UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 31, 1998
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
******************************
Commission File Number 0-26806
SHERIDAN HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3252967
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
4651 Sheridan Street, Suite 400, Hollywood, Florida
33021 (Address of principal executive offices,
including zip code)
954/987-5822
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of outstanding shares of the issuer's classes of common
stock as of the latest practicable date.
As of May 1, 1998, there were 7,910,712 shares of the Registrant's voting Common
Stock, $.01 par value, outstanding and 296,638 shares of the Registrant's
non-voting Class A Common Stock, $.01 par value, outstanding.
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents..................................................... $ 874 $ 427
Accounts receivable, net of allowances........................................ 23,212 21,588
Income tax refunds receivable................................................. 239 1,280
Deferred income taxes......................................................... 1,318 1,417
Other current assets.......................................................... 2,591 2,814
------------- -------------
Total current assets........................................................ 28,234 27,526
Property and equipment, net of accumulated depreciation.......................... 3,610 3,538
Goodwill, net of accumulated amortization........................................ 91,024 54,168
Intangible assets, net of accumulated amortization............................... 1,664 1,803
------------- -------------
Total assets.............................................................. $ 124,532 $ 87,035
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 542 $ 591
Amounts due for acquisitions.................................................. 493 527
Accrued salaries and benefits................................................. 1,973 2,686
Self-insurance accruals....................................................... 3,964 3,973
Refunds payable............................................................... 2,890 2,674
Accrued physician incentives.................................................. 327 744
Other accrued expenses........................................................ 2,484 2,235
Current portion of long-term debt............................................. 447 446
------------- -------------
Total current liabilities................................................... 13,120 13,876
Long-term debt, net of current portion........................................... 46,621 29,833
Amounts due for acquisitions..................................................... 1,851 1,976
Stockholders' equity:
Preferred stock, par value $.01; 5,000 shares authorized, none issued......... --- ---
Common stock, par value $.01; 21,000 shares authorized:
Voting; 7,901 and 6,509 shares issued and outstanding....................... 79 66
Class A non-voting; 297 shares issued and outstanding...................... 3 3
Additional paid-in capital.................................................... 81,530 61,352
Excess purchase price distributed to management stockholders.................. (7,541) (7,541)
Accumulated deficit........................................................... (11,131) (12,530)
------------- -------------
Total stockholders' equity ................................................. 62,940 41,350
------------- -------------
Total liabilities and stockholders' equity................................ $ 124,532 $ 87,035
============= =============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
------------- -------------
<S> <C> <C>
Net revenue...................................................................... $ 27,675 $ 22,979
Operating expenses:
Direct facility expenses...................................................... 19,131 16,073
Provision for bad debts....................................................... 1,309 925
Salaries and benefits......................................................... 1,893 1,830
General and administrative.................................................... 977 1,120
Amortization.................................................................. 716 437
Depreciation.................................................................. 201 143
------------- -------------
Total operating expenses.................................................... 24,227 20,528
------------- -------------
Operating income................................................................. 3,448 2,451
Interest expense................................................................. 881 601
------------- -------------
Income before income taxes....................................................... 2,567 1,850
Income tax expense............................................................... 1,168 662
------------- -------------
Net income....................................................................... $ 1,399 $ 1,188
============= =============
Net income per share
Basic......................................................................... $ .19 $ .18
Diluted....................................................................... .18 .17
Weighted average shares of common stock and
common stock equivalents outstanding
Basic......................................................................... 7,439 6,715
Diluted....................................................................... 7,859 6,897
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
SHERIDAN HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income.................................................................... $ 1,399 $ 1,188
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization................................................................ 716 437
Depreciation................................................................ 201 143
Provision for bad debts..................................................... 1,309 925
Deferred income taxes....................................................... 99 (207)
Changes in operating assets and liabilities:
Accounts receivable......................................................... (2,933) (2,727)
Other current assets........................................................ 1,264 605
Other assets................................................................ 80 (519)
Accounts payable............................................................ (49) 84
Other accrued expenses...................................................... (674) (1,178)
------------- -------------
Net cash provided by (used in) operating activities....................... 1,412 (1,249)
------------- -------------
Cash flows from investing activities:
Acquisitions of physician practices........................................... (130) (135)
Investment in management agreements........................................... (17,377) (3,203)
Sale of physician practices................................................... --- ---
Capital expenditures.......................................................... (273) (162)
------------- -------------
Net cash (used) in investing activities................................... (17,780) (3,500)
------------- -------------
Cash flows from financing activities:
Borrowings on long-term debt.................................................. 16,936 5,618
Payments on long-term debt.................................................... (176) (869)
Exercise of employee stock options............................................ 55 ---
------------- -------------
Net cash provided by financing activities................................. 16,815 4,749
------------- -------------
Increase in cash and cash equivalents............................................ 447 ---
Cash and cash equivalents:
Beginning of period........................................................... 427 ---
------------- -------------
End of period................................................................. $ 874 $ ---
============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
(1) Basis of presentation
---------------------
The interim consolidated financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to SEC rules and
regulations; nevertheless, management believes that the disclosures herein are
adequate to make the information presented not misleading. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
fairly present the consolidated financial position of the Company at March 31,
1998, and the consolidated results of its operations and its consolidated cash
flows for the periods shown in the interim consolidated financial statements,
have been included herein. The results of operations for the interim periods are
not necessarily indicative of the results for the full years.
(2) Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries and other entities in which the Company has more
than 50% ownership interest or a controlling financial interest.
In November 1997, the Emerging Issues Task Force ("EITF") reached a consensus on
when a physician practice management company ("PPM") has established a
controlling financial interest in a physician practice through a contractual
management service agreement ("MSA"). A controlling financial interest must
exist in order for a PPM to consolidate the operations of an affiliated
physician practice. The consensus is addressed in EITF Issue 97-2, "Application
of Physician Practice Entities".
The Company is following the controlling financial interest provisions of EITF
Issue 97-2 in its determination of whether the operations of an affiliated
physician practice qualify for consolidation.
(3) Goodwill
--------
Approximately $28.4 million of the total amount of goodwill, net of accumulated
amortization, at March 31, 1998 is related to the Company's acquisition of
Sheridan Healthcorp, Inc. (the "Predecessor") in November 1994. Such goodwill
represents the Company's market position and reputation, its relationships with
its customers and affiliated physicians, the relationships between its
affiliated physicians and their patients, and other similar intangible assets.
The remaining $62.6 million of the total amount of goodwill at March 31, 1998 is
related to several acquisitions of physician practices, and investments in
management agreements with physician practices accounted for as purchases, which
were completed from September 1994 to March 1998, some of which are included in
the transactions discussed in Note 6 below. Such goodwill represents the general
reputation of the practices in the communities they serve, the collective
experience of the management and other employees of certain practices in
managing health care services delivered under capitated arrangements, contracts
with third-party payors, relationships between the physicians and their
patients, patient lists, and other similar intangible assets. The Company
evaluates the underlying facts and circumstances related to each acquisition
including the term of the management services agreement and establishes an
appropriate amortization period for the related goodwill. The goodwill related
to these physician practice acquisitions is being amortized on a straight-line
basis over periods ranging from 10 to 40 years.
5
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(4) Intangible assets
-----------------
Intangible assets consist primarily of the physician employee workforce,
non-physician employee workforce, management team and computer software acquired
in the Company's acquisition of the Predecessor and deferred loan costs. These
intangible assets are being amortized over the lives of the underlying assets or
agreements, which range from three to seven years.
(5) Amounts due for acquisitions
----------------------------
Amounts due for acquisitions includes obligations to the former stockholders of
certain office-based physician practices acquired by the Company. These amounts
are being paid over the terms of the employment agreements between the Company
and the former stockholders, which range from three to five years. It also
includes termination benefits payable to the former stockholders of an acquired
practice, which are payable beginning in 2001 or upon termination of their
employment by the Company, whichever is later.
(6) Acquisitions and divestitures
-----------------------------
During the period from March 1997 to December 1997, the Company purchased
options to acquire five office-based physician practices and one hospital-based
physician practice for an aggregate of $10.8 million in cash and approximately
14,000 shares of the Company's common stock. During the period from January 1998
to March 1998 the Company completed four transactions with physician practices
for aggregate consideration of approximately $37.3 million of which
approximately $17.2 million was paid in cash and approximately $20.1 million was
paid through the issuance of approximately 1,384,000 shares of the Company's
common stock. Concurrent with each acquisition of an option the Company entered
into a long-term management agreement with each practice. These acquisitions and
management agreements were accounted for as purchases, and accordingly, the
operations of each acquired practice, or the operations under each management
agreement, are included in the Company's consolidated financial statements
beginning on each respective date of acquisition, or the effective date of the
management agreement, as applicable. In each transaction, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values.
The following table summarizes the pro forma consolidated results of operations
of the Company as though the acquisitions of physician practices discussed above
had occurred at the beginning of the period presented. The pro forma
consolidated results of operations shown below do not necessarily represent what
the consolidated results of operations of the Company would have been if these
acquisitions had actually occurred at the beginning of the period presented, nor
do they represent a forecast of the consolidated results of operations of the
Company for any future period.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- -----------
(in thousands, except
per share data)
Pro Forma Results of Operations:
<S> <C> <C>
Net revenue.......................................................... $ 28,849 $ 28,664
Income before income taxes........................................... 2,939 2,942
Net income .......................................................... 1,624 1,790
Net income per share - basic......................................... 0.20 0.22
Net income per share - diluted....................................... 0.19 0.22
</TABLE>
During the period from February 1997 through April 1997 the Company sold a
primary care office location and two rheumatology practices which generated
approximately $875,000 in net revenue for the year ended December 31, 1997.
6
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Effective April 1, 1998 the Company completed the sale of a primary care
practice with two office locations. The practices generated approximately $8.2
million in net revenue for the year ended December 31, 1997 and approximately
$1.9 million for the quarter ended March 31, 1998.
(7) Long-term debt
--------------
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- --------
Revolving credit facility, maturing in December 2000,
<S> <C> <C>
secured by substantially all assets of the Company.................... $ 45,900 $ 29,000
Capital lease obligations payable in various monthly
installments, maturing at various dates through 2001.................. 1,168 1,279
----------- -----------
Total................................................................ 47,068 30,279
Less current portion.................................................... (447) (446)
----------- -----------
Long-term debt...................................................... $ 46,621 $ 29,833
=========== ===========
</TABLE>
On March 12, 1997, the Company established a new $35 million revolving credit
facility, which was used to pay the outstanding balance under the previous
credit facility. On December 17, 1997 the Company amended its existing revolving
credit facility which increased the amount available from $35 million to $50
million. There are no principal payments due under the new credit facility until
the maturity date of December 2000. The new revolving credit facility contains
various restrictive covenants that include, among other requirements, the
maintenance of certain financial ratios, various restrictions regarding
acquisitions, sales of assets, liens and dividends, and limitations regarding
investments, additional indebtedness and guarantees. The Company was in
compliance with the loan covenants in the new credit facility as of March 31,
1998. The additional amount that could be borrowed under the credit facility is
potentially restricted by a leverage ratio defined in the credit agreement.
Based on the value of this leverage ratio at March 31, 1998, the Company had the
ability to borrow the entire unused portion of the credit facility, which was
$4.1 million at March 31, 1998.
On April 30, 1998 the Company further amended its revolving credit facility
which increased the amount available from $50 million to $75 million. This
amendment included the syndication of the credit facility with a group of banks
led by NationsBank, N.A. There are no principal payments due under the new
credit facility until the maturity date of April 30, 2001.
