (the "Preferred
Stock").
As set forth in this Article IV, the Board of Directors or any authorized
committee thereof is authorized from time to time to establish and designate one
or more series of Preferred Stock, to fix and determine the variations in the
relative rights and preferences as between the different series of Preferred
Stock in the manner hereinafter set forth in this Article IV, and to fix or
alter the number of shares comprising any such series and the designation
thereof to the extent permitted by law.
The number of authorized shares of the class of Preferred Stock may be
increased or decreased (but not below the number of shares outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below.
<PAGE>
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Preferred Stock in one or more series of such stock, and by
filing a certificate pursuant to applicable law of the State of Delaware, to
establish or change from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and the
relative, participating, optional or other special rights of the shares of each
series and any qualifications, limitations and restrictions thereof. Any action
by the Board of Directors or any authorized committee thereof under this Article
IV to fix the designations, powers, preferences and the relative, participating,
optional or other special rights of the shares of a series of Preferred Stock
and any qualifications, limitations and restrictions thereof shall require the
affirmative vote of a majority of the Directors then in office or a majority of
the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of the
following with respect to each series of Preferred Stock to the extent permitted
by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The rights in respect of dividends or the amount of dividends to
be paid on the shares of such series, whether dividends shall be cumulative and,
if so, from which date or dates, the payment date or dates for dividends, and
the participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
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<PAGE>
(h) The price or other consideration for which the shares of such
series shall be issued;
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Preferred Stock (or
series thereof) and whether such shares may be reissued as shares of the same or
any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
A. COMMON SHARES
-------------
1. General. Except as herein otherwise expressly provided, all shares of
Common Stock and Class A Common Stock shall be identical and shall entitle the
holders thereof to the same rights and privileges.
2. Voting. Each holder of record shall be entitled to one vote for each
share of Common Stock standing in his name on the books of the Corporation. The
holders of Class A Common Stock shall not have any right to vote, except that,
as to any matter on which holders of Class A Common Stock are required to have a
vote under applicable law, (a) each holder of record shall be entitled to one
vote for each share of Class A Common Stock standing in his name on the books of
the Corporation and, (b) except as required by law, the holders of Common Stock
and Class A Common Stock shall vote together as a single class on all matters as
to which holders of Class A Common Stock are entitled to vote.
3. Dividends. Subject to applicable law, the holders of Common Shares shall
be entitled to receive dividends out of funds legally available therefor at such
times and in such amounts as the Board of Directors may determine in its sole
discretion, with each share of Common Stock and each share of Class A Common
Stock sharing equally, share for share, in such dividends, except that if
dividends are declared which are payable in shares of Common Stock or Class A
Common Stock, dividends shall be declared which are payable at the same rate in
both classes of stock and the dividends payable in shares of Common Stock shall
be payable to the holders of that class of stock and the dividends payable in
shares of Class A Common Stock shall be payable to the holders of that class of
stock.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation Event"), after the
payment or provision for payment of all debts and liabilities of the Corporation
and all preferential amounts to which the holders of preferred stock are
entitled with respect to the distribution of assets in liquidation, the holders
of Common Shares shall be entitled to share ratably in the remaining assets of
the Corporation available for distribution.
3
<PAGE>
5. Conversion of Class A Common Stock.
-----------------------------------
(a) Right to Convert. Subject to and upon compliance with the
provisions of this Section 5, each share of Class A Common Stock which is to be
distributed, disposed of or sold in connection with a Class A Conversion Event
(as defined below) shall be convertible, at the option of the holder thereof,
into fully paid and non-assessable shares of Common Stock, effective upon the
occurrence of (or the expected occurrence of) a Class A Conversion Event at the
rate of one share of Common Stock for each share of Class A Common Stock so
converted (the "Class A Common Conversion Rate"), subject to adjustment as
provided in Section 7, provided that such holder has given the Corporation
notice of its intent to exercise its rights hereunder prior to the effectiveness
of such Class A Conversion Event. A "Class A Conversion Event" shall mean (i)
any sale in connection with any public offering or public sale of securities of
the Corporation (including a public offering registered under the Securities Act
of 1933, as amended (the "Securities Act")), and a sale pursuant to Rule 144 of
the Securities and Exchange Commission or any similar rule then in force), (ii)
any sale (including by way of a merger, consolidation or similar transaction) of
securities of the Corporation to a person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
if, after such sale, such person or group of persons in the aggregate would own
or control securities which possess in the aggregate the power to elect a
majority of the Corporation's directors (provided that such sale has been
approved by the Corporation's Board of Directors or a committee thereof), (iii)
any sale (including by way of a merger, consolidation or similar transaction) of
securities of the Corporation to a person or group of persons (within the
meaning of the Exchange Act) if, after such sale, such person or group of
persons in the aggregate would own or control securities of the Corporation
(excluding any being converted and disposed of in connection with such Class A
Conversion Event) which possess in the aggregate the power to elect a majority
of the Corporation's directors, and (iv) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the Exchange
Act) if, after such sale, such person or group of persons in the aggregate would
not own, control or have the right to acquire more than two percent of the
outstanding securities of any class of voting securities of the Corporation. The
term, "person" shall include any natural person and any corporation,
partnership, joint venture, trust, unincorporated organization, limited
liability company, business association and any other entity or organization.
