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SUBSCRIPTION AND TENDER AGREEMENT
SUBSCRIPTION AND TENDER AGREEMENT, dated as of March 24, 1999
(this "Agreement"), between Vestar/Calvary Holdings, Inc., a Delaware
corporation (the "Company"), and the individual named on the signature page
hereto (the "Stockholder").
WHEREAS, concurrently herewith, the Company, Vestar/Calvary,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company
("Acquisition"), and Sheridan Healthcare, Inc., a Delaware corporation
("Sheridan"), are entering into an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement") pursuant to which, among other things,
Acquisition agrees (x) to make an offer (the "Offer") to purchase all of the
outstanding shares of common stock, par value $.01 per share, and Class A Common
Stock, par value $.01 per share, of Sheridan (collectively, the "Sheridan Common
Stock") and (y) to merge (the "Merger") into Sheridan;
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and make the Offer, the Company and Acquisition have required
the Stockholder and certain other Management Investors referred to below to
enter into this Agreement and the other Stockholder Documents referred to in the
Merger Agreement;
WHEREAS, the Stockholder has agreed, among other things, to
tender pursuant to the Offer and not withdraw all outstanding shares of Sheridan
Common Stock owned by him as of the date hereof and all shares of Sheridan
Common Stock, if any, acquired by him after the date hereof and prior to the
expiration of the Offer (the "Tender Shares");
WHEREAS, on the terms and subject to the conditions hereof,
the Stockholder desires to subscribe for and acquire from the Company, and the
Company desires to issue and sell to the Stockholder, the number of shares of
common stock, par value $.01 per share, of the Company ("Common Stock") set
forth on Schedule I hereto, as hereinafter set forth;
WHEREAS, this Agreement is one of several agreements being
entered into by the Company on or after the date hereof with certain persons who
are or will be key employees of the Company or one of its subsidiaries
(collectively with the Stockholder, the "Management Investors");
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Subscription for and Purchase of Common Stock.
1.1. Purchase of Common Stock. Pursuant to the terms and
subject to the conditions set forth in this Agreement, the Stockholder hereby
subscribes for and agrees to purchase, and the Company hereby agrees to issue
and sell to the Stockholder, on the Closing
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Date (as defined in Section 1.3) the number of shares of Common Stock set forth
on Schedule I hereto at a price per share and for the aggregate amount in cash
(the "Purchase Price") set forth on Schedule I hereto.
1.2. Sales of Common Stock to Employees Only. Notwithstanding
anything in this Agreement to the contrary, the Company shall have no obligation
to issue, sell or deliver any shares of Common Stock to any person (i) who is
not a full-time employee of, or consultant to, the Company or any of its
subsidiaries on the Closing Date or (ii) who is a resident of a jurisdiction in
which such issuance, sale or delivery to such person would constitute a
violation of the securities or "blue sky" laws of such jurisdiction.
1.3. The Closing. The closing (the "Closing") of the purchase
of Common Stock hereunder shall take place on the date (the "Closing Date") that
Acquisition purchases shares of Sheridan Common Stock pursuant to the Offer and
at such time as the Company shall direct on at least one business day's prior
notice to the Stockholder. The Closing shall occur at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, or at such
other place as the parties may mutually agree. At the Closing, the Stockholder
(or the Stockholder's representative) shall deliver to the Company the Purchase
Price, payable by delivery of the amount set forth on Schedule I hereto, by
delivery of a certified check or by wire transfer in immediately available
funds.
1.4. Conditions to the Obligations of the Parties. (a) The
obligations of the Company under this Section 1 shall be subject to the
conditions that (i) the Stockholder shall have executed and delivered the
Stockholders Agreement dated as of the date hereof among the Company and its
stockholders party thereto in substantially the form attached hereto as Exhibit
A (the "Stockholders Agreement"), (ii) the representations and warranties of the
Stockholder in Section 2 of this Agreement shall be true and correct as of the
Closing Date in all material respects and (iii) the Stockholder shall not have
breached his obligations under Section 3 hereof.
(b) The obligations of the Stockholder under this Section 1
shall be subject to the conditions that (i) the Company shall have executed and
delivered the Stockholders Agreement and (ii) the representations and warranties
of the Company in Section 1.5 of this Agreement shall be true and correct as of
the Closing Date in all material respects.
1.5. Representations and Warranties of the Company. The
Company represents and warrants to the Stockholder as follows:
(a) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute and deliver this Agreement and the
Stockholders Agreement and to perform its obligations hereunder and thereunder.
The execution, delivery and performance by the Company of this Agreement and the
Stockholders Agreement has been duly authorized by all necessary corporate and
legal action by the Company, and no other corporate proceeding by the Company is
necessary for the execution, delivery and performance by the Company of this
Agreement or the Stockholders Agreement. This Agreement and the Stockholders
Agreement have been duly executed and delivered by the Company and, assuming
they are duly executed and delivered by the Stockholder,
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constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.
(b) the Common Stock to be issued to the Stockholder pursuant
to this Agreement, when issued and delivered in accordance with the terms
hereof, will be duly and validly issued and, upon receipt by the Company of the
Purchase Price therefor, will be fully paid and nonassessable with no personal
liability attached to the ownership thereof and will not be subject to any
preemptive rights under the Delaware General Corporation Law; and
(c) the execution, delivery and performance by the Company of
this Agreement and the Stockholders Agreement will not (i) conflict with the
certificate of incorporation or by-laws of the Company or any of its
subsidiaries or (ii) result in any breach of any terms or conditions of, or
constitute a default under, any contract, agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or (iii) conflict with or violate any law, rule,
regulation, ordinance, writ, injunction, judgment or decree applicable to the
Company or any of its subsidiaries or by which any of their assets may be bound
or affected.
2. Representations, Warranties and Covenants of the Stockholder.
2.1. Residence and Competency; Power; Enforceability;
Noncontravention. The Stockholder is competent to and has sufficient capacity to
execute and deliver this Agreement and the Stockholders Agreement and to perform
his obligations hereunder and thereunder. This Agreement and the Stockholders
Agreement have been duly executed and delivered by the Stockholder.
Assuming the due execution and delivery of this Agreement and
the Stockholders Agreement by the Company, this Agreement and the Stockholders
Agreement constitute valid and binding obligations of the Stockholder,
enforceable against the Stockholder in accordance with their terms.
The execution, delivery and performance of this Agreement and
the Stockholders Agreement by the Stockholder will not (i) conflict with or
violate any law, rule, regulation, ordinance, writ, injunction, judgment or
decree applicable to the Stockholder or by which any of his assets may be bound
or affected or (ii) result in any breach of any terms or conditions of, or
constitute a default under, any contract, agreement or instrument to which the
Stockholder is a party or by which the Stockholder is bound.
2.2. Investment Intention; No Resales. The Stockholder hereby
represents and warrants that he is acquiring the Common Stock for investment
solely for his own account and not with a view to, or for resale in connection
with, the distribution or other disposition thereof. The Stockholder agrees and
acknowledges that he will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any shares of Common Stock,
or solicit any offers to purchase or otherwise acquire or pledge any shares of
Common Stock, unless such offer, transfer, sale, assignment, pledge,
hypothecation or other disposition complies with the provisions hereof and of
the Stockholders Agreement.
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2.3. Common Stock Unregistered. The Stockholder acknowledges
and represents that he has been advised by the Company that:
(a) the offer and sale of the Common Stock have not been and
will not be registered under the Securities Act;
(b) the Common Stock must be held indefinitely and the
Stockholder must continue to bear the economic risk of the investment in the
Common Stock unless the offer and sale of such Common Stock is subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available;
(c) there is no established market for the Common Stock and it
is not anticipated that there will be any public market for the Common Stock in
the foreseeable future;
(d) Rule 144 promulgated under the Securities Act is not
presently available with respect to the sale of any securities of the Company,
and, except as set forth in the Stockholders Agreement, the Company has made no
covenant to make such Rule available;
(e) when and if shares of Common Stock may be disposed of
without registration under the Securities Act in reliance on Rule 144, such
disposition can be made only in limited amounts in accordance with the terms and
conditions of such Rule;
(f) if the Rule 144 exemption is not available, public offer
or sale of Common Stock without registration will require compliance with some
other exemption under the Securities Act;
(g) if any shares of Common Stock are at any time disposed of
in accordance with Rule 144, the Stockholder will deliver to the Company at or
prior to the time of such disposition an executed Form 144 (if required by Rule
144) and such other documentation as the Company may reasonably require in
connection with such sale;
(h) a restrictive legend in the form set forth in the
Stockholders Agreement shall be placed on the certificates representing Common
Stock; and
(i) a notation shall be made in the appropriate records of the
Company indicating that the Common Stock is subject to restrictions on transfer
and, if the Company should at some time in the future engage the services of a
securities transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to the Common Stock.
2.4. Additional Investment Representations. The Stockholder
represents and warrants that:
(a) the Stockholder's financial situation is such that he can
afford to bear the economic risk of holding the Common Stock for an indefinite
period of time, has adequate means for providing for his current needs and
personal contingencies, and can afford to suffer a complete loss of his
investment in the Common Stock;
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(b) the Stockholder's knowledge and experience in financial
and business matters are such that he is capable of evaluating the merits and
risks of the investment in the Common Stock, as contemplated by this Agreement;
(c) the Stockholder understands that the Common Stock is a
speculative investment which involves a high degree of risk of loss of his
investment therein, there are substantial restrictions on the transferability of
the Common Stock and, on the Closing Date and for an indefinite period following
the Closing, there will be no public market for the Common Stock and,
accordingly, it may not be possible for the Stockholder to liquidate his
investment in case of emergency, if at all;
(d) the terms of the Stockholders Agreement provide that in
the event that the Stockholder ceases to be an employee of Sheridan, the
Company, Sheridan, Vestar (as defined in the Stockholders Agreement) and their
designated affiliates have the right to repurchase the Common Stock at a price
which may, in certain circumstances, be less than the fair market value of such
stock;
(e) the Stockholder understands and has taken cognizance of
all the risk factors related to the purchase of Common Stock and, other than as
set forth in this Agreement, no representations or warranties have been made to
the Stockholder or his representatives concerning the Common Stock or the
Company, its subsidiaries or their prospects or other matters;
(f) in making his decision to purchase the Common Stock hereby
subscribed for, the Stockholder has relied upon independent investigations made
by him and, to the extent believed by the Stockholder to be appropriate, his
representatives, including his own professional, financial, tax and other
advisors;
(g) the Stockholder has been given the opportunity to examine
all documents and to ask questions of, and to receive answers from, the Company
and its representatives concerning the Company and its subsidiaries and the
terms and conditions of the purchase of the Common Stock and to obtain any
additional information, in each case as the Stockholder or his representatives
deems necessary;
(h) all information which the Stockholder has provided to the
Company and its representatives concerning the Stockholder and his financial
position is complete and correct as of the date of this Agreement; and
(i) the Stockholder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act.
3. Agreements Relating to Tender Shares.
3.1. Agreement to Tender. The Stockholder hereby agrees to
validly tender pursuant to the Offer and not withdraw from the Offer all Tender
Shares; provided that the Merger Agreement has not been terminated.
3.2. Voting of Tender Shares. The Stockholder hereby agrees,
so long as the Stockholder is required to tender Tender Shares pursuant to
Section 3.1 hereof, to vote all Tender
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Shares (a) in favor of the adoption of the Merger Agreement and the approval of
the transactions contemplated thereby and (b) against any action or agreement
that would result in a breach of any representation, warranty, covenant or
agreement of the Company contained in the Merger Agreement or would impede,
interfere with, delay or prevent the consummation of the Merger or the purchase
of shares of Sheridan Common Stock pursuant to the Offer. The Stockholder shall
not, so long as the Stockholder is required to tender Tender Shares pursuant to
Section 3.1 hereof, purport to vote (or execute a written consent with respect
to) Tender Shares other than in accordance with this Agreement or grant any
proxy or power of attorney with respect to Tender Shares, deposit any Tender
Shares into a voting trust, or enter into any agreement, arrangement or
understanding with any person (other than this Agreement), directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of Tender Shares, or agree to do any of the foregoing.
3.3. Disposition of Tender Shares. The Stockholder shall not,
so long as the Stockholder is required to tender Tender Shares pursuant to
Section 3.1 hereof, sell, transfer or otherwise dispose of, pledge or otherwise
encumber, any Tender Shares after the date hereof (except to tender Tender
Shares to Acquisition pursuant to the Offer), or agree to do any of the
foregoing.
3.4. Stop Transfer Order. The Stockholder hereby agrees to
cause Sheridan's transfer agent to be notified that there is a stop transfer
order (except to tender Tender Shares to Acquisition pursuant to the Offer) with
respect to all Tender Shares so long as the Stockholder is required to tender
Tender Shares pursuant to Section 3.1 hereof.
4. Options.
4.1. Adoption of Option Plan. Immediately following the
Effective Time (as defined in the Merger Agreement), the Company shall duly
adopt the Vestar/Calvary Holdings, Inc. 1999 Stock Option Plan in substantially
the form attached hereto as Exhibit B.
4.2. Grant of Performance Options. Immediately following the
Effective Time, the Company and the Stockholder shall duly execute and deliver a
Performance Option Agreement in substantially the form attached hereto as
Exhibit C pursuant to which the Stockholder will be granted performance options
to purchase the number of shares of Common Stock set forth opposite his name on
Schedule II hereto at an exercise price equal to the per share price paid by the
Stockholder for Common Stock pursuant hereto. Following such due execution and
delivery thereof, the Performance Option Agreement shall constitute a valid and
binding obligation of each of the Company and the Stockholder, enforceable
against each of the Company and the Stockholder in accordance with its terms.
4.3. Grant of Time Options. Immediately following the
Effective Time, the Company and the Stockholder shall duly execute and deliver a
Time Option Agreement in substantially the form attached hereto as Exhibit D
pursuant to which the Stockholder will be granted time options to purchase the
number of shares of Common Stock set forth opposite his name on Schedule II
hereto at an exercise price equal to the per share price paid by the Stockholder
for Common Stock pursuant hereto. Following such due execution and delivery
thereof, the Time Option Agreement shall constitute a valid and binding
obligation of each of the Company and the Stockholder, enforceable against each
of the Company and the Stockholder in accordance with its terms.
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5. Miscellaneous.
5.1. Recapitalizations, Exchanges, Etc., Affecting Common
Stock. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to Common Stock, to any and all shares of capital
stock of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution for Common Stock, by reason of
any stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any of such events, amounts hereunder shall be
appropriately adjusted, in good faith, by the Board of Directors of the Company.
5.2. Stockholder's Employment by the Company. Nothing
contained in this Agreement shall be deemed to obligate the Company or any
subsidiary of the Company to employ the Stockholder in any capacity whatsoever
or to prohibit or restrict the Company (or any such subsidiary) from terminating
the employment, if any, of the Stockholder at any time or for any reason
whatsoever, with or without Cause (as defined in the Stockholders Agreement).
5.3. Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns. No assignment of any of
the rights or obligations of the Stockholder shall be permitted except as
expressly contemplated hereby; any purported assignment in violation of this
provision shall be null and void ab initio.
5.4. Amendment; Waiver. This Agreement may be amended only by
a written instrument signed by the parties hereto. No waiver by either party
hereto of any of the provisions hereof shall be effective unless set forth in a
writing executed by the party so waiving.
5.5. Governing Law. This Agreement shall be governed by and
construed in all respects under the laws of the State of New York. Any action to
enforce which arises out of or in any way relates to any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located
within the State of New York as provided by law; and the parties consent to the
jurisdiction of such court or courts located within the State of New York and to
service of process by registered mail, return receipt requested, or by any other
manner provided by New York law.
5.6. Notices. Any notices or communications permitted or
required hereunder shall be deemed sufficiently given if hand-delivered, or sent
by (x) registered or certified mail return receipt requested, (y) telecopy or
other electronic transmission service (to the extent receipt is confirmed) or
(z) by overnight courier, in each case to the parties at their respective
addresses and telecopy numbers set forth below, or to such other address of
which any party may notify the other party in writing.
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(a) If to the Company, to it at the following address:
Vestar/Calvary Holdings, Inc.
c/o Vestar Capital Partners
245 Park Avenue
41st Floor
New York, NY 10167
Attention: James L. Elrod, Jr.
Telecopy: (212) 808-4922
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon, Esq.
Telecopy: (212) 455-2502
(b) If to the Stockholder, to him at his address or telecopy
number as shown on the stock register of the Company.
5.7. Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
5.8. Counterparts. This Agreement may be executed in two or
more counterparts, and by different parties on separate counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument.
5.9. Injunctive Relief. The Stockholder, on behalf of himself
and his permitted transferees, and the Company, on its own behalf and on behalf
of its successors and assigns, each acknowledges and agrees that a violation of
any of the terms of this Agreement will cause the other irreparable injury for
which adequate remedy at law is not available. Accordingly, it is agreed that
the Company or the Stockholder, as the case may be, shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which it or he may be
entitled at law or equity.
5.10. Rights to Negotiate. Nothing in this Agreement shall be
deemed to restrict or prohibit the Company from purchasing shares of Common
Stock from the Stockholder at any time upon such terms and conditions and at
such price as may be mutually agreed upon between the Company and the
Stockholder, whether or not at the time of such purchase circumstances exist
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which specifically grant the Company the right to purchase, or the Stockholder
the right to sell, shares of Common Stock pursuant to the terms of this
Agreement or the Stockholders Agreement.
5.11. Rights Cumulative; Waiver. The rights and remedies of
the Stockholder and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which either would otherwise have hereunder
or at law or in equity or by statute, and no failure or delay by either party in
exercising any right or remedy shall impair any such right or remedy or operate
as a waiver of such right or remedy, nor shall any single or partial exercise of
any power or right preclude such party's other or further exercise or the
exercise of any other power or right. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
VESTAR/CALVARY HOLDINGS, INC.
By: /s/ James L. Elrod, Jr.
----------------------------------------
Name: James L. Elrod, Jr.
Title: President
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
STOCKHOLDER:
/s/ Mitchell Eisenberg
--------------------------------
Mitchell Eisenberg
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MITCHELL EISENBERG
SCHEDULE I
Number of Shares Purchase Price Aggregate Purchase
of Common Stock Per Share Price Payable
- - --------------- --------- -------------
135,135** Per share price paid by Acquisition $1,249,998.75
for Sheridan Common Stock
pursuant to the Offer
** Assuming a purchase price per share of $9.25.
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MITCHELL EISENBERG
SCHEDULE II
Number of Shares Subject Number of Shares Subject
to Time Options to Performance Options
- - --------------- ----------------------
216,666 108,334
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Exhibit (c) (2)
EXECUTION COPY
================================================================================
STOCKHOLDERS AGREEMENT
dated as of March 24, 1999
among
VESTAR/CALVARY HOLDINGS, INC.,
SHERIDAN HEALTHCARE, INC.,
VESTAR/CALVARY INVESTORS, LLC,
MITCHELL EISENBERG,
LEWIS D. GOLD,
MICHAEL F. SCHUNDLER,
JAY A. MARTUS
and
THE OTHER MANAGEMENT INVESTORS
================================================================================
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.......................................................1
1.1 Defined Terms.....................................................1
1.2 Other Definitional Provisions; Interpretation....................10
SECTION 2. VOTING AGREEMENTS................................................11
2.1 Election of Directors............................................11
2.2 Other Voting Matters.............................................12
SECTION 3. TRANSFERS AND ISSUANCES..........................................12
3.1 Transfers to be Made Only as Permitted or
Required by this Agreement ......................................12
3.2 Permitted Transfers..............................................13
3.3 Effect of Void Transfers.........................................13
3.4 Legend on Securities.............................................13
3.5 Tag-Along Rights.................................................14
3.6 Public Offerings, etc. ..........................................15
3.7 Drag-Along Rights................................................16
3.8 Rights of First Refusal..........................................16
3.9 Participation Right..............................................18
3.10 Partial Transfers Following a Qualified Public Offering..........19
3.11 Partial Transfers to Cover Option-Related Tax Payments...........19
3.12 Transfers to Other Management Investors. .......................20
3.13 Call Right.......................................................20
3.14 Put Right........................................................22
SECTION 4. REGISTRATION RIGHTS..............................................24
4.1 Demand Registration..............................................24
4.2 Incidental Registration..........................................25
4.3 Registration Procedures..........................................27
4.4 Underwritten Offerings...........................................30
4.5 Preparation; Reasonable Investigation............................31
4.6 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants.....................................31
4.7 Expenses.........................................................32
4.8 Indemnification..................................................33
4.9 Participation in Underwritten Registrations......................34
4.10 Rule 144.........................................................35
4.11 Holdback Agreements..............................................35
4.12 Mezzanine Securities.............................................35
SECTION 5. MISCELLANEOUS....................................................36
5.1 Additional Securities Subject to Agreement.......................36
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5.2 Termination......................................................36
5.3 Injunctive Relief................................................36
5.4 Other Stockholders' Agreements...................................36
5.5 Amendments.......................................................36
5.6 Successors, Assigns and Transferees..............................36
5.7 Notices..........................................................36
5.8 Integration......................................................37
5.9 Severability.....................................................37
5.10 Counterparts.....................................................37
5.11 Governing Law....................................................38
5.12 Jurisdiction.....................................................38
5.13 Management Investors.............................................38
5.14 83(b) Election...................................................38
5.15 Management Investor Representative...............................38
5.16 Covenant Not to Compete..........................................39
5.17 Business Opportunities...........................................39
5.18 Confidentiality..................................................40
5.19 Effectiveness....................................................40
SCHEDULE 1 - Initial Other Management Investors
-ii-
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STOCKHOLDERS AGREEMENT, dated as of March 24, 1999 among
Vestar/Calvary Holdings, Inc., a Delaware corporation (the "Company"), Sheridan
Healthcare, Inc., a Delaware corporation ("Sheridan"), Vestar/Calvary Investors,
LLC, a Delaware limited liability company ("Vestar"), Mitchell Eisenberg, Lewis
D. Gold, Michael F. Schundler and Jay A. Martus (collectively, the "Senior
Management Investors") and the other persons listed on Schedule 1 hereto
(collectively, together with the persons identified in the supplementary
agreements referred to in Section 5.13 hereof, the "Other Management
Investors"). The Senior Management Investors and the Other Management Investors
are collectively referred to herein as the "Management Investors".
