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[Richards, Layton & Finger Letterhead]
April 20, 1999
VIA HAND DELIVERY
Joseph A. Rosenthal, Esq.
Rosenthal, Monhait, Gross & Goddess, P.A.
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
Re: Henner v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No. 17067-NC
Betz v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No. 17078-NC
Schoenfield v. Sheridan Healthcare, Inc., et al., Del. Ch.,
C.A. No. 17080-NC
Dear Mr. Rosenthal:
As we have discussed, this Memorandum of Understanding
constitutes the agreement of the parties with respect to settlement and
dismissal with prejudice of the above-referenced actions.
Memorandum of Understanding
1. There are now pending in the Court of Chancery, County of
New Castle, State of Delaware (the "Court"), three purported shareholder class
actions styled Henner v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No.
17067-NC; Betz v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No.
17078-NC, and Schoenfield v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A.
No. 17080-NC (collectively, the "Actions").
2. The Actions challenge certain actions allegedly taken or
not taken by Sheridan Healthcare, Inc. ("Sheridan" or the "Company"), directors
of Sheridan, and Vestar Capital Partners, Inc. ("Vestar") in connection with the
Agreement and Plan of Merger dated as of March 24, 1999 (the "Merger Agreement")
providing for the offer by Vestar/Sheridan, Inc. ("Purchaser" or "Vestar/
Sheridan"), to purchase all of the outstanding shares of common stock of the
Company, and the subsequent merger (the "Merger") of Purchaser into Sheridan,
under which Sheridan would become a wholly-owned subsidiary of Vestar/Sheridan
Holdings, Inc. ("Parent").
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Joseph A. Rosenthal, Esq.
April 20, 1999
Page 2
3. Following extensive discussions and arm's length
negotiations among counsel for the parties to the Actions, the parties reached
an agreement in principle to settle the Actions and dismiss the Actions with
prejudice (the "Settlement"). The principal terms of the Settlement are as
follows:
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Joseph A. Rosenthal, Esq.
April 20, 1999
Page 3
A. Parent, Purchaser and the Company will amend the Merger
Agreement to reduce the Termination Fee from $6,400,000 to $5,000,000.
B. Purchaser and Parent will disclose additional information
in a supplement to the following Offer to Purchase regarding the reasons for the
reduction of the consideration paid in the Merger following Vestar's due
diligence.
C. The Company will promptly issue a press release announcing
the reduction in the Termination Fee set forth in P. 3(A).
D. The parties to the Action will attempt in good faith to
agree upon and execute an appropriate Stipulation of Settlement (the
"Stipulation"), which will expressly provide, inter alia, for the certification
of a stockholder class for settlement purposes under Chancery Court Rules
23(b)(1) and/or (b)(2) of a class of all holders of common stock or Class A
common stock of the Company from and after March 26, 1999 including any and all
of their respective successors in interest, predecessors, representatives,
trustees, executors, administrators, heirs, assigns or transferees, immediate
and remote, and any person or entity acting for or on behalf of, or claiming
under any of them, and each of them, and excluding the defendants in the Actions
and all persons or entities related to or affiliated with the defendants (the
"Certification").
E. Upon final Court approval of the Certification and of the
Settlement, plaintiffs' counsel will petition the court for an award of
attorneys fees and expenses, which will be paid by the Company. Plaintiffs'
counsel has agreed to submit a request for, and the defendants have agreed not
to oppose, a request for court approval of not more than $320,000 in attorneys
fees, inclusive of all expenses.
F. The deadline for defendants to answer or otherwise move
with respect to plaintiffs' Complaints in each of the Actions has been extended
without date pending the parties' joint submission to the Court as soon as
practicable of a stipulation dismissing the Actions with prejudice according to
the terms set forth herein.
G. The consummation of the Settlement is subject to: (a) the
drafting and execution of the Stipulation; (b) the completion by plaintiffs of
appropriate discovery in the Actions reasonably satisfactory to plaintiffs'
counsel as has been discussed between counsel for the parties; (c) successful
consummation of the Merger; and (d) final Court approval (as defined below) of
the Settlement and dismissal of the Actions with prejudice and without awarding
costs to any party (except as provided in subparagraph D above). As used herein,
"final Court approval" of the Settlement means that the Court of Chancery has
entered an order approving the Settlement and
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Joseph A. Rosenthal, Esq.
April 20, 1999
Page 4
that such order is finally affirmed on appeal or is no longer subject to appeal.
The Memorandum of Understanding shall be null and void and of no force and
effect should any of these conditions not be met and, in that event, this
Memorandum of Understanding shall neither be deemed to prejudice in any way the
positions of the parties with respect to the Actions nor entitle any party to
recover any costs or expenses incurred in connection with the implementation of
the Memorandum of Understanding.
Counsel for the parties have reached this Settlement on the
terms and subject to the conditions set forth herein, on behalf of defendants
and plaintiffs, and the purported class of persons on behalf of whom plaintiffs
have brought the Actions.
Dated: April 20, 1999
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By /s/ Joseph A. Rosenthal
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Joseph A. Rosenthal
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs Stanley Henner,
Robert Betz and Bob Schoenfield
RICHARDS, LAYTON & FINGER
By /s/ Jesse A. Finkelstein
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Jesse A. Finkelstein
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Defendant Vestar Capital
Partners, Inc.
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Joseph A. Rosenthal, Esq.
April 20, 1999
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By /s/ A. Gilchrist Sparks, III
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A. Gilchrist Sparks, III
1201 Market Street
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200
Attorneys for Defendants
Sheridan Healthcare, Inc.,
Mitchell Eisenberg, Lewis Gold,
Henry E. Golembesky, Jamie
Hopping, Neil A. Natkow