(b) Notice of Conversion. Each holder of Class A Common Stock shall be
entitled to convert shares of Class A Common Stock which are to be distributed,
disposed of or sold in connection with a Class A Conversion Event, if such
holder reasonably believes that such Class A Conversion Event will be
consummated, and a written request for conversion from any holder of Class A
Common Stock to the Corporation stating such holder's reasonable belief that a
Class A Conversion Event shall occur shall be conclusive and obligate the
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<PAGE>
Corporation to effect such conversion in a timely manner, so as to enable each
such holder to participate in such Class A Conversion Event. The Corporation
will not cancel the shares of Class A Common Stock so converted before the tenth
day following such Class A Conversion Event and will reserve such shares until
such tenth day for reissuance in compliance with the next sentence. If any
shares of Class A Common Stock are converted into Common Stock in connection
with a Class A Conversion Event and such shares are not actually distributed,
disposed of or sold pursuant to such Class A Conversion Event, such shares of
Common Stock shall promptly be converted back into the same number of shares of
Class A Common Stock. No share or shares of the Class A Common Stock acquired by
the Corporation by reason of conversion or otherwise shall be reissued, and all
such shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Class A Common Stock accordingly.
(c) Surrender of Certificates. Each conversion of shares of Class A
Common Stock into shares of Common Stock shall be effected by the surrender of
the certificate or certificates representing the shares of Class A Common Stock
to be converted, duly assigned or endorsed for transfer to the Corporation (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for the
Common Shares or such office or offices in the continental United States of an
agent for conversion as may from time to time be designated by notice to the
holders of the Class A Common Stock by the Corporation together with written
notice by the holder of such Class A Common Stock stating that such holder
desires to convert the shares, or a stated number of the shares, of Class A
Common Stock represented by such certificate, into Common Stock, which notice
shall also state the name or names (with addresses) and denominations in which
the certificate or certificates for Common Stock shall be issued and shall
include instructions for delivery thereof. Upon surrender of a certificate
representing Class A Common Stock for conversion, the Corporation shall issue
and send by hand delivery, by courier or by first class mail (postage prepaid)
to the holder thereof or to such holder's designee, at the address designated by
such holder, certificates for the number of shares of Common Stock to which such
holder shall be entitled upon conversion. In the event that there shall have
been surrendered a certificate or certificates representing Class A Common
Stock, only part of which are to be converted, the Corporation shall issue and
send to such holder or such holder's designee, in the manner set forth in the
preceding sentence, a new certificate or certificates representing the number of
shares of Class A Common Stock which shall not have been converted. If the
certificate or certificates for Common Stock are to be issued in a name other
than the name of the registered holder of the stock surrendered for conversion,
the Corporation shall not be obligated to issue or deliver any certificate
unless and until the holder of the stock surrendered has paid to the Corporation
the amount of any tax that may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid. The issuance of certificates for Common Stock upon
conversion of Class A Common Stock will be made without charge to the holders of
such shares for any issuance tax in respect thereof or other costs incurred by
the Corporation in connection with such conversion and the related issuance of
such stock.
5
<PAGE>
(d) Effective Date of Conversion. Such conversion shall be deemed to
have been effected as of the close of business on the date on which such
certificate or certificates shall have been surrendered and such notice shall
have been received by the Corporation and at such time the rights of the holder
of such Class A Common Stock (or specified portion thereof) as to such converted
shares shall cease and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
(e) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the conversion of the Class A
Common Stock, such number of shares of Common Stock issuable upon the conversion
of all outstanding shares of Class A Common Stock.