(8) Income taxes
------------
The Company's income tax expense was reduced by a loss carryforward from the
prior year for the three months ended March 31, 1997. Without the loss
carryforward, income tax expense for the three months ended March 31, 1997 would
have been approximately $870,000. The Company had an unused loss carryforward of
approximately $1.6 million for book purposes as of March 31, 1997. The tax
effect of the loss carryforward from 1996 was allocated evenly among all four
quarters in the year ending December 31, 1997. The Company had net deferred tax
assets at March 31, 1998, which represent the tax effect of differences between
the tax basis and the financial reporting basis of assets and liabilities on the
Company's balance sheet.
7
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(9) Litigation
----------
In October 1996, the Company and certain of its directors, officers and legal
advisors were named as defendants in a lawsuit filed in the Circuit Court of the
Seventeenth Judicial Circuit in and for Broward County, Florida by certain
former physician stockholders of the Predecessor, which was formerly named
Southeastern Anesthesia Management Associates, Inc. The claim alleges that the
defendants engaged in a conspiracy of fraud and deception for personal gain in
connection with inducing the plaintiffs to sell their stock in the Predecessor
to the Company, as well as legal malpractice and violations of Florida
securities laws. The claim seeks damages of at least $10 million and the
imposition of a constructive trust and disgorgement of stock and options held by
certain members of the Company's management. The Company believes the lawsuit is
without merit and intends to continue to vigorously defend against it and also
believes the lawsuit's ultimate resolution will not have a material adverse
impact on the financial position of the Company.
(10) Recent accounting pronouncements
--------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", ("SFAS
No. 130"), which is required to be adopted in fiscal 1998. This statement
established standards to reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in financial statements and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of statements of financial position.
Comprehensive income is defined as the change in equity during the financial
reporting period of a business enterprise resulting from non-owner sources. The
Company currently does not have other comprehensive income and therefore does
not believe the adoption of SFAS No. 130 will have a significant impact on its
financial statement presentation.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", ("SFAS No. 131"), which is required to be
adopted in fiscal 1998. This statement requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments including, among other things, a measure of segment profit or
loss, certain specific revenue and expense items, and segment assets. The
Company does not believe the adoption of SFAS No. 131 will have a significant
impact on its financial statement presentation.
(11) Earnings per share
------------------
Reconciliation of Basic EPS Factors to Diluted EPS Factors:
<TABLE>
<CAPTION>
March 31,
------------------------
1998 1997
----------- -----------
Weighted average common shares outstanding
<S> <C> <C>
for basic earnings per share............................... 7,439 6,715
Impact of dilutive employee stock options.................... 420 182
----------- -----------
Weighted average of shares of
common stock equivalents for
diluted earnings per share................................. 7,859 6,897
=========== ===========
</TABLE>
8
<PAGE>
SHERIDAN HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(12) Stock options
-------------
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") in 1996. The Company has
elected to continue using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for employee stock
options. Each stock option has an exercise price equal to the market price on
the date of grant and, accordingly, no compensation expense has been recorded
for any stock option grants.
Stock option activity during the three months ended March 31, 1998 was as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
----------- ---------
<S> <C> <C>
Balance, December 31, 1997................................................. 937,084 $ 7.91
Exercised.................................................................. (8,833) 6.37
Granted during period...................................................... 297,675 14.25
Forfeited during period.................................................... (12,600) 7.95
-----------
Balance, March 31, 1998.................................................... 1,213,326 $ 9.48
===========
</TABLE>
9
<PAGE>
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference include the following: fluctuations in the volume of services
delivered by the Company's affiliated physicians, changes in the reimbursement
rates for those services, uncertainty about the ability to collect the
appropriate fees for those services, 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.
GENERAL
The Company is a physician practice management company which employs or manages
specialist physicians providing services at hospitals and ambulatory surgical
facilities in the areas of anesthesia, neonatology, pediatrics, obstetrics and
emergency services and owns and operates, or manages, office-based obstetrical,
general surgical, gynecologic-oncology, pain management, perinatology and
primary care practices. The Company derives substantially all of its revenue
from the medical services provided by the physicians who are employed by the
Company or whose practices are managed by the Company. The Company generates
revenue from its specialist physician services by directly billing third-party
payors or patients on a fee-for-service or discounted fee-for-service basis. In
addition, several hospitals at which the Company provides specialist physician
services pay subsidies to the Company to supplement revenue from billings to
third-party payors. The Company generates revenue from its office-based
physician services pursuant to various payment arrangements, including
shared-risk capitation arrangements, fee-for-service or discounted
fee-for-service arrangements and other capitation arrangements.
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 specialties to
existing hospital customers and acquiring or managing additional physician
practices. One of the Company's key strategies is to create integrated networks
providing women's and children's healthcare services, consisting of both
hospital-based and office-based physicians in various complementary specialties
that support the Company's hospital customers. As of April 30, 1998, the Company
employed, or managed the practices of, approximately 241 physicians practicing
under 52 specialty service contracts with 35 health care facilities and at 24
office locations.
The Company made several acquisitions of physician practices and entered into
several long-term management agreements with physician practices, during the
period from March 1997 to March 1998, as described in Note 6 to the accompanying
consolidated financial statements. These transactions were accounted for as
purchases and accordingly, the operations of each acquired practice, or the
operations under each management agreement, are included in the Company's
consolidated financial statements beginning on each respective date of
acquisition, or the effective date of the management agreement, as applicable.
The Company also sold certain physician practices during the period from
February 1997 to December 1997, as described in Note 6 to the accompanying
consolidated financial statements.
10
<PAGE>
RESULTS OF OPERATIONS
The following table shows certain statement of operations data expressed as
percentage of net revenue:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1998 1997
-------- --------
(in thousands,
except per share data)
<S> <C> <C>
Net revenue.................................................................. 100.0% 100.0%
Operating expenses:
Direct facility expenses................................................ 69.1 69.9
Provision for bad debts................................................. 4.7 4.0
Salaries and benefits................................................... 6.8 8.0
General and administrative.............................................. 3.5 4.9
Amortization............................................................ 2.6 1.9
Depreciation............................................................ 0.7 0.6
--------- --------
Total operating expenses........................................... 87.4 89.3
--------- --------
Operating income............................................................. 12.6% 10.7%
========= ========
</TABLE>
Three Months Ended March 31, 1998 Compared To Three Months Ended March 31, 1997
Net revenue was $27.7 million in 1998 compared to $23.0 million in 1997, an
increase of $4.7 million or 20.4%. Of this increase, $1.6 million was due to the
acquisition of two hospital-based physician practices during the first quarter
of 1998, $2.1 million was due to the acquisition of several office-based
practices during the past year and $1.0 million was due to the addition of
several new contracts for hospital-based services during the past year.
Direct facility expenses increased $3.0 million, or 19%, from $16.1 million in
1997 to $19.1 million in 1998. Direct facility expenses include all operating
expenses that are incurred at the location of the physician practice, including
salaries, employee benefits, referral claims (in the case of shared-risk
capitation business), office expenses, medical supplies, insurance and other
expenses. The increase in direct facility expenses corresponds to the increase
in net revenue as noted above. Direct facility expenses as a percentage of net
revenue decreased slightly from 69.9% in 1997 to 69.1% in 1998.
The provision for bad debts increased $384,000, or 41.5%, from $925,000 in 1997
to $1,309,000 in 1998. This increase was due to a 20.4% increase in net revenue,
as discussed above, and an increase in the Company's overall bad debt percentage
which increased from 4.5% in 1997 to 4.7% in 1998. The increase in the Company's
bad debt percentage is due to an increase in the Company's net revenue derived
from office-based practices with a concentration of fee-for-service revenue
rather than capitation revenue. Capitated practices do not incur bad debt
expense.
Salaries and benefits increased $63,000, or 3.4%, from $1.8 million in 1997 to
$1.9 million in 1998. Salaries and benefits includes salaries, payroll taxes and
employee benefits related to employees located at the Company's central office,
including employees related to hospital-based operations, office-based
operations and general corporate functions. The increase in salaries and
benefits was due to an increase in personnel used to support the growth in the
Company's hospital-based contracts. As a percentage of net revenue, salaries and
benefits decreased from 8.0% in 1997 to 6.8% in 1998.
General and administrative expense decreased $143,000, or 12.8%, from $1.1
million in 1997 to $1.0 million in 1998. General and administrative expense
includes expenses incurred at the Company's central office, including office
expenses, accounting and legal fees, insurance, travel and other similar
expenses. The decrease in general and administrative expense was due to a
decrease in legal fees incurred in connection with malpractice cases which are
now reflected as a direct facility expense. As a percentage of net revenue,
general and administrative expense decreased from 4.9% in 1997 to 3.5% in 1998.
11
<PAGE>
Amortization expense increased $279,000, or 63.8%, from $437,000 in 1997 to
$716,000 in 1998. This increase was related to several acquisitions of physician
practices and management agreements with physician practices, completed from
March 1997 to March 1998, which are included in the transactions discussed in
Note 6 to the accompanying consolidated financial statements.
Operating income increased $997,000, or 40.7%, from $2.5 million in 1997 to $3.4
million in 1998. This increase was due to growth from acquisitions and new
contracts. As a percentage of net revenue, operating income increased from 10.7%
in 1997 to 12.6% in 1998. This increase was due to the fact net revenue
increased at a greater rate than salaries and benefits or general and
administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of cash during the three months ended March 31,
1998 were to finance investments in management agreements with physician
practices ($17.5 million) and to finance increases in accounts receivable ($1.6
million). The Company met its cash needs during this period primarily from its
net income plus non-cash expenses (amortization, depreciation and deferred
income taxes) ($2.4 million), and net borrowings on long-term debt ($16.9
million).
On March 12, 1997, the Company established a new $35 million revolving credit
facility with NationsBank, National Association ("NationsBank"), which was used
to repay the outstanding balance under the previous facility, which was $25.2
million. On December 17, 1997, the Company amended its existing revolving credit
facility with NationsBank, which increased the total revolving credit commitment
from $35 million to $50 million which was further amended on April 30, 1998 to
increase the total revolving credit commitment from $50 million to $75 million.
This amendment included the syndication of the revolving credit facility with a
group of seven banks led by NationsBank. The credit facility bears interest at
the London interbank offered rate plus an applicable margin which is subject to
quarterly adjustment based on a leverage ratio defined in the credit agreement.
As of May 12, 1998, the applicable margin was 1.88%. The Company is also
required to pay a commitment fee on a quarterly basis based on the unused
portion of the total commitment. The fee ranges from 0.25% to 0.50% and is
subject to quarterly adjustments based on a leverage ratio defined in the credit
agreement. There are no principal payments due under the amended credit facility
until the maturity date of April 30, 2001.
The outstanding balance under the credit facility increased from $29.0 million
at December 31, 1997 to $45.9 million at March 31, 1998 primarily due to
investments in management agreements in 1998, as discussed above. The amount
that can be borrowed under the new credit facility is potentially restricted by
a leverage ratio defined in the credit agreement. Based on the value of this
leverage ratio at March 31, 1998, the Company had the ability to borrow the
entire unused portion of the credit facility, which was $4.1 million at March
31, 1998. Certain conditions must be met, including the maintenance of certain
financial ratios, and in certain circumstances, the approval of the Company's
lenders must be obtained, in order to use the credit facility to finance
acquisitions of physician practices or investments in management agreements.
There can be no assurance that the Company will be able to satisfy such
conditions in order to use its credit facility to finance any future
acquisitions or investments in management agreements.
In November 1997, the Company issued approximately 14,000 shares of its common
stock as partial consideration for an acquisition of an office-based general
surgical practice completed in November 1997. During the period from January
1998 to March 1998 the Company completed four transactions with physician
practices for consideration of approximately $17.2 million in cash and the
issuance of approximately 1,384,000 shares of the Company's common stock.
