Document:

Exhibit
10.6

 

Execution Version

 

 

SECURITIES
PURCHASE AND EXCHANGE AGREEMENT

 

by
and among

 

TSG
HOLDINGS CORP.,

 

and

 

THE
MANAGEMENT INVESTORS NAMED HEREIN

 

Dated
as of August 21, 2003

 

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I PURCHASE AND EXCHANGE OF SECURITIES

  
	
   

  
	
  1.1.

  	
  Rollover of Shares by
  Management Investors

  
	
  1.2.

  	
  Sale and
  Purchase of Common Stock and Preferred Stock

  
	
  1.3.

  	
  Closing

  
	
  1.4.

  	
  Sheridan Securities

  
	
  1.5.

  	
  Conditions
  to the Management Investor’s Obligations

  
	
  1.6.

  	
  Conditions to the
  Company’s Obligations

  
	
   

  	
   

  
	
  ARTICLE II REPRESENTATIONS, WARRANTIES AND
  COVENANTS OF THE COMPANY

  
	
   

  
	
  2.1.

  	
  Representations,
  Warranties and Covenants of the Company

  
	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS, WARRANTIES AND
  COVENANTS OF MANAGEMENT INVESTORS

  
	
   

  
	
  3.1.

  	
  Representations,
  Warranties and Covenants of Each Management Investor

  
	
   

  	
   

  
	
  ARTICLE IV MISCELLANEOUS

  
	
   

  
	
  4.1.

  	
  Legend

  
	
  4.2.

  	
  Amendment and Modification

  
	
  4.3.

  	
  Survival of
  Representations and Warranties

  
	
  4.4.

  	
  Successors and Assigns

  
	
  4.5.

  	
  Separability

  
	
  4.6.

  	
  Notices

  
	
  4.7.

  	
  Governing Law

  
	
  4.8.

  	
  Headings

  
	
  4.9.

  	
  Counterparts

  
	
  4.10.

  	
  Further Assurances

  
	
  4.11.

  	
  Entire Agreement

  

 

1

 

EXHIBITS

 

	
  Exhibit A

  	
  Form of Securities Holders
  Agreement

  
	
  Exhibit B

  	
  Form of Registration
  Rights Agreement

  
	
  Exhibit C

  	
  Amended and Restated
  Certificate of Incorporation of the Company

  
	
  Exhibit
  D

  	
  Bylaws
  of the Company

  

 

SCHEDULES

 

	
  Schedule I

  	
  Management Investors and Securities
  Purchased and Exchanged

  

 

2

 

DEFINED TERMS

 

	
  Agreement

  
	
  Closing

  
	
  Closing Date

  
	
  Common Stock

  
	
  Company

  
	
  Equity Investors

  
	
  Management Investors

  
	
  person

  
	
  Preferred Stock

  
	
  Purchasing Management Investors

  
	
  Registration Rights Agreement

  
	
  Rollover Shareholders

  
	
  Rollover Shares

  
	
  Securities

  
	
  Securities Act

  
	
  Securities Holders Agreement

  
	
  Sheridan

  
	
  Sheridan Acquisition

  
	
  Sheridan Common Stock

  
	
  Stock Purchase Agreement

  

 

3

 

SECURITIES
PURCHASE AND EXCHANGE AGREEMENT

 

 

THIS IS A SECURITIES PURCHASE AND EXCHANGE AGREEMENT,
dated as of August 21 2003 (the “Agreement”), by and among TSG Holdings
Corp., a Delaware corporation (the “Company”), and the individuals
designated as Management Investors on the signature pages hereto (such
individuals, the “Management Investors”).

 

Background

 

A.                                   This
Agreement is being entered into in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement, dated as of
August 1, 2003 (the “Stock Purchase Agreement”), by and among
Sheridan Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of the Company (“Sheridan Acquisition”), The Sheridan Group, Inc., a
Maryland corporation (“Sheridan”), and the other parties thereto,
pursuant to which Sheridan Acquisition will acquire all of the outstanding
capital stock of Sheridan (other than any such shares acquired by the Company
pursuant to this Agreement), and Sheridan will become a wholly-owned subsidiary
of the Company.

 

B.                                     The
Management Investors are employed by or serve as directors of Sheridan or its
direct or indirect subsidiaries. 
Immediately prior to the closing of the transactions contemplated by the
Stock Purchase Agreement, and after the conversion of all outstanding shares of
Sheridan preferred stock and the exercise of all outstanding options and
warrants to purchase Sheridan common stock as contemplated by the Stock
Purchase Agreement, each of the Management Investors will own at least the
number of shares of Sheridan common stock (the “Sheridan Common Stock”)
set forth opposite his or her name on Schedule I attached hereto.