(f) No Closing of Transfer Books. The Corporation shall not close its
books against the transfer of Common Shares in any manner which would interfere
with the timely conversion of any shares of Class A Common Stock.
6. Adjustments.
------------
(a) Changes in Common Stock. In the event the Corporation shall (i)
pay a dividend in or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of the Corporation,
the Class A Common Conversion Rate in effect immediately prior thereto shall be
adjusted so that the holder of a share of Class A Common Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock which it would have owned or have been entitled to receive after
the happening of any of the events described above had such share of Class A
Common Stock been converted on or immediately prior to the record date for such
dividend or the effective date of such subdivision, combination or
reclassification, as the case may be.
(b) Changes in Class A Common Stock. In the event that the Corporation
shall (i) pay a dividend in or make a distribution in shares of its Class A
Common Stock, (ii) subdivide its outstanding shares of Class A Common Stock,
(iii) combine its outstanding shares of Class A Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of Class A
Common Stock any shares of the Corporation, the Class A Common Conversion Rate
6
<PAGE>
in effect immediately prior thereto shall be adjusted so that the holder of a
share of Class A Common Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock which it would have
owned or have been entitled to receive after the happening of any of the events
described above had such share of Class A Common Stock been converted on or
immediately prior to the record date for such dividend or the effective date of
such subdivision, combination or reclassification, as the case may be.
(c) General. An adjustment made pursuant to this Section 6 shall
become effective immediately after the record date (in the case of a dividend or
distribution in shares of capital stock) and shall become effective immediately
after the effective date (in the case of a subdivision, combination or
reclassification). No adjustment in accordance with this Section 6 shall be
required unless such adjustment would require an increase or decrease in any
conversion rate of at least 0.1%; provided, however, that any adjustments which
by reason of this clause are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. Any calculations under this
Section 6 shall be made to the nearest one-thousandth of a share.
7. Notices. In the event that the Corporation provides any notice, report
or statement to any holder of Common Shares, the Corporation shall at the same
time provide a copy of any such notice, report or statement to each holder of
outstanding Common Shares.
8. Reclassification.
-----------------
(a) Effective November 3, 1995 (the "Effective Date"), each share of
the Corporation's Class A Voting Common Stock, par value $.01 per share (the
"Class A Voting Common Stock") issued and outstanding or held in treasury
immediately prior to the Effective Date shall, without any action on the part of
the respective holders thereof, be reclassified into one share of Common Stock,
and each stock certificate that, immediately prior to the Effective Date,
represented shares of Class A Voting Common Stock shall, from and after the
Effective Date and without the necessity of presenting the same for exchange,
represent one share of Common Stock.
(b) Effective upon the Effective Date, each share of the Corporation's
Class B Non-Voting Common Stock, par value $.01 per share (the "Class B
Non-Voting Common Stock"), issued and outstanding or held in treasury
immediately prior to the Effective Date shall, without any action on the part of
the respective holders thereof, be reclassified into one share of Class A Common
Stock, and each stock certificate that, immediately prior to the Effective Date,
represented shares of the Corporation's Class B Non-Voting Common Stock shall,
from and after the Effective Date and without the necessity of presenting the
same for exchange, represent one share of Class A Common Stock.
7
<PAGE>
-------------------------------------------------------------
3. The Board of Directors of the Corporation adopted resolutions on
February 26, 1997 declaring the advisability of the foregoing amendment and
directing the officers of the Corporation to submit the amendment to the
stockholders of the Corporation for their approval at the Corporation's 1997
Annual Meeting of Stockholders.
4. The stockholders of the Corporation approved the foregoing amendment by
the affirmative vote of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Corporation's 1997 Annual Meeting of
Stockholders held on May 15, 1997.
5. The amendment was duly adopted in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Sheridan Healthcare, Inc., has caused this Certificate
to be signed on its behalf by Mitchell Eisenberg, M.D., Chairman of the Board of
Directors, President and Chief Executive Officer and attested by Jay A. Martus,
Esq., Vice President, General Counsel and Secretary, and does hereby affirm that
the facts stated therein are true, this 21st day of May, 1997.
SHERIDAN HEALTHCARE, INC.
By: /s/ Mitchell Eisenberg
-------------------------------------
Mitchell Eisenberg, M.D.