12
<PAGE>
In order to provide funds necessary for the Company's future expansion
strategies, it will be necessary for the Company to incur, from time to time,
additional long-term bank indebtedness and/or issue equity or debt securities,
depending on market and other conditions.
On April 20, 1998 the Company filed a Form S-3 registration statement with the
Securities and Exchange Commission for a public offering of up to 1,000,000
newly issued shares of the Company's common stock. The registration statement
relating to these securities has not yet become effective. All the shares are
being offered by the Company and Pacific Growth Equities, Inc. is acting as the
Company's placement agent in connection with the offering.
Three Months Ended March 31, 1998 Compared To Three Months Ended March 31, 1997
Net cash provided by operating activities increased by $2.7 million from 1997 to
1998. This increase was due to several factors, the largest of which was an
increase of net income plus non-cash expenses (amortization, depreciation and
deferred income taxes) which increased from $1.6 million in 1997 to $2.4 million
in 1998.
Net cash used by investing activities increased from $3.5 million in 1997 to
$17.8 million in 1998. This increase was primarily due to an increase in cash
used for physician practice acquisitions and investments in management
agreements from $3.3 million in 1997 to $17.5 million in 1998.
Net cash provided by financing activities increased from $4.7 million in 1997 to
$16.8 million in 1998. This increase was primarily due to an increase in net
borrowings under the Company's revolving credit facility from $5.6 million in
1997 to $16.9 million in 1998, which is related to the increase in cash used for
physician practice acquisitions and investments in management agreements.
13
<PAGE>
PART II. OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
From time to time, the Company is party to various claims,
suits, and complaints. Currently, there are no such claims,
suits or complaints which, in the opinion of management, would
have a material adverse effect on the Company's financial
position, liquidity or results of operations.
Item 2. Changes in Securities and Use of Proceeds
SALES OF UNREGISTERED SECURITIES
--------------------------------
During the period from January 1, 1998 to March 31, 1998, the Company
issued unregistered securities to a limited number of persons, as described
below. No underwriters or underwriting discounts or commissions were involved.
There was no public offering in any such transaction, and the Company believes
that each transaction was exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), by reason of Section
4(2) thereof, based on the private nature of the transactions and the financial
sophistication of the purchasers, all of whom had access to complete information
concerning the Company and acquired the securities for investment and not with a
view to the distribution thereof.
(1) On January 9, 1998, the Company issued an aggregate of
172,816 shares of common stock to the former stockholders of a
physician practice in consideration for the acquisition of such
practice by the Company.
(2) On January 28, 1998, the Company issued an aggregate of
287,304 shares of common stock to the former stockholders of a
physician practice in consideration for the acquisition of such
practice by the Company.
(3) On March 4, 1998, the Company issued an aggregate of
885,000 shares of common stock to the former stockholders of a
physician practice and a related party in consideration for the
acquisition of such practice by the Company.
(4) On March 6, 1998, the Company issued on aggregate of
38,593 shares of common stock to the former stockholder and an employee
of a physician practice in consideration for the acquisition of such
practice by the Company.
Item 6: Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
14
<PAGE>
Exhibit
Number Description
- ------- -----------
10.1 Investment and Stockholders' Agreement, by and among the Company
and Rafael D. Arango, M.D., Stuart J. Leaderman, M.D., Eduardo H.
Marti, M.D., Charles Merson, M.D., Ramiro Rodriguez, M.D., Tirso
J. Rojas, M.D., Laurence Skolnik, M.D., and Joaquin C. Taranco,
M.D., dated as of January 9, 1998.
10.2 Investment and Stockholders' Agreement, by and among the Company
and Jeffrey L. Buchalter, M.D., Kurt A. Krueger, M.D., Davie E.
Fairleigh, M.D., and Ruben B. Timmons, M.D., dated as of January
28, 1998.
10.3 Investment and Stockholers' Agreement, by and among the Company
and Michael R. Cavenee, M.D., and Kenneth J. Trimmer, M.D., dated
as of March 4, 1998 (incorporated herein by reference to such
exhibit filed as an exhibit to the Company's Report on Form 8-K
filed as of March 19, 1998).
10.4 Investment and Stockholders' Agreement, by and between the Com
pany and Nord Capital Group, Inc., dated as of March 4, 1998.
10.5 Investment and Stockholders' Agreement, by and among the Company,
Staffan R. B. Nordqvist, M.D., and Laurel A. King, M.D., dated as
of March 6, 1998.
27 Financial Data Schedule (for SEC use only).
(b) (i) A report on Form 8-K was filed on March 19, 1998 to report
a material acquisition completed on March 4, 1998.
(ii) A report on Form 8-K/A was filed on April 16, 1998 to
amend a report on Form 8-K which was filed on March 19, 1998
to report a material acquisition completed on March 4, 1998.
The Form 8-K/A includes Item 7.(a), the financial statements
of businesses acquired, and Item 7.(b), the pro forma
financial information, both of which were not included in the
Form 8-K.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHERIDAN HEALTHCARE, INC.
(Registrant)
Date: May 15, 1998 By: /s/ Michael F. Schundler
-----------------------------
Michael F. Schundler
Chief Financial Officer
(principal financial officer)
INVESTMENT AND STOCKHOLDERS' AGREEMENT
--------------------------------------
THIS INVESTMENT AND STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of
January 9, 1998, by and among Sheridan Healthcare, Inc., a Delaware corporation
("SHCR"), and the individuals who are identified as Stockholders on Schedule A
attached to this Agreement (the "Stockholders").
PRELIMINARY STATEMENTS
----------------------
Reference is made to: (i) the Management Services Agreement, dated as of
January 9, 1998 by and among Taranco & Associates Anesthesiology Group, Inc., a
Florida corporation, also known as Plantation-Tamarac Anesthesiology Group, P.A.
(the "Company"), the Stockholders, and Sheridan Healthcorp, Inc., a Florida
corporation ("Sheridan"); (ii) each of the Restrictive Covenant Agreements,
dated as of January 9, 1998 by and between Sheridan and each of the
Stockholders; (iii) the Purchase Option Agreement, dated as of January 9, 1998
by and among SHCR, the Company and the Stockholders; and (iv) each of the
Physician Employment Agreements, dated as of January 9, 1998 by and between the
Company and each of the Stockholders (collectively, the "Related Documents").
Capitalized terms not defined in this Agreement shall have the meanings given
them in the Related Documents.
The parties to this Agreement desire to set forth the terms of their
interest in the securities of SHCR.
In consideration of the foregoing and the mutual covenants and agreements
contained in this Agreement, the parties to this Agreement agree as follows:
ARTICLE I ACQUISITION OF SECURITIES
- --------- -------------------------
Section 1 Acquisition of SHCR Common Stock by Stockholders. Pursuant to the
Purchase Option Agreement, each Stockholder has been issued by SHCR the
respective number of shares of SHCR Common Stock (as defined in the Purchase
Option Agreement), set forth opposite the name of that Stockholder on Schedule A
to this Agreement.
ARTICLE II THE CLOSING
- ---------- -----------
Section 1 Closing. The delivery and acceptance of the shares of SHCR Common
Stock being acquired by the Stockholders pursuant to the Purchase Option
Agreement (the "Closing Shares"), shall take place at the offices of Sheridan
concurrently with the Closing of the transactions contemplated by the Related
Documents, or at a later date as agreed to in writing by the parties and subject
to satisfaction or waiver of all of the conditions set forth in the Related
Documents and in this Agreement. For the purposes of this Agreement, the term
"Closing Shares" shall mean: (a) any shares of SHCR Common Stock issued at
Closing or at a later date as agreed to in writing by the parties, pursuant to
the Related Documents; and, (b) any securities of SHCR issued or issuable with
respect to any of the shares described in clause (a) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization (it being
understood that for purposes of this Agreement, a person will be deemed to be a
holder of Closing Shares whenever that person has the right to then acquire or
obtain from SHCR any Closing Shares, whether or not that acquisition has
actually been effected).
<PAGE>
ARTICLE III RESTRICTIONS ON TRANSFER
- ----------- ------------------------
Section 1 Restrictions on Transfer of Closing Shares.
--------- -------------------------------------------
(a) Each Stockholder agrees not to offer, transfer, donate, sell,
assign, pledge, hypothecate or otherwise dispose of (collectively "Transfer" and
the result of any of these actions is a "Transfer") any Closing Shares now or
hereafter acquired or other rights in respect to those Closing Shares or rights
pursuant to this Agreement, whether occurring voluntarily or involuntarily,
directly or indirectly, or by operation of law or otherwise, except that a
Stockholder may Transfer Closing Shares in accordance with the provisions of
Article III, Section 1(b).
(b) Notwithstanding anything in this Agreement, the following
transactions shall be exempt from the prohibition on Transfers in Section 1 of
this Article III:
(i) Transfers between a Stockholder and the trustees of a trust
revocable by that Stockholder alone and the sole beneficiary of which is that
Stockholder;
(ii) Transfers by gift by a Stockholder to that Stockholder's
spouse or issue or to the trustees or a trust for the benefit of that spouse
and/or issue;
(iii) Transfers between a Stockholder and that Stockholder's
guardian or conservator; and,
(iv) Transfers upon the death of a Stockholder by will, intestacy
laws or the laws of survivorship to that Stockholder's personal representatives,
heirs or delegatees.
provided, however, that, except in the case of Transfers pursuant to
Article III, the transferee agrees in writing for the benefit of the other
Stockholders and SHCR, as a condition to that Transfer, to be bound by all of
the provisions of this Agreement to the same extent as was the transferor prior
to that Transfer; and provided, further, that any of these transferees shall
take all Closing Shares and rights so transferred subject to all the provisions
of this Agreement as if those Closing Shares or rights were still held by the
Stockholder who made the Transfer. If any Transfer is effected in accordance
with the provisions of this Article III, Section 1(b)(i), (ii), (iii) or (iv),
then the transferee shall be referred to as a "Permitted Transferee," and for
all purposes of this Agreement unless expressly indicated to the contrary, the
Permitted Transferee shall be deemed to be a "Stockholder," but only to the
extent that the transferor was included within that definition prior to the
transfer.
(c) If any Transfer by a Stockholder is made or attempted contrary to
the provisions of this Agreement, that purported Transfer shall be void ab
initio; SHCR and the other Stockholders (and their transferees) shall have, in
addition to any other legal or equitable remedies which they may have, the right
to enforce the provisions of this Agreement by actions for specific performance
<PAGE>
(to the extent permitted by law); and SHCR shall have the right to refuse to
recognize any Transferee of a Stockholder pursuant to any Transfer that is made
or attempted contrary to the provisions of this Agreement as one of its
stockholders for any purpose.
Section 2 Termination of Restrictions on Transfer of Closing Shares. The
provisions of this Article III, as they relate to certain Closing Shares, shall
terminate and be of no further force and effect as of January 8, 1999.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
- ---------- --------------------------------------------------
By execution of a counterpart of this Agreement, any Stockholder at the
time of that execution makes the following representations and warranties to
SHCR, these representations and warranties being made in connection with the
issuance of the Closing Shares:
1. This Agreement is made in reliance on each Stockholder's
representations to SHCR that all Closing Shares acquired by that
Stockholder will be acquired for investment for that Stockholder's own
account, not as a nominee or agent, and not with a view toward distribution
of any part thereof, and that Stockholder has, except as otherwise
contemplated in the Related Documents, no present intention of selling,
granting participation in, or otherwise distributing those Closing Shares.
2. Each Stockholder understands that the Closing Shares will not be
registered under the Securities Act, on the ground that the sale and
issuance of the same are exempt from registration under Section 4(2) of the
Securities Act, and that SHCR's reliance on that exemption is predicated on
the representations of each Stockholder set forth in this Agreement.