W I T N E S S E T H :
WHEREAS, the Company, the Senior Management Investors and the Other
Management Investors listed on Schedule 1 hereto have entered into subscription
and tender agreements dated as of the date hereof (the "Subscription and Tender
Agreements");
WHEREAS, pursuant to the Subscription and Tender Agreements and on
the terms and subject to the conditions set forth therein, the Senior Management
Investors and the Other Management Investors listed on Schedule 1 hereto have
agreed to purchase shares of common stock of the Company;
WHEREAS, the Company, Sheridan, Vestar and the Management Investors
desire to make certain arrangements among themselves with respect to matters set
forth herein; and
WHEREAS, it is a condition to the consummation of the closings under
the Subscription and Tender Agreements that this Agreement (as defined below)
shall have been duly authorized, executed and delivered by each of the parties
hereto and be in full force and effect;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined in the
headings and the recitals shall have their respective assigned meanings, and the
following capitalized terms shall have the meanings ascribed to them below:
"Acquisition" means Vestar/Calvary, Inc., a Delaware corporation and
a wholly owned subsidiary of the Company.
"Affiliate" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under common control
with, such Person, or (ii) any director, officer, partner or employee of such
Person or any Person specified in clause (i) above, or
(iii) any a spouse, parent, child, step-child, grandchild, step-grandchild or
sibling of any Person specified in clause (i) or (ii) above.
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"Aggregate Investment" shall have the meaning ascribed to such term
in the definition of "Lapse Date."
"Agreement" means this Stockholders Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Applicable Percentage" shall mean (i) for the period from the
Closing Date through the day immediately preceding the first anniversary of the
Closing Date, 0%, (ii) for the period from the first anniversary of the Closing
Date through the date immediately preceding the second anniversary of the
Closing Date, 25%, (iii) for the period from the second anniversary of the
Closing Date through the day immediately preceding the third anniversary of the
Closing Date, 50%, (iv) for the period from the third anniversary of the Closing
Date through the day immediately preceding the fourth anniversary of the Closing
Date, 75% and (v) on and after the fourth anniversary of the Closing Date, 100%.
"Business Day" means a day other than a Saturday, Sunday, holiday or
other day on which commercial banks in New York City or Miami, Florida are
authorized or required by law to close.
"Call Notice" shall have the meaning ascribed to such term in
Section 3.13(a).
"Cause" shall mean "cause" as defined in any employment agreement
entered into by and between the Management Investor and the Company or any of
its Subsidiaries which is in effect as of or after the Closing Date (as the same
may be amended in accordance with the terms thereof) or, if not defined therein
or if there shall be no such agreement, "Cause" shall exist if a Management
Investor has (i) committed an act of fraud, embezzlement, misappropriation or
breach of fiduciary duty against Vestar, Sheridan, the Company or any Subsidiary
of the Company or Sheridan or a felony involving the business, assets, customers
or clients of Vestar, Sheridan, the Company or any Subsidiary of the Company or
Sheridan or has been convicted by a court of competent jurisdiction or has plead
guilty or nolo contendere to any other felony; (ii) committed a material breach
of any written confidentiality, non-compete, non-solicitation or business
opportunity covenant contained in any agreement entered into by the Management
Investor and Vestar, Sheridan, the Company or any of their Affiliates; (iii)
substantially failed to perform the Management Investor's duties to Sheridan,
the Company or any Subsidiary, including by committing a material breach of any
written covenant contained in any agreement entered into by the Management
Investor and Vestar, Sheridan, the Company or any Subsidiary of the Company or
Sheridan (other than a confidentiality, non-compete, non-solicitation or
business opportunity covenant), which failure or breach has not been remedied
within a reasonable time specified by Sheridan (it being understood that
Sheridan can act on behalf of its Affiliates) that is not less than thirty (30)
days after delivery to the Management Investor by Sheridan of written notice
thereof; or (iv) breached the Management Investor's obligations pursuant to
Sheridan's, the Company's or any of the Company's or Sheridan's Subsidiary's
substance abuse policy.
"Closing Date" shall have the meaning ascribed to such term in the
Subscription and Tender Agreements.
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"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding provision
in any successor statute.
"Columbia" means the hospitals and ambulatory surgical facilities
owned by Columbia/HCA Healthcare, Inc.
"Common Stock" means the common stock of the Company or common
equity securities, or securities exchangeable or exercisable for or convertible
into common equity securities, of any Person into or for which Common Stock is
converted, exchanged or received in an Exit Transaction.
"Common Stock Equivalents" means any stock, warrants, rights, calls,
options or other securities exchangeable or exercisable for or convertible into
Common Stock.
"Company" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall also include any Person who, in connection
with an Exit Transaction, becomes the issuer of Common Stock.
"Competitive Enterprise" means any Person the activities, products
or services of which (A) are competitive with activities, products or services
of the Company or any of its Controlled Entities (as defined in the Merger
Agreement) in any state in which the Company is engaged or intends to engage in
the same or a similar business during the one year period preceding the
Management Investor's termination of employment or during the Non-Competition
Period, and (B) include (1) the provision of medical services, including without
limitation, the provision of anesthesia services, pain management services,
emergency room services, primary medical care services, neonatology,
perinatology and radiology services; (2) the provision of Payor Services; (3)
the provision of administrative services for medical services and Payor
Services, including without limitation, quality assurance services, utilization
management services, billing services, recruitment services and medical
management information services; or (4) the provision of services or products of
any nature to Columbia.
"Confidential Information" shall have the meaning ascribed to such
term in Section 5.18(a).
"Cost" means the purchase price per share of Common Stock paid by
the applicable Management Investor determined by dividing (x) the total purchase
price paid by such Management Investor on the date of purchase of such share by
(y) the number of shares of Common Stock purchased by such Management Investor
on such date, as adjusted by the Board of Directors of the Company in good faith
and on a consistent basis to reflect Exit Transactions and stock splits, stock
dividends, recapitalizations and other similar transactions.
"Cost Securities" shall have the meaning ascribed to such term in
Section 3.13(f).
"Custody Agreement and Power of Attorney" shall have the meaning
ascribed to such term in Section 4.2(c)
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"DGCL" shall have the meaning ascribed to such term in Section 5.11.
"Disability" shall mean "disability" as defined in any employment
agreement entered into by and between the Management Investor and the Company or
any of its Subsidiaries which is in effect as of or after the Closing Date (as
the same may be amended in accordance with the terms thereof) or, if not defined
therein or if there shall be no such agreement, as defined in Sheridan's
long-term disability plan as in effect from time to time or if, there shall be
no plan or if not defined therein, the Management Investor's becoming physically
or mentally incapacitated and consequent inability for a period of six (6)
months in any twelve (12) consecutive month period to perform the Management
Investor's duties to Sheridan, the Company or any Subsidiary of Sheridan or the
Company.
"Effective Time" shall have the meaning ascribed to such term in the
Merger Agreement.
"Exit Transaction" shall have the meaning ascribed to such term in
the definition of "Lapse Date."
"Equity Interests" shall have the meaning ascribed to such term in
Section 3.9(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"Fair Market Value" shall mean, as of any date of determination,
with respect to shares of Common Stock, (x) prior to a Qualified Public
Offering, the fair market value of the shares, disregarding any discount for
minority interest, restrictions on transfer of the shares or lack of
marketability of the shares, as determined in good faith and on a consistent
basis by the Board of Directors of the Company, giving due consideration to,
among other things, the earnings and other financial and operating information
of the Company, Sheridan and its Subsidiaries in recent periods, the future
prospects of the Company, Sheridan and its Subsidiaries, the general condition
of the securities markets and the fair market value of securities of companies
of a similar size and engaged in businesses similar to the business of the
Company, Sheridan and its Subsidiaries, and (y) subsequent to an Initial Public
Offering, the price per share of Common Stock equal to the average of the last
sales price of a share of Common Stock on each of the last five trading days
prior to the date of determination (the "FMV Calculation Period") on each
exchange on which the Common Stock may at the time be listed or, if there shall
have been no sales on any of such exchanges during the FMV Calculation Period,
the average of the closing bid and asked prices on each such exchange on each
day during the FMV Calculation Period or, if there are no such bid and asked
prices during the FMV Calculation Period, on the next preceding five dates on
which such bid and asked prices occurred or, if Common Stock shall not be so
listed, the average of the closing sales prices as reported by NASDAQ during the
FMV Calculation Period in the over-the-counter market.
"Family Group" shall have the meaning ascribed to such term in
Section 3.2(a).
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"Financing Default" shall mean an event which constitutes (or which
with notice or lapse of time or both would constitute) an event of default
(which event of default has not been cured or waived) under any of the following
as originally entered into or as they may be amended from time to time: (i) any
agreement or instrument under which indebtedness of any of the Company and its
Subsidiaries is outstanding as of the time of the aforementioned event, and any
extensions, renewals, refinancings or refundings thereof in whole or in part;
(ii) any provision of the Company's or any of its Subsidiaries' certificates of
incorporation or other organizational documents as in effect on the date hereof;
(iii) any amendment of, supplement to or other modification of any of the
instruments referred to in clauses (i) or (ii) above; and (iv) any of the
securities issued pursuant to or whose terms are governed by the terms of any of
the agreements set forth in clauses (i) and (ii) above, and any extensions,
renewals, refinancings or refundings thereof in whole or in part.
"FMV Calculation Period" shall have the meaning ascribed to such
term in the defined term "Fair Market Value".
"Good Reason" shall mean, if the Management Investor has entered
into an employment agreement with Sheridan, the Company or any of its
Subsidiaries which is in effect as of or after the Closing Date (as the same may
be amended in accordance with the terms hereof) the occurrence of such events
which, under the terms of such employment agreement, would expressly enable the
Management Investor to resign from employment and be treated under such
employment agreement as though the Management Investor's employment had been
terminated by the Company without "cause" or, if the employment agreement does
not include such provisions or if there shall be no such employment agreement,
"Good Reason" shall mean: (i) Sheridan, the Company or any Subsidiary of
Sheridan or the Company has failed to pay the Management Investor his salary;
(ii) the office where the Management Investor performs his duties is moved more
than 30 miles from where the Management Investor performed the Management
Investor's duties on the Closing Date; (iii) a substantial reduction of the
Management Investor's base salary (other than an across the board reduction
similarly affecting other comparable employees of Sheridan, the Company or its
Subsidiaries) or a substantial diminution of the Management Investor's duties,
which, in each case, has not been remedied within a reasonable time specified by
the Management Investor that is not less than thirty (30) days after delivery to
Sheridan of written notice describing the event constituting Good Reason.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Health Care Provider" means any physician, nurse, technician or
allied health care provider providing medical services on behalf of Sheridan or
any of its Affiliates on a full or part-time basis as an independent contractor
or consultant.
"Initial Call Period" shall have the meaning ascribed to such term
in Section 3.13(f).
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"Initial Public Offering" means the first Public Offering occurring
after the date hereof.
"Issuance" shall have the meaning ascribed to such term in Section
3.9(a).
"Junior Subordinated Note" shall have the meaning ascribed to such
term in Section 3.13(g).
"Lapse Date" means the earlier of (x) the fifth anniversary of the
Closing Date and (y) the date of the sale, exchange or other disposition by
Vestar and its Affiliates, in one or a series of transactions (including,
without limitation, by way of merger, reorganization, recapitalization,
consolidation, sale of capital stock or assets of Sheridan or any other
Subsidiary of the Company, or similar transaction that results in the
disposition, directly or indirectly, of the equity interests of Vestar and its
Affiliates (other than the Management Investors) in the Company) (collectively,
an "Exit Transaction") of 70% or more of the sum of (1) its equity interest in
the Company immediately following the Closing Date plus (2) any additional
capital contributions to, or investments in, the Company made by any of Vestar
and its Affiliates after the Closing Date (clauses (1) and (2), collectively,
the "Aggregate Investment"); provided that, in the case of clause (y), either
(A) the consideration received by Vestar and its Affiliates in the Exit
Transaction for 70% or more of the Aggregate Investment is cash or securities
that are distributed in kind to the limited partners of Vestar Capital Partners
III, L.P. and its Affiliates, or a combination thereof, (B) the Exit Transaction
results in (i) designees of Vestar and its Affiliates not constituting a
majority of the Board of Directors (or analogous governing body) of the Company
and (ii) Vestar and its Affiliates not beneficially owning securities of the
Company which constitute at least a majority of the voting power of all
outstanding securities of the Company entitled to vote generally in the election
of directors (or members of an analogous governing body) of the Company.
"Majority Selling Stockholders" shall have the meaning ascribed to
such term in Section 4.7.
"Management Investors" shall have the meaning ascribed to such term
in the preamble to this Agreement.
"Management Investor Offeree" shall have the meaning ascribed to
such term in Section 3.8(a).
"Manager Investor Representative" shall have the meaning ascribed to
such term in Section 5.15.
"Management Investor's Transfer Group" shall have the meaning
ascribed to such term in Section 3.8(a).
"Measurement Date" shall have the meaning ascribed to such term in
Section 3.10.
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"Medical Customers" means patients, health maintenance
organizations, preferred payer organizations, third party payors, IPAs, PHOs,
MSOs, PSOs (or similar arrangements), employers, labor unions, hospitals,
clinics, ambulatory surgery centers, Medicare intermediaries and Medicaid
intermediaries.
"Merger" shall have the meaning ascribed to such term in the Merger
Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as
of the date hereof among Sheridan, the Company and Acquisition, as the same may
be amended, supplemented or otherwise modified from time to time, pursuant to
which, among other things, Acquisition will merge into Sheridan, with Sheridan
constituting the surviving corporation.
"Mezzanine Securities" means securities of the Company, excluding
Common Stock, but including preferred stock and warrants to purchase Common
Stock, issued to any of Vestar and its Affiliates prior to the Effective Time,
and any securities into or for which such securities are exchangeable.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"No Call Notice" shall have the meaning ascribed to such term in
Section 3.13(e).
"No ROFR Notice" shall have the meaning ascribed to such term in
Section 3.8(g).
"Non-Competition Period" means with respect to each Management
Investor who is not a Senior Management Investor and who is not a party to a
written employment agreement with the Company or any of its Subsidiaries that
contains a non-competition provision, the period commencing on the last day of
the Term of Employment and ending on the first anniversary of the last day of
the Term of Employment.
"Offeror" shall have the meaning ascribed to such term in Section
3.8(a).
"Option" means any option to acquire Common Stock or other capital
stock of the Company, including without limitation, all options granted under
the Company's 1999 Stock Option Plan.
"Option Shares" means all Common Stock or other capital stock of the
Company received by a Management Investor upon the exercise or other settlement
of an Option.
"Other Capital Stock" shall have the meaning ascribed to such term
in Section 3.9(a)(i).
"Other Capital Stock Equivalents" shall have the meaning ascribed to
such term in Section 3.9(a)(ii).
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"Other Management Investors" shall have the meaning ascribed to such
term in the preamble to this Agreement.
"Payor Services" means payor services in the area of managed care,
third party payors, provider networks, IPAs, TPAs, PHOs, MSOs, HMOs, PSOs,
capitation pools and other similar arrangements.
"Permitted Payment" shall have the meaning ascribed to such term in
Section 3.13(g).
"Permitted Transferee" has the meaning ascribed to such term in
Section 3.2(a).
"Person" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust, unincorporated
association, joint venture, Governmental Authority or other entity of any nature
whatsoever.
"Public Offering" means the sale of Securities to the public
pursuant to an effective registration statement filed under the Securities Act.
"Purchased Shares" shall mean, with respect to each Management
Investor, those shares of Common Stock that are purchased by the Management
Investor from the Company (as adjusted in good faith and on a consistent basis
by the Board of Directors of the Company to reflect Exit Transactions and stock
splits, stock dividends, recapitalizations and other similar transactions),
other than pursuant to the exercise of an Option.
"Put Notice" shall have the meaning ascribed to such term in Section
3.14(a).
"Qualified Public Offering" shall mean the sale of Common Stock to
the public after the Effective Time pursuant to an effective registration
statement filed under the Securities Act, which, together with any earlier
registered public sales of Common Stock under the Securities Act occurring after
the Effective Time, results in aggregate gross proceeds to the Company or its
stockholders, or both, of at least $50 million.
"Regulations" means the regulations promulgated under the Code.
"Request" shall have the meaning ascribed to such term in Section
4.1(a).
"Requesting Stockholder" shall have the meaning ascribed to such
term in Section 4.1(a).
"Right" shall have the meaning ascribed to such term in Section
3.9(a).
"Securities" means shares of Common Stock or Common Stock
Equivalents or other securities of the Company, other than (i) debt securities
that are not Common Stock Equivalents and (ii) Mezzanine Securities, in each
case whether owned on the date hereof or hereafter acquired.
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"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"SEC" means the Securities and Exchange Commission.
"Selling Stockholder" shall have the meaning ascribed to such term
in Section 4.3(c).
"Senior Management Investors" shall have the meaning ascribed to
such term in the preamble to this Agreement.
"Sheridan" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall also include its successors by means of a
merger, consolidation, reorganization, recapitalization or similar transaction.
"Stockholders" means Vestar, the Management Investors, and their
respective Permitted Transferees.
"Subscription and Tender Agreements" shall have the meaning ascribed
to such term in the recitals to this Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which fifty percent (50%)
or more of the total voting power of shares of capital stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof, or fifty percent (50%) or more of the
equity interest therein, is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of such
Person or a combination thereof.
"Tag Notice" shall have the meaning ascribed to such term in Section
3.5(b).
"Tagging Stockholder" shall have the meaning ascribed to such term
in Section 3.5(a).
"Term of Employment" means with respect to each Management Investor
who is not a Senior Management Investor and who is not a party to a written
employment agreement with the Company or any of its Subsidiaries that contains a
non-competition provision, any time during the period in which such Management
Investor is employed by the Company or any of its Subsidiaries.
"Third Party" means any Person other than the Company, the
Stockholders and their Affiliates.
"Transfer" means any transfer, sale, assignment, distribution,
exchange, mortgage, pledge, hypothecation or other disposition of any Securities
or any interest therein, including transfers by operation of law in connection
with a merger transaction or otherwise.
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"Transfer Notice" shall have the meaning ascribed to such term in
Section 3.8(a).
"Transfer Offer" shall have the meaning ascribed to such term in
Section 3.8(a).
"Transfer Securities" shall have the meaning ascribed to such term
in Section 3.8(a).
"Vestar" shall have the meaning ascribed to such term in the
preamble to this Agreement.
"Vested Purchased Shares" shall mean at any time, the number of
Purchased Shares initially acquired by a Management Investor (as adjusted in
good faith and on a consistent basis by the Board of Directors of the Company to
reflect Exit Transactions and stock splits, stock dividends, recapitalizations
and other similar corporate transactions) times the Applicable Percentage.
1.2 Other Definitional Provisions; Interpretation. (a) The words
"hereof", "herein", and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) For purposes of comparing the beneficial ownership of any Person
on the date of execution and delivery of this Agreement to the level of such
ownership at any later time, the level of ownership on such later date shall be
adjusted to eliminate the effect of any subdivision of the Common Stock, any
combination of the Common Stock, any issuance of Common Stock or Common Stock
Equivalents by reason of any reclassification (including, without limitation,
any reclassification in connection with a merger or consolidation), or any
dividend payable in Common Stock or Common Stock Equivalents.