Chairman of the Board of Directors,
President and Chief Executive Officer
ATTEST:
/s/ Jay A. Martus
- -----------------------------
Jay A. Martus, Esq.
Vice President, General Counsel
and Secretary
8
<PAGE>
SHERIDAN HEALTHCARE, INC.
SECOND AMENDED AND RESTATED 1995 STOCK OPTION PLAN
--------------------------------------------------
1. PURPOSE
-------
This Second Amended and Restated 1995 Stock Option Plan (the "Plan"), which
was first adopted as the SAMA Holdings, Inc. 1995 Stock Option Plan effective as
of April 27, 1995 and first amended and restated on July 27, 1995, is intended
as a performance incentive for officers, employees, consultants, directors and
other key persons of Sheridan Healthcare, Inc. (the "Company"), its Subsidiaries
(as hereinafter defined) or their Affiliates (as hereinafter defined) to enable
the persons to whom options are granted (the "Optionees") to acquire or increase
a proprietary interest in the success of the Company. The Company intends that
this purpose will be effected by the granting of "incentive stock options"
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and nonqualified stock options ("Nonqualified
Options"). The term "Subsidiaries" includes any corporations in which stock
possessing fifty percent or more of the total combined voting power of all
classes of stock is owned directly or indirectly by the Company. The term
"Affiliates" includes all corporations or other entities controlling, controlled
by or under common control with the Company or any of its Subsidiaries and
includes any physician, professional corporation or other person to whom or
which the Company or any of its Subsidiaries provides services pursuant to a
management services agreement or similar arrangements.
2. OPTIONS TO BE GRANTED; ADMINISTRATION OF THE PLAN
-------------------------------------------------
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options, and shall be designated as such at the time of grant.
To the extent that any option intended to be an Incentive Option shall fail
to qualify as an "incentive stock option" under the Code, such option shall
be deemed to be a Nonqualified Option. Each option granted hereunder shall
be embodied in a written agreement, as described in Section 4 hereof, that
is signed by the Optionee and an authorized officer of the Company.
(b) The Plan shall be administered either by the Board of Directors of
the Company (the "Board of Directors") or by a committee (the "Option
Committee") of not fewer than two directors of the Company appointed by the
Board of Directors (in either case, the "Administrator"). None of the
members of the Option Committee shall be an officer or other full-time
employee of the Company. It is the intention of the Company that each
member of the Option Committee shall be a "Non-Employee Director" as that
term is defined and interpreted pursuant to Rule 16b-3(b)(3)(i) or any
successor rule thereto promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), and that, on and after the date the Plan
becomes subject to Section 162(m) of the Code, each member of the Option
Committee shall be an "outside director" as that term is defined and
interpreted pursuant to Section 162(m) of the Code and the regulations
promulgated thereunder. Subject to the foregoing requirements of Section
2(b), the Compensation Committee of the Board of Directors may serve as the
Option Committee. Action by the Option Committee shall require the
affirmative vote of a majority of all its members.
<PAGE>
(c) Subject to the terms and conditions of the Plan, the Administrator
shall have the power:
(i) To determine from time to time the options to be granted to
eligible persons under the Plan and to prescribe the terms and
provisions (which need not be identical) of options (including without
limitation, the number of shares subject to each such option, the
effects upon such options of any change in control of the Company and
any vesting provisions with respect to such options) granted under the
Plan to such persons;
(ii) To construe and interpret the Plan and grants thereunder and
to establish, amend, and revoke rules and regulations for
administration of the Plan (including to correct any defect or supply
any omission, or reconcile any inconsistency in the Plan, in any option
agreement, or in any related agreements, in the manner and to the
extent the Administrator shall deem necessary or expedient to make the
Plan fully effective);
(iii) To amend from time to time, as the Administrator may
determine is in the best interests of the Company, the terms of any
outstanding options, including without limitation, to modify the
vesting schedule, exercise price or expiration date thereof in a manner
not inconsistent with the terms of the Plan; and
(iv) Generally, to exercise such powers and to perform such acts as
are deemed necessary or expedient to promote the best interests of the
Company with respect to the Plan.
All decisions and determinations by the Administrator in the exercise of
these powers shall be final and binding upon the Company and the Optionees.