3. Each Stockholder understands that the Closing Shares may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Closing Shares or an
available exemption from registration under the Securities Act, the Closing
Shares must be held indefinitely. Each Stockholder agrees that, in addition
to any other applicable limitations on the transfer of the Closing Shares,
in no event will it make a transfer, pledge or other disposition of any of
the Closing Shares other than pursuant to an effective registration
statement under the Securities Act, unless and until: (i) that Stockholder
shall have notified SHCR of the proposed disposition and shall have
furnished to SHCR a statement of the circumstances surrounding the
disposition; and, (ii) at the expense of the Stockholder or its transferee,
it shall have furnished to SHCR an opinion of counsel reasonably
satisfactory to SHCR and its counsel to the effect that the proposed
transfer, pledge or other disposition may be made without registration
under the Securities Act.
<PAGE>
4. Each Stockholder: (i) by reason of his or her business and
financial experience, has that knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits
and risks of his or her investment in the Closing Shares; and, (ii)
believes his or her financial condition and investments enable him or her
to bear the economic risk of a complete loss of the Closing Shares. Each
Stockholder has consulted with its own advisers with respect to their
proposed investment in SHCR. Each Stockholder has had the opportunity to
ask questions and to receive answers concerning the financial condition,
operations and prospects of SHCR and the terms and conditions of the
Stockholder's investment, as well as the opportunity to obtain any
additional information necessary to verify the accuracy of information
furnished in connection therewith that SHCR possesses or can acquire
without unreasonable effort or expense. In addition, the Stockholder
acknowledges that he or she has received prior to the execution of this
Agreement the following documentation: (i) a prospectus for SHCR, dated as
of October 31, 1995 (ii) annual reports for 1995 and 1996; (iii) 10Ks for
1995 and 1996; and, (iv) SHCR's Form 10-Q for the time period ended
September 30, 1997. Each Stockholder has carefully reviewed that
documentation and has had the opportunity to review that documentation with
his or her own advisers and SHCR.
5. Each Stockholder is an individual who either (i) has an individual
net worth, or joint net worth with that Stockholder's spouse as of the date
hereof which exceeds One Million Dollars ($1,000,000.00); or (ii) has had
income in excess of Two Hundred Thousand Dollars ($200,000.00) in each of
the two (2) most recent years or joint income with that Stockholder's
spouse in excess of Three Hundred Thousand Dollars ($300,000.00) in each of
those years and has a reasonable expectation of reaching the same income
level in the current year.
6. Each Stockholder's legal domicile for purposes of the applicable
securities laws is as set forth on Schedule A attached to this Agreement
executed by that Stockholder.
7. This Agreement and each agreement, instrument and document to be
executed and delivered by each Stockholder pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered by that
Stockholder will constitute, valid and binding obligations of that
Stockholder enforceable in accordance with their respective terms.
8. The execution, delivery and performance by each Stockholder of this
Agreement and each agreement, document and instrument:
(d) do not and will not violate any laws, rules or
regulations of the United States or any state or other jurisdiction
applicable to that Stockholder, or require that Stockholder to obtain
any approval, consent or waiver of, or to make any filing with, any
person that has not been obtained or made; and
(e) 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 agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
<PAGE>
authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which that Stockholder is a
party or by which the property of that Stockholder 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 Stockholder.
ARTICLE V MISCELLANEOUS PROVISIONS
- --------- ------------------------
Section 1 Survival of Representations and Warranties. The Stockholders
agree that each representation, warranty, covenant and agreement made by them in
this Agreement or in any certificate, instrument or other document delivered
pursuant to this Agreement is material, shall be deemed to have been relied upon
by SHCR, shall remain operative and in full force and effect after the date of
this Agreement regardless of any investigation or the acceptance of securities
hereunder and payment therefor.
This Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Agreement and their respective
successors and permitted assigns.
Section 2 Legend on Securities. SHCR and the Stockholders acknowledge and
agree that substantially the following legend shall be typed on each certificate
evidencing any of the securities issued under the Related Documents or held at
any time by the Stockholders (and their transferees):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO: (1) A
REGISTRATION STATEMENT WITH RESPECT TO THESE SECURITIES WHICH IS EFFECTIVE UNDER
THAT ACT; OR, (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THAT ACT
RELATING TO THE DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT TO
THE PROVISIONS OF A CERTAIN INVESTMENT AND STOCKHOLDERS' AGREEMENT, DATED AS OF
JANUARY 9, 1998, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
AGREEMENT. A COMPLETE AND CORRECT COPY OF THAT AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF SHERIDAN AND WILL BE FURNISHED UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
SHCR IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. SHCR WILL
FURNISH TO EACH STOCKHOLDER WHO SO REQUESTS A COPY OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE RIGHTS AND LIMITATIONS OF EACH
OUTSTANDING CLASS OF STOCK OF SHCR.
Section 3 Amendment and Waiver. Any party may waive any provision of this
Agreement intended for its benefit in writing. Except as specifically set forth
in this Agreement to the contrary, no failure or delay on the part of any party
to this Agreement in exercising any right, power or remedy under this Agreement
<PAGE>
shall operate as a waiver. The remedies in this Agreement are cumulative and are
not exclusive of any remedies that may be available to any party to this
Agreement at law or in equity or otherwise. This Agreement may be amended with
the prior written consent of all parties.
Section 4 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.
SHCR: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Mitchell Eisenberg, M.D., President
with a copy to: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Jay A. Martus, Esq.
To Stockholders: At the Addresses listed on Schedule A attached to
this Agreement
with a copy to: Strawn, Monaghan & Cohen, P.A.
54 Northeast Fourth Avenue
Delray Beach, Florida 33483
Attn: Jeffrey L. Cohen, Esq.
Facsimile: (561) 278-9462
or to any other address of which any party may notify the other parties as
provided above.
Section 5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of the reference only and shall not affect
the construction of this Agreement.
Section 6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 7 Remedies; Severability. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any person subject to
this Agreement will result in irreparable injury to the other parties to this
<PAGE>
Agreement, that the remedy at law alone will be an inadequate remedy for that
breach, and that, in addition to any other legal or equitable remedies which
they may have, those other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by law) and SHCR may
refuse to recognize any unauthorized transferee as one of its stockholders for
any purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of that provision in every
other respect and of the remaining provisions contained in this Agreement shall
not be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties to this Agreement shall be enforceable to the fullest
extent permitted by law.
Section 8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement and their agreement
and understanding. This Agreement supersedes all prior agreements and
understandings between the parties with respect to that subject matter.
Section 9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of SHCR.
Section 10 Law Governing. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the state of Delaware (without
giving effect to principles of conflicts of law).
Section 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).
Section 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 or 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.
<PAGE>
Section 13. Jury Trial. EACH PARTY WAIVES ALL RIGHTS TO ANY TRIAL BY
JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SHCR:
SHERIDAN HEALTHCARE, INC.
By:
-----------------------------------
Jay A. Martus, Esq.
Vice President
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
<PAGE>
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
STOCKHOLDERS:
----------------------------------------
Rafael D. Arango, M.D.
----------------------------------------
Stuart J. Leaderman, M.D.
----------------------------------------
Eduardo H. Marti, M.D.
----------------------------------------
Charles Merson, M.D.
----------------------------------------
Ramiro Rodriguez, M.D.
----------------------------------------
Tirso J. Rojas, M.D.
----------------------------------------
Laurence Skolnik, M.D.
----------------------------------------
Joaquin C. Taranco, M.D.
<PAGE>
INVESTMENT AND STOCKHOLDERS' AGREEMENT
SCHEDULE A
Name and Address Consideration
of Stockholder Paid in SHCR Stock
Rafael D. Arango, M.D.
140 South Hibiscus Drive
Miami Beach, Florida 33139 $300,000.00
Stuart J. Leaderman, M.D.
550 Coconut Circle
Weston, Florida 33326 $300,000.00
Eduardo H. Marti, M.D.
10244 Vestal Court
Coral Springs, Florida 33071 $300,000.00
Charles Merson, M.D.
11724 N.W. 5th Street
Plantation, Florida 33325 $300,000.00
Ramiro Rodriguez, M.D.
9810 N.W. 10th Court
Plantation, Florida 33322 $300,000.00
Tirso J. Rojas, M.D.
2200 N.W. 118th Avenue
Plantation, Florida 33323 $300,000.00
Laurence M. Skolnik, M.D.
9621 Conch Shell Manor
Plantation, Florida 33324 $300,000.00
Joaquin C. Taranco, M.D.
7201 S.W. 5th Street
Plantation, Florida 33317 $300,000.00
INVESTMENT AND STOCKHOLDERS' AGREEMENT
--------------------------------------
THIS INVESTMENT AND STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of
January 28, 1998, by and among Sheridan Healthcare, Inc., a Delaware corporation
("SHCR"), and the individuals who are identified as Stockholders on Schedule A
attached to this Agreement (the "Stockholders").
PRELIMINARY STATEMENTS
----------------------
Reference is made to: (i) the Management Services Agreement, dated as of
January 28, 1998 by and among Comprehensive Pain Medicine, Inc. ("CPM") and
Northwest Florida Anesthesia Consultants, Inc. ("NFAC"), each a Florida
corporation (collectively, the "Company"), the Stockholders, and Sheridan
Healthcorp, Inc., a Florida corporation ("Sheridan"); (ii) each of the
Restrictive Covenant Agreements, dated as of January 28, 1998 by and between
Sheridan and each of the Stockholders; (iii) the Purchase Option Agreement,
dated as of January 28, 1998 by and among SHCR, the Company and the
Stockholders; (iv) each of the Physician Employment Agreements, dated as of
January 28, 1998 by and between either CPM or NFAC and each of the Stockholders;
and (v) the Management Option Agreement by and between Sheridan, the Company and
the Stockholders (collectively, the "Related Documents"). Capitalized terms not
defined in this Agreement shall have the meanings given them in the Related
Documents.
The parties to this Agreement desire to set forth the terms of their
interest in the securities of Sheridan.
In consideration of the foregoing and the mutual covenants and agreements
contained in this Agreement, the parties to this Agreement agree as follows:
ARTICLE I ACQUISITION OF SECURITIES
- --------- -------------------------
Section 1 Acquisition of Sheridan Common Stock by Stockholders. Pursuant to
the Purchase Option Agreement, each Stockholder has been issued by SHCR the
respective number of shares of SHCR Common Stock (as defined in the Purchase
Option Agreement), set forth opposite the name of that Stockholder on Schedule A
to this Agreement.
ARTICLE II THE CLOSING
- ---------- -----------
Section 1 Closing. The delivery and acceptance of the shares of SHCR Common
Stock being acquired by the Stockholders pursuant to the Purchase Option
Agreement (the "Closing Shares"), shall take place at the offices of Sheridan
concurrently with the Closing of the transactions contemplated by the Related
Documents, or at a later date as agreed to in writing by the parties and subject
to satisfaction or waiver of all of the conditions set forth in the Related
Documents and in this Agreement. For the purposes of this Agreement, the term
"Closing Shares" shall mean: (a) any shares of SHCR Common Stock issued at
Closing or at a later date as agreed to in writing by the parties, pursuant to
the Related Documents; and, (b) any securities of SHCR issued or issuable with
respect to any of the shares described in clause (a) above by way of a stock
dividend or stock split or in connection with a combination of shares,
<PAGE>
recapitalization, merger, consolidation or other reorganization (it being
understood that for purposes of this Agreement, a person will be deemed to be a
holder of Closing Shares whenever that person has the right to then acquire or
obtain from SHCR any Closing Shares, whether or not that acquisition has
actually been effected).
ARTICLE III RESTRICTIONS ON TRANSFER
- ----------- ------------------------
Section 1 Restrictions on Transfer of Closing Shares.