 

C.                                     In
order to assist the Company in attracting and retaining valued employees and
directors, the Company wishes to offer such employees and directors the
opportunity to acquire shares of the Company’s capital stock.  This Agreement is intended to be a written
compensatory contract as defined under Rule 701 of the Securities Act of 1933,
as amended (the “Securities Act”).

 

D.                                    Pursuant
to the terms hereof, certain of the Management Investors (the “Rollover
Shareholders”) will exchange a number of shares of Sheridan Common Stock
owned by such Management Investor for the number of shares of the Company’s
Series A 10% Cumulative Compounding Preferred Stock, par value $.001 per share
(the “Preferred Stock”), and Common Stock, par value $.001 per share
(the “Common Stock”), set forth opposite such Management Investor’s name
on Schedule I hereto.  The
shares of Preferred Stock and Common Stock set forth opposite such Management
Investor’s name on Schedule I hereto are sometimes hereinafter
referred to as the “Rollover Shares.”

 

E.                                      Also
pursuant to the terms hereof, in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement, the Company desires
to sell, 

 

 

and certain of the Management Investors (the “Purchasing Management
Investors”), desire to purchase for cash, (i) the number of shares of
Preferred Stock of the Company, and (ii) the number of shares of Common Stock
of the Company, in each case as set forth opposite such Management Investor’s
name on Schedule I hereto.

 

F.                                      Also
in connection with the transactions contemplated by the Stock Purchase
Agreement, pursuant to a separate Securities Purchase Agreement dated as of the
date hereof (the “Securities Purchase Agreement”), the Company intends
to sell for cash additional shares of Preferred Stock and Common Stock to the
investors who are parties thereto (the “Equity Investors”).

 

G.                                     Immediately
following the purchase and sale of securities referred to above, the Company
will contribute the cash and non-cash proceeds from such transactions to
Sheridan Acquisition, which will use such cash proceeds in part to acquire
pursuant to the Stock Purchase Agreement the outstanding capital stock of
Sheridan that is not otherwise owned by Sheridan Acquisition by virtue of the
transactions described above.

 

H.                                    In
connection with the execution and delivery of this Agreement, the Management
Investors, the Equity Investors and the Company are also entering into a
Securities Holders Agreement (the “Securities Holders Agreement”) and a
Registration Rights Agreement (the “Registration Rights Agreement”)
substantially in the forms of Exhibit A and Exhibit B hereto,
respectively, in order to set forth more fully certain agreements regarding
their future relationships and their rights and obligations with respect to
Securities of the Company.

 

I.                                         As
used herein, the term “Securities” shall mean Common Stock, Preferred
Stock, and any other shares of capital stock of the Company, and any securities
convertible into or exchangeable for such capital stock, and any options
(including any options now or hereafter issued to Management Investors),
warrants or other rights to acquire such capital stock or securities, now or
hereafter held by any party hereto, including all other securities of the
Company (or a successor to the Company) received on account of ownership of
Common Stock or Preferred Stock, including all securities issued in connection
with any merger, consolidation, stock dividend, stock distribution, stock
split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof.

 

Terms

 

In consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:

 

2

 

ARTICLE
I

 

PURCHASE AND EXCHANGE OF
SECURITIES

 

1.1.                              Rollover
of Shares by Management
Investors.  (a) 
Subject to the terms and conditions set forth herein, at the Closing (as
defined in Section 1.3), the Company will issue to each of the Management
Investors listed as Rollover Shareholders on Schedule I hereto the
number of shares of Preferred Stock and Common Stock set forth opposite each
Management Investor’s name on Schedule I hereto, in exchange for
the number of shares of Sheridan Common Stock set forth opposite the name of
such Management Investor on Schedule I hereto.

 

(b)                                 The obligations of the Management Investors
purchasing Securities under this Section 1.1 to purchase such Securities as are
subscribed for hereunder are several in nature, and no Management Investor
shall have any obligation to purchase any Securities subscribed for hereunder
by any other Management Investor.

 

1.2.                              Sale
and Purchase of Common Stock and Preferred Stock.  (a) 
Subject to the terms and conditions set forth herein, at the Closing (as
defined in Section 1.3), the Company will issue and sell to the Purchasing
Management Investors, and the Purchasing Management Investors will purchase,
the number of shares of Preferred Stock and Common Stock set forth opposite the
name of such Management Investor on Schedule I hereto.