(d) Delegation of Authority to Grant Options. The Administrator, in its
discretion, may delegate to the Chief Executive Officer of the Company or
any Subsidiary all or part of the Administrator's authority and duties with
respect to Options, including the granting thereof, to individuals who are
not subject to the reporting and other provisions of Section 16 of the Act
and, on and after the date the Plan becomes subject to Section 162(m) of
the Code, who also are not "covered employees" within the meaning of
Section 162(m) of the Code. The Administrator may revoke or amend the terms
of a delegation at any time, but such action shall not invalidate any prior
actions of the Administrator's delegate or delegates that were consistent
with the terms of the Plan.
3. STOCK SUBJECT TO THE OPTIONS
----------------------------
The stock granted under the Plan, or subject to the options granted under
the Plan, shall be shares of the Company's authorized but unissued Common Stock,
2
<PAGE>
par value $.01 per share (the "Common Stock"), which may either be authorized
but unissued shares or treasury shares or shares previously reserved for
issuance upon exercise of options under the Plan, and allocable to one or more
options (or portions of options) which have expired or been canceled or
terminated (other than by exercise). The total number of shares that may be
issued under the Plan shall not exceed an aggregate of 1,350,000 shares of
Common Stock. Options with respect to no more than 250,000 shares of Common
Stock may be granted to any one individual during any one calendar year period.
Such number of shares shall be subject to adjustment as provided in Section 7
hereof.
4. ELIGIBILITY
-----------
(a) Incentive Options may be granted only to employees of the Company
or its Subsidiaries, including members of the Board of Directors who are
also employees of the Company or its Subsidiaries, who are eligible to
receive an Incentive Stock Option under the Code. Nonqualified Options may
be granted to officers, other employees and directors of the Company or its
Subsidiaries, and to consultants and other key persons who provide services
to the Company or its Subsidiaries or their Affiliates (regardless of
whether they are also employees) and to such other persons as the
Administrator may select from time to time, provided, however, that no
Nonqualified Options may be granted under the Plan to any person while
serving as a member of the Option Committee except as provided in Section
4(d) hereof.
(b) No person shall be eligible to receive any Incentive Option under
the Plan if, at the date of grant, such person beneficially owns stock
representing in excess of ten percent of the voting power of all
outstanding capital stock of the Company, unless notwithstanding anything
in this Plan to the contrary (i) the purchase price for Common Stock
subject to such option is at least 110% of the fair market value of such
Common Stock at the time of the grant and (ii) the option by its terms is
not exercisable more than five years from the date of grant thereof.
(c) Notwithstanding any other provision of the Plan, the aggregate fair
market value (determined as of the time the option is granted) of the
Common Stock with respect to which Incentive Options are exercisable for
the first time by any individual during any calendar year (under all plans
of the Company and its parent and Subsidiaries) shall not exceed $100,000.
Any option granted under the Plan in excess of the foregoing limitations
shall be deemed to be a Nonqualified Option.
(d) (i) (A) Each non-employee member of the Board of Directors of the
Company serving in such capacity upon consummation of the
Company's initial public offering shall automatically be
granted on such date a Nonqualified Option to purchase
7,500 shares of Common Stock.
3
<PAGE>
(B) Each person who first becomes a non-employee member of the
Board of Directors of the Company after the consummation of
the Company's initial public offering shall automatically
be granted on the date such person first becomes a director
a Nonqualified Option to purchase 7,500 shares of Common
Stock.
(C) Each non-employee member of the Board of Directors of the
Company serving in such capacity on the fifth business day
after each annual meeting of stockholders, beginning with
the 1996 annual meeting, shall automatically be granted on
such day a Nonqualified Option to purchase 2,500 shares of
Common Stock.
(ii) The purchase price per share of Common Stock of each
Nonqualified Option granted to a member of the Board of Directors
pursuant to this Section 4(d) shall be the fair market value of the
Common Stock on the date the option is granted.
(iii) Options granted under this Section 4(d) shall become
exercisable in three equal installments, with one-third becoming
exercisable on the date of grant and an additional one-third on each of
the two successive anniversaries thereof and shall expire no later than
the tenth anniversary of the grant date.
(iv) The provisions of this Section 4(d) shall apply only to
automatic grants of Nonqualified Options to non-employee directors, and
shall not be deemed to modify, limit or otherwise apply to any other
provisions of the Plan or to any option granted thereunder to any other
person, including options granted to non-employee directors otherwise
than pursuant to this Section 4(d).