--------- -------------------------------------------
(a) Each Stockholder agrees not to offer, transfer, donate, sell,
assign, pledge, hypothecate or otherwise dispose of (collectively "Transfer" and
the result of any of these actions is a "Transfer") any Closing Shares now or
hereafter acquired or other rights in respect to those Closing Shares or rights
pursuant to this Agreement, whether occurring voluntarily or involuntarily,
directly or indirectly, or by operation of law or otherwise, except that a
Stockholder may Transfer Closing Shares in accordance with the provisions of
Article III, Section 1(b).
(b) Notwithstanding anything in this Agreement, the following
transactions shall be exempt from the prohibition on Transfers in Section 1 of
this Article III:
(i) Transfers between a Stockholder and the trustees of a trust
revocable by that Stockholder alone and the sole beneficiary of which
is that Stockholder;
(ii) Transfers by gift by a Stockholder to that Stockholder's
spouse or issue or to the trustees or a trust for the benefit of that
spouse and/or issue;
(iii) Transfers between a Stockholder and that Stockholder's
guardian or conservator; and,
(iv) Transfers upon the death of a Stockholder by will, intestacy
laws or the laws of survivorship to that Stockholder's personal
representatives, heirs or delegatees.
provided, however, that, except in the case of Transfers pursuant to
Article III, the transferee agrees in writing for the benefit of the other
Stockholders and SHCR, as a condition to that Transfer, to be bound by all of
the provisions of this Agreement to the same extent as was the transferor prior
to that Transfer; and provided, further, that any of these transferees shall
take all Closing Shares and rights so transferred subject to all the provisions
of this Agreement as if those Closing Shares or rights were still held by the
Stockholder who made the Transfer. If any Transfer is effected in accordance
with the provisions of this Article III, Section 1(b)(i), (ii), (iii) or (iv),
then the transferee shall be referred to as a "Permitted Transferee," and for
all purposes of this Agreement unless expressly indicated to the contrary, the
Permitted Transferee shall be deemed to be a "Stockholder," but only to the
extent that the transferor was included within that definition prior to the
transfer.
2
<PAGE>
(c) If any Transfer by a Stockholder is made or attempted contrary to
the provisions of this Agreement, that purported Transfer shall be void ab
initio; SHCR and the other Stockholders (and their transferees) shall have, in
addition to any other legal or equitable remedies which they may have, the right
to enforce the provisions of this Agreement by actions for specific performance
(to the extent permitted by law); and SHCR shall have the right to refuse to
recognize any Transferee of a Stockholder pursuant to any Transfer that is made
or attempted contrary to the provisions of this Agreement as one of its
stockholders for any purpose.
Section 2 Termination of Restrictions on Transfer of Closing Shares. The
provisions of this Article III, as they relate to certain Closing Shares, shall
terminate and be of no further force and effect as of January 28, 1999.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
- ---------- --------------------------------------------------
By execution of a counterpart of this Agreement, any Stockholder at the
time of that execution makes the following representations and warranties to
SHCR, these representations and warranties being made in connection with the
issuance of the Closing Shares:
1. This Agreement is made in reliance on each Stockholder's
representations to SHCR that all Closing Shares acquired by that
Stockholder will be acquired for investment for that Stockholder's own
account, not as a nominee or agent, and not with a view toward
distribution of any part thereof, and that Stockholder has, except as
otherwise contemplated in the Related Documents, no present intention
of selling, granting participation in, or otherwise distributing those
Closing Shares.
2. Each Stockholder understands that the Closing Shares will not
be registered under the Securities Act, on the ground that the sale
and issuance of the same are exempt from registration under Section
4(2) of the Securities Act, and that SHCR's reliance on that exemption
is predicated on the representations of each Stockholder set forth in
this Agreement.
3. Each Stockholder understands that the Closing Shares may not
be sold, transferred or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Closing
Shares or an available exemption from registration under the
Securities Act, the Closing Shares must be held indefinitely. Each
Stockholder agrees that, in addition to any other applicable
limitations on the transfer of the Closing Shares, in no event will it
make a transfer, pledge or other disposition of any of the Closing
Shares other than pursuant to an effective registration statement
under the Securities Act, unless and until: (i) that Stockholder shall
have notified SHCR of the proposed disposition and shall have
furnished to SHCR a statement of the circumstances surrounding the
3
<PAGE>
disposition; and, (ii) at the expense of the Stockholder or its
transferee, it shall have furnished to SHCR an opinion of counsel
reasonably satisfactory to SHCR and its counsel to the effect that the
proposed transfer, pledge or other disposition may be made without
registration under the Securities Act.
4. Each Stockholder: (i) by reason of his or her business and
financial experience, has that knowledge, sophistication and
experience in business and financial matters as to be capable of
evaluating the merits and risks of his or her investment in the
Closing Shares; and, (ii) believes his or her financial condition and
investments enable him or her to bear the economic risk of a complete
loss of the Closing Shares. Each Stockholder has consulted with its
own advisers with respect to their proposed investment in SHCR. Each
Stockholder has had the opportunity to ask questions and to receive
answers concerning the financial condition, operations and prospects
of SHCR and the terms and conditions of the Stockholder's investment,
as well as the opportunity to obtain any additional information
necessary to verify the accuracy of information furnished in
connection therewith that SHCR possesses or can acquire without
unreasonable effort or expense. In addition, the Stockholder
acknowledges that he or she has received prior to the execution of
this Agreement the following documentation: (i) a prospectus for SHCR,
dated as of October 31, 1995 (ii) annual reports for 1995 and 1996;
(iii) 10Ks for 1995 and 1996; and, (iv) SHCR's Form 10-Q for the time
period ended September 30, 1997. Each Stockholder has carefully
reviewed that documentation and has had the opportunity to review that
documentation with his or her own advisers and SHCR.
5. Each Stockholder is an individual who either (i) has an
individual net worth, or joint net worth with that Stockholder's
spouse as of the date hereof which exceeds One Million Dollars
($1,000,000.00); or (ii) has had income in excess of Two Hundred
Thousand Dollars ($200,000.00) in each of the two (2) most recent
years or joint income with that Stockholder's spouse in excess of
Three Hundred Thousand Dollars ($300,000.00) in each of those years
and has a reasonable expectation of reaching the same income level in
the current year.
6. Each Stockholder's legal domicile for purposes of the
applicable securities laws is as set forth on Schedule A attached to
this Agreement executed by that Stockholder.
7. This Agreement and each agreement, instrument and document to
be executed and delivered by each Stockholder pursuant to or as
contemplated by this Agreement constitute, or when executed and
delivered by that Stockholder will constitute, valid and binding
obligations of that Stockholder enforceable in accordance with their
respective terms.
8. The execution, delivery and performance by each Stockholder of
this Agreement and each agreement, document and instrument:
(d) do not and will not violate any laws, rules or regulations
of the United States or any state or other jurisdiction
applicable to that Stockholder, or require that Stockholder
4
<PAGE>
to obtain any approval, consent or waiver of, or to make any
filing with, any person that has not been obtained or made;
and
(e) 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 agreement
or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to
which that Stockholder is a party or by which the property
of that Stockholder 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 Stockholder.
ARTICLE V MISCELLANEOUS PROVISIONS
------------------------
Section 1 Survival of Representations and Warranties. The Stockholders
agree that each representation, warranty, covenant and agreement made by them in
this Agreement or in any certificate, instrument or other document delivered
pursuant to this Agreement is material, shall be deemed to have been relied upon
by SHCR, shall remain operative and in full force and effect after the date of
this Agreement regardless of any investigation or the acceptance of securities
hereunder and payment therefor.
This Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Agreement and their respective
successors and permitted assigns.
Section 2 Legend on Securities. SHCR and the Stockholders acknowledge and
agree that substantially the following legend shall be typed on each certificate
evidencing any of the securities issued under the Related Documents or held at
any time by the Stockholders (and their transferees):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO: (1) A
REGISTRATION STATEMENT WITH RESPECT TO THESE SECURITIES WHICH IS EFFECTIVE UNDER
THAT ACT; OR, (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THAT ACT
RELATING TO THE DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT TO
THE PROVISIONS OF A CERTAIN INVESTMENT AND STOCKHOLDERS' AGREEMENT, DATED AS OF
JANUARY 28, 1998, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
AGREEMENT. A COMPLETE AND CORRECT COPY OF THAT AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF SHERIDAN AND WILL BE FURNISHED UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
5
<PAGE>
SHCR IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. SHCR WILL FURNISH
TO EACH STOCKHOLDER WHO SO REQUESTS A COPY OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE RIGHTS AND LIMITATIONS OF EACH OUTSTANDING CLASS OF
STOCK OF SHCR.
Section 3 Amendment and Waiver. Any party may waive any provision of this
Agreement intended for its benefit in writing. Except as specifically set forth
in this Agreement to the contrary, no failure or delay on the part of any party
to this Agreement in exercising any right, power or remedy under this Agreement
shall operate as a waiver. The remedies in this Agreement are cumulative and are
not exclusive of any remedies that may be available to any party to this
Agreement at law or in equity or otherwise. This Agreement may be amended with
the prior written consent of all parties.
Section 4 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.
SHCR: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn:Mitchell Eisenberg, M.D.
President
with a copy to: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn:Jay A. Martus, Esq.
To Stockholders: At the Addresses listed on Schedule A attached to
this Agreement
with a copy to: Lozier, Tipton, Thames & Frazier
One Pensacola Plaza, Suite 224
125 West Romana Street
Pensacola, Florida 32501
Attn:Daniel R. Lozier, Esq.
or to any other address of which any party may notify the other parties as
provided above.
6
<PAGE>
Section 5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of the reference only and shall not affect
the construction of this Agreement.
Section 6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 7 Remedies; Severability. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any person subject to
this Agreement will result in irreparable injury to the other parties to this
Agreement, that the remedy at law alone will be an inadequate remedy for that
breach, and that, in addition to any other legal or equitable remedies which
they may have, those other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by law) and SHCR may
refuse to recognize any unauthorized transferee as one of its stockholders for
any purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of that provision in every
other respect and of the remaining provisions contained in this Agreement shall
not be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties to this Agreement shall be enforceable to the fullest
extent permitted by law.
Section 8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement and their agreement
and understanding. This Agreement supersedes all prior agreements and
understandings between the parties with respect to that subject matter.
Section 9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of SHCR.
Section 10 Law Governing. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the state of Delaware (without
giving effect to principles of conflicts of law).
Section 11 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
7
<PAGE>
professional training, experience, education or degrees of any member, agent,
officer or 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.
Section 12. Jury Trial. EACH PARTY WAIVES ALL RIGHTS TO ANY TRIAL BY
JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SHCR:
SHERIDAN HEALTHCARE, INC.,
a Delaware corporation
By:
----------------------------------------
Jay A. Martus, Vice President
STOCKHOLDERS:
---------------------------------------------
Ruben B. Timmons, M.D.
---------------------------------------------
Jeffrey L. Buchalter, M.D.
---------------------------------------------
Kurt A. Krueger, M.D.
---------------------------------------------
David E. Fairleigh, M.D.
8
<PAGE>
INVESTMENT AND STOCKHOLDERS' AGREEMENT
SCHEDULE A
Name and Address Consideration Consideration
of Stockholder Paid in SHCR Paid in SHCR
stock for CPM Stock for NFAC
Ruben B. Timmons, M.D.
4541 Canopy Road
Pensacola, Florida 32504 $909,216.00 $290,822.40
Jeffrey L. Buchalter, M.D.
94 Chanteclaire Circle
Gulf Breeze, Florida 32561 $779,328.00 $210,988.80
Kurt A. Krueger, M.D.
