PRELIMINARY COPY
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SHERIDAN HEALTHCARE, INC.
4651 Sheridan Street
Suite 400
Hollywood, Florida 33021
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON June 24, 1998
---------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Sheridan Healthcare, Inc. (the "Company") will be held on
June 24, 1998 at 10:00 a.m. Florida time at the offices of the Company at 4651
Sheridan Street, Hollywood, Florida 33021 for the following purposes:
1. To elect two Class III Directors of the Company to serve until the 2001
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified.
2. To consider and act upon a proposal to approve the potential issuance of
shares of common stock, par value $0.01 per share ("Common Stock"), of the
Company in connection with the acquisition by the Company of an office-based
physician practice.
3. To consider and act upon a proposal to approve an amendment to the
Company's Second Amended and Restated 1995 Stock Option Plan (the "Option Plan")
to increase the total number of shares of Common Stock that may be issued under
the Option Plan from 1,350,000 to 1,750,000.
4. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on May 11, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of Common Stock at the close of business on that
date will be entitled to notice of and to vote at the Annual Meeting and at any
adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is
being solicited by the Board of Directors, and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Jay A. Martus, Esq.
Secretary
Hollywood, Florida
May __, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
PRELIMINARY COPY
SHERIDAN HEALTHCARE, INC.
4651 Sheridan Street
Suite 400
Hollywood, Florida 33021
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PROXY STATEMENT
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FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 24, 1998
May 22, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sheridan Healthcare, Inc. (the "Company")
for use at the 1998 Annual Meeting of Stockholders of the Company to be held on
June 24, 1998 and at any adjournments or postponements thereof (the "Annual
Meeting"). At the Annual Meeting, stockholders will be asked to vote upon the
election of two Class III Directors of the Company, to consider and act upon a
proposal to approve the potential issuance of shares of common stock, par value
$0.01 per share ("Common Stock"), of the Company in connection with the
acquisition by the Company of an office-based physician practice to consider
(the "Acquisition") and act upon a proposal to approve an amendment to the
Company's Second Amended and Restated 1995 Stock Option Plan (the "Option
Plan"), and to act upon any other matters properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are first being sent to stockholders on or about May 22, 1998. The
Board of Directors has fixed the close of business on May 11, 1998 as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). Only stockholders of record of Common
Stock at the close of business on the Record Date will be entitled to notice of
and to vote at the Annual Meeting. Holders of Common Stock outstanding as of the
close of business on the Record Date will be entitled to one vote for each share
held by them. As of the Record Date, there were shares of Common
-----------
Stock outstanding and entitled to vote at the Annual Meeting.
The presence, in person or by proxy, of holders of at least a majority of
the total number of shares of Common Stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker non-votes (as defined below) will be
counted as present in determining the presence of a quorum. A plurality of votes
cast shall be sufficient for the election of directors. Abstentions and broker
non-votes will be disregarded in determining the "votes cast" for purposes of
electing directors and will not affect the election of the candidates receiving
a plurality of votes. The affirmative vote of holders of a majority of the votes
cast is required to approve the proposal to issue shares of Common Stock in
connection with the Acquisition. Abstentions and broker non-votes will not be
counted in determining the number of votes cast for purposes of approval of the
proposal to potentially issue shares of Common Stock in connection with the
Acquisition, and will therefore not have the effect or votes either "for" or
"against" such proposal. The affirmative vote of the holders of a majority of
the shares of Common Stock present or represented and entitled to vote is
required to approve the amendment to the Option Plan. Abstentions will be
included in determining the number of shares of Common Stock present or
represented and entitled to vote for purposes of approval of the proposal to
amend the Option Plan, and will therefore have the effect of votes "against"
such proposal. Broker non-votes will not be counted in determining the number of
shares of Common Stock present or represented and entitled to vote to approve
the amendment to the Option Plan, and will therefore not have the effect of
votes either "for" or "against" such proposal. A "broker non-vote" is a proxy
from a broker or other nominee indicat ing that such person has not received
<PAGE>
instructions from the beneficial owner or other person entitled to vote the
shares which are the subject of the proxy on a particular matter with respect to
which the broker or other nominee does not have discretionary voting power.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
FOR CLASS III DIRECTORS OF THE COMPANY NAMED IN THIS PROXY STATEMENT, FOR THE
PROPOSAL TO POTENTIALLY ISSUE COMMON STOCK OF THE COMPANY IN CONNECTION WITH THE
ACQUISITION AND FOR THE PROPOSAL TO APPROVE THE AMENDMENT TO THE OPTION PLAN. IT
IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THOSE SET FORTH IN THIS PROXY
STATEMENT WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE
PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDERS.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
The Company's 1997 Annual Report, including financial statements for the
fiscal year ended December 31, 1997, is being mailed to stockholders
concurrently with this Proxy Statement. The Annual Report, however, is not part
of the proxy solicitation material.
PROPOSAL 1: ELECTION OF DIRECTORS
INTRODUCTION
The Board of Directors of the Company consists of five members. At the
Annual Meeting, two Class III Directors will be elected to serve until the 2001
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified. The Board of Directors has nominated Mitchell Eisenberg,
M.D. and Neil A. Natkow, D.O. to serve as the Class III Directors (the
"Nominees"). The Nominees are currently serving as directors of the Company. The
Board of Directors anticipates that the Nominees will serve, if elected, as
directors. However, if any person nominated by the Board of Directors is unable
to accept election, the proxies will be voted for the election of such other
person or persons as the Board of Directors may recommend. The Board of
Directors will consider a nominee for election to the Board of Directors
recommended by a stockholder of record if the stockholder submits the nomination
in compliance with the requirements of the Company's Amended and Restated
By-laws (the "By-laws"). See "Other Matters--Stockholder Proposals" for a
summary of these requirements.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES.
INFORMATION REGARDING THE NOMINEES, OTHER DIRECTORS AND EXECUTIVE OFFICERS
The following biographical descriptions set forth certain information with
respect to the Nominees for election as directors at the Annual Meeting, each
director who is not up for election and the executive officers who are not
directors, based on information furnished to the Company by each director and
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<PAGE>
officer. The following information is as of March 1, 1998.
Nominees For Election As Directors - Term Expiring 2001
MITCHELL EISENBERG, M.D. Dr. Eisenberg joined the Company in 1982, has
been a director of the Company since 1985, has been President since 1989, and
has been Chairman of the Board and Chief Executive Officer since 1994. Prior
to joining the Company, Dr. Eisenberg was in private practice. He is 47 years
old.
NEIL A. NATKOW, D.O. Dr. Natkow was appointed to the Company's Board of
Directors in July 1996. Dr. Natkow served as Senior Vice President -- Health
Care for Precision Response Corporation, a publicly traded company, from
February 1997 until October 1997, and is currently a member of Precision
Response Corporation's Board of Directors. From December 1993 until October
1995, Dr. Natkow served as an executive officer of PCA Health Plans of Florida,
a health maintenance organization, most recently as its Chief Executive Officer.
From July 1992 to December 1993, Dr. Natkow was the President and Chief
Executive Officer of Family Health Plan, a health maintenance organization, and
from June 1987 to July 1992, Dr. Natkow was the Vice President for Professional
Affairs at Southeastern University for Health Sciences. He is 51 years old.
Incumbent Director - Term Expiring 1999
JAMIE E. HOPPING. Mrs. Hopping has been a director of the Company since
February 1998. Mrs. Hopping is currently an independent health care consultant.
Prior to that, Mrs. Hopping served as a Group President from January 1996 to
August 1997 and as a Division President from February 1994 to January 1996 of
Columbia/HCA Healthcare Corporation. Prior to that, Mrs. Hopping served as the
Chief Executive Officer of Deering Hospital and Grant Center, an acute care
hospital and psychiatric facility, from September 1990 to January 1993. She is
44 years old.
Incumbent Directors - Term Expiring 2000
LEWIS D. GOLD, M.D. Dr. Gold joined the Company in 1985 as an
anesthesiologist and has been a director of the Company since 1988. He has
served as Executive Vice President Business Development since 1994. Dr. Gold was
also Chief of the Department of Anesthesia of Parkway Regional Medical Center
from 1990 to 1994. He is 41 years old.
HENRY E. GOLEMBESKY, M.D. Dr. Golembesky has been a director of the Company
since November 1995. Dr. Golembesky has served as a health care consultant to
APM, Inc. from January 1, 1993 to present. From 1990 to 1992, Dr. Golembesky
served as President and Chief Executive Officer of UniMed America, a physician
services division of Unihealth. He is 52 years old.
Executive Officers Who Are Not Directors
MICHAEL F. SCHUNDLER. Mr. Schundler joined the Company in July 1996 as
Chief Operating Officer and currently serves as both Chief Operating Officer and
Chief Financial Officer. Previously, Mr. Schundler served as Vice President --
Operations at American Health Network from 1994 to 1996 and as Chief Financial
Officer of AdminiStar, Inc. from 1991 to 1994. Prior to that, Mr. Schundler was
Senior Vice President -- Finance of Merrill Lynch Life Insurance Co. and Family
Life Insurance Co. He is 42 years old.
GILBERT L. DROZDOW, M.D., M.B.A. Dr. Drozdow joined the Company in 1987 as
an anesthesiologist and was a director of the Company from 1990 to 1994. He
served the Company as Vice President Medical Affairs from 1994 to February 1996
and has served as Vice President Hospital Based Services since February 1996. He
was also Chairman of the Department of Anesthesia at Westside Regional Medical
Center in 1994. He is 40 years old.
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<PAGE>
JAY A. MARTUS, ESQ. Mr. Martus joined the Company in 1994 as Vice
President, Secretary and General Counsel. Prior to joining the Company, he was a
partner with the law firm of Levey & Martus, P.A. Mr. Martus represented the
Company as outside general counsel from 1989 to 1994. He is 42 years old.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company consists of five members and is
divided into three classes. The members of each class of Directors serve for
staggered three-year terms. The Board is composed of one Class I Director (Mrs.
Hopping), two Class II Directors (Drs. Gold and Golembesky), and two Class III
Directors (Drs. Eisenberg and Natkow), who are up for election at the Annual
Meeting. The terms of the Class I and Class II Directors will expire upon the
election and qualification of directors at the annual meetings of stockholders
held following the fiscal years ending December 31, 1998 and 1999, respectively.
At each annual meeting of stockholders, directors will be reelected or elected
for a full term of three years to succeed those directors whose terms are
expiring.
During 1997, the Board of Directors met three times. Each director attended
at least 75% of the aggregate of (i) the total number of meetings of the Board
of Directors (held during the period for which such director served on the Board
of Directors) and (ii) the total number of meetings of all committees of the
Board of Directors on which such director served (during the periods for which
such director served on such committee or committees).
Audit Committee. The Board of Directors has established an Audit Committee
consisting of Mrs. Hopping and Dr. Golembesky (the "Audit Committee"). The Audit
Committee is responsible for making recommendations concerning the engagement of
independent public accountants, reviewing with the independent public
accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants, reviewing
the independence of the independent public accountants, considering the range of
audit and non-audit fees and reviewing the adequacy of the Company's internal
accounting controls. The Audit Committee met once during 1997.
Compensation Committee. The Board of Directors has also established a
Compensation Committee consisting of Drs. Eisenberg and Natkow and Mrs. Hopping
(the "Compensation Committee"). The Compensation Committee reviews and
recommends the compensation arrangements for all directors and officers and
approves such arrangements for other senior level employees. The Compensation
Committee also administers and takes such other action as may be required in
connection with the Company's Executive Incentive Plan. The Compensation
Committee met once during 1997.
Option Committee. The Board of Directors has also established an Option
Committee consisting of Drs. Golembesky and Natkow and Mrs. Hopping (the "Option
Committee"). The Option Committee administers and takes such other action as may
be required in connection with the Option Plan. The Option Committee met once
during 1997.
Indemnification Committee. The Board of Directors has also established an
Indemnification Committee consisting of Drs. Golembesky and Natkow and Mrs.
Hopping (the "Indemnification Committee"). The Indemnification Committee reviews
and recommends actions as may be required in connection with indemnification
issues arising out of litigation filed against the Company and certain of its
executive officers and directors by former shareholders of the Company's
predecessor. The Indemnification Committee met once during 1997.
The Board of Directors does not have a standing nominating committee. The
full Board of Directors performs the function of such a committee.
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<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors. Directors of the Company who are also employees receive no
additional compensation for their services as a director. Non-employee directors
receive an annual director's fee of $5,000 for their service as directors. Each
non-employee director also receives $1,000 for personal attendance at any
meeting of the Board of Directors and $500 for each committee meeting attended
and each meeting of the full Board of Directors attended by telephone
conference. All directors of the Company are reimbursed for travel related
expenses incurred in attending meetings of the Board of Directors and its
committees.
The Option Plan provides that each new non-employee director of the Company
will receive, on the date he or she first becomes a director, an option not
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") (a "Non-Qualified
Option"), to purchase up to 7,500 shares of Common Stock. In addition, the
Option Plan provides that each non-employee director serving in such capacity on
the fifth business day after each annual meeting of stockholders will also
receive, on such date, a Non-Qualified Option to purchase up to 2,500 shares of
Common Stock. Pursuant to this provision, Mr. Robert W. Daly, a former member of
the Board of Directors who resigned on December 12, 1997, and Drs. Golembesky
and Natkow received grants of such Non-Qualified Options on May 22, 1997. All
options granted to directors under the Option Plan vest in three equal
installments, with one-third vesting on the date of grant and an additional
one-third vesting on each of the two successive anniversaries thereof. All such
options are granted with an exercise price per share equal to the fair market
value per share of Common Stock on the date of grant and expire on the tenth
anniversary of such date of grant.
Executive Officers. The following table sets forth the compensation awarded
to the Company's Chief Executive Officer, the four other most highly compensated
executive officers of the Company who were serving as executive officers at the
end of 1997 and an additional individual who held an executive officer position
during 1997 but who was not serving as an executive officer following 1997, each
of whose total salary and bonus exceeded $100,000 during 1997 (collectively, the
"Named Executive Officers").
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long Term
Compensation Compensation
------------------- Awards
Securities
Underlying All Other
Salary Bonus Options(1) Compensation(2)
Name and Principal Position Year ($) ($) (#) ($)
- --------------------------- ---- ------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Mitchell Eisenberg, M.D................ 1997 274,999 -- 170,000 950
Chairman of the Board of Directors,... 1996 275,712 -- 30,000 --
President and Chief Executive Officer. 1995 290,157 -- 26,956 20,760
Valerio J. Toyos, M.D., M.B.A.......... 1997 279,076 -- -- --
Former Vice President Primary Care.... 1996 296,022 -- 28,500(3) --
Services(4)......................... 1995 137,846(5) -- 8,500 --
Lewis D. Gold, M.D..................... 1997 249,999 -- 122,500 950
Director and Executive Vice......... 1996 251,712 -- 20,000 --
President Business Development...... 1995 256,534 -- 26,956 20,760
Gilbert L. Drozdow, M.D., M.B.A........ 1997 249,999 -- 55,000 950
Vice President Hospital Based....... 1996 250,512 -- 20,000 --
Services............................ 1995 254,473 -- 5,392 20,760
Jay A. Martus, Esq..................... 1997 200,000 -- 55,000 --
Vice President, Secretary........... 1996 199,677 -- 20,000 --
and General Counsel................. 1995 200,000 -- 16,174 --
Michael F. Schundler................... 1997 199,999 -- 122,500 --
Chief Financial Officer............. 1996 84,615(6) -- 50,000 --
and Chief Operating Officer......... 1995 -- -- -- --
- ------------
<FN>
(1) Includes stock options granted on February 4, 1998 in lieu of cash bonuses
under the Company's 1997 Executive Incentive Plan as follows: Dr. Eisenberg -
20,000; Dr. Gold - 17,500; Mr. Schundler - 17,500; Dr. Drozdow - 10,000 and Mr.
Martus - 10,000. The options vested fully on March 31, 1998 at an exercise price
of $14.25 (the fair market value of the Common Stock on the date of grant).
(2) Represents contributions by the Company under its 401(k) Plan on behalf of
each of Drs. Eisenberg, Gold and Drozdow during 1995 and 1997.
(3) Includes options to purchase up to 8,500 shares of Common Stock granted
during 1995 for which the exercise price was adjusted during 1996.
(4) Dr. Toyos held the position of Vice President Primary Care Services until
December 31, 1997.
(5) Represents salary paid to Dr. Toyos from June 1995, when he began employment
with the Company, to December 31, 1995.
(6) Represents salary paid to Mr. Schundler from July 1996, when he began
employment with the Company, to December 31, 1996.
</FN>
</TABLE>
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<TABLE>
OPTION GRANTS IN FISCAL YEAR 1997
Individual Grant
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<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of
Securities Total Options Stock Price
Underlying Granted to Appreciation
Options Employees Exercise or For Option Term(1)
Granted in Fiscal Base Price Expiration ----------------------------
Name (#) Year ($/sh) Date 5% ($) 10% ($)
---- ---------- ---------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell Eisenberg, M.D......... 60,673(2) 13.1% $ 9.00 2/26/07 $ 343,412 $ 800,274
89,327(3) 19.3% $ 9.50 5/15/07 $ 533,684 $ 1,352,460
20,000(4) 4.3% $ 14.25 02/4/08 $ 179,200 $ 454,200
Valerio J. Toyos, M.D., M.B.A... -- -- -- -- -- --
Lewis D. Gold, M.D.............. 42,471(2) 9.2% $ 9.00 2/26/07 $ 240,388 $ 609,191
62,529(3) 13.5% $ 9.50 5/15/07 $ 373,579 $ 946,724
17,500(4) 3.8% $ 14.25 2/ 4/08 $ 156,800 $ 397,425
Gilbert L. Drozdow, M.D., M.B.A. 18,202(2) 3.9% $ 9.00 2/26/07 $ 103,024 $ 261,084
26,798(3) 5.8% $ 9.50 5/15/07 $ 160,105 $ 405,737
10,000(4) 2.2% $ 14.25 2/ 4/08 $ 87,100 $ 224,600
Jay A. Martus, Esq.............. 18,202(2) 3.9% $ 9.00 2/26/07 $ 103,024 $ 261,084
26,798(3) 5.8% $ 9.50 5/15/07 $ 160,105 $ 405,737
10,000(4) 2.2% $ 14.25 2/ 4/08 $ 87,100 $ 224,600
Michael Schundler............... 42,471(2) 9.2% $ 9.00 2/26/07 $ 240,388 $ 609,191
62,529(3) 13.5% $ 9.50 5/15/07 $ 373,579 $ 946,724
17,500(4) 3.8% $ 14.25 2/ 4/08 $ 156,800 $ 397,425
- ------------------
<FN>
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains are
based upon assumed rates of stock price appreciation set by the Securities and
Exchange Commission ("SEC") of five percent and ten percent compounded annually
from the date the respective options were granted. Actual gains, if any, are
dependent on the performance of the Common Stock. There can be no assurance that
the amounts reflected will be achieved.
(2) These options vest in full on February 26, 2007 so long as the applicable
option holder is employed by the Company or one of its subsidiaries as of the
respective date. The vesting of such options will be accelerated upon a change
in control of the Company or in accordance with the following schedule in the
event that the last reported sale price of the Common Stock on the Nasdaq
National Market (the "Closing Price") reaches the following thresholds and
remains at or above such thresholds each day for a period of one calendar month:
(i) 33.3% of the options will vest at a Closing Price of $18.00 per share, (ii)
66.66% of the options will vest at a Closing Price of $24.00 per share and (iii)
100% of the options will vest at a Closing Price of $30.00 per share.
(3) These options vest in full on May 15, 2007 so long as the applicable option
holder is employed by the Company or one of its subsidiaries as of the
respective date. The vesting of such options will be accelerated in the same
manner as the options which are described in footnote 2 above.
(4) These options were granted in Fiscal Year 1998, but reflect bonuses earned in
Fiscal Year 1997. These options vested in full on March 31, 1998.
</FN>
</TABLE>
Option Exercises And Year-end Holdings. The following table sets forth the
aggregate number of options exercised in 1997 and the value of options held at
the end of 1997 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND
FISCAL YEAR-END 1997 OPTION VALUES
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<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options Options
at Fiscal at Fiscal
Shares Year-End (#) Year-End ($)
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable(1)
- ---------------------- --------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Mitchell Eisenberg, M.D.......... 26,956 $331,424(2) 10,000/170,000 $62,500/$980,337
Valerio J. Toyos, M.D., M.B.A.... 0 0 3,400/25,000 $31,450/$197,175
Lewis D. Gold, M.D............... 26,956 $331,424(2) 6,667/118,333 $41,669/$682,067
Gilbert L. Drozdow, M.D., M.B.A.. 4,314 $ 51,693(3) 0/66,078 $0/$422,146
Jay A. Martus, Esq............... 0 0 12,939/68,235 $186,580/$453,250
Michael F. Schundler............. 0 0 10,000/145,000 $92,500/$599,106
- ------------------
<FN>
(1) Based on $15.00 per share, the price of the last reported trade of the Common
Stock on the National Market on December 31, 1997.
(2) Based on $12.875 per share, the price of the last reported trade of the
Common Stock on the Nasdaq National Market on November 28, 1997, the date the
options were exercised.
(3) Based on $12.56 per share, the price of the last reported trade of the Common
Stock on the Nasdaq National Market on December 23, 1997, the date the options
were exercised.
</FN>
</TABLE>
EXECUTIVE INCENTIVE PLAN
The Company has established an Executive Incentive Plan (the "Incentive
Plan") pursuant to which the Compensation Committee has the discretion to
determine those officers and key employees of the Company who will be eligible
for bonuses if certain financial and business objectives are achieved. The
formula for determining bonuses under the Incentive Plan is established annually
by the Compensation Committee. The Compensation Committee bases these formulas
upon the achievement of financial goals (such as earnings per share, specified
revenue levels, maintenance of positive cash flow or addition of economic value)
and business objectives. The Compensation Committee may change formulas during a
particular year and may, from time to time, designate additional employees as
participants in the Incentive Plan. The terms of the Incentive Plan may be
amended by the Board of Directors at any time. See "Compensation Committee
Report on Executive Compensation -- Executive Incentive Plan" for a description
of the bonus formula established by the Compensation Committee for the 1998
Fiscal Year.
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into employment agreements with each of Drs.
Eisenberg, Gold, Toyos and Drozdow and Messrs. Martus and Schundler. Dr. Toyos
held the position of Vice President Primary Care Services until December 31,
1997 and remains employed with the Company under the terms of such employment
agreement in the position of Panel Services Director. The term of each of the
agreements with Drs. Eisenberg, Gold and Drozdow and Mr. Martus ends on December
31, 1999. The term of the agreement with Mr. Schundler ends on June 30, 2001.
Thereafter each agreement is renewable for a one-year term. The term of the
agreement with Dr. Toyos ends on June 5, 2000.
The agreements with Drs. Eisenberg and Gold may be terminated (i) by the
Company without cause (as defined in the agreements) upon 30 days written
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notice, (ii) upon the death or permanent disability of the executive, and (iii)
by the executive upon the occurrence of certain events including the failure of
the Company to pay the executive's salary or provide certain benefits to which
the executive is entitled, certain relocations of the Company's offices, and a
material breach of the employment agreement by the Company. The employment
agreements provide for a continuation of base salary and certain benefits for a
period of one year following any such termination, as well as the pro rata
portion of any bonus to which the executive would otherwise have been entitled
if such executive had remained employed by the Company for the remainder of the
calendar year of his termination. Each employment agreement also provides for
termination upon mutual consent, for cause, and by the executive upon 90 days'
written notice (60 days' notice following certain reductions in medical
malpractice liability insurance), in which event the Company has no further
obligation to the executive other than the obligations to pay accrued but unpaid
salary, provide certain continuing medical malpractice insurance coverage and
make salary payments pursuant to a non-competition provision in the employment
agreement, as described below. Each agreement also requires the Company to
continue to provide each of Drs. Eisenberg and Gold with medical malpractice
insurance coverage for claims arising during the term of the agreement, to the
extent the executive was covered prior to his termination, for a period of two
years from the date of termination for any reason other than by the executive
following specified reductions in insurance coverage by the Company. Each of
Drs. Eisenberg and Gold are subject to certain restrictions on competition with
the Company for a period of three years following termination of such
executive's employment for any reason, provided that the Company continues to
pay such executives their salaries during such three year period.
The agreements with Dr. Drozdow and Messrs. Schundler and Martus may be
terminated (i) by the Company without cause (as defined in the agreements) upon
30 days written notice, (ii) upon the death or permanent disability of the
executive, and (iii) by the executive upon the occurrence of certain events
including the failure of the Company to pay the executive's salary or to provide
certain benefits to which the executive is entitled, certain relocations of the
Company's offices, and material breach of the employment agreement by the
Company. The employment agreements provide for a continuation of base salary and
certain benefits for a period of six months following any such termination. Each
employment agreement also provides for termination upon mutual consent, for
cause, and by the executive upon 90 days' written notice (60 days' notice
following certain reductions in medical malpractice liability insurance in the
case of Dr. Drozdow), in which event the Company has no further obligation to
the executive other than the payment of accrued but unpaid salary. The agreement
with Dr. Drozdow also requires the Company to continue to provide Dr. Drozdow
with medical malpractice insurance coverage for claims arising during the term
of the agreement, to the extent Dr. Drozdow was covered prior to his
termination, for a period of two years from the date of termination for any
reason other than by Dr. Drozdow following specified reductions in insurance
coverage by the Company. Each of Dr. Drozdow and Messrs. Martus and Schundler
are subject to certain restrictions on competition with the Company for a period
of one year following termination of such executive's employment for any reason.