5. TERMS OF THE OPTION AGREEMENTS
------------------------------
Subject to the terms and conditions of the Plan, each option agreement
shall contain such provisions as the Administrator shall from time to time deem
appropriate. Option agreements need not be identical, but each option agreement
by appropriate language shall include the substance of all of the following
provisions:
(a) Expiration; Termination of Employment. Notwithstanding any other
provision of the Plan or of any option agreement, each option shall expire
not later than the date specified in the option agreement, which date in
the case of any Incentive Option shall not be later than the tenth
anniversary of the date on which the option was granted. If an Optionee's
employment with the Company and its Subsidiaries terminates for any reason,
the Administrator may in its discretion provide, at any time, that any
outstanding option granted to such Optionee under the Plan shall be
exercisable for such period following termination of employment as may be
specified by the Administrator, subject to the expiration date of such
option.
4
<PAGE>
(b) Exercise. Each option shall be exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Administrator. To the extent not exercised, installments shall accumulate
and be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the option expires.
(c) Purchase Price. The purchase price per share of Common Stock
subject to each option shall be determined by the Administrator; provided,
however, that the purchase price per share of Common Stock subject to each
Incentive Option shall be not less than the fair market value of the Common
Stock on the date such Incentive Option is granted. For the purposes of the
Plan, the fair market value of the Common Stock shall be determined in good
faith by the Administrator; provided, however, that (i) if the Common Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") Small-Cap Market on the date the
option is granted, the fair market value shall not be less than the average
of the highest bid and lowest asked prices of the Common Stock on NASDAQ
reported for such date, (ii) if the Common Stock is admitted to trading on
a national securities exchange or the NASDAQ National Market on the date
the option is granted, the fair market value shall not be less than the
closing price reported for the Common Stock on such exchange or system for
such date or, if no sales were reported for such date, for the last date
preceding such date for which a sale was reported, and (iii) the fair
market value of the Common Stock on the effective date of the registration
statement for the Company's initial public offering shall be the initial
offering price.
(d) Rights of Optionees. No Optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms
thereof, (ii) all requirements under applicable law and regulations shall
have been complied with to the satisfaction of the Company, (iii) the
Company shall have issued and delivered the shares to the Optionee, and
(iv) the Optionee's name shall have been entered as a stockholder of record
on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Common Stock.
(e) Transfer. No option granted hereunder shall be transferable by the
Optionee other than by will or by the laws of descent and distribution, and
such option may be exercised during the Optionee's lifetime only by the
Optionee, or his or her guardian or legal representative. Notwithstanding
the foregoing, the Administrator may permit an optionee to transfer,
without consideration for the transfer, a Nonqualified Option to members of
his immediate family, to trusts for the benefit of such family members, to
partnerships in which such family members are the only partners, or to
charitable organizations, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this
Plan and the applicable option agreement.
5
<PAGE>
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
---------------------------------------------
(a) Any option granted under the Plan may be exercised by the Optionee
in whole or in part by delivering to the Company on any business day a
written notice specifying the number of shares of Common Stock the Optionee
then desires to purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made either: (i) in cash, or by certified or
bank check or other payment acceptable to the Company, equal to the option
exercise price for the number of shares specified in the Notice (the "Total
Option Price"); (ii) if authorized by the applicable option agreement and
if permitted by law, by delivery of shares of Common Stock that the
optionee may freely transfer having a fair market value, determined by
reference to the provisions of Section 5(c) hereof, equal to or less than
the Total Option Price, plus cash in an amount equal to the excess, if any,
of the Total Option Price over the fair market value of such shares of
Common Stock; or (iii) by the Optionee delivering the Notice to the Company
together with irrevocable instructions to a broker to promptly deliver the
Total Option Price to the Company in cash or by other method of payment
acceptable to the Company; provided, however, that the Optionee and the
broker shall comply with such procedures and enter into such agreements of
indemnity or other agreements as the Company shall prescribe as a condition
of payment under this clause (iii).
(c) The delivery of certificates representing shares of Common Stock to
be purchased pursuant to the exercise of an option will be contingent upon
the Company's receipt of the Total Option Price and of any written
representations from the Optionee required by the Administrator, and the
fulfillment of any other requirements contained in the option agreement or
applicable provisions of law (including payment of any amount required to
be withheld by the Company pursuant to applicable law).