SECTION 2. VOTING AGREEMENTS
2.1 Election of Directors. (a) Each Stockholder hereby agrees that,
so long as this Agreement shall remain in effect, such Stockholder will vote all
of the voting Securities owned or held of record by such Stockholder so as to
elect and, during such period, to continue in office a Board of Directors of the
Company and each Subsidiary of the Company (other than Subsidiaries of
Sheridan), each consisting solely of the following:
(i) 3 designees of Vestar (or its designated Permitted Transferees);
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(ii) 2 designees of the Management Investors (who shall be Mitchell
Eisenberg and Lewis Gold so long as each of them is an executive officer of
Sheridan); and
(iii) 2 persons to be designated by Vestar (or its designated
Permitted Transferees) in its sole discretion after consultation with the
Management Investor Representative.
(b) If at any time while this Agreement shall remain in effect
Vestar (or its designated Permitted Transferees) shall notify the other
Stockholders of its desire to remove, with or without cause, any director of the
Company or any of its Subsidiaries previously designated by it in accordance
with Section 2.1(a)(i), each Stockholder shall vote all of the voting Securities
owned or held of record by it so as to remove such director.
(c) If at any time while this Agreement shall remain in effect any
director previously designated by Vestar (or its Permitted Transferees) or the
Management Investors ceases to serve on the Board of Directors of the Company or
any Subsidiary of the Company (whether by reason of death, resignation, removal
or otherwise), the Stockholder or Stockholders who designated such director
shall be entitled to designate a successor director to fill the vacancy created
thereby on the terms and subject to the conditions of paragraph (a). Each
Stockholder agrees to vote all of the voting Securities owned or held of record
by such Stockholder so as to elect any such director.
(d) The parties hereto hereby agree that any individual designated
as a director of the Company or any Subsidiary of the Company may be removed for
cause (as reasonably determined by the Board of Directors of the Company, other
than such person) with or without the consent of the Stockholder which
designated such individual. No such removal of an individual designated pursuant
to this Section 2.1 shall affect the rights of any of the Stockholders to
designate a different individual pursuant to this Section 2.1.
(e) No fees shall be paid by the Company or any of its Subsidiaries
to any member of their respective Boards of Directors who are employees of
Vestar, the Company, Sheridan or any of their Affiliates in his capacity as a
member of such Board of Directors; provided that the foregoing shall not limit
reimbursement of expenses in accordance with the expense reimbursement policy of
Sheridan and its Subsidiaries.
(f) The Stockholders hereby agree that Vestar (or its designated
Permitted Transferees) shall have sole discretion to determine the composition
of the Company's and its Subsidiaries' Board of Directors' committees (e.g.,
audit, compensation, etc.) through the rights granted to Vestar (or its
designated Permitted Transferees) pursuant to Section 2.1(a)(i).
2.2 Other Voting Matters. (a) Each Management Investor and their
Permitted Transferees hereby agrees that, until the occurrence of the Lapse
Date, such Stockholder will vote all of the Securities owned or held of record
by such Stockholder, either in person or by proxy, whether at a meeting of
stockholders or by executing a written consent, (i) consistent with the vote of
Vestar with respect to the shares of Common Stock beneficially owned by Vestar
and (ii) to ratify, approve and adopt any and all actions adopted or approved by
the Board of Directors of the Company.
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(b) In order to effectuate the provisions of Sections 2.1 and 2.2
hereof, (i) each of the Management Investors and their Permitted Transferees
hereby grants to Dr. Mitchell Eisenberg, or if Dr. Eisenberg shall cease to be
Chief Executive Officer of Sheridan, to the Chief Executive Officer of Sheridan,
a proxy to vote at any annual or special meeting of Stockholders, or to take
action by written consent in lieu of such meeting with respect to, or to
otherwise take action in respect of, all of the Securities owned or held of
record by the Management Investors and their Permitted Transferees in connection
with the matters set forth in Sections 2.1 and 2.2 hereof in accordance with the
provisions of Sections 2.1 and 2.2 hereof. Each of the proxies granted hereby is
irrevocable and is coupled with an interest. To effectuate the provisions of
this Section 2, the Secretary of each of the Company and each Subsidiary of the
Company, or if there be no Secretary such other officer of the Company or such
Subsidiary as the Board of Directors of the Company or such Subsidiary may
appoint to fulfill the duties of the Secretary, shall not record any vote or
consent or other action contrary to the terms of this Section 2.
SECTION 3. TRANSFERS AND ISSUANCES
3.1 Transfers to be Made Only as Permitted or Required by this
Agreement.
(a) Each Stockholder hereby agrees that such Stockholder will not,
directly or indirectly, Transfer any Securities unless such Transfer complies
with the provisions hereof and (i) such Transfer is pursuant to an effective
registration statement under the Securities Act and has been registered under
all applicable state securities or "blue sky" laws or (ii) such Stockholder
shall have furnished the Company with a written opinion of counsel reasonably
satisfactory to the Company in form and substance reasonably satisfactory to the
Company to the effect that no such registration is required because of the
availability of an exemption from registration under the Securities Act and all
applicable state securities or "blue sky" laws.
(b) Each Management Investor and their Permitted Transferees hereby
agrees that, except for Transfers in connection with a Public Offering,
Transfers pursuant to Section 3.2(iii), 3.2(iv), 3.5, 3.7, 3.10, 3.12, 3.13 or
3.14 hereof and Transfers pursuant to Rule 144 under the Securities Act, no
Transfer shall occur unless the transferee shall agree to become a party to, and
be bound to the same extent as its transferor by the terms of, this Agreement in
accordance with the provisions of Section 5.6 hereof.
(c) Each Management Investor and their Permitted Transferees hereby
agrees that such Stockholder shall not, without the prior written consent of
Vestar (which consent may be withheld by Vestar in its absolute discretion),
effect a Transfer prior to the Lapse Date, except for Transfers in connection
with a Public Offering and Transfers pursuant to Sections 3.2, 3.5, 3.7, 3.10,
3.11, 3.12, 3.13 or 3.14 hereof.
3.2 Permitted Transfers. (a) Any Management Investor may Transfer
any of the Securities beneficially owned by him (i) to his spouse, parent,
descendant, step-child, or step-grandchild or any executor, estate, guardian,
committee, trustee or other fiduciary acting as such solely on behalf or solely
for the benefit of any such spouse, parent, descendant, step-child or
step-grandchild (collectively, a "Family Group"), (ii) to any trust,
corporation, partnership or limited liability company, all of the beneficial
interests in which shall be held, directly or
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indirectly, by such Management Investor and/or one or more of the Family Group
of such Management Investor; provided, however, that during the period that any
such trust, corporation, partnership or limited liability company holds any
right, title or interest in any Securities, no person other than such Management
Investor or members of the Family Group of such Management Investor may be or
become beneficiaries, stockholders, general partners or members thereof, (iii)
which he has purchased on a stock exchange or in the over-the-counter market
after the occurrence of a Public Offering, to any Person, or (iv) to Sheridan,
the Company, Vestar or any of Vestar's Affiliates. A transferee under this
Section 3.2(a)(i) or 3.2(a)(ii) or under Section 3.2(b), or any other transferee
of Vestar and its Affiliates in a Transfer made in accordance with this
Agreement, is referred to as a "Permitted Transferee."
(b) Notwithstanding anything in this Agreement to the contrary,
Vestar and its Affiliates shall be entitled from time to time, without
compliance with Section 3.5, to Transfer any or all of the Securities
beneficially owed by them to any of their Affiliates who agrees to become a
party to, and be bound to the same extent as its transferor by, the terms of
this Agreement.
3.3 Effect of Void Transfers. In the event of any purported Transfer
of any Securities in violation of the provisions of this Agreement, such
purported Transfer shall be void and of no effect and the Company shall not give
effect to such Transfer.
3.4 Legend on Securities. Each certificate representing Securities
issued to any Stockholder shall bear the following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT AMONG VESTAR/CALVARY HOLDINGS, INC. (THE
"COMPANY"), SHERIDAN HEALTHCARE, INC., VESTAR/CALVARY INVESTORS, LLC., AND
THE MANAGEMENT INVESTORS PARTIES THERETO, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION REASONABLY SATISFACTORY IN FORM
AND SUBSTANCE TO THE COMPANY OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
STOCKHOLDERS AGREEMENT, INCLUDING RESTRICTIONS RELATING TO THE EXERCISE OF
ANY VOTING RIGHTS GRANTED BY THE SECURITIES."
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3.5 Tag-Along Rights. (a) So long as this Agreement shall remain in
effect, with respect to any proposed Transfer by any of Vestar and its
Affiliates (in such capacity, a "Transferring Stockholder") of Common Stock
permitted hereunder, other than as provided in Section 3.2(b) and 3.6, the
Transferring Stockholder shall have the obligation, and each other Stockholder
(other than Vestar or any of its Affiliates) shall have the right, to require
the proposed transferee to purchase from each such other Stockholder having and
exercising such right (each a "Tagging Stockholder") a number of shares of
Common Stock up to the product (rounded up to the nearest whole number) of (i)
the quotient determined by dividing (A) the aggregate number of shares of Common
Stock beneficially owned on a fully diluted basis by such Tagging Stockholder
and sought by the Tagging Stockholder to be included in the contemplated
Transfer by (B) the aggregate number of shares of Common Stock beneficially
owned on a fully diluted basis by the Transferring Stockholder and all Tagging
Stockholders and sought by the Transferring Stockholder and all Tagging
Stockholders to be included in the contemplated Transfer and (ii) the total
number of shares of Common Stock proposed to be directly or indirectly
Transferred to the transferee in the contemplated Transfer, and at the same
price per share of Common Stock and upon the same terms and conditions
(including without limitation time of payment and form of consideration) as to
be paid and given to the Transferring Stockholder; provided that a Stockholder
shall not be deemed to beneficially own any shares underlying unexercised
Options unless such Options are vested and exercisable as of the date of the Tag
Notice described in Section 3.5(b); and provided further that in order to be
entitled to exercise its right to sell shares of Common Stock to the proposed
transferee pursuant to this Section 3.5(a), a Tagging Stockholder must agree to
make to the transferee the same representations, warranties, covenants,
indemnities and agreements as the Transferring Stockholder agrees to make in
connection with the proposed Transfer of the shares of Common Stock of the
Transferring Stockholder (except that in the case of representations and
warranties pertaining specifically to the Transferring Stockholder a Tagging
Stockholder shall make the comparable representations and warranties pertaining
specifically to itself); and provided further that all representations,
warranties and indemnities shall be made by Tagging Stockholders severally and
not jointly and that the liability of the Transferring Stockholder and the
Tagging Stockholders (whether pursuant to a representation, warranty, covenant,
indemnification provision or agreement) shall be evidenced in writings executed
by them and the transferee and shall be borne by each of them on a pro rata
basis. Any Tagging Stockholder that is a holder of Common Stock Equivalents and
wishes to participate in a sale of Common Stock pursuant to this Section 3.5(a)
shall convert or exercise or exchange such number of Common Stock Equivalents
into or for Common Stock as may be required therefor on or prior to the closing
date of such Transfer.
(b) The Transferring Stockholder shall give notice (a "Tag Notice")
to all relevant Stockholders of each proposed Transfer giving rise to the rights
of the Tagging Stockholders set forth in the first sentence of Section 3.5(a) at
least 45 days prior to the proposed consummation of such Transfer, setting forth
the name of the Transferring Stockholder, the number of shares of Common Stock
proposed to be so Transferred, the name and address of the proposed transferee,
the proposed amount and form of consideration, the other terms and conditions of
payment offered by the proposed transferee and the representations, warranties
and indemnities to be made or given by the Transferring Stockholders, and a
representation that the proposed transferee has been informed of the tag-along
rights provided for in this Section 3.5 and has agreed to purchase shares of
Common Stock in accordance with the terms hereof. The tag-along rights provided
by
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this Section 3.5 must be exercised by each Tagging Stockholder within 20 days
following receipt of the notice required by the preceding sentence, by delivery
of a written notice to the Transferring Stockholder indicating such Tagging
Stockholder's desire to exercise its rights and specifying the number of shares
of Common Stock it desires to sell. The Transferring Stockholder shall be
entitled under this Section 3.5 to Transfer to the proposed transferee the
number of shares of Common Stock equal to the excess of (x) the number referred
to in clause (ii) of Section 3.5(a) over (y) the aggregate number of shares of
Common Stock set forth in the written notices, if any, delivered by the Tagging
Stockholders pursuant to the preceding sentence (up to the maximum number of
shares of Common Stock beneficially owned by such Tagging Stockholder required
to be purchased by the proposed transferee pursuant to the first sentence of
Section 3.5(a)). If the proposed transferee fails to purchase shares of Common
Stock from any Tagging Stockholder that has properly exercised its tag-along
rights, then the Transferring Stockholder shall not be permitted to make the
proposed Transfer, and any such attempted Transfer shall be void and of no
effect, as provided in Section 3.3 hereof.
(c) If any of the Tagging Stockholders exercise their rights under
Section 3.5(a), (i) the first shares of Common Stock to be transferred by such
Tagging Stockholder must be Vested Purchased Shares until such Tagging
Stockholder owns no more Vested Purchased Shares, then Option Shares until such
Tagging Stockholder owns no more Option Shares, then any remaining Purchased
Shares and (ii) the closing of the purchase of the Common Stock with respect to
which such rights have been exercised shall take place concurrently with the
closing of the sale of the Transferring Stockholder's Common Stock.
3.6 Public Offerings, etc. The provisions of Sections 3.5 and 3.7
shall not be applicable to offers and sales of Securities in a Public Offering
or, if such Securities previously have been sold in a Public Offering, pursuant
to Rule 144 under the Securities Act.
3.7 Drag-Along Rights. So long as this Agreement shall remain in
effect, if any of Vestar and its Affiliates receives an offer from a Third Party
to purchase all or any portion of the outstanding shares of Common Stock and
such offer is accepted by Vestar or such Affiliate, as the case may be, then
each other Stockholder hereby agrees that it will, if requested in writing not
less than 15 days' prior to the requested Transfer date by Vestar or such
Affiliate, Transfer a pro rata number of Securities beneficially owned by it to
such Third Party on the terms of the offer so accepted by Vestar or such
Affiliate, as the case may be; including making the same representations,
warranties, covenants, indemnities and agreements that Vestar or such Affiliate,
as the case may be, agrees to make (except that, in the case of representations
and warranties pertaining specifically to Vestar or such Affiliate, as the case
may be, each other Stockholder shall make the comparable representations and
warranties pertaining specifically to itself); provided that all
representations, warranties and indemnities shall be made by Stockholders
severally and not jointly and that the liability of Stockholders (whether
pursuant to a representation, warranty, covenant, indemnification provision or
agreement) shall be evidenced in writings executed by them and the transferee
and shall be borne by each of them on a pro rata basis; and provided further
that the terms of such offer applicable to any Common Stock beneficially owned
by such other Stockholder are no less favorable than the terms of such offer
applicable to the Common Stock beneficially owned by Vestar or such Affiliate,
as the case may be, and their respective Affiliates (including with respect to
the amount and nature of consideration and time of receipt
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thereof); and provided further that the first shares of Common Stock Transferred
by such other Stockholder must be Vested Purchased Shares until such other
Stockholder owns no more Vested Purchased Shares, then the Option Shares until
such other Stockholder owns no more Option Shares, then the portion of any
Options then held by such other Stockholder that are then vested and exercisable
(provided in the case of a Transfer of any such portion of the Options that the
Company shall have made acceptable arrangements with the transferee for the same
per share consideration to be paid to such Stockholder for such portion of the
Option as the transferee pays for the shares of Common Stock to be purchased by
the transferee, reduced by the aggregate option exercise price for the
transferred portion of the Options) until no portion of the Options held by such
Stockholder is vested and exercisable, and then any remaining Purchased Shares.
3.8 Rights of First Refusal. (a) Each Management Investor and their
Permitted Transferees agree that if, prior to a Qualified Public Offering, such
Management Investor or any of its Permitted Transferees receives a bona fide
offer (a "Transfer Offer") to purchase any or all Securities (the "Transfer
Securities") then owned by such Management Investor or such Management
Investor's Permitted Transferees (collectively, the "Management Investor's
Transfer Group") from any Person (the "Offeror") which any member of the
Management Investor's Transfer Group wishes to accept (the "Management Investor
Offeree"), the Management Investor Offeree shall cause the Transfer Offer to be
reduced to writing and shall provide a written notice (the "Transfer Notice") of
such Transfer Offer to the Company, Vestar and Sheridan. The Transfer Notice
shall also contain an irrevocable offer to sell the Transfer Securities to the
Company, Vestar and Sheridan (in the manner set forth below) at a price equal to
the price contained in, and upon the same terms and conditions as the terms and
conditions contained in, the Transfer Offer and shall be accompanied by a true
and complete copy of the Transfer Offer (which shall identify the Offeror, the
Transfer Securities, the price contained in the Transfer Offer and the other
material terms and conditions of the Transfer Offer). At any time within 30 days
after the date of the receipt by the Company, Vestar and Sheridan of the
Transfer Notice, and subject to Section 3.8(c), the Company, Vestar and Sheridan
or any of their designated Affiliates shall have the right and option to
purchase all (but not less than all) of the Transfer Securities covered by the
Transfer Offer either (i) for the same consideration and on the same terms and
conditions as the Transfer Offer or (ii) if the Transfer Offer includes any
consideration other than cash, then, at the sole option of the Company, Vestar,
Sheridan, or any of their designated Affiliates, as applicable, at the
equivalent all cash price, determined in good faith by a majority of the members
of the Company's Board of Directors. If the option referred to in the preceding
sentence is exercised, on or prior to the 60th day after the date of receipt by
the Company, Vestar and Sheridan of the Transfer Notice the Company, Vestar,
Sheridan or any other designated Affiliates, as applicable, shall execute and
deliver to the Management Investor Offeree a written agreement in the form
included in the Transfer Offer, including representations, warranties, covenants
and indemnities, if the Transfer Offer included such written agreement, and
shall pay the relevant cash consideration, by delivering a certified bank check
or checks in (or, if the Management Investor Offeree so elects at least three
business days prior to the closing date in a writing specifying the Management
Investor Offeree's bank account and other wire Transfer instructions, by wire
transferring) the appropriate amount and shall deliver the relevant non-cash
consideration to the Management Investor Offeree against delivery at the
principal office of Sheridan of certificates or other instruments representing
the Transfer Securities so purchased, appropriately endorsed by the Management
Investor Offeree. If at the end of such 30-day period,
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the Company, Vestar and Sheridan have not delivered written notice of exercise
by them of their right to purchase the Transfer Securities pursuant to this
Section 3.8 or if at the end of such 60-day period, the Company, Vestar and
Sheridan have not tendered the purchase price for such shares in the manner set
forth above, the Management Investor Offeree shall be free for a period of 90
days from the end of such 30- or 60-day period, as applicable, to Transfer not
less than all of the Transfer Securities to the Offeror on the terms and
conditions set forth in the Transfer Notice (including the execution and
delivery of any written agreement in the form included in the Transfer Offer).
Such Offeror shall agree in a writing in form and substance reasonably
satisfactory to the Company to become a party hereto and be bound to the same
extent as the Management Investor Offeree by the provisions hereof. Promptly
after such sale, the Management Investor Offeree shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such sale and of the terms thereof as may reasonably be
requested by the Company. If for any reason any Management Investor Offeree does
not Transfer Transfer Securities to the Offeror on the terms and conditions set
forth in the Transfer Notice, or if any Management Investor Offeree wishes to
sell the Transfer Securities on terms other than those set forth in the Transfer
Notice, the provisions of this Section 3.8 shall again be applicable to the
Transfer Securities.
(b) The closing of the purchase of the Transfer Securities by the
Company, Sheridan, Vestar or any of their designated Affiliates, as appropriate,
upon exercise of its right of first refusal pursuant to Section 3.8(a) shall
take place at the principal office of Sheridan on a date specified by the
Company, Sheridan, Vestar or any of their designated Affiliates, as applicable,
no later than the last day of the 60-day period after the giving of the Transfer
Notice.
(c) Notwithstanding anything in this Section 3.8 to the contrary,
(i) neither Vestar nor any of its designated Affiliates may exercise a right of
first refusal under this Section 3.8 unless Vestar has received a written notice
from the Company indicating the Company's intention not to exercise such right
of first refusal (a "No ROFR Notice") and (ii) neither Sheridan nor any of its
designated Affiliates may exercise a right of first refusal under this Section
3.8 unless Sheridan has received a No ROFR Notice from Vestar.