The agreement with Dr. Toyos may be terminated by the Company (i) upon the
death or permanent disability of Dr. Toyos, and (ii) for cause (as defined in
the agreement) upon 30 days written notice. In the event of termination pursuant
to either of those provisions, the Company has no further obligation to Dr.
Toyos other than the obligation to pay accrued but unpaid salary. The agreement
may be terminated by Dr. Toyos upon 30 days written notice if the Company fails
to perform its obligations under the agreement, in which event the Company has
no further obligation to Dr. Toyos other than the obligation to pay accrued but
unpaid salary. The agreement requires the Company to continue to provide Dr.
Toyos with medical malpractice insurance coverage for claims arising during the
term of the agreement, to the extent Dr. Toyos was covered prior to his
termination, for a period of four years from the date of termination. Dr. Toyos
is subject to certain restrictions on competition with the Company for a period
of one year following termination of his employment; provided, however, that if
the agreement expires pursuant to its terms on the anticipated expiration date,
the restrictions on competition do not apply to Dr. Toyos unless the Company
agrees to pay Dr. Toyos the sum of $250,000 within 30 days of such expiration.
9
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STOCK PERFORMANCE GRAPH
The following graph provides a comparison of cumulative total stockholder
return for the period from October 31, 1995 (the date on which the Common Stock
was first publicly traded) through December 31, 1997, among the Company, the
Nasdaq Stock Market-US Companies Index (the "Nasdaq-US Index") and the Center
for Research in Security Prices ("CRSP") Nasdaq Stock Market-Health Services
Index (the "CRSP-Health Services Index"). The Stock Performance Graph assumes an
investment of $100 in each of the Company and the two indices, and the
reinvestment of any dividends. The historical information set forth below is not
necessarily indicative of future performance. Data for the Nasdaq-US Index and
the CRSP-Health Services Index was provided to the Company by CRSP.
<TABLE>
<CAPTION>
10/31/95 12/29/95 12/31/96 12/31/97
-------- -------- -------- --------
<S> <C> <C> <C> <C>
The Company $100.00 $ 95.10 $ 46.08 $117.65
Nasdaq-US Index $100.00 $101.82 $125.22 $153.65
CRSP-Health Services Index $100.00 $117.88 $117.84 $120.04
</TABLE>
Prepared By The Center For Research In Security Prices
Produced on 3/09/98 including data to 12/31/97.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
In connection with the Company's initial public offering in November 1995,
the Board of Directors established a Compensation Committee, which currently
consists of Drs. Eisenberg and Natkow and Mrs. Hopping. Prior to the
establishment of the Compensation Committee, decisions with respect to
compensation of executive officers were made by the full Board of Directors. The
Compensation Committee is responsible for setting base salaries for executive
officers and awarding bonuses under the Company's Executive Incentive Plan. In
addition to administering executive compensation, the Compensation Committee
also reviews from time to time succession planning for senior management. The
overall objectives of the Company's executive compensation program, as
established by the Board of Directors and confirmed by the Compensation
Committee, are to:
- attract, retain and reward experienced, highly motivated executives who
contribute to the Company's growth;
- reward executives based on individual and corporate performance; and to
- align executives' goals with those of the stockholders through
grants of stock options.
In order to implement this philosophy for 1998, the Compensation Committee
will review the individual elements of executive compensation, including
salaries, incentive compensation awards and the terms of employment agreements
with a view towards enhancing the profitability of the Company and closely
aligning the financial interests of the Company's officers with those of its
stockholders.
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BASE SALARY
To date, the Compensation Committee has not established a formal policy for
determining base salary ranges for executive positions, as the vast majority of
the Company's executive officers are now compensated in accordance with the
terms of employment agreements approved by the Board of Directors and entered
into prior to the establishment of the Compensation Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the compensation of the Chief Executive Officer, the
Compensation Committee applies the same philosophy and procedures as are applied
to other executive officers. As with the other executive officers, the Chief
Executive Officer is currently compensated in accordance with the terms of an
employment agreement approved by the Board of Directors and entered into prior
to the establishment of the Compensation Committee.
EXECUTIVE INCENTIVE PLAN
1997 Bonus Awards. The Compensation Committee is responsible for awarding
bonuses under the Incentive Plan. Pursuant to the Incentive Plan, the
Compensation Committee determines those officers and other key employees of the
Company who will be eligible for bonuses if the objectives established by the
Compensation Committee for the applicable period are met. Pursuant to the
Incentive Plan, for the fiscal year ending December 31, 1997, Drs. Eisenberg,
Gold and Drozdow and Messrs. Martus and Schundler earned cash bonuses because
the Company's 1997 earnings per share, exceeded $0.58. These executives elected
to receive options to purchase Common Stock in lieu of such cash bonuses as
disclosed in the Summary Compensation Table.
1998 Bonus Awards. For the fiscal year ending December 31, 1998, the
Compensation Committee has declared Drs. Eisenberg, Gold and Drozdow and Messrs.
Martus and Schundler and Dennis L. Gates and Robert Coward eligible for bonuses
under the Incentive Plan. In order to incentivize these individuals to focus
their efforts on the Company's financial performance, the Compensation Committee
has established a bonus formula for 1998 (the "1998 Formula") based on the
Company's 1998 earnings per share, as reported in the Company's 1998 audited
financial statements ("1998 EPS"). The 1998 Formula provides that in the event
1998 EPS is equal to or exceeds $0.76, the eligible employees will receive, in
the aggregate, bonuses in an amount equal to 20% of the product of the excess of
1998 EPS over $0.76 multiplied by the number of shares used in determining 1998
EPS. Of the aggregate amount of bonuses determined by the 1998 Formula, 25%
shall be awarded to Dr. Eisenberg, 5% shall be awarded to each of Drs. Gold and
Drozdow and Messrs. Martus and Schundler, 2.5% shall be awarded to each of
Messrs. Coward and Gates and the remaining 50% shall be distributed to officers
and key employees at the discretion of Dr. Eisenberg. The 1998 Formula provides
that no bonuses will be awarded pursuant to the Incentive Plan for the 1998
fiscal year if 1998 EPS is less than $0.76.
MITCHELL EISENBERG, M.D.
JAMIE E. HOPPING
NEIL A. NATKOW, D.O.
11
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COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Company's executive compensation is determined by the Compensation
Committee of the Company's Board of Directors, which consists of Drs.
Eisenberg and Natkow and Mrs. Hopping. Dr. Eisenberg serves as Chief
Executive Officer of the Company.
CERTAIN TRANSACTIONS
SHERIDAN MEDICAL HEALTHCORP, P.C.
As a result of certain prohibitions on the practice of medicine by business
corporations in New York, Sheridan Medical Healthcorp, P.C. ("Sheridan-NY") was
organized under the laws of the State of New York on October 28, 1993. Dr.
Drozdow is the only stockholder of Sheridan-NY. The Company has maintained an
affiliation with Sheridan-NY through a management services agreement pursuant to
which the Company provides all physician management services to the physicians
affiliated with Sheridan-NY in exchange for a management fee. During 1997, the
Company received approximately $2,753,000 in fees from Sheridan-NY under this
agreement.
SHERIDAN HEALTHCARE OF TEXAS, P.A.
As a result of certain prohibitions on the practice of medicine by business
corporations in Texas, Sheridan Healthcare of Texas, P.A. ("Sheridan-Texas") was
organized under the laws of the State of Texas on August 18, 1995. Dr. Drozdow
is the only stockholder of Sheridan-Texas. The Company has entered into a
management services agreement with Sheridan-Texas pursuant to which the Company
provides all physician management services to the physicians affiliated with
Sheridan-Texas in exchange for a management fee. During 1997, the Company
received approximately $47,000 in fees from Sheridan-Texas under this
arrangement.
SHERIDAN HEALTHCARE OF CALIFORNIA MEDICAL GROUP, INC.
As a result of certain prohibitions on the practice of medicine by business
corporations in California, Sheridan Healthcare of California Medical Group,
Inc. ("Sheridan-California") was organized under the laws of the state of
California on August 18, 1995. Dr. Drozdow is the only stockholder of
Sheridan-California.
SHERIDAN CHILDREN'S HEALTHCARE SERVICES OF PENNSYLVANIA, P.C.
The Company also maintains an affiliation with Sheridan Children's
Healthcare Services of Pennsylvania, P.C. ("Sheridan Children's"), under which
Sheridan Children's provides certain physician management services to the
Company. Sheridan Children's is also wholly-owned by Dr. Drozdow. The Company
provided management services to Sheridan Children's during 1997, but the
management fees were deferred.
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<PAGE>
PROPOSAL 2: POTENTIAL ISSUANCE OF COMMON STOCK
FORWARD LOOKING STATEMENTS
This Proxy Statement contains or incorporates certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 with respect to the financial condition, results of operations and business
of the Company. These forward-looking statements are subject to risks and
uncertainties that would cause actual results to differ materially from those
projected. Those risks and uncertainties include 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, the loss of significant hospital or
third-party payor relationships, the ability to recruit and retain qualified
physicians and changes in the number of patients using the Company's physician
services.
INTRODUCTION
On March 4, 1998, the Company completed a transaction in which, through one
of its subsidiaries, it purchased options to acquire all of the stock of two
entities with an office-based perinatology practice (the "Perinatology
Transaction"). The Company financed the Perinatology Transaction through the
issuance of shares of the Common Stock of the Company and from borrowings under
its revolving credit facility with NationsBank, National Association. The
Company may be obligated to issue additional shares of Common Stock as
consideration for the Perinatology Transaction if the total value of cash
received and the fair market value of shares of Common Stock held by each
shareholder of the two entities through which the acquired practice is
conducted, as of March 4, 1999, is not equal to a specified dollar value (see
"--Terms of the Perinatology Transaction and Related Transactions" below). In
addition, the Company, through one of its subdidiaries, entered into a long-term
manament agreement with such practice.
Under the Company's Charter and the Delaware General Corporation Law, the
Board of Directors had the authority to approve the issuance of the Common
Stock. However, it is possible that additional shares of Common Stock could be
issued which, together with the shares of Common Stock previously issued in the
Perinatology Transaction, would represent 20% or more of the number of shares
outstanding prior to the Perinatology Transaction. Rule 4310 of the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") requires
that stockholder approval be obtained with respect to the issuance of any shares
of Common Stock which would cause the aggregate number of shares issued in the
Perinatology Transaction to equal or exceed 20% of the number of shares
outstanding prior to the Perinatology Transaction (the shares causing the
aggregate number of shares issued to equal or exceed 20% of the shares
outstanding are referred to herein as the "Excess Shares").
DESCRIPTION OF PERINATOLOGY
Perinatology (as defined below) is an office-based perinatology practice
which provides services to high-risk obstetric patients in Dallas and the
surrounding north Texas area. Perinatology provides diagnostic, laboratory and
surgical procedures, consultations, medical management and delivery services to
women with high risk and/or complicated pregnancies, usually on a referral
basis. Perinatology operates two main offices in the greater Dallas, Texas area.
It's principal executive office is at 8160 Walnut Hill Lane, Suite 001, Dallas,
Texas 75231, (214) 696-5760.
Perinatology employs two physician specialists, both of whom are board
certified in Obstetrics and Gynecology and Maternal Fetal Medicine, as well as
two medical specialists and a complete office support staff. Perinatology
provides perinatal services to three hospitals in the Dallas area. For the year
ended December 31, 1997, approximately 55% of Perinatology's patient services
revenues billed were derived from diagnostic ultrasounds, X-rays and laboratory
fees, 18% from surgery and amniocentesis procedures, 13% from medical
consultations, 8% from caesarian sections and deliveries and the balance from
other miscellaneous services.
13
<PAGE>
REASONS FOR THE PERINATOLOGY TRANSACTION; RECOMMENDATION OF THE BOARD OF
DIRECTORS.
The Board of Directors unanimously approved the Perinatology Transaction
and the issuance of Common Stock in connection therewith, including any Excess
Shares, by written consent on March 3, 1998. THE BOARD OF DIRECTORS BELIEVES
THAT THE PERINATOLOGY TRANSACTION AND THE RELATED ISSUANCE OF COMMON STOCK,
INCLUDING ANY EXCESS SHARES, ARE IN THE BEST INTEREST OF THE COMPANY AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE ISSUANCE OF THE EXCESS
SHARES.
In making its determination with respect to the Perinatology Transaction
and the related issuance of Common Stock, including any Excess Shares, the Board
considered the following factors which it deemed to be favorable:
(i) Expansion of the Company's Specialist Physician Services. The Company's
objective is to expand its business by increasing the number of hospitals
and other health care facilities at which it provides specialist physician
services, providing physician services in additional specialities to
existing hospital customers and acquiring additional physician practices.
The Perinatology Transaction provides the Company with a new line of
office-based physician services specializing in the area of women's health.
(ii) Further Development of the Company's Integrated Network Strategy.One of the
Company's key strategies is to create integrated networks providing women's
and children's health care services, consisting of both hospital-based and
office-based physicians in various complementary specialities that support
the Company's hospital customers. The Board of Directors believes that the
Perinatology Transaction supports this strategy.
(iii)Potential Effect on Financial Results. Perinatology generated net revenue
of approximately $4.3 million for the year ended December 31, 1997 which
resulted in pro forma net income (after giving effect to a pro forma tax
provision as if the Cavenee P.A. (as defined below) and Trimmer P.A. (as
defined below) S-corporations had been C-corporations) of approximately
$898,000. The Board of Directors believes that the Perinatology Transaction
represents an opportunity for growth for the Company and that any such
growth will have a positive effect on the Company's financial results.
14
<PAGE>
The transactions involved in effecting the Perinatology Transaction and
terms of the securities issued are described below. The Board of Directors seeks
the approval of the Company's stockholders for the potential issuance of the
Excess Shares.
TERMS OF THE PERINATOLOGY TRANSACTION AND RELATED TRANSACTIONS
Management Agreement. On March 5, 1998, Sheridan Healthcorp, Inc.
("Sheridan"), a wholly-owned subsidiary of the Company, entered into a forty
(40) year Management Services Agreement (the "Management Agreement") with
Michael Cavenee, M.D., P.A. ("Cavenee P.A."), Kenneth Trimmer, M.D., P.A.
("Trimmer, P.A. and, together with Cavenee, P.A., "Perinatology"), and Michael
R. Cavenee, M.D. and Kenneth J. Trimmer, M.D., the sole stockholders of Cavenee,
P.A. and Trimmer, P.A., respectively.
Pursuant to the terms of the Management Agreement, Perinatology delegates
to Sheridan responsibility for the provision of all management services
including personnel, bookkeeping and accounting services, billing and collection
services, physician recruiting and credentialling, managed care contracting,
utilization review, malpractice risk management and management information
systems. In exchange Sheridan receives a monthly management fee from
Perinatology. The Management Agreement is terminable by a party (i) if the other
party fails to perform in any material respect any material obligation or
materially breaches any material term or condition of the Management Agreement,
which failure is not cured within 60 days after notice or (ii) upon the
application for, or consent to, the appointment of a receiver, trustee or
liquidator of all or a substantial part of the other party's assets, the filing
of a petition in bankruptcy or consent to an involuntary petition in bankruptcy
by the other party or (iii) if the other party materially breaches or defaults
under any other agreement delivered and executed in connection with the
Perinatology Transaction, subject to any applicable notice and cure periods
provided in that agreement.
Purchase Option Agreements. The Company, pursuant to the terms of separate
Purchase Option Agreements, each dated March 4, 1998, as amended, between the
Company and each of (i) Cavenee P.A. and Dr. Cavenee and (ii) Trimmer P.A. and
Dr. Trimmer (together, the "Purchase Option Agreements"), acquired options for
it or its legally qualified designee or designees to purchase at any time the
outstanding stock of Cavenee P.A. and Trimmer P.A, respectively, each for an
exercise price of $100.00.
The consideration paid to Dr. Cavenee included (i) approximately $1.8
million in cash and (ii) 403,560 shares of Common Stock. (the "Cavenee Shares").
In addition, the Purchase Option Agreement between the Company, Cavenee, P.A.
and Dr. Cavenee (the "Cavenee Purchase Option Agreement") provides that in the
event by March 4, 1999 Dr. Cavenee shall not have received an aggregate of
approximately $4.6 million in cash from the sale of all or part of the Cavenee
Shares (and/or, at the Company's option, additional issued shares of Common
Stock),then the Company shall pay cash to Dr. Cavenee in the amount of any
deficit. Further, the Cavenee Purchase Option Agreement provides that in the
event the sum of the amount of cash received upon the sale of the Cavenee Shares
and any additional shares issued (as described above) plus the fair market value
(determined based on the average per share closing price of Common Stock on the
Nasdaq National Market during the fifteen trading days immediately preceding the
Second Payment Date) of any Cavenee Shares still held by Dr. Cavenee on the
Second Payment Date plus the cash consideration previously paid to him is less
than $9,212,055, the Company at its election will either (i) issue to Dr.
Cavenee, within 15 days subsequent to the Second Payment Date, additional shares
of Common Stock such that the total value of cash received and any Cavenee
shares still held by Dr. Cavenee as of the Second Payment Date is equal to
approximately $9.2 million or (ii) pay to Dr. Cavenee by five days subsequent to
the Second Payment Date cash in an amount equal to (x) $9.2 million minus (y)
the fair market value of any Cavenee Shares still held by Dr. Cavanee on the
Second Payment Date plus the cash consideration previously paid to him. The
agreement also provides that, at the Company's request, the parties will make an
election under Section 338(h)(10) of the Internal Revenue Code (the "Election").
In the event of an Election the Company has agreed to indemnify Dr. Cavenee for
the additional tax liability, if any, arising as a result of the Election. For
purposes of this paragraph the Second Payment Date shall be March 4, 1999 unless
an Election is made in which case the Second Payment Date shall be June 30,
1999.
The consideration paid to Dr. Trimmer for the option to purchase the stock
of Trimmer, P.A. included (i) approximately $2.0 million in cash and (ii)
15
<PAGE>
446,040 shares of Common Stock (the "Trimmer Shares"). In addition, the Purchase
Option Agreement between the Company, Trimmer, P.A. and Dr. Trimmer (the
"Trimmer Purchase Option Agreement") provides that in the event that by March 4,
1999 Dr. Trimmer shall not have received in cash an aggregate of approximately
$5.1 million from the sale of all or part of the Trimmer Shares (and/or, at the
Company's option, additional issued shares of Common Stock), then the Company
shall pay cash to Dr. Trimmer in the amount of any deficit. The Trimmer Purchase
Option Agreement further provides that in the event the sum of the amount of
cash received upon the sale of shares of Common Stock (as described above) plus
the fair market value of any Trimmer Shares still held by Dr. Trimmer on the
Second Payment Date plus the cash consideration previously paid to him is less
than $10,181,745, the Company at its election will either (i) issue to Dr.
Trimmer, within fifteen days subsequent to the Second Payment Date, additional
shares of Common Stock such that the total value of cash received and any
Trimmer share still held by Dr. Trimmer as of the Second Payment Date is equal
to approximately $10.2 million or (ii) pay to Dr. Trimmer by five days
subsequent to the Second Payment Date, cash in an amount equal to (x) $10.2
million minus (y) the fair market value of any Trimmer Shares still held by Dr.
Trimmer on the Second Payment Date plus the cash consideration previously paid
to him. The agreement also provides that, at the Company's request, the parties
will make an election under Section 338(h)(10) of the Internal Revenue Code (the
"Election"). In the event of an Election the Company has agreed to indemnify Dr.
Trimmer for the additional tax liability, if any, arising as a result of the
Election. For purposes of this paragraph the Second Payment Date shall be March
4, 1999 unless an Election is made in which case the Second Payment Date shall
be June 30, 1999.This summary of the Purchase Option Agreements is not complete
and is qualified in its entirety by reference to the full text of the Form of
Purchase Option Agreement attached to this Proxy Statement as Annex A and the
Schedules attached thereto.
Employment Agreements. In connection with the Perinatology Transaction,
Cavenee, P.A. and Trimmer, P.A. entered into employment agreements with Drs.
Cavenee and Trimmer, respectively. The initial term of each of the agreements
with Drs. Cavenee and Trimmer ends on March 4, 2003. Thereafter, each agreement
is renewable for a five-year term if specified earnings thresholds are met and
the physician is less than sixty-five years old. The employment agreements
provide for a base salary and incentive compensation. Each of Drs. Cavenee and
Trimmer are subject to certain restrictions on competition with Cavenee, P.A.
and Trimmer, P.A. for a period of 24 months in a specified geographic area
following termination of such physician's employment.
Voting Agreements. The Company and its legally qualified designated trustee
entered into separate Voting Trust Agreements with each of (i) Cavenee, P.A. and
Dr. Cavenee and (ii) Trimmer, P.A. and Dr. Trimmer, pursuant to which the
Company's legally designated trustee was granted the sole right to vote all of
the capital stock of Cavenee, P.A. and Trimmer, P.A., respectively.
ACCOUNTING TREATMENT
The Company will account for the Perinatology Transaction as a purchase.
Purchase accounting for a combination is similar to the accounting treatment
used in the acquisition of any asset group. The fair market value of the
consideration (cash, stock and any other consideration) given by the acquiring
company (here, the Company) is used as the valuation basis for the combination.
The assets and liabilities of the acquired company (here, Perinatology) are
revalued to their respective fair market values at the combination date. The
financial statements of the acquiring company reflect the combined operations
from the date of combination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Perinatology Transaction and the potential issuance of the Excess
Shares are not expected to have any Federal income tax effect on the current
shareholders of the Company.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, 1,000,000 shares of Class A Common Stock (the "Nonvoting
Common") and 5,000,000 shares of undesignated preferred stock issuable in series
by the Board of Directors (the "Preferred Stock").
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<PAGE>
Common Stock. Holders of Common Stock are entitled to one vote per share on
all matters to be voted on by stockholders. Holders of Common Stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of Directors can elect all of the Directors
then standing for election, subject to the rights of the holders of Preferred
Stock, if and when issued. The holders of Common Stock have no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to the Common Stock.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor. The possible issuance of Preferred Stock with a
preference over Common Stock as to dividends could impact the dividend rights of
holders of Common Stock.
The By-laws provide, subject to the rights of the holders of the Preferred
Stock, if and when issued, that the number of Directors shall be fixed by the
Board of Directors. The Directors, other than those who may be elected by the
holders of Preferred Stock, if and when issued, are divided into three classes,
as nearly equal in number as possible, with each class serving for a three-year
term. Subject to any rights of the holders of Preferred Stock, if and when
issued, to elect Directors, and to remove any Director whom the holders of any
such stock had the right to elect, any Director of the Company may be removed
from office only with cause and 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.
Nonvoting Common. Holders of Nonvoting Common generally have the same
rights and privileges as holders of Common Stock, except that holders of
Nonvoting Common do not have any voting rights other than those which may be
provided by applicable law. Each share of Nonvoting Common is convertible at the
option of the holder thereof, into a share of Common Stock (subject to
adjustment to reflect any dividend in Common or Nonvoting Common or any
subdivision, combination or reclassification of the outstanding Common or
Nonvoting Common) upon the occurrence of a Class A Conversion Event (as defined
below) if such share of Nonvoting Common is to be distributed, disposed of or
sold in connection with such Class A Conversion Event. Under the Company's Third
Amended and Restated Certificate of Incorporation (the "Certificate"), a "Class
A Conversion Event" is defined as (i) any sale in connection with any public
offering or public sale of the securities of the Company, (ii) any sale,
including by way of merger, consolidation or similar transaction (collectively,
a "Sale"), of securities of the Company to a person or group of persons (as such
term is defined in the Exchange Act (a "Group") if, after such Sale, such person
or Group in the aggregate would own or control securities which possess in the
aggregate the power to elect a majority of the Company's Board of Directors
(provided such Sale has been approved by the Board of Directors of the Company),
(iii) any Sale of securities of the Company to a person or Group, if, after such
Sale, such person or Group in the aggregate would own or control securities of
the Company (excluding those securities 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 Company's Board of Directors and (iv) any
sale of securities of the Company to a person or Group, if, after such sale,
such person or Group in the aggregate would not own, control or have the right
to acquire more than 2% of the outstanding securities of any class of voting
securities of the Company.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to issue
up to 5,000,000 shares of Preferred Stock in classes or 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 thereon as set forth in the Certificate. Any such
Preferred Stock issued by the Company may rank prior to the Common Stock as to
dividend rights, liquidation preference or both, may have full or limited voting
rights and may be convertible into shares of Common Stock.
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VOTE REQUIRED TO APPROVE THE ISSUANCE OF THE EXCESS SHARES
An affirmative vote of a majority of the shares of Common Stock cast is
required to approve the issuance of the Excess Shares described above.
GENERAL EFFECT OF APPROVAL ON EXISTING HOLDERS OF COMMON STOCK
If the issuance of the Excess Shares is approved and such shares are
actually issued, the holders of such shares would be entitled to vote on all
matters on which the holders of Common Stock are entitled to vote. Consequently,
the voting rights of the current holders of Common Stock would be subject to
dilution. In addition, if the issuance of the Excess Shares is approved and such
shares are actually issued, the economic interest of the current holders of
Common Stock would also be diluted.