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
-----------------------------------------
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company, whether through merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate
adjustment shall be made in the number and kind of shares subject to the
Plan, and in the number, kind, and per share exercise price of shares
subject to unexercised options or portions thereof granted prior to any
such change. In the event of any such adjustment in an outstanding option,
the Optionee thereafter shall have the right to purchase the number of
shares under such option at the per share price, as so adjusted, which the
Optionee could purchase at the total purchase price applicable to the
option immediately prior to such adjustment.
6
<PAGE>
(b) Adjustments under this Section 7 shall be determined by the
Administrator and such determinations shall be conclusive. The
Administrator shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time or
times at which any option or portion thereof shall become exercisable. No
fractional shares of Common Stock shall be issued under the Plan on account
of any adjustment specified above.
8. EFFECT OF CERTAIN TRANSACTIONS
------------------------------
(a) In the case of a Change of Control (as defined below), all
outstanding options shall automatically become fully exercisable whether or
not such options were exercisable immediately prior thereto. Unless
provision is made in connection with such Change of Control for the
assumption of options theretofore granted, or the substitution for such
options of new options of the successor entity or parent thereof (with
appropriate adjustment as to the number and kind of shares and the per
share exercise prices, as provided in Section 7), the Plan and the options
issued hereunder shall terminate upon the effectiveness of such Change of
Control. In the event of such termination, all outstanding options shall be
exercisable in full for at least fifteen days prior to the date of such
termination whether or not otherwise exercisable during such period.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company of any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing in excess of 50% of either (A) the combined voting power
of the Company's then outstanding securities having the right to vote
in an election of the Company's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of Common Stock of the
Company (in either such case other than as a result of an acquisition
of securities directly from the Company); or
(ii) persons who, as of the effective date of the Plan, constitute
the Company's Board of Directors (the "Incumbent Directors") cease for
any reason, including, without limitation, as a result of a tender
offer, proxy contest, merger or similar transaction, to constitute at
least a majority of the Board, provided that any person becoming a
director of the Company subsequent to the Effective Date whose election
or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of this Plan,
be considered an Incumbent Director; or,
7
<PAGE>
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or
more of the voting shares of the corporation issuing cash or securities
in the consolidation or merger (or of its ultimate parent corporation,
if any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of
the Company or (C) any plan or proposal for the liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Common Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Common Stock beneficially owned by any person
in excess of 50% or more of the shares of Common Stock then outstanding or (y)
the proportionate voting power represented by the Voting Securities beneficially
owned by any person in excess of 50% or more of the combined voting power of all
then outstanding Voting Securities; provided, however, that if any person
referred to in clause (x) or (y) of this sentence shall thereafter become the
beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction), then a "Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (i).
9. TAX WITHHOLDING
---------------
(a) Payment by Optionee. Each Optionee shall, no later than the date as
of which the value of any option granted hereunder or of any Common Stock
issued upon the exercise of such option first becomes includible in the
gross income of the Optionee for federal income tax purposes (the "Tax
Date"), pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of any federal, state, or local taxes of
any kind required by law to be withheld with respect to such income. In the
event that an Optionee has not made the arrangements described in this
Section 9(a) and has not made an election under this Section 9(b) on or
before the Tax Date, the Company is hereby authorized to withhold the
amount of any federal, state or local taxes of any kind required by law
with respect to such income from any payment otherwise due to the Optionee.
(b) Payment in Shares. Subject to approval by the Administrator, an
Optionee may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Common Stock to be issued pursuant to an option exercise a number of shares
with an aggregate fair market value (determined by the Administrator in
accordance with Section 5(c) as of the date the withholding is effected)
8
<PAGE>
that would satisfy the withholding amount due, or (ii) transferring to the
Company shares of Common Stock owned by the Optionee with an aggregate fair
market value (determined by the Administrator in accordance with Section
5(c) as of the date the withholding is effected) that would satisfy the
withholding amount due.
10. AMENDMENT OF THE PLAN
---------------------
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to any required regulatory approval,
provided that any such amendment is also approved by the stockholders of the
Company if it would materially increase the benefits accruing to Optionees under
the Plan, or to the extent required by the Code to ensure that Incentive Options
granted under the Plan are qualified under Section 422 of the Code or if
determined by the Administrator to be necessary or advisable for purposes of the
Act or otherwise. Except as otherwise provided, an amendment shall be binding
upon options previously granted under the Plan unless the amendment adversely
affects the rights of an Optionee, in which event the consent of the Optionee
shall be required with respect to any portion of such amendment having such
effect.