3.9 Participation Right. (a) Except as otherwise set forth in
Section 3.9(b) hereof, the Company shall not issue (an "Issuance") to Vestar or
any of its Affiliates:
(i) additional shares of Common Stock or Common Stock Equivalents or
capital stock of the Company other than Common Stock and Common Stock
Equivalents ("Other Capital Stock"); or
(ii) any warrants, rights, calls, options or other securities
exchangeable for or exercisable or convertible into Other Capital Stock or
any other security other than Common Stock, Common Stock Equivalents or
Other Capital Stock entitled to participate in the Company's profits
(collectively, "Other Capital Stock Equivalents");
unless, prior to such Issuance, the Company notifies each Management Investor in
writing of the proposed Issuance and grants to such notified party or, at the
election of such notified party, one of its Affiliates the right (the "Right")
to subscribe for and purchase such additional shares of Common Stock or Other
Capital Stock or such additional shares or units of
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Common Stock Equivalents or Other Capital Stock Equivalents (collectively,
"Equity Interests") so issued at the same price and upon the same terms and
conditions (including, in the event such Equity Interests are issued as a unit
together with other securities, the purchase of such other securities) as issued
in the Issuance such that:
(A) in the case of an Issuance in which shares of Common Stock or
Common Stock Equivalents are to be issued, immediately after giving effect
to the Issuance and exercise of the Right (including, for purposes of this
calculation, the issuance of shares of Common Stock upon conversion,
exchange or exercise of any Common Stock Equivalent issued in the Issuance
or subject to the Right), the shares of Common Stock beneficially owned by
the notified party and its Affiliates on a fully diluted basis (rounded to
the nearest whole share) shall represent the same percentage of the
aggregate number of shares of Common Stock outstanding on a fully diluted
basis as was beneficially owned by such notified party and its Affiliates
and Vestar and its Affiliates, respectively, immediately prior to the
Issuance; provided, that for purposes of the calculations required by this
Section 3.9(a)(A) notified parties and their Affiliates shall not be
deemed to beneficially own any Shares underlying unexercised Options
unless such Options are vested and exercisable as of the date of the
Issuance; and
(B) in the case of an Issuance in which shares of Other Capital
Stock or Other Capital Stock Equivalents are to be issued, the notified
party and its Affiliates shall have the Right to acquire a percentage of
the Other Capital Stock or Other Capital Stock Equivalents to be issued in
the Issuance equal to the percentage of shares of Common Stock on a fully
diluted basis that was beneficially owned by such notified party and its
Affiliates and Vestar and its Affiliates, respectively, immediately prior
to the Issuance; provided, that for purposes of the calculations required
by this Section 3.9(a)(B) notified parties and their Affiliates shall not
be deemed to beneficially own any Shares underlying unexercised Options
unless such Options are vested and exercisable as of the date of the
Issuance.
(b) The Right may be exercised by the notified party at any time by
written notice to the Company received by the Company within 20 days after the
date on which such notified party receives notice from the Company of the
proposed Issuance, and the closing of the purchase and sale pursuant to the
exercise of the Right shall occur at least 15 days (but not later than 180 days)
after the Company receives notice of the exercise of the Right and prior to or
concurrently with the closing of the Issuance. Notwithstanding the foregoing
provisions of this Section 3.9, the Right shall not apply to (i) any Issuance of
Equity Interests pro rata to all holders of Common Stock and Other Capital
Stock, (ii) any Issuance upon the conversion, exercise or exchange of any Common
Stock Equivalent or any Other Capital Stock Equivalent outstanding on the
Closing Date pursuant to the terms thereof, (iii) any Issuance to a Management
Investor or any other employee of the Company pursuant to a management stock
subscription agreement or stock option or other employee benefit plan of the
Company or one of its Subsidiaries, (iv) any Issuance to a member of the Board
of Directors of the Company or a Subsidiary of the Company designated by Vestar
and its Permitted Transferees who is not a director, officer, general partner or
employee of Vestar or Vestar Capital Partners III, L.P. for services rendered as
such to the
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Board of Directors of the Company or a Subsidiary of the Company, (v) any
Issuance pursuant to a bona fide underwritten public offering pursuant to an
effective registration statement under the Securities Act or (vi) any Issuance
of Mezzanine Securities.
3.10 Partial Transfers Following a Qualified Public Offering. Each
Senior Management Investor may, during the one year period commencing on the
second anniversary of the first Qualified Public Offering and during each one
year period commencing on each succeeding anniversary of such Qualified Public
Offering thereafter (each such anniversary being referred to as a "Measurement
Date"), Transfer up to 5% of the shares of Vested Purchased Shares and Option
Shares beneficially owned by such Senior Management Investor on the applicable
Measurement Date, subject to Section 3.1(a) hereof; provided, however, that this
provision shall not permit a Senior Management Investor who has already
Transferred (pursuant to any provision of this Agreement which permits Transfers
by Senior Management Investors) the cumulative number of shares of Common Stock
he or she otherwise would be entitled to Transfer pursuant to this Section 3.10
to Transfer any additional shares of Common Stock.
3.11 Partial Transfers to Cover Option-Related Tax Payments.
If, at any time prior to the Lapse Date, a Management Investor's
employment with the Company and its Subsidiaries is terminated by the applicable
employer without Cause or by the Management Investor with Good Reason, and
thereafter such Management Investor exercises Options which would otherwise
expire unless so exercised, such Management Investor may Transfer Securities;
provided, that the aggregate purchase price for the Securities being Transferred
shall not exceed the total amount of taxes which such Management Investor's tax
consultant has reasonably advised will be due and owing in respect of such tax
year by such Management Investor as a result of such Management Investor
exercising such Options; and provided, further, that such Transfer shall be
subject to the right of first refusal provisions of Section 3.8.
3.12 Transfers to Other Management Investors.
If, at any time prior to the Lapse Date, a Management Investor's
employment with the Company and its Subsidiaries is terminated by the applicable
employer without Cause or by such Management Investor with Good Reason, then at
any time after the conclusion of the Second Call Period, such Management
Investor may Transfer all or any portion of the Securities beneficially owned by
him to one or more of the other Management Investors; provided, however, that if
the proposed purchase price for such Securities which is offered to the other
Management Investors is less than the relevant purchase price under Section
3.13(c), such proposed Transfer hereunder by such Management Investor shall be
subject to the right of first refusal provisions of Section 3.8.
3.13 Call Right. (a) If, at any time prior to the Lapse Date, a
Management Investor's employment with the Company and its Subsidiaries is
terminated by the applicable employer for Cause, then within 180 days of the
employment termination date, and subject to Section 3.13(e), the Company,
Vestar, Sheridan or any of their designated Affiliates shall have the option to
purchase all or any portion of the Purchased Shares and Option Shares held by
such
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Management Investor and such Management Investor's Permitted Transferees by
providing written notice of the relevant election (including the number of
Securities to be purchased) to the applicable Management Investor and Permitted
Transferees (a "Call Notice"). The purchase price per share for such Securities
will be the lower of Cost and Fair Market Value on the date of termination of
employment.
(b) If, at any time prior to the Lapse Date, a Management Investor's
employment with the Company and its Subsidiaries is terminated due to the death
or Disability of such Management Investor, then within 180 days of the
employment termination date (and, with respect to any Option Shares, within 180
days after the date of the last exercise of any Options, if later), and subject
to Section 3.13(e), the Company, Vestar, Sheridan or any of their designated
Affiliates shall have the option to purchase all or any portion of the Purchased
Shares and Option Shares held by such Management Investor and such Management
Investor's Permitted Transferees by providing a Call Notice to the applicable
Management Investor and Permitted Transferees. The purchase price per share for
such Securities will be the greater of Cost and Fair Market Value on the date of
termination of employment.
(c) If, at any time prior to the Lapse Date, a Management Investor's
employment with the Company and its Subsidiaries is terminated by the applicable
employer without Cause or by such Management Investor with Good Reason, then
within the later of (1) 180 days of the employment termination date (and, with
respect to any Option Shares, within 180 days after the date of the last
exercise of any Options, if later) or (2) ten days after the applicable
Management Investor has rescinded his election to sell all or a portion of his
Purchased Shares which were to be paid for with a Junior Subordinated Note in
connection with the put right set forth in Section 3.14, and subject to Section
3.13(e), the Company, Vestar, Sheridan or any of their designated Affiliates
shall have the option to purchase all or any portion of the Purchased Shares and
Option Shares held by such Management Investor and such Management Investor's
Permitted Transferees by providing a Call Notice to the applicable Management
Investor and Permitted Transferees. The purchase price per share for (A) the
Applicable Percentage of the Purchased Shares and for all Option Shares will be
the greater of (x) Cost or (y) Fair Market Value on the date of termination of
employment and (B) the remaining portion of such Purchased Shares, if any, will
be Cost.
(d) If, at any time prior to the Lapse Date, a Management Investor's
employment with the Company and its Subsidiaries is voluntarily terminated by
such Management Investor without Good Reason, then within 180 days of the
employment termination date (and, with respect to any Option Shares, within 180
days after the date of the last exercise of any Options, if later), and subject
to Section 3.13(e), the Company, Vestar, Sheridan or any of their designated
Affiliates shall have the option to purchase all or any portion of the Purchased
Shares and Option Shares held by such Management Investor and such Management
Investor's Permitted Transferees by providing a Call Notice to the applicable
Management Investor and Permitted Transferees. The purchase price per share for
the Applicable Percentage of the Purchased Shares and for all Option Shares will
be Fair Market Value on the date of termination of employment and the purchase
price for the remaining portion of the Purchased Shares, if any, will be the
lower of (x) Cost or (y) Fair Market Value on the date of termination of
employment; provided that if such voluntary termination without Good Reason
occurs prior to the second anniversary of the Closing
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Date, the Purchase Price per share for all Option Shares will be the lower of
(x) Cost or (y) Fair Market Value on the date of termination of employment.
(e) Notwithstanding anything in this Section 3.13 to the contrary
(i) neither Vestar nor any of its designated Affiliates may exercise a call
right under this Section 3.13 unless Vestar has received written notice from the
Company indicating the Company's intention not to exercise such call right (a
"No Call Notice") and (ii) neither Sheridan nor any of its designated Affiliates
may exercise a call right under this Section 3.13 unless Sheridan has received a
No Call Notice from Vestar.
(f) In the event that pursuant to Section 3.13(c), Cost exceeds Fair
Market Value on the date of the Management Investor's termination of employment
and none of the Company, Vestar or Sheridan exercises the call right with
respect to the Purchased Shares and Option Shares which it could have purchased
at Cost (the "Cost Securities") during the 180 day period commencing on such
date of termination (the "Initial Call Period"), then the Company, Vestar or
Sheridan (subject once again to the provisions of Section 3.13(e) with respect
to the Second Call Period regardless of whether No Call Notices were issued in
the Initial Call Period) will have an additional right to call the Cost
Securities during the 90-day period commencing on the eighteen-month anniversary
of the Management Investor's termination of employment (the "Second Call
Period") by providing a Call Notice to the applicable Management Investor. The
purchase price per share for such Securities pursuant to Section 3.13(c)(A) will
be the greater of (x) Fair Market Value on the date of termination of employment
and (y) Fair Market Value on the first day of the Second Call Period and the
purchase price for such Securities pursuant to Section 3.13(c)(B) will be the
lower of (x) Cost or (y) Fair Market Value on the first day of the Second Call
Period.
(g) The completion of the purchases pursuant to Sections 3.13(a),
(b), (c), (d) and (f) shall take place at the principal office of Sheridan on or
prior to the thirtieth (30th) day after the giving of the applicable Call
Notice. The repurchase price for the Securities shall be paid by delivery to the
appropriate Management Investor or Permitted Transferee of a certified bank
check or checks in the appropriate amount payable to the order of such
Management Investor or Permitted Transferee unless Sheridan is the party
exercising such call right and a Financing Default exists or, after giving
effect to such payment would exist, which prohibits such cash payment, in which
case the portion of the cash payment so prohibited shall be made, to the extent
permitted by any loan agreement, indenture or other agreement to which Sheridan
is a party, by Sheridan's delivery of a junior subordinated promissory note
(which shall be subordinated and subject in right of payment to the prior
payment of all indebtedness of Sheridan including, without limitation, any debt
outstanding under any credit agreement and any modifications, renewals,
extensions, replacements and refunding of all such indebtedness) of Sheridan (a
"Junior Subordinated Note") in a principal amount equal to the amount of the
purchase price which cannot be paid in cash, payable in five equal annual
installments commencing on the first anniversary of the issuance thereof and
bearing interest payable annually in arrears at the publicly announced prime
rate of Chase Manhattan Bank, N.A. on the date of issuance. If Sheridan pays all
or any of the purchase price for any of the Securities with a Junior
Subordinated Note, and then resells such Securities for cash, the portion of the
accrued but unpaid interest and, to the extent of any excess, the outstanding
principal amount of the Junior Subordinated Note that is equal to the amount of
such cash proceeds shall become immediately due and payable, unless and to the
extent
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that payment of such accrued interest or outstanding principal under the Junior
Subordinated Note would constitute or result in a Financing Default. If at any
time after the issuance by Sheridan of a Junior Subordinated Note, the payment
of all or any portion of the amounts outstanding under such Junior Subordinated
Note can be repaid by Sheridan without giving rise to a Financing Default (a
"Permitted Payment"), Sheridan shall, as promptly as practicable but not later
than thirty days after such payment becomes permissible, pay the Permitted
Payment (accrued interest first and then principal) in cash to the applicable
Management Investor or Permitted Transferee by delivery of a certified bank
check to the order of such Management Investor or Permitted Transferee. If
Sheridan cannot pay the purchase price for any Securities subject to a Call
Notice in cash or a Junior Subordinated Note due to any circumstance described
in this subparagraph 9(g), Sheridan shall not be permitted to exercise the
applicable call right.
3.14 Put Right. (a) If, at any time prior to the Lapse Date, a
Management Investor's employment with the Company and its Subsidiaries is
terminated due to the death or Disability of such Management Investor, then
within 180 days of the employment termination date such Management Investor and
the members of the Family Group of such Management Investor shall have the
option to sell to Sheridan, and Sheridan shall be obligated to purchase, on one
occasion from such Management Investor and the members of the Family Group of
such Management Investor, all or any portion of the Purchased Shares held by
such Management Investor and the members of the Family Group of such Management
Investor by providing written notice of his or their election (including the
number of Securities to be sold) to Sheridan (a "Put Notice"). The purchase
price per share for such Securities will be Fair Market Value on the date of
termination of employment.
(b) If, at any time prior to the Lapse Date, a Senior Management
Investor's employment with the Company and its Subsidiaries is terminated by the
applicable employer without Cause or by such Senior Management Investor with
Good Reason, then within 180 days of the employment termination date such Senior
Management Investor shall have the option to sell to Sheridan, and Sheridan
shall be obligated to purchase, on one occasion from such Senior Management
Investor a number of Purchased Shares held by such Senior Management Investor
the aggregate purchase price for which under this Section 3.14(b) is not in
excess of the aggregate purchase price paid by such Senior Management Investor
on the Closing Date for all Securities purchased by such Senior Management
Investor on the Closing Date. Such Senior Management Investor shall exercise
such put right by providing a Put Notice to Sheridan. The purchase price per
share for (A) the Applicable Percentage of such Purchased Shares will be Fair
Market Value on the date of termination of employment and (B) the remaining
portion of such Purchased Shares, if any, will be the lower of Cost and Fair
Market Value on the date of termination of employment.
(c) The completion of the purchase pursuant to Section 3.14 (a)
shall take place at the principal office of Sheridan on or prior to the sixtieth
day after the giving of the Put Notice. The purchase price for the Purchased
Shares included in the Put Notice shall be paid by delivery to the appropriate
Management Investor or the members of his Family Group, as applicable, of a
certified bank check or checks in the appropriate amount payable to the order of
such Management Investor or the members of his Family Group, as applicable,
unless a Financing Default exists or, after giving effect to such payment would
exist, which prohibits such cash
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payment, in which case the portion of the cash payment so prohibited shall be
made, to the extent permitted by any loan agreement, indenture or other
agreement to which Sheridan is a party, by Sheridan's delivery of a Junior
Subordinated Note in a principal amount equal to the amount of the purchase
price which cannot be paid in cash, payable in five equal annual installments
commencing on the first anniversary of the issuance thereof and bearing interest
payable annually in arrears at the publicly announced prime rate of Chase
Manhattan Bank, N.A. on the date of issuance. If Sheridan intends to pay all or
any portion of the purchase price with a Junior Subordinated Note, Sheridan
shall give the notice of the principal amount of such note at least 15 days
prior to such purchase, and the relevant Management Investor shall have ten days
thereafter to rescind his election to sell all or a portion of his Purchased
Shares to be paid for with such note. If Sheridan pays all or any portion of the
purchase price for any Purchased Shares with a Junior Subordinated Note, and
then resells such Purchased Shares for cash, the portion of the accrued but
unpaid interest and, to the extent of any excess, the outstanding principal
amount of the Junior Subordinated Note that is equal to the amount of such cash
proceeds shall become immediately due and payable, unless and to the extent that
payment of such accrued interest or outstanding principal under the Junior
Subordinated Note would constitute or result in a Financing Default. If at any
time after the issuance by Sheridan of a Junior Subordinated Note, a Permitted
Payment can be made, Sheridan shall, as promptly as practicable but not later
than thirty days after such payment becomes permissible, pay the Permitted
Payment in cash to the applicable Management Investor or the members of his
Family Group, as applicable, by delivery of a certified bank check to the order
of such Management Investor or the members of his Family Group, as applicable.
(d) The completion of the purchase pursuant to Sections 3.14 (b)
shall take place at the principal office of Sheridan on or prior to the sixtieth
day after the giving of the Put Notice, at which time at least fifty percent of
the purchase price shall be paid. If Sheridan elects to pay less than all of the
purchase price initially, the remaining portion of the purchase price shall be
paid in one payment on or prior to the first anniversary of the giving of the
Put Notice. The purchase price for the Purchased Shares included in the Put
Notice shall be paid by delivery to the appropriate Senior Management Investor
of a certified bank check or checks in the appropriate amount payable to the
order of such Senior Management Investor unless a Financing Default exists or,
after giving effect to such payment would exist, which prohibits such cash
payment, in which case the portion of the cash payment so prohibited shall be
made, to the extent permitted by any loan agreement, indenture or other
agreement to which Sheridan is a party, by Sheridan's delivery of a Junior
Subordinated Note in a principal amount equal to the amount of the purchase
price which cannot be paid in cash, payable in five equal annual installments
commencing on the first anniversary of the issuance thereof and bearing interest
payable annually in arrears at the publicly announced prime rate of Chase
Manhattan Bank, N.A. on the date of issuance. If Sheridan intends to pay all or
any portion of the initial payment of the purchase price with a Junior
Subordinated Note, Sheridan shall give the Senior Management Investor notice of
the principal amount of such note at least 15 days prior to such purchase, and
the relevant Senior Management Investor shall have ten days thereafter to
rescind his election to sell all or a portion of his Purchased Shares to be paid
for with such note. If Sheridan pays all or any portion of the purchase price
for any Purchased Shares with a Junior Subordinated Note, and then resells such
Purchased Shares for cash, the portion of the accrued but unpaid interest and,
to the extent of any excess, the outstanding principal amount of the Junior
Subordinated Note that is equal to the
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amount of such cash proceeds shall become immediately due and payable, unless
and to the extent that payment of such accrued interest or outstanding principal
under the Junior Subordinated Note would constitute or result in a Financing
Default. If at any time after the issuance by Sheridan of a Junior Subordinated
Note, a Permitted Payment can be made, Sheridan shall, as promptly as
practicable but not later than thirty days after such payment becomes
permissible, pay the Permitted Payment (accrued interest first and then
principal) in cash to the applicable Senior Management Investor by delivery of a
certified bank check to the order of such Senior Management Investor.
SECTION 4. REGISTRATION RIGHTS
4.1 Demand Registration.
(a) Common Stock Request. Upon the written request (a "Request") of
Vestar or its designated Permitted Transferees that the Company effect the
registration under the Securities Act of all or part of the shares of Common
Stock owned or to be acquired upon conversion, exercise or exchange of Common
Stock Equivalents by Vestar and/or its Permitted Transferees (a "Requesting
Stockholder"), the Company will use its best efforts to effect the registration
under the Securities Act of such shares.
(b) Registration Statement Form. Registrations under this Section
4.1 shall be on such appropriate registration form of the SEC as shall (i) be
selected by the Company and (ii) permit the disposition of the Common Stock
being registered in accordance with the intended method or methods of
disposition specified in the request for such registration. The Company agrees
to include in any such registration statement all information which, in the
opinion of counsel to the underwriters, the Requesting Stockholder and the
Company, is required to be included.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 4.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, or
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the SEC or other
Governmental Authority for any reason not attributable to the Requesting
Stockholder or any of its Affiliates and has not thereafter become effective.
(d) Limitations on Registration on Request. Notwithstanding anything
in this Section 4.1 to the contrary, in no event will (i) the Company be
required to effect more than one registration pursuant to Section 4.1(a) within
any 180 day period or (ii) the Requesting Stockholder be entitled to more than
five registrations in the aggregate pursuant to Section 4.1(a); unless in the
case of clause (d)(ii) above such Requesting Stockholder agrees to pay all of
the costs and expenses of each such additional registration (unless either (x) a
registration so requested is not deemed to have been effected pursuant to
Section 4.1(c) for a reason not attributable to the Requesting Stockholder or
any of its Affiliates or (y) the number of shares of Common Stock sought to be
included by such Requesting Stockholder in such registration is reduced by more
than 25% pursuant to the provisions of Section 4.2(b)).