IMPACT OF FAILURE TO APPROVE ISSUANCE OF THE EXCESS SHARES
If stockholder approval of this Proposal 2 is not obtained the Company
would be prohibited from issuing the Excess Shares pursuant to the rules
governing Nasdaq, and consequently, the Company would be required to pursue
means of making any required additional payments to Drs. Cavenee and Trimmer in
cash rather than Common Stock. The Company believes that any such cash payments
would require an external source of financing, and such external financing would
require the consent of the syndicate of banks which provided the Company's
revolving credit facility. There can be no assurance that any such financing
could be obtained on commercially reasonable terms, or at all.
RECENT DEVELOPMENTS
During the period from January 1998 through March 1998, the Company
completed three transactions with physician practices (in addition to the
Perinatology Transaction) for aggregate consideration of approximately $20.2
million, of which approximately $13.2 million was paid in cash and approximately
$7.0 million was paid through the issuance of approximately 499,000 shares of
Common Stock. In connection with such transactions, the Company entered into
long-term management agreements with a hospital-based anesthesia practice with
twelve physicians, a hospital-based anesthesia and pain management practice with
eight physicians and an office-based gynecologic-oncology practice with two
physicians. These practices are all located in Florida.
Effective April 1, 1998, the Company completed the sale of a primary care
practice with two office locations for an aggregate price of approximately $3.5
million. As consideration for the sale the Company received from the buyer a
promissory note pursuant to which payments are made based on a 20-year
amortization schedule, with a balloon payment at the end of the fifth year. The
annual interest rate on the note is 7.5%. The practices generated approximately
$8.2 million in net revenue for the year ended December 31, 1997. The Company
did not realize a significant gain or loss on the transaction.
The Company amended and restated its existing credit agreement on April 30,
1998 in order to increase the maximum aggregate borrowing amount to $75 million.
In addition, the Company received commitments from six syndicate banks that have
agreed to participate in the lending under the amended and restated credit
agreement.
18
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
<CAPTION>
QUARTERLY OPERATING RESULTS March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1997
Net revenue $ 22,979 $ 24,253 $ 24,996 $ 26,388
Operating income 2,451 2,483 2,686 2,902
Net income 1,188 1,232 1,334 1,413
Net income per share $ 0.17 $ 0.18 $ 0.19 $ 0.20
March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
1996
Net revenue $ 19,854 $ 23,200 $ 24,869 $ 24,844
Operating income 1,406 1,967 2,157 (14,895)
Net income 853 1,116 727 (14,822)
Net income per share $ 0.14 $ 0.16 $ 0.11 $ (2.21)(1)
- ---------
<FN>
(1) Includes a $17.4 million write down of office based net assets in the fourth
quarter of 1996, which is related to a change in the Company's strategic
direction and its decision to sell certain office-based physician practices.
</FN>
</TABLE>
MARKET PRICE DATA
The following table sets forth the high and low sale prices per share of
Common Stock on (i) March 5, 1998, the last Nasdaq trading day preceding public
announcement of the Perinatology Transaction and (ii) May , 1998.
---
High Low
---- ---
March 5, 1998....................... $14.75 $14.625
May , 1998........................ -- --
--
BECAUSE THE MARKET PRICE FOR SHARES OF COMMON STOCK IS SUBJECT TO
FLUCTUATION, STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
SUCH SHARES.
19
<PAGE>
SHERIDAN HEALTHCARE, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands)
The following selected financial data have been derived from the audited
financial statements of the Company and its Predecessor (as defined below). The
financial statements of the Predecessor as of and for the period ended December
31, 1993 have been audited by Peed, Koross, Finklestein & Crain, P.A. The
financial statements of the Predecessor (i) for the period from January 1, 1994
to November 28, 1994, (ii) of the Company as of December 31, 1994 and for the
period from November 29, 1994 to December 31, 1994 and (iii) as of and for the
periods ended December 31, 1995, 1996 and 1997, have been audited by Arthur
Andersen LLP. The combined statement of operations data for 1994 combines the
audited results of operations of the Predecessor for the period from January 1,
1994 to November 28, 1994 and of the Company for the period from November 29,
1994 to December 31, 1994. The financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and the notes thereto included in the Company's Annual Report on Form
10-K, as amended, for the year ended December 31, 1997, which is incorporated in
this Proxy Statement by reference.
<TABLE>
<CAPTION>
Company Combined Company Predecessor
---------------------------- ------------ ----------- ---------------------------
Period from Period from
Year Ended November 29, January 1, Year
December 31, Year Ended 1995 to 1994 to Ended
---------------------------- December 31, December 31, November 28, December 31,
Statement of Operations 1997 1996 1995 1994 1994 1994 1993
-------- --------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Data (in thousands):
Net revenue........................ $ 98,616 $ 92,767 $ 64,665 $ 38,624 $ 5,129 $ 33,495 $ 29,891
Operating income (loss)............ 10,522 (9,365) 2,301 1,708 (478) 2,186 (557)
Income (loss) before extraordiary
item............................. $ 5,167 $ (12,126)$ (1,497)$ 614 $ (642) $ 1,256 $ (481)
Extraordinary item................. (2,184)
Net income (loss)............... $ 5,167 $ (12,126)$ (3,681)$ 614 $ (642) $ 1,256 $ (481)
Income (loss) before extraordinary item
per share....................... $ 0.77 $ (1.84)$ (1.05) $ (.36)
Net income (loss) per share:
Basic........................... 0.77 (1.84) (1.86) (.36)
Diluted......................... 0.73 (1.84) (1.86) (.36)
Company Predecssor
----------------------------------------------------- --------------
December 31,
----------------------------------------------------- December 31,
1997 1996 1995 1994 1993
-------- --------- --------- ----------- --------------
Total assets....................... 87,035 73,408 64,373 54,127 8,356
Long-term debt, net................ 29,833 21,367 11,365 30,581 101
Stockholders' equity............... 41,350 35,958 42,669 13,261 130
<FN>
(1) The "Predecessor" is Sheridan Healthcorp, Inc. and its subsidiaries. See Note 1 of Notes to the Company's
Consolidated Financial Statements included in the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 1997, which is incorporated in this Proxy Statement by reference.
</FN>
</TABLE>
20
<PAGE>
MICHAEL CAVENEE, M.D., P.A. AND
KENNETH TRIMMER, M.D., P.A.
SELECTED COMBINED FINANCIAL DATA
The following selected financial data as of and for the year ended December
31, 1997 has been derived from the audited financial statements of Michael
Cavenee, M.D., P.A. and Kenneth Trimmer, M.D., P.A. as of and for the period
ended December 31, 1997 which were audited by Arthur Andersen LLP. The selected
financial data as of and for the years ended December 31, 1993, 1994, 1995 and
1996 has been prepared from the unaudited internal financial statements of
Perinatology, adjusted where necessary, to the basis of accounting used in the
Company's consolidated financial statements. No adjustments have been made to
reflect any modification to the post-acquisition salary rates of the
stockholders.
<TABLE>
<CAPTION>
Combined
Year Ended December 31,
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data (in thousands):
Net revenue.................. $ 4,346 $ 4,017 $ 3,050 $ 2,255 $ 2,121
Operating income............. 1,481 2,775 1,923 1,211 1,025
Net income (loss)............ $ 899 $ 954 $ 461 $ 240 $ (79)
Combined
Year Ended December 31,
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- --------- -------- --------
Balance Sheet Data
(in thousands):
Total assets................. $ 683 $ 592 $ 564 $ 396 $ 485
Long-term debt, net.......... 54 83 293 123 301
Stockholders' equity......... $ 284 $ 573 $ 437 $ 129 $ 23
</TABLE>
21
<PAGE>
SHERIDAN HEALTHCARE, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following unaudited pro forma consolidated balance sheet as of December
31, 1997 and the unaudited pro forma consolidated statement of operations for
the year ended December 31, 1997 reflect adjustments to the Company's historical
financial position and results of operations to give effect to the transactions
discussed below as if such transactions had been consummated at December 31,
1997, in the case of the balance sheet, and at January 1, 1997, in the case of
the statement of operations. The accompanying unaudited pro forma consolidated
financial statements should be read in connection with the consolidated
financial statements of the Company included in the Company's Annual Report on
Form 10-K, as amended, for the year ended December 31, 1997, which is
incorporated into this Proxy Statement by reference.
The unaudited pro forma consolidated financial statements have been
prepared by the Company based, in part, on the audited financial statements of
the businesses acquired as required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") which financial statements are included in the
Company's Form 8-K/A filed April 16, 1998, which is incorporated into this Proxy
Statement by reference. These unaudited pro forma consolidated financial
statements are not intended to be indicative of the results that would have
occurred if the transactions had occurred on the dates indicated or which may be
realized in the future.
On March 5, 1998, Sheridan Healthcorp, Inc., a wholly-owned subsidiary of
the Company, entered into a long-term management services agreement with Cavenee
P.A. and Trimmer P.A. In addition, the Company acquired options to purchase at
any time the stock of Cavenee P.A. and Trimmer P.A. at a specified exercise
price. The aggregate consideration paid for the options was approximately $4.0
million in cash and 885,000 shares of the Company's common stock. As a result of
these transactions, which have been accounted for as purchases, goodwill of
approximately $16.9 million was recorded. This goodwill is being amortized over
25 years. The unaudited pro forma consolidated statement of operations for the
year ended December 31, 1997 includes the operating results of Perinatology for
the year ended December 31, 1997. See the audited combined financial statements
of Perinatology as of December 31, 1997 and for the year then ended, included in
the Company's Form 8-K/A, as filed on April 16, 1998, which is incorporated into
this Proxy Statement by reference.
Pro Forma
Year Ended
December 31, 1997
-----------------
Unaudited Pro Forma Statement
of Operations Data:
Net revenue..................................... $ 102,962
Operating income................................ 12,389
Net income (loss)............................... $ 6,113
Net income (loss) per share
Basic................................. $ 0.80
Diluted............................... $ 0.77
Weighted average share of common stock
and common stock equivalents outstanding
Basic................................. 7,607
Diluted............................... 7,920
December 31, 1997
-----------------
Unaudited Pro Forma Consolidated
Balance Sheet Data:
Total assets.................................... $ 104,575
Long-term debt, net............................. 33,837
Stockholders' equity............................ $ 54,514
22
<PAGE>
PROPOSAL 3: APPROVAL OF AN AMENDMENT
TO THE COMPANY'S SECOND AMENDED AND RESTATED
1995 STOCK OPTION PLAN
INTRODUCTION
On February 4, 1998, the Board of Directors adopted, subject to stockholder
approval at the Annual Meeting, an amendment to the Option Plan (the "Plan
Amendment") pursuant to which the number of shares of Common Stock reserved for
issuance under the Option Plan would be increased from 1,350,000 to 1,750,000.
The effect of the Plan Amendment is reflected in full on Annex B attached
hereto.
The Board of Directors believes that the Company's growth and long-term
success depend in large part upon retaining and motivating key management
personnel and that such retention and motivation can be achieved in part through
the grant of stock options. The Board of Directors also believes that stock
options can play an important role in the success of the Company by encouraging
and enabling the directors, officers and other employees of the Company, upon
whose judgment, initiative and efforts the Company depends for sustained growth
and profitability, to acquire a proprietary interest in the long-term
performance of the Company. The Board of Directors anticipates that providing
such persons with a direct stake in the Company will assure a closer
identification of the interests of the participants in the Option Plan with
those of the Company, thereby stimulating the efforts of such participants to
promote the Company's future success and strengthen their desire to remain with
the Company. The Board of Directors believes that the proposed increase in the
number of shares issuable under the Option Plan will help the Company accomplish
these goals and will keep the Company's equity incentive compensation
competitive with that of its competitors.
As of the date of this Proxy Statement, options to purchase all 1,350,000
shares of Common Stock currently reserved for issuance under the Option Plan
have been granted and remain outstanding. In addition, options to purchase an
additional 200,000 shares of Common Stock have been granted under the Option
Plan, subject to stockholder approval of the Plan Amendment at the Annual
Meeting. If the Plan Amendment is approved by the stockholders, these 200,000
shares will come out of the additional 400,000 shares of Common Stock reserved
for issuance, and 200,000 shares of Common Stock will remain available for
issuance under the Option Plan. If the Plan Amendment is not approved by the
stockholders, the 200,000 additional options will automatically be canceled.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE OPTION PLAN.
SUMMARY OF THE OPTION PLAN
The following description of certain features of the Option Plan is
intended to be a summary only. The summary is qualified in its entirety by the
full text of the Option Plan which is attached hereto as Annex B and which
indicates the effect of the Plan Amendment.
Number of Shares Issuable. Subject to adjustment for stock splits, stock
dividends and similar events, 1,350,000 shares of Common Stock are currently
authorized and reserved for issuance under the Option Plan. If adopted, the Plan
Amendment would increase the number of shares of Common Stock authorized and
reserved for issuance to 1,750,000. Shares of Common Stock underlying any grants
of options under the Option Plan which expire or are canceled or terminated
(other than by exercise) shall be added back to the shares of Common Stock
available for issuance under the Option Plan.
23
<PAGE>
Plan Administration; Eligibility. The Option Plan provides that it shall be
administered by the full Board of Directors or a committee of non-employee
directors as appointed by the Board of Directors from time to time the Option
Committee. The Option Committee currently consists of Mrs. Hopping and Drs.
Golembesky and Natkow. The Board of Directors may discontinue or amend the
Option Plan at any time provided that the rights and obligations under any
option issued prior to an amendment to the Option Plan can not be adversely
affected by such amendment without the consent of the optionee. The Option
Committee has full power to select, from among the persons eligible for awards
under the Option Plan, the individuals to whom awards will be granted, to make
any combination of awards to participants, and to determine the specific terms
of each award, subject to the provisions of the Option Plan. Incentive Options
(as defined below) may be granted only to officers or other employees of the
Company or its subsidiaries, including members of the Board of Directors who are
also employees of the Company or its subsidiaries. Non-Qualified Options may be
granted or issued to officers or other employees of the Company or its
subsidiaries or their affiliates, directors and to consultants and other key
persons who provide services to the Company or its subsidiaries or affiliates
(regardless of whether they are also employees), and to such other persons as
the Option Committee may select from time to time.
Material Terms Of Options. The Option Plan permits the grant of (i) options
to purchase shares of Common Stock intended to qualify as incentive stock
options under Section 422 of the Code ("Incentive Options") and (ii)
Non-Qualified Options. In order to comply with the requirements of Section
162(m) of the Code, the Option Plan provides that 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. The exercise price of each option granted under
the Option Plan is determined by the Option Committee but, in the case of
Incentive Options, may not be less than 100% of the fair market value of the
underlying shares on the date of grant. No Incentive Option may be granted under
the Option Plan to any employee of the Company or any subsidiary who owns at the
date of grant shares of stock representing in excess of 10% of the voting power
of all classes of stock of the Company or a parent or a subsidiary unless the
exercise price for the stock subject to such option is at least 110% of the fair
market value of such stock at the time of grant and the option term does not
exceed five years. Each option may be exercised only by the optionee during his
or her lifetime. As of the close of business on March 31, 1998, the fair market
value of a share of Common Stock was $17.00 as determined by the price of a
share of the Common Stock on the Nasdaq National Market.
The term of each option is fixed by the Option Committee and, in the case
of an Incentive Option, may not exceed ten years from the date of grant. Except
with respect to the automatic grants of options which are made to non-employee
directors on the date they become directors and on the fifth business day after
each annual meeting of stockholders, which provide for a fixed vesting schedule,
the Option Committee determines at what time or times each option may be
exercised and, subject to the provisions of the Option Plan, the period of time
during which options may be exercised, if any, after termination of employment
for any reason. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Option Committee. Upon
exercise of options, the option exercise price must be paid in full (i) in cash
or by certified or bank check or other instrument acceptable to the Option
Committee, (ii) if the applicable option agreement permits, by delivery of
shares of Common Stock already owned by the optionee, or (iii) through a
"cashless" exercise procedure, subject to certain limitations.
The Option Plan provides that in the case of certain transactions
constituting a change in control of the Company, all outstanding options shall
become fully exercisable whether or not such options were exercisable
immediately prior thereto. In addition, the Option Plan and the options issued
thereunder shall terminate upon the effectiveness of any such transaction or
event, unless provision is made in connection with such transaction 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. In the event of such termination, each holder of outstanding options
shall be permitted to exercise all options for a period of at least 15 days
prior to the date of such termination.
24
<PAGE>
Tax Aspects Under the U.S. Internal Revenue Code. Under current federal tax
law, an employee who receives a Non-Qualified Option does not generally realize
any taxable income at the time the option is granted. However, upon the exercise
of such an option, the employee will recognize ordinary income measured by the
excess of the then fair market value of the Common Stock over the exercise
price, and the Company generally will be entitled to a tax deduction for a
corresponding amount. On the other hand, an employee who receives an Incentive
Option does not generally realize any taxable income at the time the option is
granted or at the time it is exercised. The excess of the fair market value of
the Common Stock on the date of exercise over the exercise price is a "tax
preference item," however, that may cause the employee to be subject to the
alternative minimum tax. Upon the sale of stock received upon exercise of any
Incentive Option, the optionee will recognize a capital gain or loss or,
depending on the holding period of the shares of Common Stock, ordinary income,
equal to the difference between the sale price and the exercise price. The
Company is not entitled to a tax deduction with respect to the grant or exercise
of an Incentive Option.
Option Plan Benefits. The following table sets forth the option grants to
the individuals and groups identified below that were made on February 4, 1998
under the Option Plan subject to stockholder approval of the Plan Amendment at
the Annual Meeting. These grants were made from the 400,000 additional shares of
Common Stock reserved under the Option Plan that stockholders are being asked to
approve. If the Plan Amendment is approved, the options will have an exercise
price equal to the fair market value on the date of such approval. If the Plan
Amendment is not approved by the stockholders, 200,000 of the option grants set
forth below will be canceled.
<TABLE>
OPTIONS GRANTED UNDER THE OPTION PLAN
<CAPTION>
Dollar Value Number of
Name and Position ($) Options(1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mitchell Eisenberg, M.D................................. 0 62,500
Chairman of the Board of Directors, President and
Chief Executive Officer
Lewis D. Gold, M.D...................................... 0 43,750
Director and Executive Vice President Business
Development
Gilbert L. Drozdow, M.D., M.B.A......................... 0 18,750
Vice President Hospital Based Services
Jay A. Martus, Esq....................................... 0 18,750
Vice President, Secretary and General Counsel
Michael Schundler........................................ 0 43,750
Chief Financial Officer and Chief Operating Officer
Executive Officers as a Group............................ 0 187,500
Non-Executive Director Group............................. 0 0
Non-Executive Officer Employee Group..................... 0 12,500
</TABLE>
25
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 31, 1998 (except as noted below)
certain information regarding the beneficial ownership of Common Stock by (i)
each person or "group" (as that term is defined in Section 13(d)(3) of the
Exchange Act) known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) the Named Executive Officers, (iii) each
director and nominee for director of the Company and (iv) all directors and
executive officers of the Company as a group (nine (9) persons). Except as
otherwise indicated, each person listed below has sole voting and investment
power over the shares of Common Stock shown as beneficially owned.
Number of Shares Percent of
Name Beneficially Owned Common Stock(1)
- ---- ------------------ ---------------
TA Associates, Inc.
125 High Street
Boston, MA 02110 1,890,882(2) 23.1%
Chestnut Investors
c/o MVP Ventures
45 Milk Street
Boston, MA 02109 213,339(3) 2.6
NationsBank Investment Corporation
c/o NationsBank Leveraged Capital
NationsBank Corporate Center, 10th Floor
100 North Tryon Street
Charlotte, North Carolina 28202-4006 438,695(4) 5.4
Kaufmann Fund, Inc.
140 E. 45th Street, 43rd Floor
New York, New York 10017 900,000(5) 11.0
Kenneth J. Trimmer
6228 Castle Pines Drive
Plano, TX 75093 446,040 5.4
Mitchell Eisenberg 248,041(6) 3.0
Valerio J. Toyos 41,400(7) *
Lewis D. Gold 199,659(8) 2.4
Gilbert L. Drozdow 77,459(9) *
Jay A. Martus 53,721(10) *
Michael F. Schundler 61,700(11) *
Henry E. Golembesky 11,667(12) *
Neil A. Natkow 30,667(13) *
Jamie Hopping 2,500(14) *
All directors and executive officers
as a group (9 persons) 726,814 8.6
- ----------------------------
*Less than one percent
(1) The number of shares of Common Stock outstanding used in calculating the
percentage for each listed person includes the shares of Common Stock
underlying the options held by such person or entity that are exercisable
within 60 days of March 1, 1998, but excludes shares of Common Stock
underlying options held by any other person.
(2) Includes 1,031,130 shares owned by Advent VII L.P.,526,099 shares owned by
Advent Atlantic and Pacific II L.P., 103,105 shares owned by Advent New
York L.P., 210,456 shares owned by Advent Industrial II Limited
Partnership, and 20,029 shares owned by TA Venture Investors Limited
Partnership. (3)Includes 105,189 shares owned by Chestnut III Limited
Partnership and 100,521 shares owned by Chestnut Capital International III
Limited Partnership.
(4) Includes 296,638 shares of Non-voting Common which are convertible into
Common Stock at the option of NationsBank Investment Corporation upon the
occurrence of certain events. As a result, NationsBank Investment
Corporation may be deemed to beneficially own the number of shares of
Common Stock into which the shares of Class A Common Stock so held are
convertible.
(5) The indicated ownership is as of February 18, 1998 and is based solely on a
Schedule 13G provided by this entity to the Company.
(6) Includes 151,015 shares owned by the Eisenberg Family Limited Partnership,a
Florida limited partnership. Dr. Eisenberg acts as the sole general partner
of this limited partnership and exercises sole voting and investment power
with respect to such shares. Also includes 570 shares owned by Dr.
Eisenberg's wife, of which shares Dr. Eisenberg disclaims beneficial
ownership. Also includes 30,000 currently vested options and 10,000 options
which vest within 60 days of March 31, 1998.
(7) Includes 20,000 currently vested options.
(8) Includes 107,870 shares owned by the Gold Family Limited Partnership,Ltd.,a
Florida limited partnership. Dr. Gold acts as the sole general partner of
this limited partnership and exercises sole voting and investment power
with respect to such shares. Also includes 32,000 shares owned by Dr.
Gold's wife, of which shares Dr. Gold disclaims beneficial ownership. Also
includes 24,167 currently vested options and 6,666 options which vest
within 60 days of March 31, 1998.
(9) Includes 43,145 shares owned by the Drozdow Family Limited Partnership,a
Florida limited partnership. Drozdow Family GP Corp., a Florida corporation
owned by Dr. Drozdow and his wife as tenants by the entireties, is the
general partner of this limited partnership. Dr. Drozdow, in his capacity
as the sole director and officer of the general partner of the limited
partnership, exercises sole voting and investment power with respect to
such shares. Includes 30,000 currently vested options.
(10) Includes 42,939 currently vested options.
(11) Includes 27,500 currently vested options.
(12) Includes 10,000 currently vested options and 1,667 options which vest
within 60 days of March 31, 1998.
(13) Includes 1,000 shares owned by Dr. Natkow's wife and minor children, of
which shares Dr. Natkow disclaims beneficial ownership. Also includes 5,834
currently vested options and 833 options which vest within 60 days of March
31, 1998.
(14) Represents 2,500 currently vested options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Exchange Act, requires the Company's executive
officers and directors, and persons who beneficially own (directly or
indirectly) more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC
and Nasdaq. Officers, directors and greater than 10% stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during or with respect to the fiscal year ended December
31, 1997, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% stockholders were satisfied, except
that Dr. Natkow inadvertently failed to file on a timely basis two reports
relating to transactions which took place in March 1997 and May 1997,
respectively and Dr. Drozdow inadvertently failed to file on a timely basis one
report relating to a transaction which took place in December 1997. Each of
these individuals subsequently filed the required forms.
26
<PAGE>
OTHER MATTERS
INDEPENDENT AUDITORS
The accounting firm of Arthur Andersen LLP has served as the Company's
independent auditors since November 1994 and will continue to do so for the 1998
Fiscal Year. A representative of Arthur Andersen LLP will be present at the
Annual Meeting, will be given an opportunity to make a statement if he or she so
desires and will be available to respond to appropriate questions.
MARKET VALUE
On December 31, 1997, the closing price of a share of Common Stock on
Nasdaq was $15.00.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In an
effort to have as large a representation at the Annual Meeting as possible,
special solicitation of proxies may, in certain instances, be made personally or
by telephone, telegraph or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy material to
their principals who are beneficial owners of the Common Stock.
STOCKHOLDER PROPOSALS
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 and
intended to be presented at the Company's 1999 annual meeting of stockholders
must be received by the Company on or before January 18, 1999 to be eligible for
inclusion in the proxy statement and form of proxy to be distributed by the
Board of Directors in connection with such meeting.