11. NONEXCLUSIVITY OF THE PLAN
--------------------------
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock or stock options otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases. Neither the Plan nor any option granted hereunder shall be
deemed to confer upon any employee any right to continued employment with the
Company or its Subsidiaries or their Affiliates.
12. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
-----------------------------------------------
(a) The obligation of the Company to sell and deliver shares of Common
Stock with respect to options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the
Administrator.
(b) The Plan shall be governed by Delaware law, except to the extent
that such law is preempted by federal law.
9
<PAGE>
3. EFFECTIVE DATE OF THE PLAN; STOCKHOLDER APPROVAL
------------------------------------------------
The Plan shall become effective upon the date that it is approved by the
Board of Directors of the Company; provided, however, that the Plan shall be
subject to the approval of the Company's stockholders in accordance with
applicable laws and regulations within twelve months of such effective date. No
options granted under the Plan prior to such stockholder approval may be
exercised until such approval has been obtained. No options may be granted under
the Plan after the tenth anniversary of the effective date of the Plan.
* * * * *
APPROVED BY BOARD OF DIRECTORS: JULY 27, 1995
APPROVED BY STOCKHOLDERS: AUGUST 17, 1995
AMENDED BY BOARD OF DIRECTORS: FEBRUARY 26, 1997
APPROVED BY STOCKHOLDERS: MAY 15, 1997
<TABLE>
Exhibit 11.1
SHERIDAN HEALTHCARE, INC.
Computation of Earnings per Share of Common Stock
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
Primary Earnings Per Share:
- ---------------------------
<S> <C> <C>
Weighted average shares outstanding............................................ 6,715 6,725
Dilutive effect of outstanding stock options................................... 219 106
----------- -----------
Primary weighted average shares of common stock and
common stock equivalents outstanding........................................ 6,934 6,831
=========== ===========
Net income..................................................................... $ 1,232 $ 1,116
Net income per share - primary................................................. $ .18 $ .16
Fully Diluted Earnings Per Share:
- ---------------------------------
Weighted average shares outstanding............................................ 6,715 6,725
Dilutive effect of outstanding stock options................................... 296 106
----------- -----------
Fully diluted weighted average shares of common stock and
common stock equivalents outstanding........................................ 7,011 6,831
=========== ===========
Net income..................................................................... $ 1,232 $ 1,116
Net income per share - fully diluted........................................... $ .18 $ .16
</TABLE>
<PAGE>
<TABLE>
Exhibit 11.1
SHERIDAN HEALTHCARE, INC.
Computation of Earnings per Share of Common Stock
(in thousands, except per share amounts)
<CAPTION>
Six Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
Primary Earnings Per Share:
- ---------------------------
<S> <C> <C>
Weighted average shares outstanding............................................ 6,715 6,459
Dilutive effect of outstanding stock options................................... 198 118
----------- -----------
Primary weighted average shares of common stock and
common stock equivalents outstanding........................................ 6,913 6,577
=========== ===========
Net income..................................................................... $ 2,420 $ 1,969
Net income per share - primary................................................. $ .35 $ .30
Fully Diluted Earnings Per Share:
- ---------------------------------
Weighted average shares outstanding............................................ 6,715 6,459
Dilutive effect of outstanding stock options................................... 280 118
----------- -----------
Fully diluted weighted average shares of common stock and
common stock equivalents outstanding........................................ 6,995 6,577
=========== ===========
Net income..................................................................... $ 2,420 $ 1,969
Net income per share - fully diluted........................................... $ .35 $ .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FIANNACIAL INFORMATIN EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SHERIDAN HEALTHCARE, INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AN DIS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 53,094
<ALLOWANCES> 32,600
<INVENTORY> 0
<CURRENT-ASSETS> 24,119
<PP&E> 5,353
<DEPRECIATION> 2,011
<TOTAL-ASSETS> 79,054
<CURRENT-LIABILITIES> 14,754
<BONDS> 0
0
0
<COMMON> 67
<OTHER-SE> 38,311
<TOTAL-LIABILITY-AND-EQUITY> 79,054
<SALES> 0
<TOTAL-REVENUES> 46,634
<CGS> 0
<TOTAL-COSTS> 32,485
<OTHER-EXPENSES> 7,340
<LOSS-PROVISION> 1,875
<INTEREST-EXPENSE> 1,184
<INCOME-PRETAX> 3,750
<INCOME-TAX> 1,330
<INCOME-CONTINUING> 2,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,420
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