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4.2 Incidental Registration.
(a) Right to Include Common Stock and Common Stock Equivalents. If
the Company at any time proposes to register any shares of Common Stock (or
Common Stock Equivalents, including any registration of Common Stock Equivalents
pursuant to the exercise of rights under Section 4.2(b)) under the Securities
Act (except registrations on such form(s) solely for registration of Common
Stock or Common Stock Equivalents in connection with any employee benefit plan
or dividend reinvestment plan or a merger or consolidation), including
registrations pursuant to Section 4.1(a), whether or not for sale for its own
account, it will each such time as soon as practicable give written notice of
its intention to do so to all the Stockholders. Upon the written request (which
request shall specify the total number of shares of Common Stock or Common Stock
Equivalents intended to be disposed of by such Stockholder) of any Stockholder
made within 30 days after the receipt of any such notice (15 days if the Company
gives telephonic notice with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use all reasonable efforts to effect the registration under the Securities Act
of all Common Stock held or to be acquired upon conversion, exercise or exchange
of Common Stock Equivalents (or, if Common Stock Equivalents are proposed to be
registered by the Company, Common Stock Equivalents) by the Stockholders which
the Company has been so requested to register for sale in the manner initially
proposed by the Company; provided that the Company shall not be obliged to
register any Common Stock Equivalents which are not of the same class, series
and form as the Common Stock Equivalents proposed to be registered by the
Company. If the Company thereafter determines for any reason not to register or
to delay registration of the Common Stock or Common Stock Equivalents (provided,
however, that in the case of any registration pursuant to Section 4.1(a), such
determination shall not violate any of the Company's obligations under Section
4.1 or any other provision of this Agreement), the Company may, at its election,
give written notice of such determination to the Stockholders and (A) in the
case of a determination not to register, shall be relieved of the obligation to
register such Common Stock or Common Stock Equivalents in connection with such
registration (without prejudice, however, to any right the Requesting
Stockholder may have to request that such registration be effected as a
registration under Section 4.1(a)) and (B) in the case of a determination to
delay registering, shall be permitted to delay registering any Common Stock or
Common Stock Equivalents of a Stockholder for the same period as the delay in
registration of such other securities. No registration effected under this
Section 4.2(a) shall relieve the Company of any obligation to effect a
registration upon a Common Stock Request under Section 4.1(a).
(b) Priority in Incidental Registration. In a registration pursuant
to this Section 4.2, if the managing underwriter of such underwritten offering
shall inform the Company and the relevant Stockholders by letter of its belief
that the number of shares of Common Stock or Common Stock Equivalents, as the
case may be, to be included in such registration would adversely affect its
ability to effect such offering, then the Company will be required to include in
such registration only that number of shares of Common Stock or Common Stock
Equivalents which it is so advised should be included in such offering. Shares
of Common Stock or Common Stock Equivalents proposed by the Company to be
registered for issuance by the Company shall have the first priority in a
registration pursuant to Section 4.2(a) and all other shares of Common
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Stock or Common Stock Equivalents to be registered (whether or not requested to
be registered pursuant to Section 4.1(a) or 4.2(a) or otherwise) shall be given
second priority without preference among the relevant holders. If less than all
of the Stockholder's shares of Common Stock or Common Stock Equivalents are to
be registered, each such Stockholder's shares of Common Stock or Common Stock
Equivalents shall be included in the registration pro rata based on the total
number of shares of Common Stock or Common Stock Equivalents sought to be
registered by each Stockholder (as opposed to the Company).
(c) Custody Agreement and Power of Attorney. Upon delivering a
request under this Section 4.2, Management Investors and their Permitted
Transferees will, if requested by the Company, execute and deliver a custody
agreement and power of attorney in form and substance reasonably satisfactory to
the Company and one of the director designees referred to in Section 2.1(a)(i)
with respect to such Stockholder's shares of Common Stock or Common Stock
Equivalents to be registered pursuant to this Section 4.2 (a "Custody Agreement
and Power of Attorney"). The Custody Agreement and Power of Attorney will
provide, among other things, that the Stockholder will deliver to and deposit in
custody with the custodian and attorney-in-fact named therein (who shall be
reasonably satisfactory to one of the director designees referred to in Section
2.1(a)(i)) a certificate or certificates representing such shares of Common
Stock or Common Stock Equivalents (duly endorsed in blank by the registered
owner or owners thereof or accompanied by duly executed stock powers in blank)
and irrevocably appoint said custodian and attorney-in-fact as such
Stockholder's agent and attorney-in-fact with full power and authority to act
under the Custody Agreement and Power of Attorney on such Stockholder's behalf
with respect to the matters specified therein. Such Stockholder also agrees to
execute such other agreements as the Company may reasonably request to further
evidence the provisions of this Section 4.2.
4.3 Registration Procedures. In connection with the Company's
obligations pursuant to Sections 4.1 and 4.2 hereof, the Company will use all
reasonable efforts to effect such registration and the Company will promptly:
(a) prepare and file with the SEC as soon as practicable after
request for registration hereunder the requisite registration statement to
effect such registration and use all reasonable efforts to cause such
registration statement to become effective and to remain continuously effective
until the earlier to occur of (i) 180 days following the date on which such
registration statement is declared effective or (ii) the termination of the
offering being made thereunder;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
shares of Common Stock or Common Stock Equivalents, as the case may be, covered
by such registration statement until such Common Stock or Common Stock
Equivalents have been sold or such lesser period of time as the Company, any
seller of such Common Stock or Common Stock Equivalents or any underwriter is
required under the Securities Act to deliver a prospectus in accordance with the
intended methods of disposition by the sellers
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of such Common Stock or Common Stock Equivalents set forth in such registration
statement or supplement to such prospectus;
(c) furnish to each Stockholder which owns shares of Common Stock or
Common Stock Equivalents, as the case may be, covered by such registration
statement (the "Selling Stockholders") and the managing underwriter, if any, at
least one executed original of the registration statement and such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, as may reasonably be requested by
such Selling Stockholder;
(d) use all reasonable efforts (i) to register or qualify all shares
of Common Stock or Common Stock Equivalents covered by such registration
statement under the securities or "blue sky" laws of such jurisdictions where an
exemption is not available as the Selling Stockholders shall reasonably request,
(ii) to keep such registration or qualification in effect for so long as such
registration statement remains in effect and (iii) to take any other action
which may be reasonably necessary or advisable to enable the Selling
Stockholders to consummate the disposition in such jurisdictions of such Common
Stock or Common Stock Equivalents; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified, subject itself to taxation in any such jurisdiction or take
any action which would subject it to general service of process in any such
jurisdiction;
(e) notify the Selling Stockholders and the managing underwriter, if
any, promptly, and confirm such advice in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to a registration statement or related prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the registered
securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event or information
becoming known which requires the making of any changes in a registration
statement or related prospectus so that such documents will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (vi) of the Company's reasonable determination that a post-effective
amendment to a registration statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification of any of the registered securities for
sale in any jurisdiction, at the earliest possible moment;
(g) upon the occurrence of any event contemplated by clause (e)(v)
above, prepare a supplement or post-effective amendment to the applicable
registration statement or related prospectus or any document incorporated
therein by reference or file any other required document
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so that, as thereafter delivered to the purchasers of the securities being sold
thereunder, such 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;
(h) use its best efforts to furnish to the Selling Stockholders a
signed counterpart, addressed to the Selling Stockholders and the underwriters,
if any, of (A) an opinion of counsel for the Company, and (B) a "comfort"
letter, signed by the independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
registration statement, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and, in the
case of the accountant's letter, with respect to events subsequent to the date
of such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities (and dated the dates such opinions and comfort
letters are customarily dated) and, in the case of the accountant's letter, such
other financial matters, and in the case of the legal opinion, such other legal
matters, as the Selling Stockholders or the underwriters may reasonably request;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to the Selling Stockholders
an earnings statement satisfying the provisions of Section 10(a)(i) of the
Securities Act and Rule 158 promulgated thereunder, no later than 90 days after
the end of any 12-month period beginning after the effective date of a
registration statement pursuant to which shares of Common Stock or Common Stock
Equivalents are sold, which statement shall cover such 12-month period;
(j) cooperate with the Selling Stockholders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing shares of Common Stock or Common Stock Equivalents to
be sold; and enable such shares of Common Stock or Common Stock Equivalents to
be in such denominations and registered in such names as the Selling
Stockholders or the managing underwriters, if any, may request at least two
Business Days prior to any sale of shares of Common Stock or Common Stock
Equivalents to the underwriters;
(k) use its best efforts to cause the shares of Common Stock or
Common Stock Equivalents, as the case may be, covered by the applicable
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the Selling
Stockholder(s) or the underwriters, if any, to consummate the disposition of
such shares of Common Stock or Common Stock Equivalents;
(l) cause all shares or units of Common Stock or Common Stock
Equivalents, as the case may be, covered by the registration statement to be
listed on each securities exchange, if any, on which securities of such class,
series and form issued by the Company, if any, are then listed if requested by
the managing underwriters, if any, or the holders of a majority of the shares or
units of Common Stock or Common Stock Equivalents covered by the registration
statement and entitled hereunder to be so listed;
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(m) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD); and
(n) as soon as practicable prior to the filing of any document which
is to be incorporated by reference into the registration statement or the
prospectus (after initial filing of the registration statement) provide copies
of such document to counsel to the Selling Stockholders and to the managing
underwriters, if any, and make the Company's representatives available for
discussion of such document and consider in good faith making such changes in
such document prior to the filing thereof as counsel for such Selling
Stockholders or underwriters may reasonably request.
The Company may require each Selling Stockholder to furnish to the
Company such information regarding such Selling Stockholder and the distribution
of such securities as the Company may from time to time reasonably request in
writing in order to comply with the Securities Act.
The Selling Stockholders agree that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
4.3(e)(ii), (iii), (iv), (v) or (vi) hereof, they will forthwith discontinue
disposition pursuant to such registration statement of any shares of Common
Stock or Common Stock Equivalents, as the case may be, covered by such
registration statement or prospectus until their receipt of the copies of the
supplemented or amended prospectus relating to such registration statement or
prospectus or until they are advised in writing by the Company that the use of
the applicable prospectus may be resumed (and the period of such discontinuance
shall be excluded from the calculation of the period specified in clause (x) of
Section 4.3(a)) and, if so directed by the Company, will deliver to the Company
(at the Company's expense, except as otherwise provided in Section 4.1(d)) all
copies, other than permanent file copies then in their possession, of the
prospectus covering such securities in effect at the time of receipt of such
notice. The Selling Stockholders agree to furnish the Company a signed
counterpart, addressed to the Company and the underwriters, if any, of an
opinion of counsel for the Selling Stockholders covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of selling stockholder's counsel
delivered to the underwriters in underwritten public offerings of securities
(and dated the dates such opinions are customarily dated) and such other legal
matters as the Company or the underwriters may reasonably request.
4.4 Underwritten Offerings.
(a) Demand Underwritten Offerings. In any underwritten offering
pursuant to a registration requested under Section 4.1, the Company will use its
best efforts to enter into an underwriting agreement for such offering with the
underwriters selected by the Requesting Stockholder, such agreement and
underwriters to be reasonably satisfactory in form and substance to the Company,
the Requesting Stockholder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type. The Selling Stockholders who
hold shares of Common Stock to be
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distributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
them and that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to their
obligations. The Company may require that any or all of the representations and
warranties by, and the other agreements on the part of the Selling Stockholders
to and for the benefit of such underwriters shall also be made to and for the
benefit of the Company with due regard to the amount of Securities being sold by
such Selling Stockholder and the nature of such representations, warranties and
agreements and the underwriting.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any shares of its Common Stock or Common Stock Equivalents
under the Securities Act as contemplated by Section 4.2 and such Securities are
to be distributed by or through one or more underwriters, the Company and the
Selling Stockholders who hold shares of Common Stock or Common Stock Equivalents
to be distributed by such underwriters in accordance with Section 4.2 hereof
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of them and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to their obligations. The Company may, at its option, require that any
or all of the representations and warranties by, and the other agreements on the
part of the Selling Stockholders to and for the benefit of such underwriters
shall also be made to and for the benefit of the Company with due regard to the
amount of Securities being sold by such Selling Stockholder and the nature of
such representations, warranties and agreements and the underwriting.
4.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Selling Stockholders, the
underwriters and their respective counsels and accountants a reasonable
opportunity (but such Persons shall not have the obligation) to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the SEC, and, to the extent practicable, each amendment thereof or
supplement thereto, and, subject to the execution and delivery of a customary
confidentiality agreement, will give each of them such access to its books and
records (to the extent customarily given to the underwriters of the Company's
securities), and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary to conduct a reasonable investigation
within the meaning of the Securities Act.
4.6 Limitations, Conditions and Qualifications to Obligations under
Registration Covenants. The obligations of the Company to use its reasonable
efforts to cause shares of Common Stock and Common Stock Equivalents to be
registered under the Securities Act are subject to each of the following
limitations, conditions and qualifications:
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(a) The Company shall be entitled to postpone for a reasonable
period of time the filing or effectiveness of, or suspend the rights of Selling
Stockholders to make sales pursuant to, any registration statement otherwise
required to be prepared, filed and made and kept effective by it hereunder (but
the duration of such postponement or suspension may not exceed the earlier to
occur of (i) 15 days after the cessation of the circumstances described in
clauses (A) and (B) below or (ii) 120 days after the date of the determination
of the Board of Directors of the Company referred to below, and the duration of
such postponement or suspension shall be excluded from the calculation of the
period specified in clause (i) of Section 4.3(a)) if the Board of Directors of
the Company determines in good faith that (A) there is a material undisclosed
development in the business or affairs of the Company (including any pending or
proposed financing, recapitalization, acquisition or disposition), the
disclosure of which at such time could be adverse to the Company's interests or
(B) the Company has filed a registration statement with the SEC, such
registration statement has not yet been declared effective, the Company is using
its reasonable best efforts to have such registration statement declared
effective, and the underwriters with respect to such registration advise that
such registration would be adversely affected. If the Company shall so delay the
filing of a registration statement, it shall, as promptly as possible, notify
the Selling Stockholders of such determination, and the Selling Stockholders
shall have the right (x) in the case of a postponement of the filing or
effectiveness of a registration statement, to withdraw the request for
registration by giving written notice to the Company within 10 days after
receipt of the Company's notice or (y) in the case of a suspension of the right
to make sales, to receive an extension of the registration period equal to the
number of days of the suspension.
(b) The Company shall not be required hereby to include shares of
Common Stock or Common Stock Equivalents in a registration statement if, in the
written opinion (to be issued to, and relied upon by, the Stockholders seeking
inclusion) of outside counsel to the Company of recognized standing in
securities law matters, the beneficial owners of such Common Stock or Common
Stock Equivalents seeking registration would be free to sell all of such shares
of Common Stock or Common Stock Equivalents within the current calendar quarter
without registration under Rule 144 under the Securities Act.
(c) The Company's obligations shall be subject to the obligations of
the Selling Stockholders, which the Selling Stockholders acknowledge, to furnish
all information and materials and to take any and all actions as may be required
under applicable federal and state securities laws and regulations to permit the
Company to comply with all applicable requirements of the SEC and to obtain any
acceleration of the effective date of such registration statement.
(d) The Company shall not be obligated to cause any special audit to
be undertaken in connection with any registration pursuant hereto unless such
audit is requested by the underwriters with respect to such registration.
4.7 Expenses. The Company and Sheridan jointly and severally agree
to pay all reasonable out-of-pocket costs and expenses incurred in connection
with each registration of Common Stock or Common Stock Equivalents pursuant to
this Agreement, including, without limitation, the reasonable fees and
disbursements of a single firm of outside counsel retained by Selling
Stockholders which beneficially own a majority of the total number of shares or
units of Common Stock or Common Stock Equivalents being registered by Selling
Stockholders (the
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"Majority Selling Stockholders"), and any and all filing fees payable to the
SEC, fees with respect to filings required to be made with stock exchanges, the
NASDAQ and the NASD, fees and expenses of compliance with state securities or
blue sky laws (including reasonable fees and disbursements of a single firm of
outside counsel for the underwriters or the Majority Selling Stockholders in
connection with blue sky qualifications of the Common Stock or Common Stock
Equivalents being registered and determination of its eligibility for investment
under the laws of such jurisdictions as the Selling Stockholders may designate),
printing expenses, fees and disbursements of counsel and accountants of the
Company, including costs associated with comfort letters, and fees and expenses
of other Persons retained by the Company, but excluding underwriters' expenses
(including discounts, commissions or fees of underwriters and expenses included
therein, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the securities being registered or
legal expenses of any Person other than the Company and the Selling
Stockholders) but including the fees and expenses of any qualified independent
underwriter required to participate in such registration pursuant to applicable
law or the requirements of the NASD. The Company and its Subsidiaries shall, in
any event in all cases, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), and the expense of securities law liability
insurance and rating agency fees, if any.
4.8 Indemnification.
(a) Indemnification by the Company. In connection with any
registration pursuant hereto in which shares of Common Stock or Common Stock
Equivalents are to be disposed of, the Company shall indemnify and hold
harmless, to the full extent permitted by law, each holder of such Common Stock
or Common Stock Equivalents to be disposed of and, when applicable, its
officers, directors, agents and employees and each Person who controls such
holder (within the meaning of the Securities Act or the Exchange Act) against
all losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, including, without
limitation, any loss, claim, damage, liability or expense resulting from the
failure to keep a prospectus current, except insofar as the same (i) are caused
by or contained in any information relating to such holder furnished in writing
to the Company by such holder expressly for use therein or (ii) are caused by
such holder's failure to deliver a copy of the current prospectus simultaneously
with or prior to such sale after the Company has furnished such holder with a
sufficient number of copies of such prospectus correcting such material
misstatement or omission or (iii) arise in respect of any offers to sell or
sales made during any period when a holder is required to discontinue sales
under Section 4.3(e) (and after such holder has received in writing the notice
contemplated by Section 4.3(e)). The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each person
who controls such Persons (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders of
such Common Stock or Common Stock Equivalents to be disposed of, and shall enter
into an indemnification agreement with such Persons containing such terms, if
requested.
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(b) Indemnification by Stockholders. In connection with each
registration statement effected pursuant hereto in which shares of Common Stock
or Common Stock Equivalents are to be disposed of, each Selling Stockholder
shall, severally but not jointly, indemnify and hold harmless, to the full
extent permitted by law, the Company, each other Selling Stockholder and their
respective directors, officers, agents and employees and each Person who
controls the Company and each other Selling Stockholder (within the meaning of
the Securities Act or the Exchange Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in such registration
statement or prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission relates to such Selling Stockholder and is
contained in any information furnished in writing by such Selling Stockholder or
any of its Affiliates to the Company expressly for inclusion in such
registration statement or prospectus. In no event shall the liability of any
Selling Stockholder hereunder be greater in amount than the dollar amount of the
proceeds actually received by such Selling Stockholder upon the sale of the
securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall give prompt notice to the indemnifying party of
any claim with respect to which it shall seek indemnification and shall permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the indemnifying party shall have agreed to pay such fees or expenses, or (ii)
the indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (iii) in the opinion of
outside counsel to such Person there may be one or more legal defenses available
to such Person which are different from or in addition to those available to the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party shall not be subject to any liability for any settlement made
without its consent (but such consent shall not be unreasonably withheld). No
indemnified party shall be required to consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a written
release in form and substance reasonably satisfactory to such indemnified party
from all liability in respect of such claim or litigation. An indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim shall
not be obligated to pay the fees and expenses of more than one firm of counsel
(and, if necessary, local counsel) for all parties indemnified by such
indemnifying party with respect to such claim, unless in the written opinion of
outside counsel to an indemnified party a conflict of interest as to the subject
matter exists between such indemnified party and another indemnified party with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of additional counsel for such indemnified party.
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(d) Contribution. If for any reason the indemnification provided for
herein is unavailable to an indemnified party or is insufficient to hold it
harmless as contemplated hereby, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that in no event shall the liability of any Selling Stockholder for
such contribution and indemnification exceed, in the aggregate, the dollar
amount of the proceeds received by such Selling Stockholder upon the sale of
securities giving rise to such indemnification and contribution obligation.
4.9 Participation in Underwritten Registrations. No Stockholder or
Permitted Transferee may participate in any underwritten registration hereunder
unless such Stockholder or Permitted Transferee (a) agrees to sell its shares of
Common Stock or Common Stock Equivalents on the basis provided in and in
compliance with any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and to comply with Rules 10b-6 and 10b-7
under the Exchange Act, and (b) completes and executes all questionnaires,
appropriate and limited powers of attorney, escrow agreements, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements; provided that all such documents shall be
consistent with the provisions hereof.