Any stockholder proposals intended to be presented at the Company's 1998
Annual Meeting, other than a stockholder proposal submitted pursuant to Exchange
Act Rule 14a-8, must be received in writing at the principal executive office of
the Company no later than April 10, 1999 nor prior to February 24, 1999,
together with all supporting documentation required by the Company's By-laws.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act are hereby incorporated by reference into this
Proxy Statement:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
as filed on March 30, 1998, amended on Form 10-K/A on April 17, 1998 and further
amended on form 10K/A-2 on April 30, 1998.
2. Current Report on Form 8-K as filed on March 19, 1998 and amended on
Form 8-K/A on April 16, 1998.
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In addition, all reports and other documents filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Annual Meeting shall be deemed to be incorporated by
reference herein and to be made a part hereof from the date of filing of such
reports and documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein, or in any other subsequently filed document that also is
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
SUCH INFORMATION WILL BE FURNISHED WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROXY STATEMENT IS MAILED UPON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON TO
JAY A. MARTUS, ESQ. SECRETARY, VICE PRESIDENT AND GENERAL COUNSEL, SHERIDAN
HEALTHCARE INC., 4651 SHERIDAN STREET, SUITE 400, HOLLYWOOD, FLORIDA 33021.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD TODAY.
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ANNEX A
PURCHASE OPTION AGREEMENT
THIS PURCHASE OPTION AGREEMENT (the "Agreement"), dated as of March 4, 1998
(the "Execution Date") is by and among SHERIDAN HEALTHCARE, INC., a Delaware
corporation ("SHCR"), MICHAEL CAVENEE, M.D., P.A., a Texas professional
association (the "Company"), and each of the owners of the stock of the Company
listed on Exhibit A of this Agreement (each a "Shareholder" and collectively,
the "Shareholders") and each of the Partner PA Shareholders (as defined below).
The Partner PA (as defined below) Shareholders are executing and delivering this
Agreement for the limited purpose of joining in the indemnification provisions
of this Agreement.
PRELIMINARY STATEMENTS
1. Each of the Shareholders is a physician, licensed and qualified under
the laws of the State of Texas ("State Law") to own all of the issued and
outstanding shares of capital stock (the "Shares") of the Company.
2. The Shareholders, SHCR and the Company each desire to enter into this
Agreement under which a person or entity, or to persons or entities qualified to
own the Shares of the Company as designated by SHCR (each a "Purchaser" and
collectively, the "Purchasers"), is given the right to acquire all of the Shares
for One Hundred Dollars ($100.00) in exchange for SHCR's payment of the Option
Consideration (as defined below) to the Shareholders.
3. Simultaneously with the execution and delivery of this Agreement each of
the Shareholders and SHCR have executed and delivered a Restrictive Covenant
Agreement (the "RCAs") in which the Shareholders have agreed to restrict certain
professional activities for five (5) years from the date of this Agreement.
Simultaneously with the execution and delivery of this Agreement each of the
Shareholders has entered into a Physician Employment Agreement with the Company
(collectively, the "PEAs"). One day after the execution and delivery of this
Agreement, Sheridan Healthcorp, Inc. ("Sheridan"), a Florida corporation and a
wholly-owned subsidiary of SHCR, will enter into a management services
arrangement with the Company pursuant to a Management Services Agreement dated
as of March 5, 1998 by and between Sheridan, the Company, the Partner PA and
each of the Shareholders and the Partner PA's Shareholders (the "MSA"). The
RCAs, PEAs, MSA and the VTA (as defined below) together with all schedules and
exhibits to each of them are collectively, the "Related Documents".
4. Prior to and as of the execution and delivery of this Agreement, Michael
Cavenee, M.D., P.A. and MICHAEL CAVENEE, M.D., P.A. are in partnership and SHCR
has decided to acquire each of them in parallel simultaneous transactions, which
shall remain separate except for certain rights to indemnification (as described
below) in which SHCR shall be entitled to joint and several indemnity from their
respective shareholders. Simultaneously with the execution and delivery of this
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Agreement and the Related Documents, MICHAEL CAVENEE, M.D., P.A. (the "Partner
PA") and each of the Partner PA's Shareholders and SHCR have executed and
delivered an Additional Restrictive Covenant Agreement (the "ARCAs") in which
the Partner PA's Shareholders have agreed to restrict certain professional
activities for five (5) years from the date of the ARCA. Simultaneously with the
execution and delivery of this Agreement each of the Partner PA's Shareholders
has entered into a Partner PA's Physician Employment Agreement with the Partner
PA (collectively, the "APEAs"). Simultaneously with the execution and delivery
of this Agreement the Partner PA Shareholders and SHCR have executed and
delivered a Purchase Option Agreement (the "AOA") under which SHCR, its assignee
or nominee has been given the right to acquire all of the Partner PA
Shareholders' shares of stock in the Partner PA. The ARCAs, APEAs, and a Voting
Trust Agreement (the "AVTA") together with all schedules and exhibits to each of
them are collectively, the "Partner PA Related Documents".
6. In consideration of the mutual covenants and agreements contained in
this Agreement, and subject to the conditions contained in this Agreement, the
parties agree as follows:
AGREEMENT
SECTION 1. Grant of Option; Consideration.
Subject to the terms and conditions of this Agreement, each of the
Shareholders grants to SHCR an irrevocable, unconditional exclusive option (the
"Option") to cause all of the then outstanding Shares of the Company (the "Sale
Shares") to be acquired through the purchase from each of the Shareholders of
the portion of the Sale Shares owned by that Shareholder (i) by a Purchaser or
Purchasers to be selected by SHCR in its sole discretion; or, (ii) to the extent
permitted by law, by SHCR, in which case the Shareholders shall cause the
Company to promptly convert the Company from a professional association to a
corporation pursuant to the Texas Business Corporation Act (the "Texas Code").
To the extent permitted by law, the purchase price (the "Purchase Price") for
the Sale Shares shall be One Hundred Dollars ($100.00) for all of the Shares of
the Company, to be allocated pro rata among the Shareholders depending on the
respective number of Sale Shares owned by each of them as of the date of the
exercise of the Option.
The consideration payable to the Shareholders for their grant of the Option
is listed on Schedule 1.1 attached to this Agreement (the "Option
Consideration").
SECTION 2. Exercise of Option.
The Option granted in this Agreement is exercisable by SHCR, or its
lawfully permitted designees or assignees (the "Designees"), in its sole
discretion at any time on or after the Execution Date; provided however, that
SHCR may not exercise this Option for reasons of peer review, utilization
review, quality assurance or credentialing. If SHCR shall determine that a peer
review, utilization review, quality assurance or credentialing issue has
occurred at the Company for which SHCR desires to exercise this Option, then
that decision shall be submitted to binding arbitration. SHCR shall appoint one
disinterested physician third party to an arbitration panel, and the
Shareholders shall appoint another disinterested physician third party to an
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arbitration panel. These two panelists shall then select another physician
panelist. These three panelists shall then decide whether the underlying reason
for which SHCR wishes to exercise the Option is valid. The decision of the panel
shall be final. If the panel agrees to allow SHCR to exercise this Option, or in
cases other than those based on peer review, utilization review, quality
assurance or credentialing, then in order to exercise the Option, SHCR or its
Designees shall deliver to each Shareholder or a Shareholder's legal
representative, written notice of (i) SHCR's or its Designee's election to
exercise the Option in favor of a Purchaser or Purchasers (a "Purchaser Exercise
Notice"); or, (ii) SHCR's or its Designee's election to exercise the Option and
acquire the Sale Shares for its own benefit (a "SHCR Exercise Notice"), and, in
each case, the number of Sale Shares of the Company to be purchased by each
Purchaser, SHCR or its Designee, as the case may be.
SECTION 3. Purchase of Shares by Purchaser.
Within ten (10) days of delivery of a Purchaser Exercise Notice, the
Purchaser, or, if applicable, each of the Purchasers, shall deliver to each of
the Shareholders or a Shareholder's legal representative, if applicable, by
check or by wire transfer of immediately available funds the Purchase Price for
the pro rata portion of the Sale Shares belonging to that Shareholder being sold
to that Purchaser, and each of the Shareholders or a Shareholder's legal
representative, if applicable, shall promptly deliver to each Purchaser a
certificate or certificates representing all of the issued and outstanding Sale
Shares of the Company being purchased by that Purchaser from that Shareholder,
duly endorsed for transfer, and with all necessary stock transfer stamps
attached, and if the Shareholder of the Sale Shares shall be deceased, any tax
waivers and other documents that SHCR or the Purchaser, as the case may be,
shall reasonably request.
SECTION 4. Purchase of Shares by SHCR or its Designee.
Upon receipt by the Shareholders of a SHCR Exercise Notice, if requested by
SHCR or its Designee, the Shareholders shall cause the Company to promptly file
a plan of conversion under Article 5.17 of the Texas Code and take all other
steps necessary and acceptable to SHCR or its Designee to convert the Company
from a professional association to a corporation pursuant to the Texas Code, and
shall deliver evidence of the conversion to SHCR or its Designee upon receipt
thereof. Within ten (10) days of receipt of evidence of the conversion, SHCR or
its Designee shall deliver to each of the Shareholders or a Shareholder's legal
representative, if applicable, by check or by wire transfer of immediately
available funds, the Purchase Price for the pro rata portion of the Sale Shares
being purchased from that Shareholder by SHCR or its Designee. Each of the
Shareholders or a Shareholder's legal representative, if applicable, shall
promptly deliver to SHCR or its Designee a certificate or certificates
representing all of the issued and outstanding Sale Shares being purchased from
that Shareholder, duly endorsed for transfer, and with all necessary stock
transfer stamps attached, and if the Shareholder of the Sale Shares shall be
deceased, any tax waivers and other documents that SHCR or its Designee shall
reasonably request. Each of the Shareholders shall also execute and deliver all
other documents or instruments and shall take all other actions as may be
requested by SHCR or its Designee in order to effect the purposes provided for
in this Section 4.
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SECTION 5. Sale of Shares by Shareholder.
In the event that any Shareholder, or any Shareholder's legal
representative, if applicable, shall desire to sell all or part of the Shares of
the Company owned by the Shareholder (also, the "Sale Shares"), the Shareholder
or the Shareholder's legal representative, shall first give notice (the "Sale
Notice") in writing to SHCR or its Designee to that effect. SHCR or its Designee
shall have a period of ninety (90) business days after receipt of the Sale
Notice in which to exercise its option to cause the purchase, in the manner set
forth in Sections 2, 3 and 4 of this Agreement, of all of the Shares of the
Company (including any Shares owned by the other Shareholders or by the selling
Shareholder which are not Sale Shares pursuant to the terms of this Section 5),
to a Purchaser or Purchasers to be selected by SHCR or its Designee in its sole
discretion or to be held in escrow for the benefit of a Purchaser or Purchasers
in accordance with Section 4 of this Agreement; provided, that any Purchaser so
selected be qualified under State Law to own all of the Shares of the Company;
and further provided, that SHCR or its Designee shall, upon written notice to
each of the Shareholders or a Shareholder's legal representative, as the case
may be, be granted an additional six (6) months to find a suitable Purchaser or
suitable Purchasers.
In the event that SHCR or its Designee fails within the time period
specified in this Section 5, to exercise its option to purchase the Shares of
any or all of the Shareholders of the Company, that Shareholder, or the
Shareholder's legal representative, may independently sell all, but not less
than all, the unsold Sale Shares to a third party who is not a party to this
Agreement (an "Outside Purchaser"); provided, however, that the Outside
Purchaser be qualified under State Law to own the Shares of the Company; and
further provided that SHCR or its Designee shall receive written notice, (also
the "Sale Notice") of any offer to an Outside Purchaser (the "Outside Offer") to
purchase the Sale Shares and further provided that the Outside Purchaser shall
have agreed to uphold the terms of the MSA and other related agreements in
effect regarding the Company and the medical practice conducted by the Company.
SHCR or its Designee shall have a period of ninety (90) business days from
receipt of that "Sale Notice" in which to exercise its option to match the
Outside Offer and cause the purchase of any or all of the Shares of the Company
(including any Shares owned by the other Shareholders or by the selling
Shareholder which are not Sale Shares pursuant to the terms of this Section 5),
by a qualified Purchaser or Purchaser(s) or to be held in escrow at the price
and terms specified in the Outside Offer, except that SHCR or its Designee shall
not be obligated to match any purchase price which exceeds the fair market value
of the Sale Shares. An Outside Purchaser shall enter into an option agreement
with the Company and SHCR containing substantially the same terms and conditions
of this Agreement in accordance with Section 10 hereto.
SECTION 6. Failure to Deliver Shares.
Notwithstanding anything to the contrary in this Agreement, in the event
that a Shareholder or a Shareholder's legal representative or any other person
or entity (each a "Seller") is required to or elects to sell Shares of the
Company to SHCR or its Designee or a Purchaser or Purchasers (each a "Buyer")
pursuant to the provisions of this Agreement, and in the further event that the
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Seller refuses to, is unable to, or for any reason fails to deliver the
certificate or certificates evidencing the Sale Shares of the Seller being sold
to the Buyer, then the Buyer may deposit the Purchase Price for the Sale Shares
with any bank doing business within fifty (50) miles of SHCR's principal office,
or with SHCR's independent public accounting firm, as agent or trustee, or in
escrow, for the Seller, to be held by the bank or accounting firm for the
benefit of and for delivery to the Seller upon delivery of the certificate or
certificates. SHCR or its Designee shall provide written notice to the Seller of
the location and amount of the escrow fund, together with the name and address
of the person or entity responsible for the escrow fund. Upon deposit by the
designated Buyer of the Purchase Price and upon notice to the Seller, the Sale
Shares shall be deemed to have been sold, assigned, transferred and conveyed to
the Buyer, and the Seller shall have no further rights to the Sale Shares (other
than the right to withdraw the payment for the Sale Shares held in escrow), and
the Company shall record the transfer in its stock transfer book or in any
appropriate manner except as may be required by law.
SECTION 7. Covenants of the Shareholders.
1. Each of the Shareholders covenants and agrees that he or she shall not
sell, assign, pledge or hypothecate any of the Shares of the Company owned by
him or her unless and until the provisions of Section 5 of this Agreement are
satisfied.
2. Each of the Shareholders covenants and agrees that for the period
commencing upon receipt of either a Purchaser Exercise Notice or a SHCR Exercise
Notice until the consummation of the sale of the Sale Shares to a Purchaser or
Purchasers, SHCR or its Designee, as the case may be, he or she shall, and shall
cause the Company to:
(a) conduct its business only in the ordinary course of business
and consistent with prior practices;
(b) deposit all monies received from services rendered by the Company
or its employees and agents, into the bank accounts designated for that purpose
consistent with prior practices and consistent with the terms of the MSA so long
as the MSA remains in effect;
(c) refrain from making any purchase, sale or disposition of any asset
or property other than in the ordinary course of business, and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of its properties or
assets;
(d) refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(e) refrain from making any change or incurring any obligation to make
a change in its Articles of Association, By-laws or authorized or issued capital
stock;
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(f) refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock;
(g) refrain from making any change in the compensation payable or to
become payable to any of its officers, employees, agents or independent
contractors;
(h) refrain from prepaying any loans (if any) from its stockholders,
officers or directors or making any change in their borrowing arrangements;
(i) use its best efforts to keep intact its business organization, to
keep available its present officers, employees and health care providers and to
preserve the goodwill of all suppliers, customers, independent contractors and
others having business relations with it; and
(j) permit SHCR and its authorized representatives and agents to have
full access to all its properties, assets, records, tax returns, contracts and
documents and furnish to SHCR or their authorized representatives and agents,
all financial and other information with respect of its business or properties
as may from time to time be reasonably requested.
3. Simultaneously with the execution and delivery of this Agreement, each
of the Shareholders shall have executed and delivered to the Company a Physician
Employment Agreement in the form attached to this Agreement as Exhibit B (the
"Employment Agreement") pursuant to which each Shareholder shall be an Employee
of the Company, subject to the terms and conditions of the Employment Agreement,
until termination or expiration of the Employment Agreement. Each of the
Shareholders and the Company covenants and agrees that during the term of the
Shareholder's employment with the Company pursuant to the Employment Agreement,
no modifications or amendments shall be made to the Employment Agreement without
the prior written consent of SHCR. Each of the Shareholders and the Company
covenants and agrees that no amendments or modifications shall be made to any
employment agreements or arrangements, which are in effect as of the Execution
Date of this Agreement or which are subsequently entered into between the
Company and any employee or agent of the Company, including the Company's
Physician Employees (as defined in the MSA), without the prior written consent
of SHCR or Sheridan.
4. Simultaneously with the execution and delivery of this Agreement, each
of the Shareholders has executed and delivered to SHCR a Voting Trust Agreement
and related exhibits (the "VTA"), substantially in the form of Exhibit D
attached to this Agreement.
5. Each of the Shareholders and the Company covenants and agrees that all
payables and other obligations of the Company arising prior to March 5, 1998
shall be satisfied by the Shareholders as of the Execution Date except for those
obligations which are continuing obligations of the Company in which case the
Shareholders shall satisfy that portion of the continuing obligations which
relate to the time period prior to the Execution Date.
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SECTION 8. Representations and Warranties of the Company and the
Shareholders.
As a material inducement to Sheridan and SHCR to enter into this Agreement
and consummate the transactions contemplated by the MSA, each of the
Shareholders and the Company, jointly and severally hereby make to Sheridan the
representations and warranties contained in this Section 8 as of the Execution
Date, and as of the effective date of the closing of the purchase of any Sale
Shares pursuant to the terms of this Agreement (the "Acquisition Date");
provided, however, that no Shareholder shall have any right of indemnity or
contribution from the Company with respect to any breach of representation or
warranty under this Agreement.
1. Ownership of Stock. Each Shareholder owns all of the shares set forth
opposite his name in Exhibit A attached to this Agreement free and clear of any
and all liens, claims or encumbrances. Upon delivery to SHCR or its Designee or
the Purchaser on the Acquisition Date of the certificate(s) representing the
shares of the Company owned by each Shareholder with stock powers (or the
equivalent) duly executed in blank, against delivery of the applicable purchase
price therefor, good and marketable title to those shares shall be transferred
to the Purchaser or SHCR, as the case may be, free and clear of any and all
liens, claims or encumbrances. As of the Acquisition Date, no options, warrants
or other rights to purchase or otherwise acquire any unissued shares of the
common stock or any other equitable or legal interests of the Company will be
outstanding. All of the outstanding shares of the Company owned by the
Shareholders will have been validly issued and will be fully paid and
nonassessable.
2.Authority of Shareholders; Receipt of Information.
(a) Each Shareholder and the Company has full authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of that Shareholder and
the Company pursuant to or as contemplated by this Agreement and to carry out
the contemplated transactions. This Agreement and each agreement, document and
instrument to be executed and delivered by that Shareholder and the Company or
pursuant to or as contemplated by this Agreement constitute, or when executed
and delivered by each Shareholder and the Company will constitute, valid and
binding obligations of that Shareholder and the Company, enforceable in
accordance with their respective terms.
(b) The execution, delivery and performance by each Shareholder and
the Company of this Agreement and each agreement, document and instrument
executed in connection with the contemplated transaction:
(i) do not violate any laws, rules or regulations of the United
States or any state or other jurisdiction applicable to any Shareholder or the
Company, or require any Shareholder or the Company to obtain any approval,
consent or waiver of, or to make any filing with, any individual, corporation,
association, partnership, estate, trust or any other entity or organization
(governmental or otherwise) (each a "Person") that has not been obtained or
made; and
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(ii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which any
Shareholder or the Company is a party or by which the property of that
Shareholder or the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of that Shareholder or the
Company.
(c) Each Shareholder represents that he or she: (i) has received all
information as he or she has deemed relevant regarding the properties, assets,
business, condition (financial or otherwise), results of operations or prospects
of the Company; (ii) has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of his
or her participation in the contemplated transactions under this Agreement;
(iii) has been afforded the opportunity to ask questions and receive answers
from management of the Company and from management of Sheridan, SHCR and its
advisers; and, (iv) understands that the prospects of the Company and the value
of the Company, Sheridan and their Affiliates may improve significantly and that
he or she will not, except through possible appreciation of SHCR Common Stock
they may own, participate in any such improvement after the Execution Date
(except as specifically provided in their employment agreements), although there
is no assurance that any improvement will occur. In furtherance and not in
limitation of the foregoing, each Shareholder represents that he or she has read
carefully, fully understood, and if appropriate, discussed with his or her legal
and financial advisers: (a) the materials described in clause (i) above; (b) the
financial statements and projections set forth in Sections 8.2(a) and 8.2(b) of
the Disclosure Schedule delivered by the Company and the Shareholders to
Sheridan under this Agreement (the "Disclosure Schedule"); and, (c) the
remainder of the Disclosure Schedule.
3. Organization, Existence and Authority; Corporate Records.
(a) The Company is, and as of the Acquisition Date shall be, a Texas
professional association duly organized, validly existing and in good standing
under the laws of the State of Texas, duly qualified or registered as a foreign
corporation in each jurisdiction listed in (a) Section 8.3 of the Disclosure
Schedule; or, (b) in which the Company is required to be licensed or qualified
to conduct its business or own its property.
(b) The Company has, and as of the Acquisition Date shall have, all
requisite power and authority, and all material and necessary authorizations,
approvals, orders, licenses, certificates and permits to conduct its business as
presently conducted and to hold under lease the property it purports to own or
hold under lease. A true and complete copy of the articles of association and
by-laws of the Company has previously been delivered to Sheridan.
(c) Except as provided in the Disclosure Schedule, the Company is not
in violation of any term of its articles of association and by-laws, or in
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violation, of any term of any agreement, instrument, judgment, decree, order,
statute, rule or government regulation applicable to it or to which it is a
party.
(d) The corporate record books of the Company accurately record all
corporate action taken by its respective Shareholders and board of directors and
committees. The copies of the corporate records of the Company, as made
available to Sheridan for review, are true and complete copies of the originals
of those documents.
4. Capitalization. The total authorized capital stock of the Company
consists of 100,000 shares of common stock, par value Ten Cents ($.10) per
share. As of the Execution Date of this Agreement, 1000 shares of Common Stock
are issued and outstanding, all of which are duly and validly issued, fully paid
and nonassessable, were issued in compliance with all applicable state and
federal securities laws and are owned beneficially and of record by the
Shareholders, all as listed in Exhibit A. No shares of capital stock of the
Company are held in the treasury of the Company. Except as set forth in Section
8.4 of the Disclosure Schedule, (i) there are no outstanding subscriptions,
options, warrants, commitments, agreements, arrangements or commitments of any
kind for or relating to the issuance, or sale of, or outstanding securities
convertible into or exchangeable for, any shares of capital stock of any class
or other equity interests of the Company; (ii) no person has any preemptive
right, right of first refusal or similar right to acquire Common Stock or any
additional shares of capital stock of the Company in connection with the
transactions contemplated by this Agreement or otherwise; (iii) there are no
restrictions on the transfer of the shares of capital stock of the Company,
other than those imposed by relevant state and federal securities laws; (iv) no
person has any right to cause the Company to effect the registration under the
Securities Act of 1933, as amended, of any shares of capital stock of the
Company or any other securities (including debt securities); (v) the Company has
no obligation to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein, or to pay any dividend or make any other
distribution in respect thereto; and (vi) there are no voting trusts,
stockholders' agreements, or proxies relating to any securities of the Company
other than as provided for in Section 7, paragraph 4 of this Agreement.
5. Subsidiaries; Investments. Except as set forth in Section 8.5 of the
Disclosure Schedule, the Company does not own or have any direct or indirect
interest in or Control over any corporation, partnership, joint venture or other
entity of any kind. For purposes of this Agreement, Control means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership or voting of securities, by contract or otherwise.
6. Prior Transactions. Except as set forth in Section 8.6 of the Disclosure
Schedule, the Company is not a party to, or is otherwise obligated in any manner
under, any agreement, arrangement or understanding regarding acquisitions,
mergers, consolidations, asset sales, joint ventures or similar transactions.
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7. Financial Statements and Projections.
(a) Included as Section 8.7 of the Disclosure Schedule are the
following financial statements of the Company, all of which statements are
complete and correct in all material respects and fairly present the financial
position of the Company on the dates of those statements and the results of
their respective operations for the periods covered thereby all in accordance
with the cash basis of accounting: (a) unaudited internal balance sheets as at
December 31, 1996 and the related statements of operations, for the fiscal year
then ended, and (b) unaudited, internal balance sheets as at December 31, 1997
and the related statements of operations for the 12-month period then ended (the
"Base Balance Sheet").
(b) Attached as Section 8.7(b) of the Disclosure Schedule are the
estimates and projections prepared by the management of the Company which have
been delivered to all of the Shareholders and Sheridan (the "Projections").
These Projections are based upon good faith estimates or projections of, and
assumptions believed to be reasonable by the Company and the Shareholders as of
the date those estimates or Projections were made and on the Execution Date, and
the Company and the Shareholders believe that these assumptions remain
reasonable; provided, however, that the foregoing is not intended as a
representation or warranty that results identified in the Projections will be
achieved.
8. Absence of Undisclosed Liabilities.
(a) As of the date of the Base Balance Sheet, the Company had no
liability of any nature, whether accrued, absolute, contingent or otherwise
asserted or unasserted, known or unknown (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Company or the conduct of
its business prior to the date of the Base Balance Sheet regardless of whether
claims in respect thereof had been asserted as of that date), except liabilities
stated or adequately reserved against on the Base Balance Sheet, or reflected in
Section 8.8 of the Disclosure Schedule.