3913 W. Madura Road
Gulf Breeze, Florida 32561 $779,328.00 N/A
David E. Fairleigh, M.D.
96 Chanteclaire Circle
Gulf Breeze, Florida 32561 $779,328.00 $210,988.80
<PAGE>
INVESTMENT AND STOCKHOLDERS' AGREEMENT
--------------------------------------
THIS INVESTMENT AND STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of
March 4, 1998 (the "Execution Date"), by and among Sheridan Healthcare, Inc., a
Delaware corporation ("SHCR"), and Nord Capital Group, Inc. (the "Stockholder").
PRELIMINARY STATEMENTS
----------------------
The parties to this Agreement desire to set forth the terms of their
interest in the securities of SHCR.
In consideration of the foregoing and the mutual covenants and agreements
contained in this Agreement, the parties to this Agreement agree as follows:
ARTICLE I ACQUISITION OF SECURITIES
- --------- -------------------------
Section 1. Acquisition of SHCR Common Stock by Stockholders. The
Stockholder has been issued by SHCR Thirty Five Thousand Four Hundred (35,400)
shares of Sheridan common stock (the "Common Stock").
ARTICLE II THE CLOSING
- ---------- -----------
Section 1 Closing. The delivery and acceptance of the shares of SHCR Common
Stock being acquired by the Stockholder (the "Closing Shares"), shall take place
at the offices of SHCR's Counsel, Passman & Jones, on March 4, 1998. For the
purposes of this Agreement, the term "Closing Shares" shall mean: (a) any shares
of SHCR Common Stock issued at Closing or at a later date as agreed to in
writing by the parties; and, (b) any securities of SHCR issued or issuable with
respect to any of the shares described in clause (a) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization (it being
understood that for purposes of this Agreement, a person will be deemed to be a
holder of Closing Shares whenever that person has the right to then acquire or
obtain from SHCR any Closing Shares, whether or not that acquisition has
actually been effected).
ARTICLE III RESTRICTIONS ON TRANSFER
- ----------- ------------------------
Section 1 Restrictions on Transfer of Closing Shares.
--------- -------------------------------------------
(a) The Stockholder agrees not to offer, transfer, donate, sell,
assign, pledge, hypothecate or otherwise dispose of (collectively "Transfer" and
the result of any of these actions is a "Transfer") any Closing Shares now or
hereafter acquired or other rights in respect to those Closing Shares or rights
i
<PAGE>
pursuant to this Agreement, whether occurring voluntarily or involuntarily,
directly or indirectly, or by operation of law or otherwise, except that the
Stockholder may Transfer Closing Shares in accordance with the provisions of
Article III, Section 1(b).
(b) Notwithstanding anything in this Agreement, the following
transactions shall be exempt from the prohibition on Transfers in Section 1 of
this Article III, transfers between a Stockholder and the trustees of a trust
revocable by that Stockholder alone and the sole beneficiary of which is that
Stockholder;
Provided, however, that, except in the case of Transfers pursuant to
Article III, the transferee agrees in writing for the benefit of the other
Stockholders and SHCR, as a condition to that Transfer, to be bound by all of
the provisions of this Agreement to the same extent as was the transferor prior
to that Transfer; and provided, further, that any of these transferees shall
take all Closing Shares and rights so transferred subject to all the provisions
of this Agreement as if those Closing Shares or rights were still held by the
Stockholder who made the Transfer. If any Transfer is effected in accordance
with the provisions of this Article III, then the transferee shall be referred
to as a "Permitted Transferee," and for all purposes of this Agreement unless
expressly indicated to the contrary, the Permitted Transferee shall be deemed to
be a "Stockholder," but only to the extent that the transferor was included
within that definition prior to the transfer.
(c) If any Transfer by a Stockholder is made or attempted contrary to
the provisions of this Agreement, that purported Transfer shall be void ab
initio; SHCR and the other Stockholders (and their transferees) shall have, in
addition to any other legal or equitable remedies which they may have, the right
to enforce the provisions of this Agreement by actions for specific performance
(to the extent permitted by law); and SHCR shall have the right to refuse to
recognize any Transferee of a Stockholder pursuant to any Transfer that is made
or attempted contrary to the provisions of this Agreement as one of its
stockholders for any purpose.
Section 2 Termination of Restrictions on Transfer of Closing Shares. The
provisions of this Article III, as they relate to the Closing Shares and
transfer of rights pursuant to this Agreement, shall terminate and be of no
further force and effect as of the first anniversary of the Closing, subject to
the restrictions of applicable federal and state securities laws and regulations
including, without limitation, Rule 144. Notwithstanding anything in this
Agreement, Closing Shares which remain unregistered after restrictions contained
in this Agreement lapse, are still subject to the restrictions of applicable
federal and state securities laws and regulations including, without limitation,
Rule 144.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND SHCR
- ---------- -----------------------------------------------------------
By execution of a counterpart of this Agreement, any Stockholder at the
time of that execution makes the following representations and warranties to
SHCR, these representations and warranties being made in connection with the
issuance of the Closing Shares:
ii
<PAGE>
1. This Agreement is made in reliance on each Stockholder's representations
to SHCR that all Closing Shares acquired by that Stockholder will be acquired
for investment for that Stockholder's own account, not as a nominee or agent,
and not with a view toward distribution of any part thereof, and that
Stockholder has, except as otherwise contemplated in the Related Documents, no
present intention of selling, granting participation in, or otherwise
distributing those Closing Shares.
2. Each Stockholder understands that the Closing Shares will not be
registered under the Securities Act, on the ground that the sale and issuance of
the same are exempt from registration under Section 4(2) of the Securities Act,
and that SHCR's reliance on that exemption is predicated on the representations
of each Stockholder set forth in this Agreement.
3. Each Stockholder understands that the Closing Shares may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Closing Shares or an available exemption
from registration under the Securities Act, the Closing Shares must be held
indefinitely. Each Stockholder agrees that, in addition to any other applicable
limitations on the transfer of the Closing Shares, in no event will it make a
transfer, pledge or other disposition of any of the Closing Shares other than
pursuant to an effective registration statement under the Securities Act, unless
and until: (i) that Stockholder shall have notified SHCR of the proposed
disposition and shall have furnished to SHCR a statement of the circumstances
surrounding the disposition; and, (ii) at the expense of the Stockholder or its
transferee, it shall have furnished to SHCR an opinion of counsel reasonably
satisfactory to SHCR and its counsel to the effect that the proposed transfer,
pledge or other disposition may be made without registration under the
Securities Act.
4. Each Stockholder: (i) by reason of his or her business and financial
experience, has that knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of his or
her investment in the Closing Shares; and, (ii) believes his or her financial
condition and investments enable him or her to bear the economic risk of a
complete loss of the Closing Shares. Each Stockholder has consulted with its own
advisers with respect to their proposed investment in SHCR. Each Stockholder has
had the opportunity to ask questions and to receive answers concerning the
financial condition, operations and prospects of SHCR and the terms and
conditions of the Stockholder's investment, as well as the opportunity to obtain
any additional information necessary to verify the accuracy of information
furnished in connection therewith that SHCR possesses or can acquire without
unreasonable effort or expense. In addition, the Stockholder acknowledges that
he or she has received prior to the execution of this Agreement the following
documentation: (i) a prospectus for SHCR, dated as of October 31, 1995 (ii)
annual reports for 1995 and 1996; (iii) 10Ks for 1995 and 1996; and, (iv) SHCR's
Form 10-Q for the time period ended September 30, 1997. Each Stockholder has
iii
<PAGE>
carefully reviewed that documentation and has had the opportunity to review that
documentation with his or her own advisers and SHCR.
5. Each Stockholder's legal domicile for purposes of the applicable
securities laws is as set forth on Schedule A attached to this Agreement
executed by that Stockholder.
6. This Agreement and each agreement, instrument and document to be
executed and delivered by each Stockholder pursuant to or as contemplated by
this Agreement constitute, or when executed and delivered by that Stockholder
will constitute, valid and binding obligations of that Stockholder enforceable
in accordance with their respective terms.
7. The execution, delivery and performance by each Stockholder of this
Agreement and each agreement, document and instrument to be executed and
delivered by each Stockholder pursuant to or as contemplated by this Agreement:
(i) do not and will not violate any laws, rules or regulations of the
United States or any state or other jurisdiction applicable to
that Stockholder, or require that Stockholder to obtain any
approval, consent or waiver of, or to make any filing with, any
person that has not been obtained or made; and
(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 agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which that Stockholder is a
party or by which the property of that Stockholder 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
Stockholder.
8. As of the Execution Date, SHCR represents and warrants to the
Shareholders that it is in material compliance with all requirements of the
Securities Act of 1933, as amended and the Securities and Exchange Act of 1934,
as amended and all of their respective rules and regulations, that SHCR is
current in its reporting requirements necessary for Rule 144 sales, and SHCR is
eligible to file and cause to be effective Form S-3s.
ARTICLE V REGISTRATION OF SECURITIES
- --------- --------------------------
Section 1. Registrable Securities. For the purposes of this Article V, the
term "Registrable Securities" shall mean any Closing Shares as defined in
Article II, section 1 of this Agreement; provided, however, that securities that
are available for sale and can be sold (whether or not so sold) pursuant to Rule
144 under the Securities Act (or any comparable rule) shall not constitute
Registrable Securities.
iv
<PAGE>
Section 2. Obligations of Sheridan. The Closing Shares shall not be
registered under the Securities Act at the Closing. Sheridan shall use its best
efforts to cause any Registrable Securities to be registered with and declared
effective by the Securities and Exchange Commission (the "Commission") under the
Securities Act after the first anniversary of the Execution Date and after a
written request by the Shareholder within sixty days of a written request (a
"Registration Request"). The Shareholders may make two Registration Requests up
to the second anniversary of the Execution Date. Sheridan may postpone the
filing of any registration statement required hereunder for a reasonable period
of time, not to exceed sixty (60) days during any twelve-month period, if
Sheridan has been advised by legal counsel that such filing would require a
special audit or the disclosure of a material impending transaction or other
material, non-public matter and Sheridan determines reasonably and in good faith
that such disclosure would have a material adverse effect on Sheridan.
Section 3. Expenses. In the case of any registration pursuant to this
Article V, Sheridan shall bear all costs and expenses of the registration,
including but not limited to printing, legal and accounting expenses, federal
and state regulatory filing fees and expenses and the reasonable fees and
disbursements of not more than one counsel for the selling holders of
Registrable Securities in connection with the registration of their Registrable
Securities (which counsel shall be selected by the holders of not less than a
majority of the Registrable Securities to be included in that registration).