4.10 Rule 144. The Company hereby covenants that after it has filed
(and such registration statement has become effective) a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of
Common Stock, the Company will file in a timely manner all reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any Stockholder, make publicly
available other information so long as necessary to permit sales by such
Stockholder under Rule 144 under the Securities Act) and will take such further
action as any Stockholder may reasonably request to the extent required from
time to time to enable such Stockholder to sell shares of Common Stock under
Rule 144 under the Securities Act. Notwithstanding the foregoing, no Management
Investor shall Transfer shares of Common Stock under Rule 144 unless expressly
permitted to do so by the terms of this Agreement.
4.11 Holdback Agreements. (a) Each Stockholder agrees that, if any
of its shares of Common Stock or Common Stock Equivalents is included in a
registration statement filed by the Company in connection with an underwritten
public offering it shall not effect any public sale or distribution of shares of
Common Stock or Common Stock Equivalents during the 30 days prior to or the 180
day period beginning on the effective date of such registration statement
(except as part of such registration) if and to the extent reasonably requested
in writing (with reasonable prior notice) by the managing underwriter of the
underwritten public offering.
(b) The Company agrees not to effect any primary public sale or
distribution of any Common Stock or Common Stock Equivalents, as the case may
be, during the 10 days prior to and the 180 day period beginning on the
effective date of any registration statement in which
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any Stockholder is participating in connection with an underwritten public
offering of Common Stock or Common Stock Equivalents, as the case may be, if and
to the extent reasonably requested in writing (with reasonable prior notice) by
the managing underwriter of the underwritten public offering.
4.12 Mezzanine Securities. Notwithstanding anything to the contrary
herein, the Company may grant registration rights to holders of Mezzanine
Securities which are more, as or less favorable to such holders than the
registration rights of the parties hereto. To the extent that Mezzanine
Securities consist of Common Stock or Common Stock Equivalents, holders of
Mezzanine Securities may be given the right by the Company to participate in
registrations as if such holders were Stockholders, and the Company shall not be
obliged hereunder to comply with any provision of this Section 4 in respect of a
registration of Mezzanine Securities.
SECTION 5. MISCELLANEOUS
5.1 Additional Securities Subject to Agreement. Each Stockholder
agrees that any other Securities which it shall hereafter acquire by means of a
stock split, stock dividend, distribution, exercise of stock options, or
otherwise (other than Mezzanine Securities or pursuant to a Public Offering or
Section 3.2(a)(iii)) shall be subject to the provisions of this Agreement to the
same extent as if held on the date hereof.
5.2 Termination. Except as otherwise provided herein, this Agreement
shall terminate, and thereby become null and void, as to any particular
Securities, on the date on which they are sold in a Public Offering or are sold
pursuant to Rule 144 under the Securities Act (unless such Securities are
reacquired by a Stockholder).
5.3 Injunctive Relief. The Stockholders and their Permitted
Transferees acknowledge and agree that a violation of any of the terms of this
Agreement will cause the Stockholders and their Permitted Transferees
irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that each Stockholder and Permitted Transferee shall
be entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction in the
United States or any state thereof, in addition to any other remedy to which
they may be entitled at law or equity.
5.4 Other Stockholders' Agreements. None of the Stockholders shall
enter into any stockholder agreement or other arrangement of any kind with any
Person with respect to any Securities which is inconsistent with the provisions
of this Agreement or which may impair its ability to comply with this Agreement.
5.5 Amendments. This Agreement may be amended only by a written
instrument signed (a) by Vestar, so long as it or its Affiliates own Securities,
and (b) by Stockholders other than Vestar and its Affiliates which own on a
fully diluted basis Securities representing at least a majority of the voting
power represented by all Securities outstanding on a fully diluted basis and
owned by all Stockholders other than Vestar and its Affiliates.
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5.6 Successors, Assigns and Transferees. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their Permitted Transferees and their respective successors, each of
which Permitted Transferees shall agree, in a writing in form and substance
satisfactory to the Company and the owners on a fully diluted basis of
Securities representing at least a majority of the voting power represented by
all Securities outstanding on a fully diluted basis and owned by all
Stockholders, to become a party hereto and be bound to the same extent as its
transferor hereby, provided that no Stockholder may assign to any Permitted
Transferee any of its rights hereunder other than in connection with a Transfer
to such Permitted Transferee of Securities in accordance with the provisions of
this Agreement.
5.7 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or when delivered by a
recognized courier or, in the case of telecopy notice, when received, addressed
as follows to the parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto:
if to the Company, Sheridan or Vestar, to it:
c/o Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, NY 10167
Attention: James L. Elrod, Jr.
Facsimile: (212) 808-4922
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon, Esq.
Facsimile: (212) 455-2502
if to any other Stockholder, to such Stockholder at such
Stockholder's address or telecopy number set forth in the books
and records of the Company.
5.8 Integration. This Agreement and the documents referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof and thereof other than those expressly set forth herein
and therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
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5.9 Severability. If one or more of the provisions, paragraphs,
words, clauses, phrases or sentences contained herein, 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 any such
provision, paragraph, word, clause, phrase or sentence in every other respect
and of the remaining provisions, paragraphs, words, clauses, phrases or
sentences hereof shall not be in any way impaired, it being intended that all
rights, powers and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
5.10 Counterparts. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
5.11 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
except for matters directly within the purview of the General Corporation Law of
the State of Delaware (the "DGCL"), which shall be governed by the DGCL.
5.12 Jurisdiction. Any action to enforce, which arises out of or in
any way relates to, any of the provisions of this Agreement may be brought and
prosecuted in such court or courts located within the States of New York as
provided by law; and the parties consent to the jurisdiction of such court or
courts located within the States of New York and to service of process by
registered mail, return receipt requested, or by any other manner provided by
New York law.
5.13 Management Investors. Each employee or director of the Company
or any of its Subsidiaries who becomes party to a stock subscription agreement
or option agreement with any of the Company and its Subsidiaries after the date
hereof shall become a party hereto and shall be bound hereby. The Company shall
not issue any securities to an employee or director of the Company or any of its
Subsidiaries unless he or she enters into a supplementary agreement with the
Company agreeing to be bound by the terms hereof in the same manner as the other
Management Investors. Each such supplementary agreement shall become effective
upon its execution by the Company and such employee or director, and it shall
not require the signature or consent of any other party hereto. Such
supplementary agreement may modify some of the terms hereof as they effect such
employee or director; provided that the modified terms shall be no more
favorable to such employee or director than the terms set forth herein.
5.14 83(b) Election. Promptly after the Closing Date, each
Management Investor shall, with respect to all Securities beneficially owned by
such Management Investor, make a timely election under Section 83(b) of the Code
in accordance with applicable Regulations thereunder.
5.15 Management Investor Representative. Each Management Investor
hereby designates and appoints (and each Permitted Transferee of each such
Management Investor shall be deemed to have so designated and appointed)
Mitchell Eisenberg, with full power of substitution (the "Management Investor
Representative") as the representative of each such Person to perform all such
acts as are required, authorized or contemplated by this Agreement to
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be performed by any such Person and hereby acknowledges that the Management
Investor Representative shall be the only Person authorized to take any action
so required, authorized or contemplated by this Agreement by each such Person.
Each such Person further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive the
death or incapacity of such Person. Each such Person hereby authorizes (and each
Permitted Transferee shall be deemed to have authorized) the other parties
hereto to disregard any notice or other action taken by such Person pursuant to
this Agreement on any action so taken or any notice given by the Management
Investor Representative and are and will be entitled and authorized to give
notices only to the Management Investor Representative for any notice
contemplated by this Agreement to be given to any such Person. A successor to
the Management Investor Representative may be chosen by Management Investors
which own on a fully diluted basis Securities representing at least a majority
of the voting power represented by all Securities outstanding on a fully diluted
basis and owned by all Management Investors, provided that written notice
thereof is given by the successor to the Management Investor Representative to
the Company. Whenever any action or consent (but not any forbearance) is
required to be taken or given by the Management Investors, the action or consent
of the Management Investor Representative shall be considered the act or consent
of all the Management Investors, and Vestar and the Company shall be protected
in relying on such act or consent.
5.16 Covenant Not to Compete. (a) Each Management Investor who is
not a Senior Management Investor and who is not a party to a written employment
agreement with the Company or any of its Subsidiaries that contains a
non-competition provision hereby covenants and agrees that, except as provided
below, during the Term of Employment and the Non-Competition Period, the
Management Investor shall not, without the express written consent of the
Company, directly or indirectly, engage in any activity which is, or participate
or invest in or assist (whether as owner, part-owner, stockholder, partner,
director, officer, trustee, employee, agent, independent contractor or
consultant, or in any other capacity) any Competitive Enterprise, except that
the Management Investor may make passive investments in a Competitive Enterprise
the shares of which are publicly traded if such investment constitutes less than
one percent of the equity of such enterprise. Without implied limitation, the
forgoing covenant shall include hiring or attempting to hire for or on behalf of
any such Competitive Enterprise any officer or other employee of Sheridan or any
Affiliate of Sheridan, encouraging any officer, Health Care Provider or employee
to terminate his or her relationship or employment with Sheridan or any
Affiliate of Sheridan, soliciting for or on behalf of any such Competitive
Enterprise any client or customer (including any Medical Customer) of Sheridan
or any Affiliate of Sheridan, and diverting to any Person, any client or
business opportunity of Sheridan or any Affiliate of Sheridan.
(b) In furtherance and not in limitation of the foregoing
restrictions, during the Term of Employment and the Non-Competition Period, each
Management Investor who is not a Senior Management Investor and who is not a
party to a written employment agreement with the Company or any of its
Subsidiaries that contains a non-competition provision shall not devote any time
to consulting, lecturing or engaging in other self-employment or employment
activities without the prior written consent of Sheridan.
(c) This Section 5.16 shall survive the termination of this
Agreement.
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5.17 Business Opportunities. Each Management Investor who is not a
Senior Management Investor and who is not a party to a written employment
agreement with the Company or any of its Subsidiaries that contains a business
opportunities provision agrees, while he is employed by any of the Company and
its Subsidiaries, to offer or otherwise make known or available to the Company
or any Subsidiary, as directed by the Company and without additional
compensation or consideration, any business prospects, contracts or other
business opportunities that he may discover, find, develop or otherwise have
available to him in any field in which the Company or any of its Affiliates is
engaged, and further agrees that any such prospects, contracts or other business
opportunities shall be the property of the Company.
5.18 Confidentiality. (a) Each Management Investor who is not a
Senior Management Investor and who is not a party to a written employment
agreement with the Company or any of its Subsidiaries that contains a
confidentiality provision acknowledges that the Management Investor has and will
necessarily become informed of, and have access to, certain valuable and
confidential information of the Company and its Affiliates, including, without
limitation, trade secrets, technical information, plans, lists of patients,
data, records, fee schedules, computer programs, manuals, processes, methods,
intangible rights, contracts, agreements, licenses, personnel information and
the identity of health care providers (collectively, the "Confidential
Information"), and that the Confidential Information, even though it may be
contributed, developed or acquired in whole or in part by the Management
Investor, is the Company's exclusive property to be held by the Management
Investor in trust and solely for the Company's benefit. Accordingly, except as
required by law, the Management Investor shall not, at any time, either during
or subsequent to the Term of Employment, use, reveal, report, publish, copy,
transcribe, Transfer or otherwise disclose to any person, corporation or other
entity, any of the Confidential Information without the prior written consent of
the Company, except to responsible officers and employees of the Company and its
Subsidiaries and other responsible persons who are in a contractual or fiduciary
relationship with the Company or one of its Subsidiaries and except for
information which legally and legitimately is or becomes of general public
knowledge from authorized sources other than the Management Investor.
(b) Upon the termination of the Term of Employment, each Management
Investor who is not a Senior Management Investor and who is not a party to a
written employment agreement with the Company or any of its Subsidiaries that
contains a confidentiality provision shall promptly deliver to the Company all
property and possessions of the Company and its Subsidiaries, including all
drawings, manuals, letters, notes, notebooks, reports, copies, deliverable
Confidential Information and all other materials relating to the Company's and
its Subsidiaries' business which are in the Management Investor's possession or
control.
5.19 Effectiveness. This Agreement shall become effective on the
Closing Date.
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IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
VESTAR/CALVARY HOLDINGS, INC.
By: /s/ Robert L. Rosner
---------------------------------
Name: Robert L. Rosner
SHERIDAN HEALTHCARE, INC.
By: /s/ Mitchell Eisenberg
---------------------------------
Name: Mitchell Eisenberg
VESTAR/CALVARY INVESTORS, LLC
By: VESTAR CAPITAL PARTNERS III, L.P.,
By: VESTAR ASSOCIATES III, L.P.,
its General Partner
By: VESTAR ASSOCIATES CORPORATION III,
its General Partner
By: /s/ Robert L. Rosner
---------------------------------
Name: Robert L. Rosner
57
/s/ Mitchell Eisenberg
--------------------------------------
MITCHELL EISENBERG
/s/ Lewis D. Gold
--------------------------------------
LEWIS D. GOLD
/s/ Michael F. Schundler
--------------------------------------
MICHAEL F. SCHUNDLER
/s/ Jay a. Martus
--------------------------------------
JAY A. MARTUS
/s/ Gilbert L. Drozdow
--------------------------------------
GILBERT L. DROZDOW
58
SCHEDULE 1
INITIAL OTHER
MANAGEMENT INVESTORS
GILBERT L. DROZDOW
59
Exhibit B
Vestar/Calvary Holdings, Inc.
1999 Stock Option Plan
SECTION 1. Purpose. The purposes of the Vestar/Calvary Holdings, Inc. 1999
Stock Option Plan (the "Plan") are to promote the interests of Vestar/Calvary
Holdings, Inc. and its stockholders by (i) attracting and retaining exceptional
officers, key employees and outside directors of, and consultants to, the
Company and its Subsidiaries and (ii) enabling such individuals to participate
in the long-term growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following
terms shall have the meanings set forth below:
"Affiliate" shall mean any entity that, directly or indirectly, is
controlled by, controls or is under common control with, the Company.
"Award Agreement" shall mean any written agreement, contract, or
other instrument or document evidencing any Option, which may, but need
not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the earlier to occur of (x) the date
of the sale or disposition, in one or a series of related transactions, of
all or substantially all of the assets of the Company to any "person" or
"group" (as such terms are defined in Section 13(d)(3) and 14(d)(2) of the
Exchange Act), other than Vestar, or (y) the date of the sale, exchange or
other disposition by Vestar and its Affiliates, in one or a series of
transactions (including, without limitation, by way of merger,
reorganization, recapitalization, consolidation, Public Offering (as
defined in the Stockholders' Agreement), sale of capital stock or assets
of Sheridan or any other Subsidiary of the Company or similar transaction
that results in the disposition, directly or indirectly, of the equity
interests of Vestar and its Affiliates (other than the Management
Investors) in the Company) (collectively, an "Exit Transaction") of 70% or
more of the sum of (1) their equity interest in the Company immediately
following the Closing Date (as defined in the Stockholders'sAgreement)
plus (2) any additional capital contributions to, or investments in, the
Company made by any of Vestar and its Affiliates after the Closing Date
(clauses (1) and (2), collectively, the "Aggregate Investment"); provided
that, in the case of (y) either (A) the consideration received by Vestar
and its Affiliates in the Exit Transaction for 70% or more of the
Aggregate Investment is cash or securities that are distributed in kind to
the limited partners of Vestar Capital Partners III, L.P. and its
Affiliates or a combination thereof or (B) the Exit Transaction results in
(i) designees of Vestar and its Affiliates not constituting a majority of
the Board of Directors (or analogous governing body) of the Company and
(ii) Vestar and its Affiliates not beneficially owning securities of the
Company which constitute at least a majority of the voting power of all
outstanding
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securities of the Company entitled to vote generally in the election of
directors (or members of an analogous governing body) of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the compensation committee of the Board, or
such other committee of the Board as may be designated by the Board to
administer the Plan.
"Company" shall have the meaning specified in the Stockholders'
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall have the meaning specified in the
Stockholders' Agreement.
"Management Investor" shall have the meaning specified in the
Stockholders' Agreement.
"Option" shall mean a right to purchase Shares from the Company that
is granted under Section 6 of the Plan.
"Participant" shall mean any officer, key employee or outside
director of, or consultant to, the Company or its Subsidiaries eligible
for an Option under Section 5 of the Plan and selected by the Committee to
receive an Option under the Plan.
"Performance Option" shall mean an Option granted under the Plan
which becomes exercisable, or for which the period of exercisability is
accelerated, upon the satisfaction of certain performance criteria
established by the Committee and set forth in the Award Agreement
evidencing such option.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
"Plan" shall mean this Vestar/Calvary Holdings, Inc. 1999 Stock
Option Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by
the SEC under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
"Shares" shall mean (i) shares or units of Common Stock (as defined
in the Stockholders' Agreement) or (ii) as may be determined by the
Committee pursuant to Section 4(b).
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"Stockholders' Agreement" shall mean the Agreement, dated as of
March 24, 1999, among the Company and the other parties identified
therein.
"Subsidiary" shall mean any entity that, directly or indirectly,
is controlled by the Company.
"Substitute Options" shall have the meaning specified in Section
4(c).
"Time Option" shall mean an Option granted under the Plan, which is
not a Performance Option, and which becomes exercisable over time based on
a Participant's continued employment with the Company or its Subsidiaries.
"Vestar" shall mean Vestar Capital Partners III, L.P. and any of
its Affiliates.
SECTION 3. Administration. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan, any Award Agreement and applicable
law, and in addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Options to be
granted to a Participant; (iii) determine the number of Shares to be covered by,
or with respect to which payments, rights, or other matters are to be calculated
in connection with, Options; (iv) determine the terms and conditions of any
Option; (v) determine whether, to what extent, and under what circumstances
Options may be settled or exercised in cash, Shares, other securities, other
Options or other property, or canceled, forfeited, or suspended and the method
or methods by which Options may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what circumstances
cash, Shares, other securities, other Options, other property, and other amounts
payable with respect to an Option shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret,
administer, reconcile any inconsistency, correct any default and/or supply any
omission in the Plan and any instrument or agreement relating to, or Option made
under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan.
(b) Unless otherwise expressly provided in the Plan and subject to the
terms of any Award Agreement, all designations, determinations, interpretations,
and other decisions under or with respect to the Plan or any Option shall be
within the sole discretion of the Committee, may be made at any time and shall
be final, conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Option, and any
holder of Shares.
(c) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
hereunder.
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SECTION 4. Shares Available for Options.
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
the aggregate number of Shares with respect to which Options may be granted
under the Plan shall be 1,150,000; provided, however, that in no event shall the
number of Shares subject to Time Options granted under the Plan exceed 666,667.
If, after the effective date of the Plan, any Shares covered by an Option
granted under the Plan, or to which such an Option relates, are forfeited, or if
an Option has expired, terminated or been cancelled for any reason whatsoever
(other than by reason of exercise or vesting), then the Shares covered by such
Option shall again be, or shall become, Shares with respect to which Options may
be granted hereunder.
(b) Adjustments. In the event that the Committee determines that any Exit
Transaction, dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee in its
discretion to be necessary or appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it in good faith
deems equitable, adjust any or all of (i) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which Options may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Options, and (iii) the exercise price with respect to any
Option or, if deemed appropriate in connection with a Change of Control, make
provision for an immediate cash payment to the holder of an outstanding Option
in consideration for the cancellation of such Option in an amount equal to the
excess, if any, of the Fair Market Value of the Shares subject to the Options
over the aggregate exercise price of such Option.
(c) Substitute Options. Options may be granted, in the discretion of the
Committee, under the Plan in assumption of, or in substitution for, outstanding
awards previously granted by a company acquired by the Company or with which the
Company combines ("Substitute Options"). The number of Shares underlying any
Substitute Options shall be counted against the aggregate number of Shares
available for Options under the Plan.
(d) Sources of Shares Deliverable Under Options. Any Shares delivered
pursuant to an Option may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any officer, key employee or outside director of,
or consultant to, the Company or any of its Subsidiaries (including any
prospective officer or key employee) shall be eligible to be designated a
Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Options shall
be granted, the
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number of Shares to be covered by each Option, the exercise price therefor and
the conditions and limitations applicable to the exercise of the Option. None of
the Options granted under the Plan are intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
(b) Exercise Price. The Committee shall establish the exercise price at
the time each Option is granted, which exercise price shall be set forth in the
applicable Award Agreement.
(b) Exercise. Each Option shall be exercisable at such times and subject
to such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or, with the consent of the
Participant thereafter. The Committee may impose such conditions with respect to
the exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable.
(c) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the aggregate exercise price therefor is
received by the Company. Such payment shall be made in cash or by bank check or,
subject to the consent of the Committee in its sole discretion, in Shares which
have been owned by the Participant for at least six months, such Shares to be
valued at their Fair Market Value as of the date of exercise.
