-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MNOB6cU/JtXJ+BMXegfY0IJRXy+snO5xx+f996OreLYV+ktfVnZOHo+5WRuCnpAE un0l/PobrxcIBxLpTM4+tQ== 0000946489-98-000008.txt : 19980518 0000946489-98-000008.hdr.sgml : 19980518 ACCESSION NUMBER: 0000946489-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHERIDAN HEALTHCARE INC CENTRAL INDEX KEY: 0000946489 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 043252967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26260 FILM NUMBER: 98624092 BUSINESS ADDRESS: STREET 1: 4651 SHERIDAN ST STREET 2: STE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 BUSINESS PHONE: 3059875822 MAIL ADDRESS: STREET 1: 4651 SHERIDAN STREET STREET 2: SUITE 400 CITY: HOLLYWOOD STATE: FL ZIP: 33021 10-Q 1 10-Q 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. Part I: Financial Information Item 1: Financial Statements SHERIDAN HEALTHCARE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
March 31, December 31, 1998 1997 ------------- ------------- (unaudited) ASSETS Current assets: 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 ============= =============
See accompanying notes. 2 SHERIDAN HEALTHCARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended March 31, 1998 1997 ------------- ------------- 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
See accompanying notes. 3 SHERIDAN HEALTHCARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended March 31, 1998 1997 ------------- ------------- Cash flows from operating activities: 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 $ --- ============= =============
See accompanying notes. 4 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 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.
Three Months Ended March 31, 1998 1997 ----------- ----------- (in thousands, except per share data) Pro Forma Results of Operations: 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
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 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):
March 31, December 31, 1998 1997 ----------- -------- Revolving credit facility, maturing in December 2000, 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 =========== ===========
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 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:
March 31, ------------------------ 1998 1997 ----------- ----------- Weighted average common shares outstanding 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 =========== ===========
8 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:
Weighted Average Number Exercise of Shares Price ----------- --------- 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 ===========
9 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 RESULTS OF OPERATIONS The following table shows certain statement of operations data expressed as percentage of net revenue:
Three Months Ended March 31, ------------------- 1998 1997 -------- -------- (in thousands, except per share data) 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% ========= ========
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 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 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 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 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 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) EX-10 2 INVESTMENT AND STOCKHOLDERS' AGREEMENT 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). 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 (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. 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, 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 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 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. 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] [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. 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 EX-10 3 INVESTMENT AND STOCKHOLDERS' AGREEMENT 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, 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 (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 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 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 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 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 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 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 EX-10 4 INVESTMENT AND STOCKHOLDERS' AGREEMENTS 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 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 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 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 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 v 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. vi 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 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 viii 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 ix 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. x 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 xi EX-10 5 INVESTMENT AND STOCKHOLDERS' AGREEMENT 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 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 2 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 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 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 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 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 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 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 EX-27 6 FDS --
5 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. 0000946489 SHERIDAN HEALTHCARE, INC. 1,000 $ 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1.000 874 0 25,160 1,948 0 28,234 6,761 3,151 124,532 13,120 0 0 0 70 62,870 124,532 0 27,675 0 19,131 3,787 1,309 881 2,567 1,168 1,399 0 0 0 1,399 .19 .18
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