(b) As of the Execution Date, the Company does not have and will not
have any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company or the
conduct of its business prior to the Execution Date, as the case may be,
regardless of whether claims in respect thereof had been asserted as of that
date), except liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, or (ii) reflected in Section 8.8 of the
Disclosure Schedule.
9. Absence of Certain Developments. Since the date of the Base Balance
Sheet, the Company has conducted its business only in the ordinary course
consistent with past practice and, except as set forth in Section 8.9 of the
Disclosure Schedule and except as permitted under the MSA, there has not been:
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(a) any material adverse change in the financial condition,
properties, assets, liabilities, business or operations of the Company, which
change by itself or in conjunction with all other changes creates a material
adverse change;
(b) any contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
debt or claim owing to, or waiver of any right of the Company;
(c) any mortgage, encumbrance or lien placed on any of the properties
of the Company which remains in existence on the Execution Date or will remain
on the Closing Date and the Acquisition Date (as defined in the MSA);
(d) any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities for taxes due or to become due or
contingent or potential liabilities relating to services provided by the
Company, including without limitation, any claims or potential claims for
malpractice, or the conduct of the business of the Company since the date of the
Base Balance Sheet regardless of whether claims in respect thereof have been
asserted), incurred by the Company other than obligations and liabilities
incurred in the ordinary course of business consistent with the terms of this
Agreement (it being understood that claims in connection with services provided
by the Company, including without limitation, malpractice claims, shall not be
deemed to be incurred in the ordinary course of business);
(e) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the properties, assets or business of the
Company;
(g) any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock;
(h) any labor trouble or claim of unfair labor practices involving the
Company; any change in the compensation payable or to become payable by the
Company to any of its respective officers, employees, agents or independent
contractors other than normal merit increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of those
officers, employees, agents or independent contractors;
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(i) any change with respect to the officers or management of the
Company;
(j) any payment or discharge of a lien or liability of the Company
which was not shown on the Base Balance Sheet or incurred in the ordinary course
of business thereafter;
(k) any obligation or liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to any of its respective officers, directors, stockholders or
employees, except normal compensation and expense allowances payable to officers
or employees;
(l) any change in accounting methods or practices, credit practices or
collection policies used by the Company;
(m) any compensation paid by the Company to Shareholders in excess of
Five Thousand Dollars ($5,000.00) in the aggregate;
(n) any capital expenditure by the Company in excess of Five Thousand
Dollars ($5,000.00) in the aggregate;
(o) any borrowings or entering into any leases;
(p) any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(q) any agreement or understanding whether in writing or otherwise,
for the Company to take any of the actions specified in paragraphs (a) through
(p) above.
10. Accounts Receivable. Except to the extent reserved against in the Base
Balance Sheet or disclosed in Section 8.10(a) of the Disclosure Schedule, all of
the accounts receivable of the Company as of March 5, 1998, which are listed in
Section 8.10(b) to the Disclosure Schedule, are valid and enforceable claims,
are subject to no set-off or counterclaim, and are, in the commercially
reasonable judgment of the Company, fully collectable in the normal course of
business, after deducting the allowance for doubtful accounts stated in the
respective Base Balance Sheet and adjusted since the date thereof in accordance
with generally accepted accounting principles consistently applied. Except as
disclosed in Section 8.10(c) of the Disclosure Schedule, the Company has no
accounts receivable from any person, firm or corporation which is affiliated
with it or from any of its directors, officers, employees, or stockholders.
11. Transactions with Affiliates. Except as set forth in Section 8.11 of
the Disclosure Schedule, there are no loans, leases or other continuing
transactions between the Company and any present or former stockholder,
director, or officer of the Company, or any member of that officer's, director's
or stockholder's immediate family, or any person controlled by that officer,
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director or stockholder or his or her immediate family. Except as set forth in
Section 8.11 of the Disclosure Schedule, no stockholder, director or officer of
the Company or any of their respective spouses or family members, owns directly
or indirectly on an individual or joint basis any material interest in, or
serves as an officer or director or in another similar capacity of, any
competitor or supplier of the Company, or any organization which has a contract
or arrangement with the Company. For purposes of the foregoing, "control" means
the possession, direct or indirect, or the power to direct or cause the
direction of the management and policies of an entity or individual, whether
through the ownership of voting securities, by contract, or otherwise.
12. Title to Properties. Except as set forth in Section 8.12 of the
Disclosure Schedule, the Company has good and marketable title to all of its
properties and assets reflected on the latest balance sheet included in Section
8.7 of the Disclosure Schedule or acquired thereafter, free and clear of all
liens, restrictions or encumbrances. All equipment included in those properties
which is necessary to the business of the Company is in good condition and
repair, ordinary wear and tear excepted. All leases of real or personal property
to which the Company is a party are fully effective and afford the Company
peaceful and undisturbed possession of the subject matter of those leases. The
Company is not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, nor has it received any notice of a
violation. The Company does not own any real property or, except as set forth in
Section 8.12 of the Disclosure Schedule, have any interests in real property. As
of the Execution Date, the Company shall have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances and
defects except such as will not materially affect the value of the property and
will not interfere with the use made and proposed to be made of the property by
the Company; and any real property and buildings held at the time under lease by
the Company will be held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of the property and buildings.
13. Tax Matters. The Company has filed all federal, state, local and
foreign tax returns required to be filed through the Execution Date, and has
paid or caused to be paid all Taxes (as defined below) required to be paid by it
through the Execution Date whether disputed or not, except Taxes which have not
yet accrued or otherwise become due, for which adequate provision has been made
in the pertinent financial statements referred to in Section 8.7 above. The
provisions for taxes on the Base Balance Sheet and on the latest balance sheet
included in Section 8.7 of the Disclosure Schedule are sufficient as of its date
for the payment of all accrued and unpaid Taxes of any nature of the Company and
any applicable Taxes owing by that Person to any jurisdiction, whether or not
assessed or disputed. All taxes and other assessments and levies which the
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Company is required to withhold or collect have been withheld and collected and
have been paid over to the proper governmental authorities. Neither the I.R.S.
nor any other governmental authority is now asserting or, to the knowledge of
any Shareholder, threatening to assert against the Company any deficiency or
claim for additional Taxes. Except as set forth in Section 8.13 of the
Disclosure Schedule, there has not been any audit of any tax return filed by the
Company. Except as set forth in Section 8.13 of the Disclosure Schedule, no
waiver or agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes. The Company is not a party to any agreement,
contract or arrangement that would result individually or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended. For purposes of this
Agreement, "Taxes" means federal, state, local, foreign and other taxes,
including without limitation, income taxes, estimated taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes and
property taxes, whether or not measured in whole or in part by net income.
14. Contracts and Commitments.
(a) The Company is not a party to any contract, obligation or
commitment which involves a potential commitment in excess of $10,000 or which
is otherwise material to the business of the Company and, except as set forth in
Section 8.14 of the Disclosure Schedule, the Company has no: (i) employment or
consulting contracts; (ii) stock redemption or purchase agreements; (iii)
agreements providing for the indemnification of others against any liabilities
or the sharing of the tax liability of others; (iv) license agreements (as
licensor or licensee); (v) distributor or sales agreements; (vi) contracts,
agreements or understandings with officers, managers, directors, employees, or
stockholders of the Company or persons or organizations related to or affiliated
with any such persons; (vii) leases; (viii) agreements with customers of the
Company; (ix) plans or contracts providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union; (x) agreements for the purchase of any commodity, material or equipment;
(xi) agreements regarding the provision of medical services to patients,
including without limitation, agreements with any patients, HMOs, PPOs, third
party payors, IPAs, PHOs, MSOs (or similar arrangements), employers, labor
unions, hospitals, clinics and ambulatory surgery centers, Medicare
intermediaries and Medicaid intermediaries (collectively, "Medical Customers");
(xii) contracts, agreements or understandings with physicians, nurses,
technicians or allied healthcare providers; (xiii) other agreements creating any
obligations of the Company with respect to any contract or agreement not
specifically disclosed elsewhere herein or in the Disclosure Schedule; (xiv)
agreements containing covenants limiting the freedom of the Company to compete
in any line of business or territory or with any person or entity; or (xv)
indentures, mortgages, promissory notes, loan agreements, guaranties or other
agreements or commitments for the borrowing of money or any related security
agreements.
(b) All contracts, agreements, leases and instruments to which the
Company is a party or by which the Company is obligated are valid and are in
full force and effect and constitute legal, valid and binding obligations of the
Company or, as the case may be, and, to the knowledge of the Company and each
Shareholder, of the other parties thereto, enforceable in accordance with their
respective terms. Neither the Company nor any Shareholder knows of any notice or
threat of or basis for the termination, expiration or modification of those
agreements within one year from the Execution Date, which termination,
expiration or modification would reasonably br expected to have a Material
Adverse Effect (as defined below). Neither the Company and, to the knowledge of
the Company and each Shareholder, nor any other party to any material contract,
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agreement or instrument of the Company, is in default in complying with any
provisions thereof, and no condition or event or fact exists which, with notice,
lapse of time or both would constitute a default thereunder on the part of the
Company or, to the knowledge of the Company and each Shareholder, any other
party thereto, except for any default, condition, event or fact that,
individually or in the aggregate, would not have a Material Adverse Effect (as
defined below). For purposes of this Agreement, Material Adverse Effect means
any change or effect that is or would be materially adverse to the properties,
assets, business, condition (financial or otherwise) results of operation or
business prospects of the Company.
(c) The Company is not a party to any contract, agreement,
understanding or arrangement which under circumstances now foreseeable is likely
to have a Material Adverse Effect.
(d) Neither the Company, nor any Shareholder, nor any physician,
nurse, technician or allied health care provider providing medical services on
behalf of the Company on a full or part-time basis or as an independent
contractor or consultant (a "Health Care Provider"): (i) has any direct or
indirect liability for renegotiation of government contracts or subcontracts;
(ii) has been suspended or debarred from bidding on contracts or subcontracts
with any federal, state or local agency or governmental authority; (iii) has
been audited or investigated by any such agency or authority with respect to
contracts entered into or goods and services provided by the Company or any
Health Care Provider; or, (iv) has had a contract terminated by any such agency
or authority for default or failure to perform in accordance with applicable
standards.
15. Intellectual Property Rights; Employee Restrictions. Except as set
forth in Section 8.15 of the Disclosure Schedule, the Company owns or possesses
adequate license or other rights to use, free and clear of claims or rights of
any other person, all Intellectual Property (as defined below) material to the
conduct of its businesses as presently conducted and as proposed to be
conducted. The rights of the Company in all of its Intellectual Property is
freely transferable. Neither the Company nor any of the Shareholders are aware
of any infringement by any other person of any rights of the Company under any
of its Intellectual Property. No claim is pending or threatened against the
Company to the effect that any of its Intellectual Property infringes upon or
conflicts with the asserted rights of any other person and, to the knowledge of
each Shareholder and the Company, there is no basis for any of these claims
(whether or not pending or threatened). No claim is pending or threatened
against the Company to the effect that any of its Intellectual Property is
invalid or unenforceable, and, to the knowledge of each Shareholder and the
Company, there is no basis for any of these claims (whether or not pending or
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threatened). All proprietary information developed by or belonging to the
Company and which is material to the business of the Company which has not been
patented has been kept confidential. The Company is not making unlawful use of
any Intellectual Property of any other person, including without limitation, any
former employer or any past or present employees of the Company. Neither the
Company nor any of their respective employees have any agreements or
arrangements with former employers of those employees relating to any
Intellectual Property of those employers, which interfere or conflict with the
performance of those employee's duties. All Intellectual Property, to the extent
applicable, of the Company are subsisting and have not been abandoned. Except as
set forth in Section 8.15 to the Disclosure Schedule, none of the Intellectual
Property is the subject of any outstanding assignments, grants, liens, licenses,
obligations or agreements, whether written, oral or implied. All required
annuities, renewal fees, maintenance fees, royalty payments, amendments and/or
other filings or payments which are necessary to preserve and maintain the
Intellectual Property have been filed and/or made. For purposes of this
Agreement, Intellectual Property means patents, patent applications, trademarks,
trade secrets, trademark applications, logos, service marks, service mark
applications, trade names, assumed names, copyrights, copyright registrations,
know-how, manufacturing processes, programming processes, formulae, trade
secrets, customer lists, patient lists, or other intellectual property rights.
16. Litigation. Except as otherwise provided in Section 8.16 of the
Disclosure Schedule, there is no litigation or governmental or administrative
proceeding or investigation (including without limitation, any malpractice
claims, Department of Professional Regulation or Board of Medicine (or
equivalent) investigation, suit, notice of intent to institute, arbitration or
other proceeding) pending or, to the knowledge of the Company and each
Shareholder, threatened against the Company or affecting any of its properties
or assets, or against any officer, director or stockholder or employee of the
Company or which would prevent or hinder the consummation of the contemplated
transactions, nor has there occurred any event, nor does there exist any
condition on the basis of which any such claim may be asserted. No claim has
been asserted against the Company for renegotiation or price redetermination of
any material business transaction, and there are no facts upon which any such
claim could be based. All the actions, suits, claims, proceedings, arbitrations
or investigations described in Section 8.16 to the Disclosure Schedule are being
diligently prosecuted and are adequately covered by insurance or adequate
reserves have been set aside therefor on the financial statements. As of the
Execution Date, there will be no actions, suits or proceedings pending or, to
the knowledge of the Shareholders, threatened against or affecting the Company,
or any property of the Company in any court or before any arbitrator of any kind
or before or by any governmental body, except for malpractice incurred in the
ordinary course of business which will be disclosed to SHCR by the Company and
the Shareholders prior to the closing of the purchase of any Sale Shares
pursuant to this Agreement. As of the Execution Date, the Company shall not be
in default under any order of any court, arbitrator or governmental body; and
the Company shall not be subject to or party to any order of any court or
governmental body arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters. As of the Execution Date, neither the Company
nor any of the Shareholders shall be in violation of any statute or other rule
or regulation of any governmental body the violation of which may have a
Material Adverse Effect.
17. Permits; Compliance with Laws. The Company has all necessary Permits
(meaning franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges) necessary to permit it to own its property and to conduct its
business as it is presently conducted and all those Permits are valid and in
full force and effect. No Permit is subject to termination as a result of the
execution of the Agreement or consummation of the contemplated transactions. The
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Company is now and has been in compliance with all applicable statutes,
ordinances, orders, rules and regulations (including all applicable laws and
regulations relating to drugs and controlled substances) promulgated by any
federal, state, municipal or other governmental authority which apply to the
conduct of its business. The Company has never entered into or been subject to
any judgment, consent decree, compliance order or administrative order with
respect to any environmental or health and safety law or received any notice,
demand letter, formal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any such law.
18. Licenses; Credentials. Section 8.18 of the Disclosure Schedule contains
a complete and accurate list of all licenses held by the Shareholders and all of
the Health Care Providers. Prior to the Execution Date, the Company has
delivered copies of all licenses and all credentialing documents and
correspondence relating to or about the Company, the Shareholders and all of the
Health Care Providers. Each Health Care Provider is duly licensed under the laws
of the State of Texas or the laws of the states disclosed in Section 8.18 of the
Disclosure Schedule and has complied with all laws, rules and regulations
relating to the rendering of services in their respective specialty areas.
Except as disclosed on Schedule 8.18 (a) of the Disclosure Schedule no
Shareholder or Health Care Provider has: (i) had his or her professional
license, Drug Enforcement Agency number, Medicare provider status or staff
privileges at any hospital or medical facility suspended, relinquished,
terminated or revoked; (ii) been reprimanded, sanctioned or disciplined by any
licensing board or any federal, state or local society or agency, governmental
body, hospital, third party payor or specialty board; or, (iii) had a final
judgment or settlement without judgment entered against him or her in connection
with a malpractice or similar action for an amount in excess of Five Thousand
Dollars ($5,000.00). As of the Execution Date, the Company will possess all
licenses, permits, franchises, authorizations, patents, copyrights, trademarks
and trade names, or rights thereto, required to conduct its business as then
conducted and as then proposed to be conducted, without known conflict with the
rights of others.
19. Labor Laws. The Company employs full-time and part-time
-------- -------
employees and generally enjoys a good employer-employee relationship with those
employees. The Company is not delinquent in payment to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it prior to the Execution Date or amounts required to be
reimbursed to its employees. There are no charges of employment discrimination
or unfair labor practices or strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations existing, pending or, to each of
the Shareholder's knowledge, threatened against or involving the Company. No
question concerning labor representation exists respecting any group of
employees of the Company. The Company is in compliance with all applicable laws,
including, without limitation, environmental laws, OSHA, ERISA, Americans with
Disabilities Act, the Fair Labor Standards Act and the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Sections 212(n) and 274A
of the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto.
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20. Information Supplied by the Company.
(a) Neither this Agreement nor any document referenced in this
Agreement, nor any certificate or statement furnished pursuant to the Agreement
by or on behalf of the Company or any Shareholder, when taken together, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading.
(b) The Company has provided to each Shareholder all information that
Shareholder has requested regarding the properties, assets, business, condition
(financial or otherwise), results of operations or prospects of the Company, has
provided the Shareholders the opportunity to ask questions and has answered any
and all questions from the Shareholders in connection with those matters, and
has delivered to each Shareholder the financial statements and Projections set
forth in Section 8.7 of the Disclosure Schedule. No document referenced in this
Agreement or statement furnished pursuant to this Section 8.20(b) by or on
behalf of the Company, when taken together, to the knowledge of the Company,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
(c) The Company has provided to, or made available for inspection and
copying by, Sheridan and its counsel and the Shareholders and their counsel
true, correct and complete copies of all documents referred to in this Article
III or in the Disclosure Schedules delivered to Sheridan pursuant to this
Agreement.
(d) As of the Execution Date, no representation or warranty by any of
the Shareholders in any written statement or certificate furnished or to be
furnished to SHCR or any Purchaser pursuant to this Agreement or the Related
Documents when taken together, will have contained any untrue statement of a
material fact or will have omitted to state a material fact necessary to make
the statements made not misleading. There will be no fact or condition which at
the time has not been disclosed to SHCR or any Purchaser which could materially
adversely affect the business, prospects, financial condition or results of
operations of the Company.
21. Investment Banking; Brokerage Fees. Neither the Company nor any of the
Shareholders have incurred or become liable for any broker's or finder's fee,
banking fees or similar compensation, relating to or in connection with the
contemplated transactions, except fees payable to Nord Capital Group, Inc..
22.Employee Benefit Programs.
(a) Section 8.22 of the Disclosure Schedule sets forth a list of every
Employee Program that has been maintained (as such term is further defined
below) by the Company at any time during the three-year period ending on the
Execution Date.
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(b) Each Employee Program which has been maintained by the Company and
which has at any time been intended to qualify under Section 401(a) or 501(c)(9)
of the Code, has received a favorable determination or approval letter from the
IRS regarding its qualification under that section and has, in fact, been
qualified under the applicable section of the Code from the effective date of
that Employee Program through and including the Closing (or, if earlier, the
date that all of that Employee Program's assets were distributed). No event or
omission has occurred which would cause that Employee Program to lose its
Qualification under the applicable Code section.
(c) There has not been any failure of any party to comply with any
laws applicable with respect to the Employee Programs that have been maintained
by the Company. With respect to any Employee Program now or heretofore
maintained by the Company, there has occurred no "prohibited transaction," as
defined in Section 406 of ERISA, or Section 4975 of the Code, or breach of any
duty under ERISA or other applicable law (including, without limitation, any
health care continuation requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which could
result, directly or indirectly (including without limitation, through any
obligation of indemnification or contribution), in any taxes, penalties or other
liability to either of the Company or any Affiliate. No litigation, arbitration,
or governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
knowledge of any Shareholder, threatened with respect to any such Employee
Program.
(d) Neither the Company nor any of its Affiliates has incurred any
liability under Title IV of ERISA which will not be paid in full prior to the
Closing. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program ever maintained by the Company or
any of its Affiliates and subject to Code Section 412 or ERISA Section 302. With
respect to any Employee Program maintained by the Company or any of its
Affiliates and subject to Title IV of ERISA, there has been no (nor will be any
as a result of the transaction contemplated by this Agreement): (i) "reportable
event," within the meaning of ERISA Section 4043, or the regulations thereunder
(for which notice the notice requirement is not waived under 29 C.F.R. Part
2615); and, (ii) event or condition which presents a risk of plan termination or
any other event that may cause the Company or any of its Affiliates to incur
liability or have a lien imposed on its assets under Title IV of ERISA. All
payments and/or contributions required to have been made (under the provisions
of any agreements or other governing documents or applicable law) with respect
to all Employee Programs ever maintained by the Company or any Affiliate, for
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all periods prior to the Closing, either have been made or have been accrued
(and all such unpaid but accrued amounts are described on Section 8.22 of the
Disclosure Schedule). Except as described in Section 8.22 of the Disclosure
Schedule, no Employee Program maintained by the Company or any Affiliate and
subject to Title IV of ERISA (other than a Multiemployer Plan) has any "unfunded
benefit liabilities" within the meaning of ERISA Section 4001(a)(18), as of the
Closing Date. Neither the Company nor any Affiliate have ever maintained a
Multiemployer Plan. None of the Employee Programs ever maintained by the Company
or any Affiliate have ever provided health care or any other non-pension
benefits to any employees after their employment was terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide those post-termination benefits.
(e) With respect to each Employee Program maintained by the Company
within the three years preceding the Execution Date, complete and correct copies
of the following documents (if applicable to that Employee Program) have
previously been delivered to Sheridan: (i) all documents embodying or governing
that Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the Execution Date; (ii) the most recent IRS determination or approval letter
with respect to that Employee Program under Code Section 401 or 501(c)(9), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for that Employee Program (or other descriptions of that Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to that
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) with respect to any
Multiemployer Plan, any participation or adoption agreement relating to the
Company's participation in or contributions under that plan;
(f) Each Employee Program maintained by the Company as of the
Execution Date is subject to termination by the Board of Directors of the
Company without any further liability or obligation on the part of the Company
to make further contributions to any trust maintained under any such Employee
Program following such termination.
(g) For purposes of this Section 8.22:
(i) an entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries); and
(ii) an entity is an "Affiliate" of the Company for purposes of
this Section 8.22 if it would have ever been considered a single employer with
either of the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA Section 302(d)(8)(C).
(iii) an Employee Program means: (i) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; and, (ii) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (i) above. In the case of
an Employee Program funded through an organization described in Code Section
501(c)(9), each reference to that Employee Program shall include a reference to
such organization.
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(h) The Shareholders and the Company represent to SHCR that immediately prior to
the Execution Date, the Shareholders and the Company took all necessary and
appropriate action to terminate the Plans (as defined below), and that no
additional contributions are required to be made by the Company to the Plans
after the Execution Date. The Company agrees that as soon as practicable
following the Execution Date, the Company shall apply for determination letters
from the Internal Revenue Service to the effect that the termination of the
Plans does not have any adverse effect upon their qualification. As soon as
practicable after the Company has received such determination letters from the
IRS, the Company shall direct the Plan's trustees to make distributions to
participants and beneficiaries under the Plans in accordance with the terms of
the Plans. Any and all costs associated with the administration or termination
of the Plans, including without limitation, costs relating to the preparation of
Forms 5500, annual valuations, and the Forms 5310, and any costs relating to the
distribution of benefits to participants and beneficiaries under the Plans,
shall promptly be paid in their entirety directly by the Shareholders or borne
by the Plan as the Trustees shall determine. "Plans" means the individual SEP
IRA plans.
23. Environmental Matters.
(a) Except as set forth in Section 8.23 of the Disclosure Schedule,
(i) the Company has never generated, transported, used, stored, treated,
disposed of, or managed any Hazardous Waste (as defined below); (ii) no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
leased, or occupied by the Company, or has ever come to be located in the soil
or groundwater at any such site, for which the Company may have any liability;
(iii) no Hazardous Material has ever been transported from any site presently or
formerly owned, leased, or occupied by the Company for treatment, storage, or
disposal at any other place; (iv) the Company does not presently own, operate,
lease, or occupy any site on which underground storage tanks are or were
located, for which the Company may have any liability; and (v) no lien has ever
been imposed by any governmental agency on any property, facility, machinery, or
equipment owned, leased, or occupied by the Company in connection with the
presence of any Hazardous Material.
(b) Except as set forth in Section 8.23 of the Disclosure Schedule,
(i) the Company has no liability under, nor has the Company ever violated in any
material respect, any Environmental Law; (ii) any property owned, leased, or
occupied by the Company, and any facilities and operations thereon are presently
in compliance in all material respects with all applicable Environmental Laws
for which the Company may have liability; (iii) the Company has never entered
into or been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither the Company nor any Shareholder has any
reason to believe that any of the items enumerated in clause (iii) of this
paragraph will be forthcoming.
(c) Except as set forth in Section 8.23 of the Disclosure Schedule, no
site owned, leased, or occupied by the Company contain any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation, for which the Company
may have any liability.