SECTION 7. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that any such amendment, alteration, suspension, discontinuance or termination
that would impair the rights of any Participant or any holder or beneficiary of
any Option theretofore granted shall not to that extent be effective without the
consent of the affected Participant, holder or beneficiary.
(b) Amendments to Options. The Committee may waive any conditions or
rights under, amend any terms of, or alter any Option theretofore granted,
prospectively or retroactively; provided that any such waiver, amendment or
alteration that would impair the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary. In addition, with the consent of any Participant, holder or
beneficiary, the Company may suspend, discontinue, cancel or terminate any
Option theretofore granted, prospectively or retroactively
(c) Adjustment of Options Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the performance criteria applicable to outstanding Performance Options in the
event of any extraordinary and nonrecurring events affecting the Company or its
Subsidiaries, or the financial statements of the Company or its Subsidiaries, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines in good faith that such adjustments are necessary in
order to prevent dilution or enlargement of rights under such Performance
Options.
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SECTION 8. Change of Control. In the event of a Change of Control after
the date of the adoption of this Plan, (i) any outstanding Time Options then
held by Participants, which are unexercisable or otherwise unvested, shall
automatically be deemed exercisable or otherwise vested, as the case may be, as
of immediately prior to such Change of Control and (ii) any outstanding
Performance Options, whether exercisable or not, then held by Participants,
shall continue to be governed by the terms of each such Participant's Award
Agreement.
SECTION 9. General Provisions.
(a) Nontransferability.
(i) Each Option shall be exercisable only by the Participant during the
Participant's lifetime, or, if permissible under applicable law, by the
Participant's legal guardian or representative. No Option may be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant otherwise than by will or by the laws of descent and distribution
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(ii) Notwithstanding the foregoing, the Committee may in the applicable
Award Agreement evidencing an Option granted under the Plan or at any time
thereafter in an amendment to an Award Agreement provide that Options granted
hereunder may be transferred by the Participant to whom such Option was granted
(the "Grantee") without consideration, subject to such rules as the Committee
may adopt to preserve the purposes of the Plan, to:
(A) the Grantee's spouse, children or grandchildren (including
adopted and stepchildren and grandchildren) (collectively, the "Immediate
Family");
(B) a trust solely for the benefit of the Grantee and his or her
Immediate Family; or
(C) a partnership or limited liability company whose only partners
or members are the Grantee and his or her Immediate Family members;
(each transferee described in clauses (A), (B) and (C) above is
hereinafter referred to as a "Permitted Transferee"); provided that the
Grantee gives the Committee advance written notice describing the terms
and conditions of the proposed transfer and the Committee notifies the
Grantee in writing that such a transfer would comply with the requirements
of the Plan and any applicable Award Agreement evidencing the Option.
The terms of any Option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an Award Agreement to an optionee, Grantee or
Participant shall be deemed to refer to the Permitted Transferee, except
that (a) Permitted Transferees shall not be entitled to transfer any
Options, other than by will or the laws of descent and distribution; (b)
Permitted Transferees shall not be entitled to exercise any transferred
Options unless
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there shall be in effect a registration statement on an
appropriate form covering the Shares to be acquired pursuant to the
exercise of such Option if the Committee determines that such a
registration statement or form is necessary or appropriate, (c) the
Committee or the Company shall not be required to provide any notice to a
Permitted Transferee, provided all required notices are given to the
Grantee and (d) the consequences of termination of the Grantee's
employment by, or services to, the Company or any of its Affiliates under
the terms of the Plan and the applicable Award Agreement shall continue to
be applied with respect to the Grantee, following which the Options shall
be exercisable by the Permitted Transferee only to the extent, and for the
periods, specified in the Plan and the applicable Award Agreement.
(b) No Rights to Options. No Participant or other Person shall have any
claim to be granted any Option, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Options. The terms and
conditions of Options and the Committee's determinations and interpretations
with respect thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares or other securities of
the Company delivered under the Plan pursuant to any Option or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the SEC, any stock exchange upon which such Shares or other
securities are then listed, any applicable Federal or state laws, and any
applicable written agreements between Vestar and/or the Company and the
Participants including, without limitation, the Stockholders' Agreement, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(d) Withholding.
(i) A Participant shall be required to pay to the Company or any
Affiliate and the Company shall have the right and is hereby authorized to
withhold, any applicable withholding taxes in respect of an Option, its exercise
or any payment or transfer under an Option or under the Plan and to take such
other action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such withholding taxes.
(ii) Notwithstanding any provision of this Plan to the contrary, in
connection with the transfer of an Option to a Permitted Transferee pursuant to
Section 9(a) of the Plan, the Grantee shall remain liable for any withholding
taxes required to be withheld upon the exercise of such Option by the Permitted
Transferee.
(e) Award Agreements. Each Option hereunder shall be evidenced by an Award
Agreement, which shall be delivered to the Participant and shall specify the
terms and conditions of the Option and any rules applicable thereto, including
but not limited to the effect on such Option of the death, disability or
termination of employment or service of a Participant, and the effect, if any,
of such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other
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compensation arrangements, which may, but need not, provide for the grant of
options (subject to stockholder approval if such approval is required), and such
arrangements may be either generally applicable or applicable only in specific
cases.
(g) No Right to Employment. The grant of an Option shall not be construed
as giving a Participant the right to be retained in the employ of, or in any
consulting relationship to, the Company or any Affiliate. Further, the Company
or an Affiliate may at any time dismiss a Participant from employment or
discontinue any consulting relationship, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(h) No Rights as Stockholder. Subject to the provisions of the applicable
Option, no Participant or holder or beneficiary of any Option shall have any
rights as a stockholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares.
(i) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of New York.
(j) Severability. If any provision of the Plan or any Option is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Option, or would disqualify the Plan or any Option under any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Option, such provision shall be stricken
as to such jurisdiction, Person or Option and the remainder of the Plan and any
such Option shall remain in full force and effect.
(k) Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Option if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration will violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Option shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Option granted hereunder shall be construed as an offer to
sell securities of the Company, and no such offer shall be outstanding, unless
and until the Committee in its sole discretion has determined that any such
offer, if made, would be in compliance with all applicable requirements of the
U.S. federal and any other applicable securities laws.
(l) No Trust or Fund Created. Neither the Plan nor any Option shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Option, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
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(m) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(n) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 10. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date of its
approval by the persons and/or entities who own, immediately after giving effect
to the Effective Time (as defined in the Agreement and Plan of Merger dated as
of March 24, 1999 among Vestar/Calvary Holdings, Inc., Vestar/Calvary, Inc. and
Sheridan Heathcare, Inc.), more than 75% of the voting power of all outstanding
stock of the Company, determined in a manner consistent with Section 280G(b)(5)
of the Internal Revenue Code of 1986, as amended and the proposed regulations
promulgated thereunder. If such approval is not obtained, this Plan and any
Options granted under the Plan shall be null and void and of no force and
effect.
(b) Expiration Date. No Option shall be granted under the Plan after
December 31, 2009. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Option granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Option or to waive any conditions or rights under any such
Option shall, continue after December 31, 2009.
SECTION 11. Awards Subject to Stockholders' Agreement.
Options granted under the Plan and any Shares delivered upon the exercise
or settlement of any Options granted hereunder shall be subject to the
Stockholders' Agreement. The terms and provisions of the Stockholders' Agreement
as it may be amended from time to time are hereby incorporated herein by
reference. In the event of a conflict between any term or provision contained
herein and any terms or provisions of the Stockholders' Agreement, the
applicable provisions of the Stockholders' Agreement will govern and prevail.
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Exhibit C
VESTAR/CALVARY HOLDINGS, INC. 1999 STOCK OPTION PLAN
PERFORMANCE OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the _____ day of
_____, 199_, (hereinafter called the "Date of Grant")1/, between Vestar/Calvary
Holdings, Inc., a Delaware corporation (hereinafter called the "Company"), and
_______ (hereinafter called the "Participant"):
R E C I T A L S:
WHEREAS, the Company has adopted the Vestar/Calvary Holdings, Inc. 1999
Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference
and made a part of this Agreement. Capitalized terms not otherwise defined
herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its stockholders to grant the option provided for
herein (the "Option") to the Participant pursuant to the Plan and the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. Grant of the Option. The Company hereby grants to the Participant the
right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of ______ Shares, subject
to adjustment as set forth in the Plan. The purchase price of the Shares subject
to the Option (the "Exercise Price") shall be the per share price paid by the
Company or one of its Subsidiaries for shares of common stock of Sheridan
Healthcare, Inc. ("Sheridan") in the Offer referred to in the Agreement and Plan
of Merger dated March 24 , 1999 among the Company, Sheridan and Vestar/Calvary,
Inc. The Option is intended to be a non-qualified stock option, and is not
intended to be treated as an option that complies with Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Vesting. At any time, the portion of the Option which has become vested
and exercisable as described in this Section 2 is hereinafter referred to as the
"Vested Portion."
- - ----------
(1)The Date of Grant will be the Effective Time under the Merger Agreement.
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(a) Time Vesting.
Subject to paragraphs (b), (c) and (d) of this Section 2, the Option
shall vest and become exercisable in full on the ninth anniversary of the
purchase of shares of common stock of Sheridan pursuant to the Offer (the date
of such purchase being the "Purchase Date").
(b) Accelerated Vesting Based Upon Performance.
(i) Subject to the Participant's continued employment with the
Company, the Option shall vest and become exercisable on an accelerated basis
with respect to up to twenty-five percent (25%) of the Shares initially covered
by the Option (such 25% being referred to as the "Scheduled Accelerated Vesting
Shares") on each of the first, second, third and fourth anniversaries of the
Purchase Date (each an "Accelerated Vesting Date") as follows:
(A) With respect to each Accelerated Vesting Date, 100% of
the Scheduled Accelerated Vesting Shares will vest if the Value of Common Equity
Per Share (as defined in Exhibit A) as of the last day of the fiscal year ending
immediately prior to the applicable Accelerated Vesting Date (such last day of
the fiscal year being referred to as the "Determination Date") equals or exceeds
the Maximum Annual Price Target (described below) for such Determination Date;
(B) With respect to each Accelerated Vesting Date, 0% of the
Scheduled Accelerated Vesting Shares will vest if the Value of Common Equity Per
Share as of the applicable Determination Date is less than or equal to the
Minimum Annual Price Target (described below) for such Determination Date; and
(C) With respect to each Accelerated Vesting Date, if the
Common Equity Per Share as of the Determination Date is less than the Maximum
Annual Price Target and greater than the Minimum Annual Price Target for such
Determination Date, then the number of Scheduled Accelerated Vesting Shares
which shall vest will equal the product of (x) 100% of the Scheduled Accelerated
Vesting Shares times (y) the Proration Fraction. The Proration Fraction shall
equal the quotient obtained by dividing (A) the excess of the Value of Common
Equity Per Share as of the Determination Date over the Minimum Annual Price
Target for such Determination Date by (B) the excess of the Maximum Annual Price
Target as of the Determination Date over the Minimum Annual Price Target for
such Determination Date.
(ii) In the event that the Option does not vest on an accelerated
basis with respect to all of the Scheduled Accelerated Vesting Shares on an
Accelerated Vesting Date solely as a result of the failure to achieve or exceed
the applicable Maximum Annual Price Target, then the number of Scheduled Vesting
Shares with respect to which the Option did not vest on an accelerated basis
(the "Missed Shares"), will be available for vesting on the next succeeding
Accelerated Vesting Date only (the "Make-Up Vesting Date") as follows: The
number of Missed Shares, if any, which will vest on an accelerated basis on the
Make-Up Vesting Date will equal the excess, if any, of (x) the number of
Scheduled Accelerated Vesting Shares which vest on an accelerated basis on the
Make-Up Vesting Date pursuant to Section 2(b)(i) above over (y) the number of
Scheduled Accelerated Vesting Shares which actually vested on an accelerated
basis on the immediately preceding Accelerated Vesting Date.
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Determination Minimum Maximum
Vesting Date Date Annual Price Target Annual Price Target
- - ------------ ---- ------------------- -------------------
1st anniversary of FY Ending
Purchase Date 12/31/99 $10.18 $10.64
2nd anniversary of FY Ending
Purchase Date 12/31/00 $12.21 $13.83
3rd anniversary of FY Ending
Purchase Date 12/31/01 $14.65 $17.98
4th anniversary of FY Ending
Purchase Date 12/31/02 $17.58 $23.37
5th anniversary of FY Ending $21.10 $30.38
Purchase Date 2/31/03
(Used for 4th
anniversary
missed shares only)
The determination of the Value of Common Equity Per Share for each fiscal
year shall be made by the Board in good faith based upon, and immediately
following receipt of, the audited financial statements for such fiscal year and
will be calculated (after giving effect to the issuance of all Time Options and
all Performance Options which have previously vested or which will vest in such
fiscal year) pursuant to the methodology outlined in Exhibit A.
(c) Termination of Employment
If the Participant's employment with the Company is terminated for any
reason, the Option shall, to the extent not then vested, be cancelled by the
Company without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a); provided that if the
Participant's employment is terminated by the Company without Cause, by the
Participant for Good Reason or due to the Participant's death or Disability (as
each such term is defined in Section 3(a) below), and the Minimum Annual Price
Target for the Determination Date applicable to the next succeeding Accelerated
Vesting Date is exceeded as of such Determination Date, then the Option shall,
upon the Board's determination that the Minimum Annual Price Target for such
Determination Date has been exceeded, become vested with respect to, and the
Vested Portion of the Option shall include a number of Shares (the "Termination
Shares") equal to the sum of:
(i) the product of (A) the number of Scheduled Accelerated Vesting
Shares that would otherwise have vested pursuant to Section 2(b)(i) had the
Participant remained employed by the Company through the next succeeding
Accelerated Vesting Date times (B) a fraction, the numerator of which is the
number of days that passed since the immediately preceding Accelerated Vesting
Date through and including the date of the Participant's
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termination of employment and the denominator of which is 365 (the "Termination
Fraction"); plus
(ii) If there were Missed Shares with respect to the immediately
preceding Accelerated Vesting Date, the product of (A) the number of Missed
Shares that would otherwise have vested pursuant to Section 2(b)(ii) had the
Participant remained employed by the Company through the next succeeding
Accelerated Vesting Date times (B) the Termination Fraction.
(d) Change of Control.
Notwithstanding any other provisions of this Agreement to the contrary, in
the event of a Change of Control, the Option shall, to the extent not previously
cancelled, immediately become vested and exercisable with respect to the
Scheduled Accelerated Vesting Shares for any remaining future Accelerated
Vesting Dates, if, and only if, in connection with the Change of Control, Vestar
receives aggregate proceeds, in cash, securities or a combination of cash and
securities, having an aggregate Fair Market Value in an amount equal to or in
excess of the product of (i) Vestar's Aggregate Investment (as defined below)
times (ii) the Minimum Investment Multiple (as defined below) applicable to the
fiscal year of the Company in which such Change of Control occurs; provided
that, securities received by Vestar shall be taken into account for purposes
hereof only if such securities are distributed by Vestar, in kind, to its
limited partners.
For purposes of this Agreement:
"Vestar's Aggregate Investment" shall mean the total amount of capital
invested by Vestar in the Company and its Subsidiaries, including investments
made in connection with the Offer, the Merger contemplated by the Merger
Agreement, or otherwise; and
"Minimum Investment Multiple" shall mean with respect to the Company's
fiscal years ending December 31, 1999 through December 31, 2003 as follows:
FY In Which Change of Control Occurs Minimum Investment Multiple
- - ------------------------------------ ---------------------------
1999 1.22
2000 1.66
2001 2.12
2002 2.50
2003 3.26
For purposes of this Section 2(d), "Fair Market Value"shall mean,
solely with respect to securities distributed by Vestar to its limited partners,
the value of such securities as reported by Vestar to such limited partners.
3. Exercise of Option.
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(a) Period of Exercise. Subject to the provisions of the Plan and this
Agreement, the Participant may exercise all or any part of the Vested Portion of
the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) six months following the date of the Participant's termination
of employment as a result of death or Disability and, with respect to the
Termination Shares, if applicable, 30 days after the determination of the
number of Termination Shares, if later;
(iii) ninety days following the date of the Participant's
termination of employment by the Company without Cause (other than as a
result of death or Disability) or by the Participant for Good Reason and,
with respect to the Termination Shares, if applicable, 30 days after the
determination of the number of Termination Shares, if later; and
(iv) the date of the Participant's termination of employment by the
Company for Cause or by the Participant without Good Reason.
For purposes of this Agreement:
"Cause" shall mean "cause" as defined in any employment agreement
entered into by and between the Participant and the Company or any of its
Subsidiaries which is in effect as of or after the Date of Grant (as the
same may be amended in accordance with the terms thereof) or if not
defined therein or if there shall be no such agreement, "Cause" shall
exist if a Participant has (i) committed an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against Vestar, Sheridan, the
Company or any Subsidiary or a felony involving the business, assets,
customers or clients of Vestar, Sheridan, the Company or any Subsidiary or
has been convicted by a court of competent jurisdiction or has plead
guilty or nolo contendere to any other felony; (ii) committed a material
breach of any written confidentiality, non-compete, non-solicitation or
business opportunity covenant contained in any agreement entered into by
the Participant and Vestar, Sheridan, the Company or any of their
Affiliates; (iii) substantially failed to perform the Participant's duties
to Sheridan, the Company or any Subsidiary, including by committing a
material breach of any written covenant contained in any agreement entered
into by the Participant and Vestar, Sheridan, the Company or any
Subsidiary (other than a confidentiality, non-compete, non-solicitation or
business opportunity covenant), which failure or breach has not been
remedied within a reasonable time specified by Sheridan (it being
understood that Sheridan can act on behalf of its Affiliates) that is not
less than thirty (30) days after delivery to the Participant by Sheridan
of written notice thereof; or (iv) breached the Participant's obligations
pursuant to Sheridan's, the Company's or any Subsidiary's substance abuse
policy;
"Disability" shall mean "disability" as defined in any employment
agreement entered into by and between the Participant and the Company or
any of its Subsidiaries which is in effect as of or after the Date of
Grant (as the same may be amended in accordance with the terms thereof) or
if not defined therein or if there shall be no such agreement, as defined
in Sheridan's long-term disability plan as in effect from time to
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time, or if there shall be no plan or if not defined therein, the
Participant's becoming physically or mentally incapacitated and consequent
inability for a period of six (6) months in any twelve (12) consecutive
month period to perform the Participant's duties to Sheridan, the Company
or any Subsidiary;
"Good Reason" shall mean, if the Participant has entered into an
employment agreement with Sheridan, the Company or any of its Subsidiaries
which is in effect as of the Date of Grant, the occurrence of such events
which, under the terms of such employment agreement (as the same may be
amended in accordance with the terms thereof), would expressly enable the
Participant to resign from employment and be treated under such employment
agreement as though the Participant's employment had been terminated by
the Company without "cause" or, if the employment agreement does not
include such provisions or if there shall be no such employment agreement,
"Good Reason" shall mean: (i) Sheridan, the Company or any Subsidiary has
failed to pay the Participant his salary; (ii) the office where the
Participant performs his duties is moved more than 30 miles from where the
Participant performed the Participant's duties on the Date of Grant; (iii)
a substantial reduction of the Participant's base salary (other than an
across the board reduction similarly affecting other comparable employees
of Sheridan, the Company or its Subsidiaries) or a substantial diminution
of the Participant's duties, which, in each case, has not been remedied
within a reasonable time specified by the Participant that is not less
than thirty (30) days after delivery to Sheridan of written notice
describing the event constituting Good Reason; and
"Vestar" shall mean, solely for purposes of the Cause definition,
Vestar Capital Partners III, L.P.
(b) Method of Exercise.
(i) Subject to Section 3(a), the Vested Portion of the Option
may be exercised by delivering to the Company at its principal office written
notice of intent to so exercise; provided that, the Option may be exercised with
respect to whole Shares only. Such notice shall specify the number of Shares for
which the Option is being exercised and shall be accompanied by payment in full
of the Exercise Price. The payment of the Exercise Price shall be made in cash
or, subject to the consent of the Committee, in Shares which have been owned by
the Participant for at least six months, such Shares to be valued at their Fair
Market Value as of the date of exercise.
(ii) Notwithstanding any other provision of the Plan or this
Agreement to the contrary, the Option may not be exercised prior to the
completion of any registration or qualification of the Option or the Shares that
is required to comply with appliicable state and federal securities or any
ruling or regulation of any governmental body or national securities exchange
that the Committee shall in its sole discretion determine in good faith to be
necessary or advisable.
(iii) Upon the Company's determination that the Option has
been validly exercised as to any of the Shares, the Company shall issue
certificates in the Participant's name for such Shares. However, the Company
shall not be liable to the Participant for damages
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relating to any delays in issuing the certificates to him, any loss of the
certificates, or any mistakes or errors in the issuance of the certificates or
in the certificates themselves.