Section 4. Further Obligations of Sheridan. Whenever, under the
preceding Sections of this Article V, Sheridan is required to register any
Registrable Securities, it agrees that it shall also do the following:
(a) diligently to prepare and file with and use its best efforts to
have declared effective by the Commission a registration statement (the
"Registration Statement") and the amendments and supplements to that
Registration Statement and the prospectus used in connection with it as may
be necessary to keep the Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the sale of
securities covered by that registration statement for the lesser of: (i)
ninety (90) days (in the case of any registration pursuant to this Article
V) which ninety (90) days shall be extended to the extent that any delay
occurs under Article V, Section 4(d); or, (ii) the period necessary to
complete a proposed public offering;
(b) furnish to each selling holder copies of each preliminary and
final prospectus and any other documents as a holder may reasonably request
to facilitate the public offering of his or her Registrable Securities;
(c) use its best efforts to register or qualify the securities covered
by the Registration Statement under the securities or "blue-sky" laws of
those jurisdictions as any selling holder may reasonably request, provided
that Sheridan shall not be required to qualify to do business in any
jurisdiction where it is not then so qualified or subject itself to service
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<PAGE>
of process in suits other than those arising out of the offer or sale of
securities covered by the Registration Statement in any jurisdiction where
it is not then so subject;
(d) immediately notify each selling holder, at any time when a
prospectus relating to that holder's Registrable Securities is required to
be delivered under the Securities Act, of the happening of any event as a
result of which that prospectus contains an untrue statement of a material
fact or omits any material fact necessary to make the statements therein
not misleading, and, at the request of a selling holder, prepare a
supplement or amendment to the prospectus so that, as thereafter delivered
to the purchasers of the Registrable Securities, that prospectus will not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(e) cause all the Registrable Securities to be listed on each
securities exchange or quoted in each quotation system on which similar
securities issued by Sheridan are then listed or quoted; and
(f) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than
forty five (45) days after the close of the period covered thereby (ninety
(90) days in case the period covered corresponds to a fiscal year of
Sheridan), an earnings statement of Sheridan which will satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any comparable successor provisions);
Section 5. Rule 144 Requirements. Sheridan, which is subject to the
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), will use its best efforts to file with the
Commission that information as is specified under that Section for so long as
there are holders of Registrable Securities; and Sheridan shall use its best
efforts to take all action as may be required by an issuer as a condition to the
availability of Rule 144 under the Securities Act (or any comparable successor
rules to the stockholders of that issuer). Sheridan shall furnish to any holder
of Registrable Securities upon request a written statement executed by Sheridan
as to the steps it has taken to comply with the current public information
requirement of Rule 144 (or any comparable successor rules). Sheridan, subject
to the limitations on transfers imposed by this Agreement, shall use its best
efforts to facilitate and expedite transfers of Registrable Securities pursuant
to Rule 144 under the Securities Act, which efforts shall include timely notice
to its transfer agent to expedite any transfers of Registrable Securities.
Section 6. Transfer of Registration Rights. The registration rights
and related obligations under this Article V shall not be transferrable,
except to transferees permitted under this Agreement.
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ARTICLE VI MISCELLANEOUS PROVISIONS
- ---------- ------------------------
Section 1 Survival of Representations and Warranties. The Stockholders
agree that each representation, warranty, covenant and agreement made by them in
this Agreement or in any certificate, instrument or other document delivered
pursuant to this Agreement is material, shall be deemed to have been relied upon
by SHCR, shall remain operative and in full force and effect after the date of
this Agreement regardless of any investigation or the acceptance of securities
hereunder and payment therefor.
This Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Agreement and their respective
successors and permitted assigns.
Section 2 Legend on Securities. SHCR and the Stockholders acknowledge and
agree that substantially the following legend shall be typed on each certificate
evidencing any of the securities issued under the Related Documents or held at
any time by the Stockholders (and their transferees):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO: (1) A
REGISTRATION STATEMENT WITH RESPECT TO THESE SECURITIES WHICH IS EFFECTIVE UNDER
THAT ACT; OR, (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THAT ACT
RELATING TO THE DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT TO
THE PROVISIONS OF A CERTAIN INVESTMENT AND STOCKHOLDERS' AGREEMENT, DATED AS OF
MARCH 4, 1998, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
AGREEMENT. A COMPLETE AND CORRECT COPY OF THAT AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF SHERIDAN AND WILL BE FURNISHED UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
SHCR IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. SHCR WILL
FURNISH TO EACH STOCKHOLDER WHO SO REQUESTS A COPY OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE RIGHTS AND LIMITATIONS OF EACH
OUTSTANDING CLASS OF STOCK OF SHCR.
Section 3 Amendment and Waiver. Any party may waive any provision of this
Agreement intended for its benefit in writing. Except as specifically set forth
in this Agreement to the contrary, no failure or delay on the part of any party
to this Agreement in exercising any right, power or remedy under this Agreement
shall operate as a waiver. The remedies in this Agreement are cumulative and are
not exclusive of any remedies that may be available to any party to this
Agreement at law or in equity or otherwise. This Agreement may be amended with
the prior written consent of all parties.
vii
<PAGE>
Section 4 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.
SHCR: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Mitchell Eisenberg, M.D., President
with a copy to: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Jay A. Martus, Esq.
To Stockholders: Nord Capital Group, Inc.
8400 E. Prentice Avenue, Suite 1416
Englewood, Colorado 80111
or to any other address of which any party may notify the other parties as
provided above.
Section 5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of the reference only and shall not affect
the construction of this Agreement.
Section 6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 7 Remedies; Severability. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any person subject to
this Agreement will result in irreparable injury to the other parties to this
Agreement, that the remedy at law alone will be an inadequate remedy for that
breach, and that, in addition to any other legal or equitable remedies which
they may have, those other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by law) and SHCR may
refuse to recognize any unauthorized transferee as one of its stockholders for
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<PAGE>
any purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of that provision in every
other respect and of the remaining provisions contained in this Agreement shall
not be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties to this Agreement shall be enforceable to the fullest
extent permitted by law.
Section 8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement and their agreement
and understanding. This Agreement supersedes all prior agreements and
understandings between the parties with respect to that subject matter.
Section 9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of SHCR.
Section 10 Law Governing. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the state of Delaware (without
giving effect to principles of conflicts of law).
Section 11 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 or 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.
Section 12 Guarantee. Except as provided below, SHCR guarantees the
Stockholder that on or before the first anniversary (the "First Anniversary") of
the Execution Date, the Stockholder shall have received an amount of cash in at
least the minimum aggregate amount of Four Hundred Thousand Six Hundred Dollars
($406,600.00) from the proceeds of the sale of their SHCR Shares. SHCR may issue
more shares (the "Other Shares") of Common Stock to the Stockholder at any time
during the first year prior to the First Anniversary and SHCR may require the
Stockholder 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
Stockholder pursuant to the two preceding sentences is less than Four Hundred
Thousand Six Hundred Dollars ($406,600.00)(the "Deficit"), SHCR shall pay to the
Stockholder 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 Stockholder pursuant to the preceding
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<PAGE>
sentences plus the fair market value of the SHCR Shares (the "Retained Shares")
(the sum of which is the "Anniversary Value") retained by the Stockholder as of
the First Anniversary shall equal or exceed Six Hundred Forty Nine Thousand Five
Dollars ($649,000.00), and if such sum is less than amount, SHCR shall issue
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 Six Hundred Forty Nine Thousand Five Dollars ($649,000.00)
on the date the additional shares are tendered. The Shareholder shall have the
registration rights with respect to the Additional Shares as set forth in the
Investment and Shareholder Agreement.
Section 13. 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 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 DOCUMENTS
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 LEGAL 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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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SHCR:
SHERIDAN HEALTHCARE, INC.
By:
-----------------------------------
Jay A. Martus, Vice President
STOCKHOLDER:
Nord Capital Group, Inc.
By:
-----------------------------------
Arlen D. Nordhagen, President
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<PAGE>
INVESTMENT AND STOCKHOLDERS' AGREEMENT
--------------------------------------
THIS INVESTMENT AND STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of
March 6, 1998, by and among Sheridan Healthcare, Inc., a Delaware corporation
("SHCR"), and the individuals who are identified as Stockholders of SHCR on
Schedule A attached to this Agreement (each a "SHCR Stockholder", and
collectively, the "SHCR Stockholders").
PRELIMINARY STATEMENTS
----------------------
Reference is made to: (i) the Management Services Agreement, dated as of
March 6, 1998 by and among Gynecologic Oncology Associates, Inc., a Florida
corporation (the "Company"), Staffan R.B. Nordqvist, M.D. ("Nordqvist"), and
Sheridan Healthcorp, Inc., a Florida corporation ("Sheridan"); (ii) the Purchase
Option Agreement, dated as of March 6, 1998 by and among SHCR, the Company and
Nordqvist; (iii) the Restrictive Covenant Agreement, dated as of March 6, 1998
by and between the Company and Nordqvist; (iv) the Restrictive Covenant
Agreement, dated as of March 6, 1998 by and between Sheridan and Nordqvist; and
(vi) each of the Physician Employment Agreements, dated as of March 6, 1998 by
and between the Company and each of the SHCR Stockholders respectively
(collectively, the "Related Documents"). Capitalized terms not defined in this
Agreement shall have the meanings given them in the Related Documents,
applicable to each respective SHCR Stockholder.
The parties to this Agreement desire to set forth the terms of their
interest in the securities of SHCR.
In consideration of the foregoing and the mutual covenants and agreements
contained in this Agreement, the parties to this Agreement agree as follows:
ARTICLE I ACQUISITION OF SECURITIES
- --------- -------------------------
Section 1 Acquisition of SHCR Common Stock by SHCR Stockholders. In
connection with the execution and delivery of the Related Documents and the
consummation of the transactions contemplated by the MSA, each SHCR Stockholder
has been issued by SHCR the respective number of shares of SHCR Common Stock (as
defined in the Purchase Option Agreement), set forth opposite the name of that
Stockholder on Schedule A to this Agreement.
ARTICLE II THE CLOSING
- ---------- -----------
Section 1 Closing. The delivery and acceptance of the shares of SHCR Common
Stock being acquired by the SHCR Stockholders pursuant to the Related Documents
applicable to each respective SHCR Stockholder (the "Closing Shares"), shall
take place at the offices of Sheridan concurrently with the Closing of the
transactions contemplated by the Related Documents, or at a later date as agreed
to in writing by the parties and subject to satisfaction or waiver of all of the
conditions set forth in the Related Documents and in this Agreement. For the
purposes of this Agreement, the term "Closing Shares" shall mean: (a) any shares
<PAGE>
of SHCR Common Stock issued at Closing or at a later date as agreed to in
writing by the parties, pursuant to the Related Documents; and, (b) any
securities of SHCR issued or issuable with respect to any of the shares
described in clause (a) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization (it being understood that for purposes of this
Agreement, a person will be deemed to be a holder of Closing Shares whenever
that person has the right to then acquire or obtain from SHCR any Closing
Shares, whether or not that acquisition has actually been effected).
ARTICLE III RESTRICTIONS ON TRANSFER
- ----------- ------------------------
Section 1 Restrictions on Transfer of Closing Shares.
(a) Each SHCR Stockholder agrees not to offer, transfer, donate, sell,
assign, pledge, hypothecate or otherwise dispose of (collectively "Transfer" and
the result of any of these actions is a "Transfer") any Closing Shares now or
hereafter acquired or other rights in respect to those Closing Shares or rights
pursuant to this Agreement, whether occurring voluntarily or involuntarily,
directly or indirectly, or by operation of law or otherwise, except that a SHCR
Stockholder may Transfer Closing Shares in accordance with the provisions of
Article III, Section 1(b).
(b) Notwithstanding anything in this Agreement, the following
transactions shall be exempt from the prohibition on Transfers in Section 1 of
this Article III:
(i) Transfers between a SHCR Stockholder and the trustees of a
trust revocable by that SHCR Stockholder alone and the sole
beneficiary of which is that SHCR Stockholder;
(ii) Transfers by gift by a SHCR Stockholder to that SHCR
Stockholder's spouse or issue or to the trustees or a trust for the
benefit of that spouse and/or issue;
(iii) Transfers between a SHCR Stockholder and that SHCR
Stockholder's guardian or conservator; and,
(iv) Transfers upon the death of a SHCR Stockholder by will,
intestacy laws or the laws of survivorship to that SHCR Stockholder's
personal representatives, heirs or delegatees.
provided, however, that, except in the case of Transfers pursuant to
Article III, the transferee agrees in writing for the benefit of the other SHCR
Stockholders and SHCR, as a condition to that Transfer, to be bound by all of
the provisions of this Agreement to the same extent as was the transferor prior
to that Transfer; and provided, further, that any of these transferees shall
take all Closing Shares and rights so transferred subject to all the provisions
of this Agreement as if those Closing Shares or rights were still held by the
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<PAGE>
SHCR Stockholder who made the Transfer. If any Transfer is effected in
accordance with the provisions of this Article III, Section 1(b)(i), (ii), (iii)
or (iv), then the transferee shall be referred to as a "Permitted Transferee,"
and for all purposes of this Agreement unless expressly indicated to the
contrary, the Permitted Transferee shall be deemed to be a "SHCR Stockholder,"
but only to the extent that the transferor was included within that definition
prior to the transfer.