(d) The Company has provided to Sheridan copies of all documents,
records, and information available to the Company concerning any environmental
matter relevant to the Company, whether generated by the Company or others,
including, without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
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(e) For purposes of this Section 8.23: (i) Hazardous Material means
any hazardous or bio-hazardous waste, hazardous or bio-hazardous material,
hazardous or bio-hazardous substance, petroleum product, oil, toxic substance,
pollutant, or contaminant, as defined or regulated under any Environmental Law,
or any other substance which may pose a threat to the environment or to human
health or safety; (ii) Hazardous Waste means any hazardous or bio-hazardous
waste as defined or regulated under any Environmental Law. Environmental Law
means any environmental or health and safety-related law, regulation, rule,
ordinance, or by-law at the foreign, federal, state, or local level, whether
existing as of the Execution Date or previously enforced.
24. Insurance. The physical properties, assets, business, operations,
employees, officers and directors of the Company are insured to the extent
disclosed in Section 8.24 of the Disclosure Schedule. Except as set forth in
Section 8.24 of the Disclosure Schedule, there is no claim by the Company
pending under any of those policies. Those insurance policies and arrangements
are in full force and effect, all premiums with respect thereto are currently
paid, and the Company is in compliance with the terms thereof. That insurance is
sufficient for compliance by the Company with all requirements of applicable law
and all agreements and leases to which it is a party. Those insurance policies
shall continue to be in full force and effect following consummation of the
transactions contemplated by the Agreement. Neither the Company nor any
Shareholder knows, after due inquiry, of any threatened termination of any of
those policies or arrangements.
25. Relationship with Customers. The relationships of the Company with its
customers and Medical Customers are good commercial working relationships. No
customer or Medical Customer, which accounted for more than 1% of the revenues
of the Company for the twelve (12) months ended February 28, 1998 or which is
otherwise significant to the Company, has canceled or otherwise terminated or to
the knowledge of the Company and each of the Shareholders, threatened to cancel
or otherwise terminate its relationship with the Company, or has during that
period decreased materially its usage or purchase of the services or products of
the Company. No such customer or Medical Customer has, to the knowledge of any
Shareholder, any plan or intention to terminate, to cancel or otherwise
materially and adversely modifying its relationship with the Company or to
decrease materially or limit its usage, purchase or distribution of the services
or products of the Company.
26. Powers of Attorney. Neither the Company nor any Shareholder have any
outstanding power of attorney relating to their status as Shareholders,
officers, agents or employees of the Company, or relating to the Company, except
as otherwise contemplated by this Agreement.
27. Health Care Facilities. Each of the Shareholders and Health Care
Providers maintains in good standing staff memberships or similar affiliations
with the health care facilities as set forth on Section 8.27 of the Disclosure
Schedule.
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28. Good Health. The Shareholders and, to the Shareholders' knowledge, all
of the Health Care Providers are in good physical and mental health and do not
suffer from any illnesses or disabilities which could prevent any of them from
fulfilling their responsibilities under the respective contracts, agreements or
understandings with the Company or prevent them from fulfilling their
responsibilities with the Company as they currently exist. None of the
Shareholders, and to the Shareholders' knowledge, none of the Health Care
Providers use or abuse drugs or any controlled substances, or have used or
abused any controlled substances at any time (other than those medications
lawfully prescribed by a medical doctor in a reasonable diagnosis and which do
not interfere with that person's capacity to perform his or her obligations to
the Company), or are under the influence of alcohol or are affected by the use
of alcohol during the time period required to perform their duties and
obligations under any contracts, agreements or understandings with the Company.
29. Employees; Independent Contractors. The Company has made available to
Sheridan the names and annual salary rates and other incentive, bonus or other
compensation, if applicable, for all present full-time and part-time employees
of the Company and a complete and correct copy of the permanent payroll of the
Company as of February 28, 1998. To the best knowledge of the Company and the
Shareholders, no former or current employee of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including, without limitation,
any confidentiality, non-competition or proprietary rights agreement, between
that individual and any other person that in any way adversely affects the
performance of his duties or the ability of the Company to conduct its business.
30. No Default. As of the Execution Date, the Company will not be in
default under, and no condition will exist that with notice or lapse of time or
both would constitute a default by the Company under, (i) any mortgage, loan
agreement, indenture, evidence of indebtedness for borrowed money or other
agreement or instrument by the Company, or to which the Company is a party at
the time, or pursuant to which any material portion of its assets is bound at
the time, or (ii) any judgment, order or injunction of any court, arbitrator or
governmental agency, except for non-payment defaults which in the aggregate
could not materially and adversely affect the business, financial condition or
results of operations of the Company.
SECTION 9. SHCR's Representations and Warranties
1. Making of Representations and Warranties. As a material inducement to
the Shareholders and the Company to enter into this Agreement and consummate the
contemplated transactions, SHCR makes to the Shareholders the representations
and warranties contained in this Section.
2. Organization and Corporate Power. SHCR is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
and has the full corporate power and authority to own or lease its properties
and to conduct its business in the manner and in the places where those
properties are owned or leased or their business is conducted and to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by it pursuant to or as contemplated by this Agreement and to carry
out the contemplated transactions.
3. Authority. The execution, delivery and performance of this Agreement and
each agreement, document and instrument to be executed and delivered by SHCR
pursuant to this Agreement have been duly authorized by all necessary corporate
action of SHCR, and no other corporate action on the part of SHCR or its
stockholders is required in connection therewith. This Agreement and each such
agreement, document and instrument constitutes, or when executed and delivered
by SHCR will constitute, valid and binding obligations of SHCR enforceable in
accordance with their respective terms. The execution, delivery and performance
by SHCR of this Agreement and each such agreement, document and instrument:
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(a) do not and will not violate any provisions of the
Certificate of Incorporation or By-Laws of SHCR;
(b) do not and will not result in any violation by SHCR of any laws,
rules or regulations of the United States or any state or other jurisdiction
applicable to SHCR, or require SHCR to obtain any approval, consent or waiver
of, or to make any filing with, any Person (governmental or otherwise) that has
not been obtained or made; and
(c) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, order, writ, judgment, injunction, decree,
determination or arbitration award to which SHCR is a party or by which the
property of SHCR is bound or affected.
4. Investment Banking; Brokerage Fees. Neither SHCR nor any affiliate of
SHCR has incurred or become liable for any broker's or finder's fee, banking
fees or similar compensation relating to or in connection with the contemplated
transactions.
5. Litigation. Except as otherwise provided in Section 9.5 of the
Disclosure Schedule, there is no litigation or governmental or administrative
proceeding ("Litigation") or to SHCR's knowledge any investigation (including
without limitation, any malpractice claims, Department of Professional
Regulation or Board of Medicine (or equivalent) investigation, suit, notice of
intent to institute, arbitration or other proceeding) ("Investigation") pending
or, to the knowledge of SHCR, threatened against the SHCR or affecting any of
their respective properties or assets, or against any officer, director or
stockholder or employee of SHCR or which would prevent or hinder the
consummation of the contemplated transactions, nor, to the knowledge of SHCR,
has there occurred any event nor does there exist any condition on the basis of
which any such claim may be asserted, except for Litigation and Investigations
which will not have a Material Adverse Effect or for which adequate insurance is
in effect.
6. SHCR Stock. Upon delivery to each of the Shareholders of SHCR Common
Stock and upon their surrender of Common Stock at the Closing in accordance with
the terms of this Agreement, those Shareholders shall receive SHCR Common Stock
which is fully paid, non-assessable, with good and marketable title, free and
clear of all claims, except for restrictions provided for in the Investment and
Shareholders Agreement and applicable laws and regulations.
7. Financial Statements. SHCR has delivered to the Shareholders and the
Company the following consolidated financial statements which are complete and
correct in all material respects and fairly present the financial position of
SHCR and its subsidiaries on the dates of those statements and the results of
their respective operations for the periods covered thereby: (a) unaudited
consolidated balance sheet as at December 31, 1997 and the related statement of
operations, shareholders' equity and cash flows for the fiscal year then ended.
The audited December 31, 1997 statements (including the footnotes and schedules
thereto) were prepared in accordance with generally accepted accounting
principles consistently applied during the period covered thereby (the "SHCR
Base balance Sheet").
8. Absence of Undisclosed Liabilities.
(a) As of the date of the SHCR Base Balance Sheet, neither SHCR nor
its subsidiaries had any material liability of any nature, whether accrued,
absolute, contingent or otherwise asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or contingent or potential liabilities relating to activities
of SHCR or any of its subsidiaries or the conduct of their business prior to the
date of the SHCR Base Balance Sheet regardless of whether claims in respect
thereof had been asserted as of that date), except liabilities stated or
adequately reserved against on the SHCR Base Balance Sheet.
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(b) As of the Execution Date and as of the Closing Date, SHCR does not
have and will not have and none of its subsidiaries have and or will have any
material liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of SHCR or the
conduct of its business prior to the Execution Date or the Closing Date, as the
case may be, regardless of whether claims in respect thereof had been asserted
as of that date), except liabilities: (i) stated or adequately reserved against
on the SHCR Base Balance Sheet or the notes thereto; (ii) reflected in Section
9.8 of the Disclosure Schedule; or, (iii) incurred in the ordinary course of
business of SHCR or its subsidiaries since the date of the SHCR Base Balance
Sheet.
9. Absence of Certain Developments. Since the date of the SHCR Base Balance
Sheet, except as set forth in Section 9.9 of the Disclosure Schedule, SHCR and
its subsidiaries have conducted their business only in the ordinary course
consistent with past practice and there has not been:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of SHCR and its subsidiaries , which change
by itself or in conjunction with all other changes, whether or not arising in
the ordinary course of business, would not have a Material Adverse Effect;
(b) any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities for taxes due or to become due or
contingent or potential liabilities), incurred by SHCR or its subsidiaries other
than obligations and liabilities incurred in the ordinary course of business;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of SHCR or its subsidiaries;
(d) any other transaction entered into by SHCR or any of its
subsidiaries other than transactions in the ordinary course of business;
(e) any declaration, setting aside or payment of any dividend by SHCR,
or the making of any other distribution in respect of the capital stock of SHCR,
or any direct or indirect redemption, purchase or other acquisition by SHCR of
its own capital stock; or
(f) any agreement or understanding whether in writing or otherwise,
for SHCR to take any of the actions specified in paragraphs (a) through (e)
above.
10. Compliance with Laws. SHCR and its subsidiaries are now and have been
in compliance with all applicable statutes, ordinances, orders, rules and
regulations promulgated by any federal, state, municipal or other governmental
authority which apply to the conduct of their respective businesses, except for
any non-compliance or violation that, individually or in the aggregate, would
not have a Material Adverse Effect.
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11. SEC Documents. SHCR has filed with the United States of America
Securities and Exchange Commission all reports, notices and other documents
required to be filed by it under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the applicable regulations
thereunder. SHCR has furnished to the Shareholders and the Company a true and
complete copy of its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and, upon request, shall promptly furnish to the Shareholders
and the Company any other filing made with the United States of America
Securities and Exchange Commission. As of the date of its filing and as of the
Closing Date, SHCR's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and all other required filings with the SEC complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the applicable
regulations thereunder.
12. Information Supplied by SHCR. Neither this Agreement nor any document
referenced in this Agreement, nor any certificate or statement furnished
pursuant to the Agreement by or on behalf of Sheridan SHCR, when taken together,
to the knowledge of Sheridan SHCR, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein not misleading.
13. Capitalization. The total authorized capital stock of SHCR consists of
20,000,000 shares of common stock (the "Common Stock"), par value $.01 per
share, 1,000,000 shares of Class A common stock, par value $.01 per share and
5,000,000 shares of preferred stock, par value $.01 per share. As of February
15, 1998, 6,972,605 shares of Common Stock were issued and outstanding, all of
which are duly and validly issued, fully paid and nonassessable, were issued in
compliance with all applicable state and federal securities laws.
14. Permits; Compliance with Laws. SHCR has all necessary Permits necessary
to permit it to own its property and to conduct its business as it is presently
conducted and all those Permits are valid and in full force and effect, except
to the extent that any failure to possess a Permit would not have a Material
Adverse Effect. No Permit is subject to termination as a result of the execution
of the Agreement or consummation of the contemplated transactions. SHCR is now
and has been in compliance with all applicable statutes, ordinances, orders,
rules and regulations (including all applicable laws and regulations relating to
drugs and controlled substances) promulgated by any federal, state, municipal or
other governmental authority which apply to the conduct of its business, except
for any non-compliance or violation that, individually or in the aggregate,
would not have a Material Adverse Effect. SHCR has never entered into or been
subject to any judgment, consent decree, compliance order or administrative
order with respect to any environmental or health and safety law or received any
request for information, notice, demand letter, administrative inquiry or formal
or informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any such law.
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SECTION 10. Option Agreement; Restrictions on Transfer of Shares.
1. As of the date of the exercise of the Option, SHCR, the Company and the
Purchaser of the Shares of the Company shall enter into an option agreement
containing substantially the same terms and conditions as this Agreement (the
"Option Agreement").
2. The Company shall not transfer any Shares on its books unless the
Shareholder selling those Shares, and the Purchaser of those Shares shall have
first complied with the provisions of this Agreement and the Purchaser shall
agree in writing to be bound by the terms of the applicable Option Agreement.
3. Promptly after the Execution Date, each Shareholder shall deliver his or
her certificates for all of the Shares owned by him or her to SHCR for the
purpose of imprinting in bold the following legend on the Certificates
representing the Shares:
"The sale, pledge, assignment, encumbrance or other disposition, and the
registration or transfer of the shares represented by this Certificate are
restricted by the terms of a Purchase Option Agreement, dated as of March 4,
1998, by and among MICHAEL CAVENEE, M.D., P.A. (the "Company"), Sheridan
Healthcare, Inc. ("SHCR") and each of the shareholders of the Company including
[insert name of Shareholder], a copy of which is on file in the principal office
of Sheridan."
SHCR shall cause this legend to be affixed to the Shares and shall not permit
any transfer of the Shares in violation of this Agreement. The Shareholder or
any subsequent Purchaser or Purchasers of Shares shall deliver his or her Shares
to the Trustee (as defined in the VTA), and the Trustee shall hold all Shares in
escrow on behalf of the Shareholder or the subsequent Purchaser or Purchasers of
the Shares.
4. None of the Shareholders shall, at any time sell, assign, transfer,
donate, or otherwise dispose of any Shares of the Company now, or at any time
hereafter owned by him or her, except in the case of a sale in accordance with
the provisions of this Agreement. Any attempted sale, assignment, transfer,
donation or other encumbrance in violation of this Section shall be null and
void and of no force or effect whatsoever.
SECTION 11. Indemnification.
1. Survival of Representations, Warranties, Etc. All representations,
warranties, agreements, covenants and obligations in this Agreement, MSA,
Employment Agreements, Restrictive Covenant Agreements, VTA (as defined below)
or in the Disclosure Schedule or in any certificate, exhibit, schedule or
agreement delivered by any party pursuant to the contemplated transactions are
material and may be relied upon by the party receiving the same and shall
survive the Closing regardless of any investigation by or knowledge of that
party and shall not merge into the performance of any obligation by any party to
this Agreement, all as subject to the provisions of this Section 11.
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2. Indemnification by Shareholders. Except as otherwise provided in this
Section, each of the Shareholders and the Partner PA Shareholders on behalf of
himself and his successors, executors, administrators, estates, heirs and
permitted assigns, agree subsequent to the Closing to indemnify and hold
harmless SHCR, its subsidiaries, affiliates and each of their respective
officers, directors, employees and agents (individually a "Company Indemnified
Party" and collectively, the "Company Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Company Indemnified Party
(individually, a "Loss", collectively, "Losses") arising out of, based upon or
in connection with:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by the Company, the Partner PA, a Partner PA Shareholder or any
Shareholder of any of their representations, warranties or covenants under this
Agreement, in any Partner PA Related Document or in any of the Related
Documents.
(b) conditions, circumstances or occurrences which constitute or
result in any other breach of any representation or warranty made by the
Company, the Partner PA, a Partner PA Shareholder or any Shareholder in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered under this Agreement, the Partner PA
Documents or any of the Related Documents, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations or warranties;
(c) any breach of any other covenant or agreement made by the Company,
the Partner PA, a Partner PA Shareholder or any Shareholder in this Agreement or
in any schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered under this Agreement, the Partner PA Related Documents or
any of the Related Documents, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
covenant or agreement; and
(d) (i) any and all claims for injury (including death), claims for
damage, direct or consequential, or liability claims resulting from or connected
with products sold or services provided by the Company, the Partner PA, a
Partner PA Shareholder or any Shareholder or any of their agents or employees
prior to the Execution Date, including without limitation, any malpractice
claims; (ii) other personal injury or property damage claims relating to events
occurring on or prior to the Execution Date; (iii) amounts due in connection
with any Employee Program maintained or contributed to by the Company or the
Partner PA on or prior to the Execution Date; (iv) amounts paid or payable
relating to environmental matters including Losses resulting from or in
connection with the use, storage, or discharge into or presence in the ground,
water or atmosphere of any Hazardous Waste or Hazardous Material relating to the
Company, the Partner PA, a Partner PA Shareholder or any Shareholder or any
violation of an Environmental Law which occurred on or prior to the Execution
Date relating to Company, the Partner PA, a Partner PA Shareholder or any
Shareholder; (v) Losses relating to the failure of the Company or the Partner PA
to comply with applicable laws or regulations on or prior to the Execution Date;
and, (vi) Losses with respect to Taxes of the Company or the Partner PA
(including their respective predecessors) which relate to a time period prior to
the Execution Date.
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Claims under clauses 11.2 (a) through (d) of this Section are collectively
referred to as "Company Indemnifiable Claims".
The rights of Company Indemnified Parties to recover indemnification in
respect of any occurrence referred to in clauses (a) and (c) through (e) of this
Section 11.2 shall not be limited by the fact that such occurrence may not
constitute an inaccuracy in or breach of any representation or warranty referred
to in clause (b) of this Section 11.2.
3. Limitations on Indemnification by Shareholders and the Partner PA
Shareholders.
(a) Threshold. Subject to the exceptions set forth in Section 11.3(c),
the Shareholders shall not be obligated to indemnify Company Indemnified Parties
in respect of any occurrence referred to in clauses (b) or (c) of Section 11.2
except to the extent the cumulative amount of Company Indemnifiable Losses under
those clauses (b) and (c) of Section 11.2 exceeds Fifty Thousand Dollars
($50,000.00) (the "Company Threshold"), whereupon the full amount of those
Losses in excess of the Company Threshold shall be recoverable in accordance
with the terms of this Agreement. In no event shall the Shareholder's Company
Threshold ,between this Agreement and the AOA exceed Fifty Thousand Dollars
($50,000.00).
Subject to the exceptions set forth in Section 11.3(c), the Partner PA
Shareholders shall not be obligated to indemnify Company Indemnified Parties in
respect of any occurrence referred to in clauses (b) or (c) of Section 11.2
except to the extent the cumulative amount of Company Indemnifiable Losses under
those clauses (b) and (c) of Section 11.2 exceeds Fifty Thousand Dollars
($50,000.00) (the "Partner PA Threshold"), whereupon the full amount of those
Losses in excess of the Partner PA Threshold shall be recoverable in accordance
with the terms of this Agreement. In no event shall the Partner PA Shareholders'
Company Threshold and Partner PA Threshold between this Agreement and the AOA
exceed Fifty Thousand Dollars ($50,000.00). Any Threshold limitation on
indemnity shall not apply to any monies due under any of the Related Documents
and this Agreement.
(b) Time Limits for Claims. Subject to the exceptions set forth in
11.3(c), indemnification with respect to Company Indemnifiable Losses in respect
of any occurrence referred to in clauses (b) or (c) of 11.2 shall expire on the
second anniversary of the Execution Date; provided, however, that in each case
if prior to the applicable date of expiration a specific state of facts shall
have become known which may constitute or give rise to any Company Indemnifiable
Loss as to which indemnity may be payable and a Company Indemnified Party shall
have given notice of such facts to Shareholder, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of, and any indemnification due
in respect thereof shall have been paid, according to the date on which notice
of the applicable claim is given.
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(c) Aggregate Limitation of Losses Notwithstanding anything in this
Agreement, in no event shall the Shareholders and the Partner PA shareholders be
obligated to pay SHCR collectively more than Twenty Million Dollars for any
Losses under this Agreement and the AOA and the Related Documents. For several
obligations an individual Shareholder or Partner PA Shareholder shall be liable
for no more than Ten Million Dollars, provided, however, for joint and several
obligations, the preceding sentence shall apply.
(d) Joint and Several Liability Limitation. Except as otherwise
provided in this subsection, all obligations for indemnity under this Agreement,
the Related Documents and the Partner PA Related Documents are the joint and
several obligations of the Shareholders and the Partner PA Shareholders. Except
after a Departure (as defined below), if a Loss is readily and reasonably
identifiable as being derived from the Company, Partner PA, Partner PA
Shareholder or a Shareholder and the derivation of that Loss is not at all
reasonably attributable to the Partner PA or a Partner PA Shareholder, then the
Shareholders shall be severally responsible for that Loss. Except after a
Departure (as defined below) if a Loss is readily and reasonably identifiable as
being derived from the Partner PA or Partner PA Shareholder and the derivation
of that Loss is not at all reasonably attributable to the Company or a
Shareholder, then the Partner PA Shareholders shall be severally responsible for
that Loss. Notwithstanding the immediately preceding two sentences (the
"Severability Instances"), if a Shareholder or a PA Partner Shareholder ceases
his employment with the Partner PA or the Company (for any reason whatsoever) or
if the MSA or this Agreement or the AOA is terminated or materially altered
(collectively, a "Departure") other than by expiration, then the Severability
Instance as to those Partner PA Shareholders or Shareholders, as the case may
be, shall not apply and the affected persons shall in all events be jointly and
severally liable.
4. Indemnification by SHCR. SHCR agrees subsequent to the Execution Date to
indemnify and hold harmless the Shareholder Indemnified Parties from and against
and in respect of all Shareholder Losses sustained, suffered or incurred by or
made against any Shareholder arising out of, based upon or in connection with:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach of SHCR or Acquisition of any of its representations, warranties or
covenants under this Agreement or in any certificate, schedule or exhibit
delivered pursuant to this Agreement or any of the Related Documents;
(b) conditions, circumstances or occurrences which constitute or
result in any breach of any representation or warranty made by SHCR in this
Agreement or the Related Documents or in any schedule, exhibit, certificate,
agreement or other instrument delivered under or in connection with this
Agreement or the Related Documents, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations or warranties (collectively, "Shareholder
Representation and Warranty Claims");
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(c) any breach of any covenant or agreement made by SHCR in this
Agreement or in any Related Documents delivered under this Agreement or the
Related Documents, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement; and
(d) a determination by the Internal Revenue Service that (i) the
Shareholder did not sell his Shares for federal income tax purposes as a result
of this Agreement and the Related Documents, or (ii) any portion of the Option
Consideration (other than any portion determined by the Internal Revenue Service
for federal income tax purposes to be allocable to the RCAs) does not constitute
an amount realized within the meaning of Section 1001 of the Code from the sale
of a capital asset as defined in Section 1222. The amount of any indemnity under
this Section 11.4(d) shall include, but not be limited to, any Taxes, penalties,
and interest resulting from any such determinations and shall be grossed-up for
the federal income tax thereon by dividing such amount by the difference between
one and the then highest individual marginal federal income tax rate.
Claims under clauses (a) through (d) are hereinafter collectively referred
to as "Shareholder Indemnifiable Claims".
5. Limitations on Indemnification by SHCR.
(a) The right of all Shareholders to indemnification under 11.4 shall
be subject to the following provisions:
(i) Subject to the exceptions set forth in Section 11.5(a)(iii),
SHCR shall not be obligated to indemnify Shareholder Indemnified Parties in
respect of any occurrence referred to in clauses Section 11.4 (b) or (c) except
to the extent the cumulative amount of Shareholder Indemnifiable Losses under
those clauses exceeds Fifty Thousand Dollars ($50,000.00) (the "Shareholder
Threshold"), whereupon the full amount of such Losses in excess of the
Shareholder Threshold shall be recoverable in accordance with the terms hereof.
Any threshold limitation on indemnity shall not apply to any monies due under
any of the Related Documents and this Agreement;
(ii) Subject to the exceptions set forth in 11.5(a)(iii),
indemnification with respect to Shareholder Indemnifiable Claims in respect of
any occurrence referred to in clauses (b) or (c) of Section 11.4 shall expire on
the second anniversary of the Execution Date; provided, however, that in each
case if prior to the applicable date of expiration a specific state of facts
shall have become known which may constitute or give rise to any Shareholder
Indemnifiable Claim as to which indemnity may be payable and a Shareholder
Indemnified Party shall have given notice of such facts to Shareholder, then the
right to indemnification with respect thereto shall remain in effect until such
matter shall have been finally determined and disposed of, and any
indemnification due in respect thereof shall have been paid, according to the
date on which notice of the applicable claim is given; and
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(iii) Aggregate Limitation of Losses Notwithstanding anything in
this Agreement, in no event shall SHCR be obligated to pay the Shareholders
collectively more than Twenty Million Dollars for any Losses, under this Agreeme
nt and the AOA and any of the Related Documents.