(iv) In the event of the Participant's death, the Vested
Portion of the Option shall remain exercisable by a Permitted Transferee, the
Participant's executor or administrator, or the person or persons to whom the
Participant's rights under this Agreement shall pass by will or by the laws of
descent and distribution as the case may be, to the extent set forth in Section
3(a). Any heir or legatee of the Participant shall take rights herein granted
subject to the terms and conditions hereof.
(v) As a condition to exercising the Option, the Participant
shall become a party to the Stockholders' Agreement.
4. No Right to Continued Employment. Neither the Plan nor this
Agreement shall be construed as giving the Participant the right to be retained
in the employ of, or in any consulting relationship to, the Company or any
Affiliate. Further, the Company or an Affiliate may at any time dismiss the
Participant or discontinue any consulting relationship, free from any liability
or any claim under the Plan or this Agreement, except as otherwise expressly
provided herein.
5. Legend on Certificates. To the extent provided by the
Stockholders' Agreement, the certificates representing the Shares purchased by
exercise of the Option shall contain a legend stating that they are subject to
the Stockholders' Agreement and may be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any
applicable Federal or state laws, and the Committee may cause an additional
legend or legends to be put on any such certificates to make appropriate
reference to such other restrictions.
6. Transferability. The Option may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the
Participant otherwise than by will or by the laws of descent and distribution,
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer of the Option to heirs or legatees of
the Participant shall be effective to bind the Company unless the Committee
shall have been furnished with written notice thereof and a copy of such
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions hereof. During the Participant's lifetime, the Option is exercisable
only by the Participant.
Notwithstanding the foregoing, the Participant may transfer all or
any portion of the Option to a Permitted Transferee in accordance with Section
9(a)(ii) of the Plan.
7. Withholding. A Participant shall be required to pay to the
Company or any Affiliate and the Company shall have the right and is hereby
authorized to withhold, any applicable withholding taxes in respect of an
Option, its exercise or any payment or transfer
75
8
under an Option or under the Plan and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such withholding taxes.
8. Securities Laws. Upon the acquisition of any Shares pursuant to
the exercise of the Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
9. Notices. Any notice necessary under this Agreement shall be
addressed to the Company in care of its Secretary at the principal executive
office of the Company and to the Participant at the address appearing in the
personnel records of the Company for the Participant or to either party at such
other address as either party hereto may hereafter designate in writing to the
other. Any such notice shall be deemed effective upon receipt thereof by the
addressee.
10. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
11. Option Subject to Plan and Stockholders' Agreement. By entering
into this Agreement the Participant agrees and acknowledges that the Participant
has received and read a copy of the Plan and the Stockholders' Agreement. The
Option is subject to the Plan and the Stockholders' Agreement. The terms and
provisions of the Plan and the Stockholders' Agreement as they may be amended
from time to time in accordance with their respective terms are hereby
incorporated herein by reference. In the event of a conflict between any term or
provision contained herein and a term or provision of the Plan or the
Stockholders' Agreement, the applicable terms and provisions of the Plan or the
Stockholders' Agreement, as applicable, will govern and prevail. In the event of
a conflict between any term or provision of the Plan and any term or provision
of the Stockholders' Agreement, the applicable terms and provisions of the
Stockholders' Agreement will govern and prevail.
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12. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
VESTAR/CALVARY HOLDINGS, INC.
By:
---------------------------
Agreed and acknowledged as of the date first above written:
- - -------------------------
77
SHERIDAN HEALTHCARE, INC.
EXHIBIT A
METHODOLOGY FOR DETERMINING WHETHER PERFORMANCE OPTIONS
ARE SUBJECT TO ACCELERATED VESTING
STEP 1: CALCULATE PRO FORMA EBITDA. Upon receipt of audited financial statements
for the year, the Company shall calculate (and the Board of Directors shall
review and approve) EBITDA in good faith pro forma to give effect to all
acquisitions and divestitures completed during the year as if they had occurred
on January 1 of such year.
STEP 2: CALCULATE TOTAL ENTERPRISE VALUE. Multiply Pro Forma EBITDA (calculated
in Step 1) by 7.5.
STEP 3: CALCULATE VALUE OF COMMON EQUITY. From Total Enterprise Value
(calculated in Step 2), deduct year-end balances for Total Debt and Other
Obligations, add year-end balance for Total Cash and add Total Option Proceeds.
For purposes of this calculation, Other Obligations includes any debt-like
instruments such as acquisition-related non-compete, consulting or stock price
guarantee payments as well as non-convertible preferred stock and
out-of-the-money convertible securities. Total Option Proceeds should include
options proceeds related to i) all time-based options (whether or not vested),
ii) all performance-based options that have vested in prior years and iii) all
performance-based options that vest in current year.
STEP 4: CALCULATE ENDING FULLY-DILUTED SHARES. Add the following : i) The number
of shares outstanding at the beginning of the year, ii) shares issued in current
year for any reason, including those related to acquisitions, iii) all
time-based options (whether or not vested), iv) all performance-based options
that vest in prior years or in the current year, v) shares associated with
in-the-money convertible preferred stock and vi) shares associated with other
in-the-money common stock equivalents including, but not limited to, warrants
and any other options.
STEP 5: CALCULATE VALUE OF COMMON EQUITY PER SHARE. Divide Value of Common
Equity (calculated in Step 3) by Ending Fully-Diluted Shares (calculated in Step
4). In Step 6, this number will be compared with the maximum and minimum targets
listed below to determine how many (if any) performance-based options vest in
current year.
STEP 6: DETERMINE HOW MANY PERFORMANCE BASED OPTIONS VEST IN CURRENT YEAR.
Multiply the number of options eligible for accelerated vesting in current year
pursuant to the Performance Option Plan by i) if the Value of Common Equity per
Share (Step 5) is greater than or equal to current year's Maximum Annual Price
Target, 100%; ii) if the Value of Common Equity per Share is less than or equal
to current year's Minimum Annual Price Target, 0%; iii) if the Value of Common
Equity per Share is between current year's Minimum and Maximum Annual Price
Targets, the quotient calculated by dividing (A) excess of the Value of Common
Equity per Share over current year's Minimum Annual Price Target by (B) the
excess of current year's Maximum Annual Price Target over current year's Minimum
Annual Price Target.
Minimum Annual Price Maximum Annual Price Target
Year Target
---------- -------------------- -----------------------------
1999 $10.18 $10.64
2000 12.21 13.83
2001 14.65 17.98
2002 17.58 23.37
2003 21.10 30.38
78
SHERIDAN HEALTHCARE, INC.
EXHIBIT A
ILLUSTRATIVE METHOD FOR CALCULATING WHETHER OPTIONS VEST
PURSUANT TO PERFORMANCE MEASURES
======================================================================
1999 2000 2001 2002 2003
---------------------------------------------------------------------
Pro Forma EBITDA (a) $ 32.1 $ 40.7 $ 52.7 $ 66.9 $ 82.8
EBITDA Multiple (x) (b) 7.5 7.5 7.5 7.5 7.5
---------------------------------------------------------------------
Total Enterprise Value $ 240.8 $ 304.9 $ 395.1 $ 501.9 $ 621.3
Less: Total Debt & Other Obligations (c) (134.9) (161.2) (186.0) (215.6) (252.6)
Plus: Cash & Option Proceeds (d) 7.3 8.4 9.5 10.6 10.6
---------------------------------------------------------------------
Value of Common Equity $ 113.1 $ 152.1 $ 218.6 $ 296.9 $ 379.3
Beginning # of Shares 7.317 10.105 10.225 10.346 10.467
Share Issuances for Acquisitions 2.000 0.000 0.000 0.000 0.000
Time-Based Options (e) 0.667 0.000 0.000 0.000 0.000
Performance Options Vested (f) 0.121 0.121 0.121 0.121 0.000
Shares Associated With In-the-Money Convertible Securities 0.000 0.000 0.000 0.000 0.000
Other Common Stock Equivalents 0.000 0.000 0.000 0.000 0.000
---------------------------------------------------------------------
Ending Fully Diluted Shares 10.105 10.225 10.346 10.467 10.467
Value of Common Equity Per Share $ 11.20 $ 14.88 $ 21.13 $ 28.37 $ 36.24
% appreciation 42.1% 32.9% 42.0% 34.3% 27.7%
ANNUAL PRICE TARGET FOR MAXIMUM OPTION VESTING (g) $ 10.64 $ 13.83 $ 17.98 $ 23.37 $ 30.38
% APPRECIATION 30.0% 30.0% 30.0% 30.0% 30.0%
ANNUAL PRICE TARGET FOR MINIMUM OPTION VESTING (h) $ 10.18 $ 12.21 $ 14.65 $ 17.58 $ 21.10
% APPRECIATION 20.0% 20.0% 20.0% 20.0% 20.0%
(a) Represents full year EBITDA adjusted to give effect to all current year
acquisitions and divestitures as if they occurred on January 1.
(b) For purposes of calculating Total Enterprise Value at the end of any year,
the EBITDA multiple shall be 7.5x.
(c) Other Obligations include any debt-like instruments such as
acquisition-related noncompete, consulting or stock price guarantee payments
as well as non-convertible preferred stock and out-of-the-money convertible
securities.
(d) Option proceeds assume exercise of all vested in-the-money options,
including those options available for current year vesting. In this example,
assumes all options have exercise price of $9.25.
(e) For purposes of calculating value of common equity per share on this
schedule, all time-based options are deemed vested and exercised.
(f) 483,333 performance options are available for grant. At Closing, 333,333 of
such options will be granted to existing members of management. The
remaining 150,000 options will be reserved for future grant. This example
assumes that all 483,333 are granted.
(g) Assumes a June 30, 1999 closing. If calculated value of common equity per
share exceeds the maximum annual share price target for that year, then 100%
of eligible options will vest (0.121 million in this example).
(h) Assumes a June 30, 1999 closing. If calculated value of common equity per
share is below the minimum annual share price target for that year, then 0%
of eligible options will vest (0.000 million in this example).
79
Exhibit D
VESTAR/CALVARY HOLDINGS, INC. 1999 STOCK OPTION PLAN
TIME OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the _____ day of
_____, 199_, (hereinafter called the "Date of Grant")1/, between Vestar/Calvary
Holdings, Inc., a Delaware corporation (hereinafter called the "Company"), and
_______ (hereinafter called the "Participant"):
R E C I T A L S:
WHEREAS, the Company has adopted the Vestar/Calvary Holdings, Inc. 1999
Stock Option Plan (the "Plan"), which Plan is incorporated herein by reference
and made a part of this Agreement. Capitalized terms not otherwise defined
herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its stockholders to grant the option provided for
herein (the "Option") to the Participant pursuant to the Plan and the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. Grant of the Option. The Company hereby grants to the Participant the
right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of ______ Shares, subject
to adjustment as set forth in the Plan. The purchase price of the Shares subject
to the Option (the "Exercise Price") shall be the per share price paid by the
Company or one of its Subsidiaries for shares of common stock of Sheridan
Healthcare, Inc. ("Sheridan") in the Offer referred to in the Agreement and Plan
of Merger dated March 24, 1999 among the Company, Sheridan and Vestar/Calvary,
Inc. The Option is intended to be a non-qualified stock option, and is not
intended to be treated as an option that complies with Section 422 of the
Internal Revenue Code of 1986, as amended.
2. Vesting. At any time, the portion of the Option which has become vested
and exercisable as described in this Section 2 is hereinafter referred to as the
"Vested Portion."
- - --------
(1)The Date of Grant will be the Effective Time under the Merger Agreement.
80
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(a) Time Vesting.
Subject to paragraphs (b) and (c) of this Section 2, the Option shall vest
and become exercisable with respect to twenty percent (20%) of the Shares
initially covered by the Option on each of the first, second, third, fourth and
fifth anniversaries (each such anniversary being a "Vesting Date") of the
purchase of shares of common stock of Sheridan pursuant to the Offer.
(b) Termination of Employment.
If the Participant's employment with the Company is terminated for any
reason, the Option shall, to the extent not then vested, be cancelled by the
Company without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a); provided that if the
Participant's employment is terminated by the Company without Cause, by the
Participant for Good Reason or due to the Participant's death or Disability, the
Option shall, as of the date of such termination, become vested with respect to,
and the Vested Portion of the Option shall include, that portion of the Option
which would otherwise have vested on the next Vesting Date.
(c) Change of Control.
Notwithstanding any other provisions of this Agreement to the contrary, in
the event of a Change of Control the Option shall, to the extent not then vested
and not previously canceled, immediately become fully vested and exercisable.
3. Exercise of Option.
(a) Period of Exercise. Subject to the provisions of the Plan and this
Agreement, the Participant may exercise all or any part of the Vested Portion of
the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) six months following the date of the Participant's termination
of employment as a result of death or Disability;
(iii) ninety days following the date of the Participant's
termination of employment by the Company without Cause (other than as a
result of death or Disability) or by the Participant for Good Reason; and
(iv) the date of the Participant's termination of employment by the
Company for Cause or by the Participant without Good Reason.
For purposes of this Agreement:
"Cause" shall mean "cause" as defined in any employment agreement
entered into by and between the Participant and the Company or any of its
Subsidiaries which is in
81
3
effect as of or after the Date of Grant (as the same may be amended in
accordance with the terms thereof) or if not defined therein or if there
shall be no such agreement, "Cause" shall exist if a Participant has (i)
committed an act of fraud, embezzlement, misappropriation or breach of
fiduciary duty against Vestar, Sheridan, the Company or any Subsidiary or
a felony involving the business, assets, customers or clients of Vestar,
Sheridan, the Company or any Subsidiary or has been convicted by a court
of competent jurisdiction or has plead guilty or nolo contendere to any
other felony; (ii) committed a material breach of any written
confidentiality, non-compete, non-solicitation or business opportunity
covenant contained in any agreement entered into by the Participant and
Vestar, Sheridan, the Company or any of their Affiliates; (iii)
substantially failed to perform the Participant's duties to Sheridan, the
Company or any Subsidiary, including by committing a material breach of
any written covenant contained in any agreement entered into by the
Participant and Vestar, Sheridan, the Company or any Subsidiary (other
than a confidentiality, non-compete, non-solicitation or business
opportunity covenant), which failure or breach has not been remedied
within a reasonable time specified by Sheridan (it being understood that
Sheridan can act on behalf of its Affiliates) that is not less than thirty
(30) days after delivery to the Participant by Sheridan of written notice
thereof; or (iv) breached the Participant's obligations pursuant to
Sheridan's, the Company's or any Subsidiary's substance abuse policy;
"Disability" shall mean "disability" as defined in any employment
agreement entered into by and between the Participant and the Company or
any of its Subsidiaries which is in effect as of or after the Date of
Grant (as the same may be amended in accordance with the terms thereof) or
if not defined therein or if there shall be no such agreement, as defined
in Sheridan's long-term disability plan as in effect from time to time, or
if there shall be no plan or if not defined therein, the Participant's
becoming physically or mentally incapacitated and consequent inability for
a period of six (6) months in any twelve (12) consecutive month period to
perform the Participant's duties to Sheridan, the Company or any
Subsidiary;
"Good Reason" shall mean, if the Participant has entered into an
employment agreement with Sheridan, the Company or any of its Subsidiaries
which is in effect as of the Date of Grant, the occurrence of such events
which, under the terms of such employment agreement (as the same may be
amended in accordance with the terms thereof), would expressly enable the
Participant to resign from employment and be treated under such employment
agreement as though the Participant's employment had been terminated by
the Company without "cause" or, if the employment agreement does not
include such provisions or if there shall be no such employment agreement,
"Good Reason" shall mean: (i) Sheridan, the Company or any Subsidiary has
failed to pay the Participant his salary; (ii) the office where the
Participant performs his duties is moved more than 30 miles from where the
Participant performed the Participant's duties on the Date of Grant; (iii)
a substantial reduction of the Participant's base salary (other than an
across the board reduction similarly affecting other comparable employees
of Sheridan, the Company or its Subsidiaries) or a substantial diminution
of the Participant's duties, which, in each case, has not been remedied
within a reasonable time specified by the Participant that is not less
than thirty (30) days after delivery to Sheridan of written notice
describing the event constituting Good Reason; and
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4
"Vestar" shall mean, solely for purposes of the Cause definition,
Vestar Capital Partners III, L.P.
(b) Method of Exercise.
(i) Subject to Section 3(a), the Vested Portion of the Option may be
exercised by delivering to the Company at its principal office written notice of
intent to so exercise; provided that, the Option may be exercised with respect
to whole Shares only. Such notice shall specify the number of Shares for which
the Option is being exercised and shall be accompanied by payment in full of the
Exercise Price. The payment of the Exercise Price shall be made in cash or,
subject to the consent of the Committee, in Shares which have been owned by the
Participant for at least six months, such Shares to be valued at their Fair
Market Value as of the date of exercise.
(ii) Notwithstanding any other provision of the Plan or this Agreement to
the contrary, the Option may not be exercised prior to the completion of any
registration or qualification of the Option or the Shares that is required to
comply with applicable state and federal securities or any ruling or regulation
of any governmental body or national securities exchange that the Committee
shall in its sole discretion determine in good faith to be necessary or
advisable.
(iii) Upon the Company's determination that the Option has been validly
exercised as to any of the Shares, the Company shall issue certificates in the
Participant's name for such Shares. However, the Company shall not be liable to
the Participant for damages relating to any delays in issuing the certificates
to him, any loss of the certificates, or any mistakes or errors in the issuance
of the certificates or in the certificates themselves.
(iv) In the event of the Participant's death, the Vested Portion of the
Option shall remain exercisable by a Permitted Transferee, the Participant's
executor or administrator, or the person or persons to whom the Participant's
rights under this Agreement shall pass by will or by the laws of descent and
distribution as the case may be, to the extent set forth in Section 3(a). Any
heir or legatee of the Participant shall take rights herein granted subject to
the terms and conditions hereof.
(v) As a condition to exercising the Option, the Participant shall become
a party to the Stockholders' Agreement.
4. No Right to Continued Employment. Neither the Plan nor this Agreement
shall be construed as giving the Participant the right to be retained in the
employ of, or in any consulting relationship to, the Company or any Affiliate.
Further, the Company or an Affiliate may at any time dismiss the Participant or
discontinue any consulting relationship, free from any liability or any claim
under the Plan or this Agreement, except as otherwise expressly provided herein.
5. Legend on Certificates. To the extent provided by the Stockholders'
Agreement, the certificates representing the Shares purchased by exercise of the
Option shall
83
5
contain a legend stating that they are subject to the Stockholders' Agreement
and may be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which such Shares are listed, and any applicable Federal or state laws, and the
Committee may cause an additional legend or legends to be put on any such
certificates to make appropriate reference to such other restrictions.
6. Transferability. The Option may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the
Participant otherwise than by will or by the laws of descent and distribution,
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer of the Option to heirs or legatees of
the Participant shall be effective to bind the Company unless the Committee
shall have been furnished with written notice thereof and a copy of such
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions hereof. During the Participant's lifetime, the Option is exercisable
only by the Participant
Notwithstanding the foregoing, the Participant may transfer all or any
portion of the Option to a Permitted Transferee in accordance with Section
9(a)(ii) of the Plan.
7. Withholding. A Participant shall be required to pay to the
Company or any Affiliate, and the Company shall have the right and is hereby
authorized to withhold, any applicable withholding taxes in respect of an
Option, its exercise or any payment or transfer under an Option or under the
Plan and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such withholding taxes.
8. Securities Laws. Upon the acquisition of any Shares pursuant to the
exercise of the Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
9. Notices. Any notice necessary under this Agreement shall be addressed
to the Company in care of its Secretary at the principal executive office of the
Company and to the Participant at the address appearing in the personnel records
of the Company for the Participant or to either party at such other address as
either party hereto may hereafter designate in writing to the other. Any such
notice shall be deemed effective upon receipt thereof by the addressee.
10. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
11. Option Subject to Plan and Stockholders' Agreement. By entering into
this Agreement the Participant agrees and acknowledges that the Participant has
received and read a copy of the Plan and the Stockholders' Agreement. The Option
is subject to the Plan and the
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Stockholders' Agreement. The terms and provisions of the Plan and the
Stockholders' Agreement as they may be amended from time to time in accordance
with their respective terms are hereby incorporated herein by reference. In the
event of a conflict between any term or provision contained herein and a term or
provision of the Plan or the Stockholders' Agreement, the applicable terms and
provisions of the Plan or the Stockholders' Agreement, as applicable, will
govern and prevail. In the event of a conflict between any term or provision of
the Plan and any term or provision of the Stockholders' Agreement, the
applicable terms and provisions of the Stockholders' Agreement will govern and
prevail.
12. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
VESTAR/CALVARY HOLDINGS, INC.
By:
------------------------------
Agreed and acknowledged as of the date
first above written:
- - ------------------------------