(c) If any Transfer by a SHCR Stockholder is made or attempted
contrary to the provisions of this Agreement, that purported Transfer shall be
void ab initio; SHCR and the other SHCR Stockholders (and their transferees)
shall have, in addition to any other legal or equitable remedies which they may
have, the right to enforce the provisions of this Agreement by actions for
specific performance (to the extent permitted by law); and SHCR shall have the
right to refuse to recognize any Transferee of a SHCR Stockholder pursuant to
any Transfer that is made or attempted contrary to the provisions of this
Agreement as one of its stockholders for any purpose.
Section 2 Termination of Restrictions on Transfer of Closing Shares. The
provisions of this Article III, as they relate to certain Closing Shares, shall
terminate and be of no further force and effect as of March 5, 1999.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHCR STOCKHOLDERS
- ---------- -------------------------------------------------------
By execution of a counterpart of this Agreement, any SHCR Stockholder at
the time of that execution makes the following representations and warranties to
SHCR, these representations and warranties being made in connection with the
issuance of the Closing Shares:
1. This Agreement is made in reliance on each SHCR Stockholder's
representations to SHCR that all Closing Shares acquired by that SHCR
Stockholder will be acquired for investment for that SHCR Stockholder's own
account, not as a nominee or agent, and not with a view toward distribution
of any part thereof, and that SHCR Stockholder has, except as otherwise
contemplated in the Related Documents, no present intention of selling,
granting participation in, or otherwise distributing those Closing Shares.
2. Each SHCR Stockholder understands that the Closing Shares will not be
registered under the Securities Act, on the ground that the sale and
issuance of the same are exempt from registration under Section 4(2) of the
Securities Act, and that SHCR's reliance on that exemption is predicated on
the representations of each SHCR Stockholder set forth in this Agreement.
3. Each SHCR Stockholder understands that the Closing Shares may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Closing Shares or an
available exemption from registration under the Securities Act, the Closing
Shares must be held indefinitely. Each SHCR Stockholder agrees that, in
3
<PAGE>
addition to any other applicable limitations on the transfer of the Closing
Shares, in no event will it make a transfer, pledge or other disposition of
any of the Closing Shares other than pursuant to an effective registration
statement under the Securities Act, unless and until: (i) that SHCR
Stockholder shall have notified SHCR of the proposed disposition and shall
have furnished to SHCR a statement of the circumstances surrounding the
disposition; and, (ii) if Sheridan reasonably determines Rule 144 is not
available as an exemption, then at the expense of the SHCR Stockholder or
its transferee, it shall have furnished to SHCR an opinion of counsel
reasonably satisfactory to SHCR and its counsel to the effect that the
proposed transfer, pledge or other disposition may be made without
registration under the Securities Act.
4. Each SHCR Stockholder: (i) by reason of his or her business and
financial experience, has that knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits and
risks of his or her investment in the Closing Shares; and, (ii) believes his or
her financial condition and investments enable him or her to bear the economic
risk of a complete loss of the Closing Shares. Each SHCR Stockholder has
consulted with its own advisers with respect to their proposed investment in
SHCR. Each SHCR Stockholder has had the opportunity to ask questions and to
receive answers concerning the financial condition, operations and prospects of
SHCR and the terms and conditions of the SHCR Stockholder's investment, as well
as the opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith that SHCR possesses or
can acquire without unreasonable effort or expense. In addition, the SHCR
Stockholder acknowledges that he or she has received prior to the execution of
this Agreement the following documentation: (i) a prospectus for SHCR, dated as
of October 31, 1995 (ii) annual reports for 1995 and 1996; (iii) 10Ks for 1995
and 1996; and, (iv) SHCR's Form 10-Q for the time period ended September 30,
1997. Each SHCR Stockholder has carefully reviewed that documentation and has
had the opportunity to review that documentation with his or her own advisers
and SHCR.
6. Each SHCR Stockholder is an individual who either (i) has an individual net
worth, or joint net worth with that SHCR Stockholder's spouse as of the date
hereof which exceeds One Million Dollars ($1,000,000.00); or (ii) has had income
in excess of Two Hundred Thousand Dollars ($200,000.00) in each of the two (2)
most recent years or joint income with that SHCR Stockholder's spouse in excess
of Three Hundred Thousand Dollars ($300,000.00) in each of those years and has a
reasonable expectation of reaching the same income level in the current year.
7. Each SHCR Stockholder's legal domicile for purposes of the applicable
securities laws is as set forth on Schedule A attached to this Agreement
executed by that SHCR Stockholder.
8. This Agreement and each agreement, instrument and document to be
executed and delivered by each SHCR Stockholder pursuant to or as contemplated
by this Agreement constitute, or when executed and delivered by that SHCR
4
<PAGE>
Stockholder will constitute, valid and binding obligations of that SHCR
Stockholder enforceable in accordance with their respective terms.
9. The execution, delivery and performance by each SHCR Stockholder of this
Agreement and each agreement, document and instrument:
(d) do not and will not violate any laws, rules or regulations of the
United States or any state or other jurisdiction applicable to that SHCR
Stockholder, or require that SHCR Stockholder to obtain any approval,
consent or waiver of, or to make any filing with, any person that has not
been obtained or made; and
(e) 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
right of termination of any indenture or loan agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which that SHCR Stockholder is a party or by
which the property of that SHCR Stockholder 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 SHCR Stockholder.
ARTICLE V MISCELLANEOUS PROVISIONS
- --------- ------------------------
Section 1 Survival of Representations and Warranties. The SHCR Stockholders
agree that each representation, warranty, covenant and agreement made by them in
this Agreement or in any certificate, instrument or other document delivered
pursuant to this Agreement is material, shall be deemed to have been relied upon
by SHCR, shall remain operative and in full force and effect after the date of
this Agreement regardless of any investigation or the acceptance of securities
hereunder and payment therefor.
This Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Agreement and their respective
successors and permitted assigns.
Section 2 Legend on Securities. SHCR and the SHCR Stockholders acknowledge
and agree that substantially the following legend shall be typed on each
certificate evidencing any of the securities issued under the Related Documents
or held at any time by the SHCR Stockholders (and their transferees):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO: (1) A
REGISTRATION STATEMENT WITH RESPECT TO THESE SECURITIES WHICH IS EFFECTIVE UNDER
THAT ACT; OR, (2) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THAT ACT
5
<PAGE>
RELATING TO THE DISPOSITION OF SECURITIES. THESE SECURITIES ARE ALSO SUBJECT TO
THE PROVISIONS OF A CERTAIN INVESTMENT AND STOCKHOLDERS' AGREEMENT, DATED AS OF
MARCH 6, 1998, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
AGREEMENT. A COMPLETE AND CORRECT COPY OF THAT AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF SHERIDAN AND WILL BE FURNISHED UPON
WRITTEN REQUEST AND WITHOUT CHARGE.
SHCR IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. SHCR WILL FURNISH
TO EACH SHCR STOCKHOLDER WHO SO REQUESTS A COPY OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE RIGHTS AND LIMITATIONS OF EACH OUTSTANDING CLASS OF
STOCK OF SHCR.
Section 3 Amendment and Waiver. Any party may waive any provision of this
Agreement intended for its benefit in writing. Except as specifically set forth
in this Agreement to the contrary, no failure or delay on the part of any party
to this Agreement in exercising any right, power or remedy under this Agreement
shall operate as a waiver. The remedies in this Agreement are cumulative and are
not exclusive of any remedies that may be available to any party to this
Agreement at law or in equity or otherwise. This Agreement may only be amended
with the prior written consent of all parties.
Section 4 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.
SHCR: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Mitchell Eisenberg, M.D.,
President
with a copy to: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
Attn: Jay A. Martus, Esq.
To SHCR Stockholders: At the Addresses listed on Schedule A attached to
this Agreement
6
<PAGE>
with a copy to: Geiger, Kasdin, Heller, Kuperstein, Chames & Weil, P.A.
1428 Brickell Avenue, 6th Floor
Miami, Florida 33131
Attn: Stanley H. Kuperstein, Esq., as counsel to
Dr. Nordqvist
and McDermott, Will & Emery, P.A.
201 South Biscayne Boulevard, 22nd Floor
Miami, Florida 33131
Attn: Joseph Ignacio Zumpano, Esq., as counsel to
Dr. King
or to any other address of which any party may notify the other parties as
provided above.
Section 5 Headings. The Article and Section headings used or contained in
this Agreement are for convenience of the reference only and shall not affect
the construction of this Agreement.
Section 6 Counterparts. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
Section 7 Remedies; Severability. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any person subject to
this Agreement will result in irreparable injury to the other parties to this
Agreement, that the remedy at law alone will be an inadequate remedy for that
breach, and that, in addition to any other legal or equitable remedies which
they may have, those other parties may enforce their respective rights by
actions for specific performance (to the extent permitted by law) and SHCR may
refuse to recognize any unauthorized transferee as one of its stockholders for
any purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement. In the event that any one or more of the
provisions contained in this Agreement, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of that provision in every
other respect and of the remaining provisions contained in this Agreement shall
not be in any way impaired thereby, it being intended that all of the rights and
privileges of the parties to this Agreement shall be enforceable to the fullest
extent permitted by law.
Section 8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement and their agreement
and understanding. This Agreement supersedes all prior agreements and
understandings between the parties with respect to that subject matter.
7
<PAGE>
Section 9 Adjustments. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and similar changes affecting the capital stock of SHCR.
Section 10 Law Governing. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the state of Delaware (without
giving effect to principles of conflicts of law).
Section 11 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 or 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.
Section 12. Jury Trial. EACH PARTY WAIVES ALL RIGHTS TO ANY TRIAL BY
JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SHCR:
SHERIDAN HEALTHCARE, INC.
By:
-----------------------------------
Jay A. Martus, Vice President
SHCR STOCKHOLDERS:
-----------------------------------
Staffan R.B. Nordqvist, M.D.
-----------------------------------
Laurel A. King, M.D.
8
<PAGE>
SCHEDULE A
Name and Address Consideration Paid
of SHCR Stockholder in SHCR Stock
Staffan R.B. Nordqvist, M.D.
5700 LaGorce Drive
Miami Beach, Florida 33140 $475,000.00
Laurel A. King, M.D.
4435 Banyan Lane
Miami, Florida 33137 $75,000.00
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SHERIDAN HEALTHCARE, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000946489
<NAME> SHERIDAN HEALTHCARE, INC.
<MULTIPLIER> 1,000
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 874
<SECURITIES> 0
<RECEIVABLES> 25,160
<ALLOWANCES> 1,948
<INVENTORY> 0
<CURRENT-ASSETS> 28,234
<PP&E> 6,761
<DEPRECIATION> 3,151
<TOTAL-ASSETS> 124,532
<CURRENT-LIABILITIES> 13,120
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 62,870
<TOTAL-LIABILITY-AND-EQUITY> 124,532
<SALES> 0
<TOTAL-REVENUES> 27,675
<CGS> 0
<TOTAL-COSTS> 19,131
<OTHER-EXPENSES> 3,787
<LOSS-PROVISION> 1,309
<INTEREST-EXPENSE> 881
<INCOME-PRETAX> 2,567
<INCOME-TAX> 1,168
<INCOME-CONTINUING> 1,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,399
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