6. Notice; Defense of Claims.
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations in this Agreement
would apply, the indemnified party shall give notice thereof in writing to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted. If within twenty
(20) days after receiving such notice the indemnifying party gives written
notice to the indemnified party stating that: (a) it would be liable under the
provisions hereof for indemnity in the amount of such claim if such claim were
successful; and, (b) that it disputes and intends to defend against such claim,
liability or expense at its own cost and expense, then counsel for the defense
shall be selected by the indemnifying party (subject to the consent of the
indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all Indemnifiable matters related to claims by third parties
which are susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. As reasonably requested by
the indemnified party, the indemnifying party shall keep the indemnified party
apprized of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party, provided, however,
that the separate counsel selected by the indemnified party shall be approved by
the indemnifying party, which approval shall not be unreasonably withheld. If no
such notice of intent to dispute and defend is given by the indemnifying party,
or if such diligent good faith defense is not being or ceases to be conducted,
the indemnified party shall, at the expense of the indemnifying party, undertake
the defense of (with counsel selected by the indemnified party), and shall have
the right to compromise or settle (exercising reasonable business judgment),
such claim, liability or expense. Provided however, before settling the
indemnified party shall first use reasonable efforts to obtain the consent to
that settlement from the indemnifying party, which consent shall not be
unreasonably withheld. After using reasonable efforts without success the
indemnified party may settle without the consent of the indemnifying party
without any prejudice to its claim for indemnity. If such claim, liability or
expense is one that by its nature cannot be defended solely by the indemnifying
party, then the indemnified party shall make available all information and
assistance that the indemnifying party may reasonably request and shall
cooperate with the indemnifying party in such defense.
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7. Use of SHCR Common Stock to Pay Indemnification. In the event that the
Company or the Shareholders or the Partner PA Shareholders are liable for
indemnification under this Agreement they may satisfy their obligations, in
whole or in part by tendering shares of SHCR Common Stock, with a value
determined in accordance with the next succeeding sentence. The value of the
SHCR Common Stock tendered for payment in satisfaction of an indemnification
obligation shall be determined based upon the average of the last sale price per
share of Common Stock on the NASDAQ National Market for the last fifteen (15)
trading days immediately prior to date the SHCR Common Stock is tendered to the
indemnified party.
SECTION 12. Term of Option.
The Option may be exercised at any time after the execution and delivery of
this Agreement up to the Option Expiration Date (as defined below). The Option
Expiration Date shall be March 4, 2097, or if a court of competent jurisdiction
determines that the Option Expiration Date renders this Agreement unenforceable
or invalid, then the Option Expiration Date shall be reduced to a date which
would cure the invalidity or unenforceability. In the event that a regulatory
authority or court of competent jurisdiction shall determine that this Option
Agreement or the option contemplated by this Agreement, violates any statutes,
rules or regulations (and that determination is not stayed or appealed within
ninety (90) days of that determination), or is unenforceable or invalid, the
parties will negotiate in good faith to enter into an alternative legally valid
arrangement between SHCR or Sheridan and the then current Shareholders which
substantially preserves for the parties the relative economic benefits of this
Agreement.
SECTION 13. Miscellaneous.
1. Expenses and Taxes. Except as otherwise provided in this Agreement, all
accounting, legal and other costs and expenses incurred in connection with the
negotiation of this Agreement and the exercise of the Option granted by this
Agreement shall be paid by the party incurring those fees, costs and expenses.
Shareholder shall be solely responsible for all (i) taxes imposed upon the
conveyance of the Shares, and (ii) sales, use or excise taxes payable in
connection with the contemplated exercise of the Option. In no event shall SHCR
be liable for Taxes imposed upon the Company or any of the Shareholders for
periods or transactions prior to the Execution Date.
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The parties agree to allocate the Option Consideration set forth in
Schedule 1.1 to the Option for all purposes (including financial accounting and
Tax purposes). The parties acknowledge that the Company has filed a consent with
the Internal Revenue Service pursuant to Section 341(f) of the Code. SHCR shall
prepare or cause to be prepared and file or cause to be filed all Tax returns of
the Company with respect to taxable periods ending after the Execution Date and
shall pay or cause to be paid all Taxes of the Company with respect to periods
or transactions after the Execution Date. The parties shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of any Tax returns pursuant to this Section and any audit, litigation
or other proceeding with respect to such Taxes. The Company and the Shareholders
are solely responsible for filing any tax returns for the time period starting
from the date of their last filings and ending on the day immediately preceding
the Execution Date and pay all taxes relating thereto.
2. Survival. All of the respective representations and warranties of the
parties to this Agreement or in any certificate delivered by any party incident
to the contemplated Option are material and may be relied upon by the party
receiving the same and shall survive beyond the date of exercise of the Option
for a time period equal to the applicable statutes of limitations. All
statements in this Agreement shall be deemed representations and warranties. The
due diligence investigations conducted by the parties to this Agreement and the
results thereof shall not diminish or otherwise affect any of the
representations and warranties set forth in this Agreement.
3. Notices. Whenever any notice, request, information or other document is
required or permitted to be given under this Agreement, that notice, demand or
request shall be in writing and shall be either hand delivered, sent by United
States certified mail, postage prepaid or delivered via overnight courier to the
addresses below or to any other address that any party may specify by notice to
the other parties. No party shall be obligated to send more than one notice to
each of the other parties and no notice of a change of address shall be
effective until received by the other parties. A notice shall be deemed received
upon hand delivery, two days after posting in the United States mail or one day
after dispatch by overnight courier.
If to SHCR
and any of the Purchasers: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
ATTN: Jay A. Martus, Esq.
Vice President and General Counsel
If to the Shareholders: Michael R. Cavenee, M.D.
5128 Corinthian Bay
Plano, Texas 75093
If to the Company: Michael R. Cavenee, M.D., P.A.
8160 Walnut Hill Lane, Suite 001
Dallas, Texas 75231
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With a copy to:Jenkens & Gilchrist, a Professional
Corporation 1445 Ross Avenue, Suite 3200
Dallas, Texas 75202 ATTN: Kenneth Gordon,
Esq.
Any party to this Agreement may change the address to which any
communications are to be directed to that party by giving notice of the change
to the other parties in the manner provided in this Section.
4. Entire Agreement. This Agreement, including the schedules attached to
this Agreement set forth the entire agreement and understanding of the parties
in respect of the subject matter of this Agreement and merges and supersedes all
prior agreements, arrangements and understandings related to the subject matter
hereof or thereof.
5. Successors and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
heirs, estates, beneficiaries, executors and legal and personal representatives.
6. Amendment and Waiver. Failure of any party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of the
obligations under this Agreement shall not be construed to be a waiver of any
provisions by any party nor to in any way affect the validity of this Agreement
or any party's right to enforce any provision of this Agreement nor to preclude
any party from taking all other action at any time which it would legally be
entitled to take. All waivers to be effective shall be in writing signed by the
waiving party. This Agreement may not be modified or terminated orally, and no
modification or termination shall be binding unless in writing and signed by the
parties to this Agreement. Each party agrees to be bound by any telecopied
signature to this Agreement or any agreement executed in connection herewith as
if a manually executed signature page had been executed and delivered.
7. Further Assurances. The parties shall execute all other documents or
instruments and shall take all other actions as may reasonably be requested by
the other to effect the purposes of this Agreement.
8. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with State Law, without regard to its conflicts of laws
principles.
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10. Severability. The invalidity or unenforceability of any one or more of
the words, phrases, sentences, clauses, or sections contained in this Agreement
shall not affect the validity or enforceability of the remaining provisions of
this Agreement or any part of any provision, all of which are inserted
conditionally on their being valid in law, and in the event that any one or more
of the words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid or unenforceable, this Agreement shall be
construed as if such invalid or unenforceable word or words, phrase or phrases,
sentence or sentences, clause or clauses, or section or sections had not been
inserted or shall be enforced as nearly as possible according to their original
terms and intent to eliminate any invalidity or unenforceability. If any
invalidity or unenforceability is caused by the length of any period of time set
forth in any part of this Agreement, the period of time shall be considered to
be reduced to a period which would cure the invalidity or unenforceability.
11. Litigation; Prevailing Party. Except as otherwise required by
applicable law or as expressly provided in this Agreement, in the event of any
litigation, including appeals, with regard to this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all reasonable
fees, costs, and expenses of counsel (at pre-trial, trial and appellate levels).
12. Construction. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted, including any presumption of superior knowledge or
responsibility based upon a party's business or profession or any professional
training, experience, education or degrees of any member, agent, officer of
employee of any party. If any words in this Agreement have been stricken out or
otherwise eliminated (whether or not any other words or phrases have been added)
and the stricken words initialed by the party against whom the words are
construed, then this Agreement shall be construed as if the words so stricken
out or otherwise eliminated were never included in this Agreement and no
implication or inference shall be drawn from the fact that those words were
stricken out or otherwise eliminated.
13. Word Usage. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Agreement directs, the plural
shall be read as the singular and the singular as the plural.
14. Mergers and Consolidation; Successors and Assigns. Neither the Company
nor any of the Shareholders shall have the right to assign their rights or
delegate their duties and obligations under this Agreement. SHCR may freely
assign and delegate all of its rights and duties under this Agreement.
Additionally, the parties each agree that upon the sale of all or substantially
all of the assets, business and goodwill of SHCR or all or substantially all of
the stock of SHCR to another company or any other entity, or upon the merger or
consolidation of SHCR with another company or any other entity (each a "Change
in Control Event"), this Agreement shall inure to the benefit of, and be binding
upon, the Shareholders, the Company and SHCR and any entity purchasing the
assets, business and goodwill or stock, or surviving merger or consolidation (a
"Successor").
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15. Reformation Upon Change in or Violation of Health Laws.
(a) Reformation. In the event that subsequent to the Execution Date
(i) the contents or validity of this Agreement or any of the Related Documents
are successfully challenged by any Governmental Authority under the Health Laws
or (ii) any party determines, based upon advice received from legal counsel,
that a violation of a Health Law has occurred as a result of this Agreement or
the documents or contemplated transactions, or that there is a substantial risk
that a violation of a Health Law will occur as a result of this Agreement or the
Related Documents, that is reasonably expected to have a material adverse affect
on any of the parties, that party shall notify the other parties with respect
thereto. If the parties are unable to agree in good faith on the need for
reformation as contemplated in the foregoing sentence, then any party may
request and initiate a binding arbitration in Dallas, Texas, to be conducted
pursuant to the provisions of this Agreement. In the event the arbitrator shall
determine that reformation is necessary, the parties shall act in good faith and
use their reasonable efforts to analyze, revise, reform and, to the extent
necessary, restructure this Agreement and the Related Documents and the
contemplated transactions to fully comply with all applicable Health Laws in a
manner that is equitable to all parties in light of the intent of the parties
regarding the contemplated transactions by this Agreement and the Related
Documents as evidenced by this Agreement and the Related Documents. If SHCR,
Purchaser, the Company and the Shareholders cannot reach agreement on any term
of such revision, reformation or restructuring contemplated in this section
within a reasonable time, any of those parties may request and initiate a
binding arbitration in Dallas, Texas to be conducted pursuant to the provisions
of this Agreement to determine the extent and nature of any reformation or, if
reformation is not possible, recission.
(b) Failure to Reform; Recission of Agreement. If an event causing the
application of this section occurs within six (6) months of the Execution Date
and the parties in good faith are unable to modify the terms of this Agreement
in accordance with this section, the Parties shall rescind this Agreement, and
to the fullest extent possible, the Seller Shares shall be released to the
Shareholders, the Option Consideration and the Purchase Price, if any, shall be
returned to SHCR and Purchaser, and the parties shall take such other reasonable
actions as are necessary to place the parties as near as reasonably possible to
the positions of the parties prior to entering into this Agreement. If an event
causing the application of this section occurs after six (6) months of the
Execution Date and before the fifth anniversary of the Execution Date, and the
parties in good faith are unable to modify the terms of this Agreement in
accordance with this section the Parties shall rescind this Agreement, and to
the fullest extent possible, the Seller Shares shall be released to the
Shareholders, and the Unrealized Percentage of the Option Consideration and the
Purchase Price, if any, shall be returned to SHCR and Purchaser, and the parties
shall take all other reasonable actions as are necessary to place the parties as
near as reasonably possible to the positions of the parties prior to entering
into this Agreement.
(c) Defined Terms. As used in this Agreement, the following terms
shall have the meanings provided below unless the context otherwise requires:
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(1) "Governmental Authority" shall mean any and all federal,
Texas or local governments, governmental institutions, public authorities and
other governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and/or existing.
(2) "Health Laws" shall mean applicable provisions of the federal
Social Security Act (including the federal Medicare and Medicaid Anti-Fraud and
Abuse Amendments (42 U.S.C. §1320a-7, -7a and -7b) and the federal
physician anti-self referral law (42 U.S.C. §1395nn, the "Stark Bill")),
the Texas Medical Practice Act (Article 4495b of the Texas Revised Civil
Statutes, the "TMPA"), and the Texas Illegal Remuneration Law (Texas Health &
Safety Code §161.091), as such laws may now exist or be amended hereafter.
(3) "Unrealized Percentage" shall mean the percentage which is
equal to 100 minus 4 for each 12 month calendar year (or the pro rata portion
thereof for periods less than a full calendar year) which has passed since the
sixth (6th) month anniversary of the date of this Agreement.
16. Corporate Practice of Medicine. Nothing contained herein is intended to
(a) constitute the use of a medical license for the practice of medicine by
anyone other than a licensed physician; (b) aid Purchaser or any other
corporation to practice medicine when in fact such corporation is not authorized
to practice medicine; or (c) do any other act or create any other arrangements
in violation of the TMPA. Any other provision of this Agreement to the contrary
notwithstanding, SHCR shall not exercise any of its rights under this Agreement
to direct the medical, professional or ethical aspects of the practice of
medicine by the Company or its physician employees or to make credentialing,
quality assurance, utilization review or peer review policies for the Company,
all of which shall be left to the sole direction of the physicians on the
Company's board of directors and the physician or physicians having the right to
vote the shares of the Company.
17. Compliance with Health Laws. The parties enter into this Agreement with
the intent of conducting their relationship in full compliance with applicable
state, local and federal law, including, but not limited to, the Health Laws.
Notwithstanding any unanticipated effect of any of the provisions herein, no
party to this Agreement will intentionally conduct itself under the terms of
this Agreement in a manner to constitute a violation of the Health Laws.
18. Referral Policy. Nothing contained in this Agreement shall require
(directly or indirectly, explicitly or implicitly) any of the Parties to refer
or direct any patients to any other party or to use another party's facilities
as a precondition to receiving the benefits set forth herein or in establishing
the valuation of the Option or the Sale Shares.
19. Arbitration; Jury Trial. THE PARTIES SHALL USE GOOD FAITH NEGOTIATION
TO RESOLVE ANY CONTROVERSY, DISPUTE OR DISAGREEMENT ARISING OUT OF, RELATING TO
OR IN CONNECTION WITH THIS AGREEMENT OR THE BREACH OF THIS AGREEMENT. IN THE
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EVENT THE PARTIES ARE UNABLE TO RESOLVE ANY DISPUTE OR CONTROVERSY BY
NEGOTIATION, EITHER PARTY MAY SUBMIT SUCH DISPUTE TO BINDING ARBITRATION WHICH
SHALL BE CONDUCTED IN DALLAS, TEXAS. THE BINDING ARBITRATION SHALL BE CONDUCTED
IN ACCORDANCE WITH THE RULES OF PROCEDURE FOR ARBITRATION OF THE NATIONAL HEALTH
LAWYERS ASSOCIATION ALTERNATIVE DISPUTE RESOLUTION SERVICE. JUDGMENT ON THE
AWARD OR DECISION RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. NOTWITHSTANDING THE TERMS OF THIS SECTION, IN THE EVENT OF ANY
BREACH OR DISPUTE OF THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS FOR WHICH
AN EQUITABLE REMEDY IS APPROPRIATE THE AGGRIEVED PARTY MAY SEEK AND OBTAIN
RELIEF IN A COURT OF COMPETENT JURISDICTION TO AVAIL ITSELF OF THE EQUITABLE
REMEDIES. IN THAT CASE SHOULD ANY PENDENT LEGAL CLAIMS ARISE, THOSE CLAIMS SHALL
BE SUBMITTED TO BINDING ARBITRATION, HOWEVER IF THE COURT FAILS TO REMAND THOSE
LEGAL CLAIMS TO ARBITRATION, THEN FOR THOSE CLAIMS, THE PARTIES WAIVE ALL RIGHTS
TO ANY TRIAL BY JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS
AGREEMENT.
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Each of the parties to this Agreement have caused this Agreement to be
duly executed as of the date first written above.
SHAREHOLDERS:
Michael R. Cavenee, M.D.
COMPANY:
MICHAEL CAVENEE, M.D., P.A.,
a Texas professional association
By:
----------------------------------------
Michael R. Cavenee, M.D.
President
PARTNER PA SHAREHOLDERS:
--------------------------------------------
Michael R. Cavenee, M.D.
SHCR:
SHERIDAN HEALTHCARE, INC.,
a Delaware corporation
By:
----------------------------------------
Jay A. Martus
Vice President and General Counsel
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Exhibit A to Purchase Option Agreement
Shareholders of the Company
Name of Shareholder Number of Shares Owned
Michael R. Cavenee, M.D. 1,000
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ANNEX A-1
AMENDMENT NO. 1
CAVENEE PURCHASE OPTION AGREEMENT
This Amendment No. 1 to the Purchase Option Agreement, is by and among
Sheridan Healthcare, Inc., a Delaware corporation ("SHCR"), Michael Cavenee,
M.D., P.A., a Texas professional association (the "Company"), and each of the
owners listed on Exhibit A to the Purchase Option Agreement (each a
"Shareholder" and collectively, the "Shareholders").
WHEREAS, the parties to the Purchase Option Agreement (the"Agreement"),
dated as of March 4, 1998, desire to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises, the Agreement is amended
(the "Amendment") as follows:
1. The first sentence of Section 8.19 is amended to read as follows:
"19. Labor Laws. The Company employs nine (9) full-time and nine (9)
part-time employees and generally enjoys a good employer-employee relationship
with those employees."
2. The last sentence of Section 11.3(a) is amended to read as follows:
"Any Threshold limitation on indemnity shall not apply to the Shareholders'
breach of any of their covenants under Schedule 1.1 to this Agreement or any
monies due under any of the Related Documents and this Agreement."
3.If the parties file the Section 338(h)(10) Election (as defined in
Section 8 below), Section 11.4(d)(ii) is hereby amended to read as follows:
"(ii) any portion of the Option Consideration does not constitute an
amount realized within the meaning of Section 1001 of the Code from the sale of
a capital asset as defined in Section 1222."
4. Section 11.4 is hereby amended by adding 11.4(e) to read as
follows:
"(e) Losses relating to the failure of SHCR to comply with applicable laws
or regulations relating to a transaction undertaken by Shareholders pursuant to
Schedule 1.1."
5.Section 11.4 is hereby amended by amending the last paragraph thereof to
read as follows:
"Claims under clauses (a) through (e) are hereinafter collectively
referred to as "Shareholder Indemnifiable Claims."
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6. The last sentence of Section 11.5(a)(i) is hereby amended to read as
follows:
"Any threshold limitation on indemnity shall not apply to SHCR's covenants
pursuant to Schedule 1.1 of this Agreement or any monies due under any of the
Related Documents and this Agreement."
7.If the parties file the Section 338(h)(10) Election (as defined in
Section 8 below), the last sentence in the last paragraph of Section 13.1 shall
be amended to read as follows:
"The Company and the Shareholders are solely responsible for filing any tax
returns for the time period starting from the date of their last filings and
ending as of the close of the Execution Date and paying all Taxes relating
thereto."
8.Section 13.1 is hereby amended by adding a new last paragraph to read as
follows:
"If SHCR determines that it will file an election under Section 338(h)(10)
of the Code with respect to the Option granted by this Agreement to purchase the
Shares of the Company (the "Section 338(h)(10) Election"), the parties
(including the Company, subject to the receipt of the notices referred to below)
(i) will cooperate in the preparation and timely filing of the Section
338(h)(10) Election and (ii) take all such action as is required in order to
give effect to the election for federal, state, and local Tax purposes to the
greatest extent permitted by law. If the parties file the Section 338(h)(10)
Election, SHCR shall pay to the Shareholders on or before April 15, 1999 in
immediately available funds the sum of: (i) an amount equal to the product of
19.6% multiplied by any ordinary income reported by the Company (including any
adjustments thereto) from the deemed sale of its assets resulting from the
Section 338(h)(10) Election, including, without limitation, ordinary income from
the deemed sale of accounts receivable and ordinary income from depreciation
recapture under Section 1245 of the Code; plus (ii) an amount equal to any Texas
franchise Tax reported by the Company (including any adjustments thereto) as
a result of the Section 338(h)(10) Election. The amount of the payment under
the preceding sentence shall be grossed up for the federal income tax thereon.
If SHCR determines that it will file a Section 338(h)910) Election, SHCR shall
notify the Company in writing that it will file a Section 338(h)(10) Election no
later than June 10, 1998.
9.Schedule 1.1 is hereby amended to read as set forth in Annex I hereto;
provided, however, that in the event that the parties do not file the Section
338(h)(10) Election, Schedule 1.1 is hereby amended to read as set forth in
Annex II hereto.
10.SHCR shall pay to the Shareholders in immediately available funds all
reasonable legal, accounting and other costs incurred by the Shareholder in
connection with this Amendment, including, without limitation, the evaluation,
preparation and filing of the Section 338(h)(10) Election and the calculation of
the payments required under Section 8 of this Amendment. The amount of the
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payment under the preceding sentence shall be grossed up for the federal income
Tax thereon. Payments required under this Section 10 shall be made by SHCR
within thirty (30) days of written notice of the amount of such costs by the
Shareholders. Notwithstanding the foregoing, in no event shall such payments
exceed Twenty Thousand Dollars ($20,000.00).
11.Capitalized terms used herein and not defined herein shall have the same
meaning as set forth in the Agreement.
12.Except as amended by this Amendment, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of May ____, 1998.
SHAREHOLDERS:
------------------------------------
Michael R. Cavenee, M.D.
COMPANY:
Michael Cavenee, M.D., P.A.,
a Texas professional association
By:
-----------------------------------------
Michael R. Cavenee, M.D.,
President
Partner P.A.
Shareholders:
------------------------------------
Michael R. Cavenee, M.D.
SHCR:
Sheridan Healthcare, Inc.,
a Delaware corporation
By:
-----------------------------------------
Michael Schundler, Chief Operating Officer
and Chief Financial Officer
73
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ANNEX I TO AMENDMENT NO. 1
CAVENEE PURCHASE OPTION AGREEMENT
Schedule 1.1
------------
Consideration
The aggregate option consideration (the "Option Consideration") payable to
the Shareholders for their grant of the Option is as follows:
1. Common Stock. Within fifteen days of the Execution Date, SHCR shall deliver
to each Shareholder, that number of shares (the "SHCR Shares") of the common
stock of SHCR, par value $.01 per share (the "Common Stock") specified next to
each Shareholder's name in Exhibit C. Stock being rendered pursuant to this
provision is subject to the terms and conditions of an Investment and
Shareholders' Agreement dated as of March 4, 1998 by and between SHCR and each
of the Shareholders of the Company (the "ISA"). The aggregate number of shares
of Common Stock to be issued to all Shareholders as Option Consideration shall
be equal to Four Hundred Three Thousand Five Hundred Sixty (403,560) shares of
Common Stock for Dr. Cavenee.
2 Cash Consideration. Upon the execution and delivery of this Agreement, SHCR
shall deliver cashier's checks to the Shareholders in the amounts specified next
to each Shareholder's name in Exhibit C. The aggregate cash consideration
portion of the Option Consideration shall be equal to One Million Eight Hundred
Twelve Thousand Four Hundred Fifty Five Dollars ($1,812,455.00) for Dr. Cavenee.
3. Guarantee. Except as provided below, SHCR guarantees the Shareholders that on
or before the first anniversary (the "First Anniversary") of the Execution Date,
the Shareholders shall have received an amount of cash in at least the minimum
aggregate amount of Four Million Six Hundred Thirty Four Thousand Nine Hundred
Fifty Dollars ($4,634,950.00) from the proceeds of the sale of their SHCR
Shares. SHCR may issue more shares (the "Other Shares") of Common Stock to the
Shareholders at any time during the first year prior to the First Anniversary
and SHCR may require the Shareholders to sell the Other Shares during that year.
The proceeds of the sale of the Other Shares shall be accounted in calculating
the existence of a Deficit (as hereinafter defined). If the total amount of cash
received by the Shareholders pursuant to the two preceding sentences is less
than Four Million Six Hundred Thirty Four Thousand Nine Hundred Fifty Dollars
($4,634,950.00) (the "Deficit"), SHCR shall pay to the Shareholders by the First
Anniversary the amount of the Deficit in immediately available funds in Dallas,
Texas. SHCR further guarantees that the sum of the amount of such cash received
by the Shareholders pursuant to the preceding sentences of this Section and
Section 2 of this Schedule 1.1 plus the fair market value of the SHCR Shares
(the "Retained Shares") (the sum of which is the "Anniversary Value") retained
by the Shareholders as of June 30, 1999 shall equal or exceed Nine Million Two
Hundred Twelve Thousand Fifty Five Dollars ($9,212,055.00), and if such sum is
less than that amount, SHCR shall at its election, either (i) issue by July 15,
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1999 such number of additional shares (the "Additional Shares") of Common Stock
such that the Anniversary Value and the fair market value of the Additional
Shares shall equal or exceed Nine Million Two Hundred Twelve Thousand Fifty Five
Dollars ($9,212,055.00); or (ii) pay to Shareholder by July 5, 1999 cash in an
amount equal to Nine Million Two Hundred Twelve Thousand Fifty Five Dollars
($9,212,055.00) minus the Anniversary Value. The Shareholder shall have the
registration rights with respect to the Additional Shares as set forth in the
Investment and Stockholders' Agreement.
In connection with these provisions, prior to July 1, 1999, the Shareholders
agree to promptly sell their shares of Common Stock pursuant to the written
directions of SHCR, provided such directions are in accordance with applicable
laws.
Notwithstanding the foregoing, the Shareholders may refuse to sell any of their
SHCR shares under this provision on the terms directed by SHCR; however, the
proceeds that would have been realized from any refused sales shall be deemed as
cash received for purposes of calculating the Deficit and the value of the SHCR
Shares not sold shall be the refused proceeds.
The Shareholders agree not to sell any of their shares of Common Stock prior to
July 1, 1999, except as permitted in the Investment and Stockholders Agreement.
SHCR shall reimburse the Shareholders for all expenses, including reasonable
attorneys fees and disbursements of not more than one counsel for all
Shareholders, incurred in connection with any sale undertaken by Shareholders
pursuant to Schedule 1.1 which sale is not pursuant to a registration under the
Securities Act of 1933. SHCR shall reimburse the Shareholders for expenses
relating to sales pursuant to a registration under the Securities Act of 1933 as
provided in the Investment and Stockholders' Agreement.
For this purpose, the proceeds of the sale of Common Stock shall mean the
proceeds of such sales net of all expenses, including underwriter fees and
discounts and broker's commissions.
Fair market value of the Retained Shares and the Additional Shares for this
purpose shall mean the average of the last sale price per share of Common Stock
on NASDAQ National Market for the last fifteen (15) trading days immediately
prior to June 30, 1999.
75
<PAGE>
ANNEX II TO AMENDMENT NO. 1
CAVENEE PURCHASE OPTION AGREEMENT
SCHEDULE 1.1
------------
Consideration
The aggregate option consideration (the "Option Consideration") payable to
the Shareholders for their grant of the Option is as follows:
1. Common Stock. Within fifteen days of the Execution Date, SHCR shall deliver
to each Shareholder, that number of shares (the "SHCR Shares") of the common
stock of SHCR, par value $.01 per share (the "Common Stock") specified next to
each Shareholder's name in Exhibit C. Stock being rendered pursuant to this
provision is subject to the terms and conditions of an Investment and
Shareholders' Agreement dated as of March 4, 1998 by and between SHCR and each
of the Shareholders of the Company (the "ISA"). The aggregate number of shares
of Common Stock to be issued to all Shareholders as Option Consideration shall
be equal to Four Hundred Three Thousand Five Hundred Sixty (403,560) shares of
Common Stock for Dr. Cavenee.
2 Cash Consideration. Upon the execution and delivery of this Agreement, SHCR
shall deliver cashier's checks to the Shareholders in the amounts specified next
to each Shareholder's name in Exhibit C. The aggregate cash consideration
portion of the Option Consideration shall be equal to One Million Eight Hundred
Twelve Thousand Four Hundred Fifty Five Dollars ($1,812,455.00) for Dr. Cavenee.
3. Guarantee. Except as provided below, SHCR guarantees the Shareholders that on
or before the first anniversary (the "First Anniversary") of the Execution Date,
the Shareholders shall have received an amount of cash in at least the minimum
aggregate amount of Four Million Six Hundred Thirty Four Thousand Nine Hundred
Fifty Dollars ($4,634,950.00) from the proceeds of the sale of their SHCR
Shares. SHCR may issue more shares (the "Other Shares") of Common Stock to the
Shareholders at any time during the first year prior to the First Anniversary
and SHCR may require the Shareholders to sell the Other Shares during that year.
The proceeds of the sale of the Other Shares shall be accounted in calculating
the existence of a Deficit (as hereinafter defined). If the total amount of cash
received by the Shareholders pursuant to the two preceding sentences is less
than Four Million Six Hundred Thirty Four Thousand Nine Hundred Fifty Dollars
($4,634,950.00) (the "Deficit"), SHCR shall pay to the Shareholders by the First
Anniversary the amount of the Deficit in immediately available funds in Dallas,
Texas. SHCR further guarantees that the sum of the amount of such cash received
by the Shareholders pursuant to the preceding sentences of this Section and
Section 2 of this Schedule 1.1 plus the fair market value of the SHCR Shares
(the "Retained Shares") (the sum of which is the "Anniversary Value") retained
by the Shareholders as of the First Anniversary shall equal or exceed Nine
Million Two Hundred Twelve Thousand Fifty Five Dollars ($9,212,055.00), and if
such sum is less than that amount, SHCR shall at its election, either (i) issue
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within fifteen days following the First Anniversary such number of additional
shares (the "Additional Shares") of Common Stock such that the Anniversary Value
and the fair market value of the Additional Shares shall equal or exceed Nine
Million Two Hundred Twelve Thousand Fifty Five Dollars ($9,212,055.00); or (ii)
pay to Shareholder within five (5) days following the First Anniversary cash in
an amount equal to Nine Million Two Hundred Twelve Thousand Fifty Five Dollars
($9,212,055.00) minus the Anniversary Value. The Shareholder shall have the
registration rights with respect to the Additional Shares as set forth in the
Investment and Stockholders' Agreement.
In connection with these provisions, during the first year after the Execution
Date, the Shareholders agree to promptly sell their shares of Common Stock
pursuant to the written directions of SHCR, provided such directions are in
accordance with applicable laws.
Notwithstanding the foregoing, the Shareholders may refuse to sell any of their
SHCR shares under this provision on the terms directed by SHCR; however, the
proceeds that would have been realized from any refused sales shall be deemed as
cash received for purposes of calculating the Deficit and the value of the SHCR
Shares not sold shall be the refused proceeds.
The Shareholders agree not to sell any of their shares of Common Stock during
the first year after the Execution Date except as permitted in the Investment
and Stockholders Agreement.
SHCR shall reimburse the Shareholders for all expenses, including reasonable
attorneys fees and disbursements of not more than one counsel for all
Shareholders, incurred in connection with any sale undertaken by Shareholders
pursuant to Schedule 1.1 which sale is not pursuant to a registration under the
Securities Act of 1933. SHCR shall reimburse the Shareholders for expenses
relating to sales pursuant to a registration under the Securities Act of 1933 as
provided in the Investment and Stockholders' Agreement.
For this purpose, the proceeds of the sale of Common Stock shall mean the
proceeds of such sales net of all expenses, including underwriter fees and
discounts and broker's commissions.
Fair market value of the Retained Shares and the Additional Shares for this
purpose shall mean the average of the last sale price per share of Common Stock
on NASDAQ National Market for the last fifteen (15) trading days immediately
prior to the Anniversary Date.
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<PAGE>
ANNEX A-2
AMENDMENT NO. 1 TO
TRIMMER PURCHASE OPTION AGREEMENT
This Amendment No. 1 to the Purchase Option Agreement, is by and among
Sheridan Healthcare, Inc., a Delaware corporation ("SHCR"), Kenneth Trimmer,
M.D., P.A., a Texas professional association (the "Company"), and each of the
owners listed on Exhibit A to the Purchase Option Agreement (each a
"Shareholder" and collectively, the "Shareholders").
WHEREAS, the parties to the Purchase Option Agreement (the"Agreement"),
dated as of March 4, 1998, desire to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises, the Agreement is amended
(the "Amendment") as follows:
1. The first sentence of Section 8.19 is amended to read as follows:
"19. Labor Laws. The Company employs nine (9) full-time and nine (9)
part-time employees and generally enjoys a good employer-employee relationship
with those employees."
2. The last sentence of Section 11.3(a) is amended to read as follows:
"Any Threshold limitation on indemnity shall not apply to the Shareholders'
breach of any of their covenants under Schedule 1.1 to this Agreement or any
monies due under any of the Related Documents and this Agreement."
3.If the parties file the Section 338(h)(10) Election (as defined in
Section 8 below), Section 11.4(d)(ii) is hereby amended to read as follows:
"(ii) any portion of the Option Consideration does not constitute an
amount realized within the meaning of Section 1001 of the Code from the sale of
a capital asset as defined in Section 1222."
4. Section 11.4 is hereby amended by adding 11.4(e) to read as
follows:
"(e) Losses relating to the failure of SHCR to comply with applicable laws
or regulations relating to a transaction undertaken by Shareholders pursuant to
Schedule 1.1."
5.Section 11.4 is hereby amended by amending the last paragraph thereof to
read as follows:
"Claims under clauses (a) through (e) are hereinafter collectively
referred to as "Shareholder Indemnifiable Claims."
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<PAGE>
6. The last sentence of Section 11.5(a)(i) is hereby amended to read as
follows:
"Any threshold limitation on indemnity shall not apply to SHCR's covenants
pursuant to Schedule 1.1 of this Agreement or any monies due under any of the
Related Documents and this Agreement."
7.If the parties file the Section 338(h)(10) Election (as defined in
Section 8 below), the last sentence in the last paragraph of Section 13.1 shall
be amended to read as follows:
"The Company and the Shareholders are solely responsible for filing any tax
returns for the time period starting from the date of their last filings and
ending as of the close of the Execution Date and paying all Taxes relating
thereto."
8.Section 13.1 is hereby amended by adding a new last paragraph to read as
follows:
"If SHCR determines that it will file an election under Section 338(h)(10)
of the Code with respect to the Option granted by this Agreement to purchase the
Shares of the Company (the "Section 338(h)(10) Election"), the parties
(including the Company, subject to the receipt of the notices referred to below)
(i) will cooperate in the preparation and timely filing of the Section
338(h)(10) Election and (ii) take all such action as is required in order to
give effect to the election for federal, state, and local Tax purposes to the
greatest extent permitted by law. If the parties file the Section 338(h)(10)
Election, SHCR shall pay to the Shareholders on or before April 15, 1999 in
immediately available funds the sum of: (i) an amount equal to the product of
19.6% multiplied by any ordinary income reported by the Company (including any
adjustments thereto) from the deemed sale of its assets resulting from the
Section 338(h)(10) Election, including, without limitation, ordinary income from
the deemed sale of accounts receivable and ordinary income from depreciation
recapture under Section 1245 of the Code; plus (ii) an amount equal to any Texas
franchise Tax reported by the Company (including any adjustments thereto) as a
result of the Section 338(h)(10) Election. The amount of the payment under the
preceding sentence shall be grossed up for the federal income Tax thereon. If
SHCR determines that it will file a Section 338(h)(10) Election, SHCR shall
notify the Company in writing that it will file a Section 338(h)(10) Election no
later than June 10, 1998.
9.Schedule 1.1 is hereby amended to read as set forth in Annex I hereto;
provided, however, that in the event that the parties do not file the Section
338(h)(10) Election, Schedule 1.1 is hereby amended to read as set forth in
Annex II hereto.
10.SHCR shall pay to the Shareholders in immediately available funds all
reasonable legal, accounting and other costs incurred by the Shareholders in
connection with this Amendment, including, without limitation, the evaluation,
preparation and filing of the Section 338(h)(10) Election and the calculation of
the payments required under Section 8 of this Amendment. The amount of the
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<PAGE>
payment under the preceding sentence shall be grossed up for the federal income
Tax thereon. Payments required under this Section 10 shall be made by SHCR
within thirty (30) days of written notice of the amount of such costs by the
Shareholders. Notwithstanding the foregoing, in no event shall such payments
exceed Twenty Thousand Dollars ($20,000.00).
11.Capitalized terms used herein and not defined herein shall have the same
meaning as set forth in the Agreement.
12.Except as amended by this Amendment, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of May ____, 1998.
SHAREHOLDERS:
------------------------------------
Kenneth J. Trimmer, M.D.
COMPANY:
Kenneth Trimmer, M.D., P.A.,
a Texas professional association
By:
-----------------------------------------
Kenneth J. Trimmer, M.D.,
President
Partner P.A.
Shareholders:
------------------------------------
Kenneth J. Trimmer, M.D.
SHCR:
Sheridan Healthcare, Inc.,
a Delaware corporation
By:
------------------------------------------
Michael Schundler, Chief Operating Officer
and Chief Financial Officer
80
<PAGE>
ANNEX I TO AMENDMENT NO. 1
TRIMMER PURCHASE OPTION AGREEMENT
SCHEDULE 1.1
------------
Consideration
The aggregate option consideration (the "Option Consideration") payable to
the Shareholders for their grant of the Option is as follows:
1. Common Stock. Within fifteen days of the Execution Date, SHCR shall deliver
to each Shareholder, that number of shares (the "SHCR Shares") of the common
stock of SHCR, par value $.01 per share (the "Common Stock") specified next to
each Shareholder's name in Exhibit C. Stock being rendered pursuant to this
provision is subject to the terms and conditions of an Investment and
Shareholders' Agreement dated as of March 4, 1998 by and between SHCR and each
of the Shareholders of the Company (the "ISA"). The aggregate number of shares
of Common Stock to be issued to all Shareholders as Option Consideration shall
be equal to Four Hundred Forty Six Thousand Forty Shares (446,040) shares of
Common Stock for Dr. Trimmer.
2 Cash Consideration. Upon the execution and delivery of this Agreement, SHCR
shall deliver cashier's checks to the Shareholders in the amounts specified next
to each Shareholder's name in Exhibit C. The aggregate cash consideration
portion of the Option Consideration shall be equal to Two Million Three Thousand
Three Hundred Forty Five Dollars ($2,003,345.00) for
Dr. Trimmer.
3. Guarantee. Except as provided below, SHCR guarantees the Shareholders that on
or before the first anniversary (the "First Anniversary") of the Execution Date,
the Shareholders shall have received an amount of cash in at least the minimum
aggregate amount of Five Million One Hundred Twenty Two Thousand Eight Hundred
Fifty Dollars ($5,122,850.00) from the proceeds of the sale of their SHCR
Shares. SHCR may issue more shares (the "Other Shares") of Common Stock to the
Shareholders at any time during the first year prior to the First Anniversary
and SHCR may require the Shareholders to sell the Other Shares during that year.
The proceeds of the sale of the Other Shares shall be accounted in calculating
the existence of a Deficit (as hereinafter defined). If the total amount of cash
received by the Shareholders pursuant to the two preceding sentences is less
than Five Million One Hundred Twenty Two Thousand Eight Hundred Fifty Dollars
($5,122,850.00) (the "Deficit"), SHCR shall pay to the Shareholders by the First
Anniversary the amount of the Deficit in immediately available funds in Dallas,
Texas. SHCR further guarantees that the sum of the amount of such cash received
by the Shareholders pursuant to the preceding sentences of this Section and
Section 2 of this Schedule 1.1 plus the fair market value of the SHCR Shares
(the "Retained Shares") (the sum of which is the "Anniversary Value") retained
by the Shareholders as of June 30, 1999 shall equal or exceed Ten Million One
Hundred Eighty One Thousand Seven Hundred Forty Five Dollars ($10,181,745.00),
and if such sum is less than that amount, SHCR shall at its election, either (i)
issue by July 15, 1999 such number of additional shares (the "Additional
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<PAGE>
Shares") of Common Stock such that the Anniversary Value and the fair market
value of the Additional Shares shall equal or exceed Ten Million One Hundred
Eighty One Thousand Seven Hundred Forty Five Dollars ($10,181,745.00); or (ii)
pay to Shareholder July 5, 1999 cash in an amount equal to Ten Million One
Hundred Eighty One Seven Hundred Forty Five Dollars ($10,181,745.00) minus the
Anniversary Value. The Shareholder shall have the registration rights with
respect to the Additional Shares as set forth in the Investment and
Stockholders' Agreement.
In connection with these provisions, prior to July 1, 1999, the Shareholders
agree to promptly sell their shares of Common Stock pursuant to the written
directions of SHCR, provided such directions are in accordance with applicable
laws.
Notwithstanding the foregoing, the Shareholders may refuse to sell any of their
SHCR Shares under this provision on the terms directed by SHCR; however, the
proceeds that would have been realized from any refused sales shall be deemed as
cash received for purposes of calculating the Deficit and the value of the SHCR
Shares not sold shall be the refused proceeds.
The Shareholders agree not to sell any of their shares of Common Stock prior to
July 1, 1999 except as permitted in the Investment and Stockholders Agreement..
SHCR shall reimburse the Shareholders for all expenses, including reasonable
attorneys fees and disbursements of not more than one counsel for all
Shareholders, incurred in connection with any sale undertaken by Shareholders
pursuant to Schedule 1.1 which sale is not pursuant to a registration under the
Securities Act of 1933. SHCR shall reimburse the Shareholders for expenses
relating to sales pursuant to a registration under the Securities Act of 1933 as
provided in the Investment and Stockholders' Agreement.
For this purpose, the proceeds of the sale of Common Stock shall mean the
proceeds of such sales net of all expenses, including underwriter fees and
discounts and broker's commissions.
Fair market value of the Retained Shares and the Additional Shares for this
purpose shall mean the average of the last sale price per share of Common Stock
on NASDAQ National Market for the last fifteen (15) trading days immediately
prior to June 30, 1999.
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<PAGE>
ANNEX II TO AMENDMENT NO. 1
TRIMMER PURCHASE OPTION AGREEMENT
SCHEDULE 1.1
------------
Consideration
The aggregate option consideration (the "Option Consideration") payable to
the Shareholders for their grant of the Option is as follows:
1. Common Stock. Within fifteen days of the Execution Date, SHCR shall deliver
to each Shareholder, that number of shares (the "SHCR Shares") of the common
stock of SHCR, par value $.01 per share (the "Common Stock") specified next to
each Shareholder's name in Exhibit C. Stock being rendered pursuant to this
provision is subject to the terms and conditions of an Investment and
Shareholders' Agreement dated as of March 4, 1998 by and between SHCR and each
of the Shareholders of the Company (the "ISA"). The aggregate number of shares
of Common Stock to be issued to all Shareholders as Option Consideration shall
be equal to Four Hundred Forty Six Thousand Forty Shares (446,040) shares of
Common Stock for Dr. Trimmer.
2 Cash Consideration. Upon the execution and delivery of this Agreement, SHCR
shall deliver cashier's checks to the Shareholders in the amounts specified next
to each Shareholder's name in Exhibit C. The aggregate cash consideration
portion of the Option Consideration shall be equal to Two Million Three Thousand
Three Hundred Forty Five Dollars ($2,003,345.00) for
Dr. Trimmer.
3. Guarantee. Except as provided below, SHCR guarantees the Shareholders that on
or before the first anniversary (the "First Anniversary") of the Execution Date,
the Shareholders shall have received an amount of cash in at least the minimum
aggregate amount of Five Million One Hundred Twenty Two Thousand Eight Hundred
Fifty Dollars ($5,122,850.00) from the proceeds of the sale of their SHCR
Shares. SHCR may issue more shares (the "Other Shares") of Common Stock to the
Shareholders at any time during the first year prior to the First Anniversary
and SHCR may require the Shareholders to sell the Other Shares during that year.
The proceeds of the sale of the Other Shares shall be accounted in calculating
the existence of a Deficit (as hereinafter defined). If the total amount of cash
received by the Shareholders pursuant to the two preceding sentences is less
than Five Million One Hundred Twenty Two Thousand Eight Hundred Fifty Dollars
($5,122,850.00) (the "Deficit"), SHCR shall pay to the Shareholders by the First
Anniversary the amount of the Deficit in immediately available funds in Dallas,
Texas. SHCR further guarantees that the sum of the amount of such cash received
by the Shareholders pursuant to the preceding sentences of this Section and
Section 2 of this Schedule 1.1 plus the fair market value of the SHCR Shares
(the "Retained Shares") (the sum of which is the "Anniversary Value") retained
by the Shareholders as of the First Anniversary shall equal or exceed Ten
Million One Hundred Eighty One Thousand Seven Hundred Forty Five Dollars
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<PAGE>
($10,181,745.00), and if such sum is less than that amount, SHCR shall at its
election, either (i) issue within fifteen days following the First Anniversary
such number of additional shares (the "Additional Shares") of Common Stock such
that the Anniversary Value and the fair market value of the Additional Shares
shall equal or exceed Ten Million One Hundred Eighty One Thousand Seven Hundred
Forty Five Dollars ($10,181,745.00); or (ii) pay to Shareholder within five (5)
days following the First Anniversary cash in an amount equal to Ten Million One
Hundred Eighty One Seven Hundred Forty Five Dollars ($10,181,745.00) minus the
Anniversary Value. The Shareholder shall have the registration rights with
respect to the Additional Shares as set forth in the Investment and
Stockholders' Agreement.
In connection with these provisions, during the first year after the Execution
Date, the Shareholders agree to promptly sell their shares of Common Stock
pursuant to the written directions of SHCR, provided such directions are in
accordance with applicable laws.
Notwithstanding the foregoing, the Shareholders may refuse to sell any of their
SHCR Shares under this provision on the terms directed by SHCR; however, the
proceeds that would have been realized from any refused sales shall be deemed as
cash received for purposes of calculating the Deficit and the value of the SHCR
Shares not sold shall be the refused proceeds.
The Shareholders agree not to sell any of their shares of Common Stock during
the first year after the Execution Date except as permitted in the Investment
and Stockholders Agreement..
SHCR shall reimburse the Shareholders for all expenses, including reasonable
attorneys fees and disbursements of not more than one counsel for all
Shareholders, incurred in connection with any sale undertaken by Shareholders
pursuant to Schedule 1.1 which sale is not pursuant to a registration under the
Securities Act of 1933. SHCR shall reimburse the Shareholders for expenses
relating to sales pursuant to a registration under the Securities Act of 1933 as
provided in the Investment and Stockholders' Agreement.
For this purpose, the proceeds of the sale of Common Stock shall mean the
proceeds of such sales net of all expenses, including underwriter fees and
discounts and broker's commissions.
Fair market value of the Retained Shares and the Additional Shares for this
purpose shall mean the average of the last sale price per share of Common Stock
on NASDAQ National Market for the last fifteen (15) trading days immediately
prior to the Anniversary Date.
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Annex B
SHERIDAN HEALTHCARE, INC.
Third 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.
(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;
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(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, 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 1,750,000 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.
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(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.
(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
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<PAGE>
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.
(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.
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,
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<PAGE>
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.
(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
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<PAGE>
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
(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) 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.
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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.
13. 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
Approved by Stockholders: June 24, 1998
======================================
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<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant x
Filed by a party other than the Registrant
Check the appropriate box:
x Preliminary Proxy Statement Confidential, For Use of the Commission
Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Sheridan Healthcare, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Sheridan Healthcare, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Check box if any part of the fee if offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number
of the Form or Schedule and the date of its filing.
- --------------------------------------------------------------------------------
(1) Amount Previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
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SHERIDAN HEALTHCARE, INC.
4651 Sheridan Street, Suite 400, Hollywood, Florida 33021
Proxy for Common Stock
P
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X
Y The undersigned hereby appoints Mitchell Eisenberg, M. D. and Jay A. Martus,
Esq., and each of them, proxies with full power of substitution to vote for and
on behalf of the undersigned at the Annual Meeting of Stockholders of Sheridan
Healthcare, Inc. (the "Company"), to be held at the offices of the Company at
4651 Sheridan Street, Suite 400, Hollywood, Florida 33021 on June 24, 1998 at
10:00 a.m., Florida time, and at any adjournments or postponements thereof,
hereby granting full power and authority to act on behalf of the undersigned at
said meeting and any adjournments or postponements thereof. The undersigned
hereby revokes any proxy previously given in connection with such meeting and
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement and the 1997 Annual Report to Stockholders.
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
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<PAGE>
X Please mark votes as in this example.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no instruction is indicated with
respect to Proposals 1, 2 or 3 below, the undersigned's votes will be cast "FOR"
each of such matters. The undersigned's votes will be cast in accordance with
the proxies' discretion on such other business as may properly come before the
meeting or any adjournments or postponements thereof. PLEASE SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
1.Proposal to elect Mitchell Eisenberg, M.D. and Neil A. Natkow, D.O. as Class
III Directors of the Company, each for a three-year term to continue until the
2001 Annual Meeting of Stockholders and until the successor of each is duly
elected and qualified.
FOR BOTH WITHHELD --------------------------------------
FROM BOTH Withheld as to the nominee noted above
2.Proposal to approve the potential issuance of shares of Common Stock of the
Company in connection with the acquisition by the Company of an office-based
physician practice.
FOR AGAINST ABSTAIN
3.Proposal to approve the amendment to the Company's Second Amended and Restated
1995 Stock Option Plan to increase the number of shares of Common Stock of the
Company that may be issued thereunder from 1,350,000 to 1,750,000.
FOR AGAINST ABSTAIN
4.To consider and act upon such other business as may properly come before the
meeting or any adjournments or postponements thereof.
For joint accounts, each owner should Signature Date
sign. Executors, administrators, trustees, ----------- -------
corporate officers and others acting in a Signature Date
representative capacity should give full ----------- -------
title or authority.
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