 

(b)                                 The per share purchase price for the Preferred
Stock and Common Stock to be purchased under this Section 1.2 shall be $1,000
per share and $10 per share, respectively. 
The aggregate purchase price to be paid by each Purchasing Management
Investor purchasing Preferred Stock and Common Stock pursuant to this Section
1.2, is set forth opposite such Management Investor’s name on Schedule I
hereto.  The Purchasing Management
Investors shall pay the purchase price for the shares of Preferred Stock and
Common Stock purchased by him or her
hereunder by wire transfer of immediately available funds (or such other means
as the parties might agree) to an account designated by the Company.

 

(c)                                  The obligations of the Management Investors
purchasing Securities under this Section 1.2 are several in nature, and no
Management Investor shall have any obligation to purchase any Securities
subscribed for hereunder by any other Management Investor.

 

1.3.                              Closing.  (a) 
The closing (the “Closing”) of the purchase and sale of the
Securities referred to in Section 1.1 and Section 1.2 will take place on the
date of this Agreement or at such other time or on such other date as may be
agreed by the parties hereto.  The date
such Closing occurs is referred to herein as the “Closing Date.”

 

(b)                                 At the Closing, the Company will deliver to each
Management Investor certificates evidencing the number of shares of Preferred
Stock and Common Stock to be purchased by such Management Investor as set forth
opposite such Management Investor’s name on Schedule I hereto, registered
in such Management Investor’s name, against (i) in the case of 

 

3

 

the
Rollover Shareholders, certificates representing the number of shares of
Sheridan Common Stock listed opposite such Management Investor’s name on Schedule
I hereto, together with stock powers or other instruments duly endorsed or
otherwise sufficient for transfer, and (ii) in the case of the Purchasing
Management Investors, payment of the purchase price therefor in cash, by wire
transfer of immediately available funds (or such other means as the parties
might agree), with confirmed receipt.

 

1.4.                              Sheridan Securities.  In order to facilitate any cancellation or
exchange of any shares of Sheridan Common Stock contemplated hereby, each Rollover
Shareholder shall deliver one or more certificates representing all of the
shares of Sheridan Common Stock to be cancelled or exchanged in accordance with
this Agreement, together with stock powers or other instruments duly endorsed
or otherwise sufficient for transfer of such certificates or instruments, as
the case may be.  The Company shall hold
such instruments in escrow pending the Closing Date.

 

1.5.                              Conditions
to the Management Investor’s Obligations.  The obligation of each Management Investor
to purchase such Management Investor’s Securities at the Closing is subject to
the satisfaction on or prior to the date hereof of the following conditions:

 

(a)                                  The representations and warranties of the Company
set forth in Article II hereof shall be true and correct in all material
respects on and as of the Closing Date as though then made, and all covenants
of the Company set forth in Article I required to be performed on or prior to
the Closing shall have been performed in all material respects.

 

(b)                                 No
preliminary or permanent injunction or order, decree or ruling of any nature
issued by any court or governmental agency of competent jurisdiction, nor any
statute, rule, regulation or executive order promulgated or enacted by any
United States federal, state or local governmental authority, shall be in
effect, that would prevent the consummation of the transactions contemplated by
this Agreement or the Stock Purchase Agreement.

 

(c)                                  All
of the conditions to effecting the transactions contemplated by the Stock
Purchase Agreement shall have been fulfilled or waived in accordance with the
terms of the Stock Purchase Agreement.

 

(d)                                 The
Company shall have executed and delivered the Securities Holders Agreement and
the Registration Rights Agreement.

 

(e)                                  The Company’s Amended and Restated Certificate of
Incorporation and Bylaws shall be substantially in the forms of Exhibit C
and Exhibit D hereto, respectively.

 

(f)                                    The Company shall have delivered to each of the
Management Investors certificates for the Securities being purchased by such
Management Investor.

 

(g)                                 All corporate and other proceedings, if any,
taken or to be taken by the Company in connection with the transactions
contemplated hereby shall have been taken.

 

4

 

1.6.                              Conditions
to the Company’s Obligations.  The
obligations of the Company to issue and sell the Securities to each Management
Investor as set forth herein at the Closing are subject to the satisfaction on
or prior to the Closing of the following conditions:

 

(a)                                  The representations and warranties of each
Management Investor set forth in Article III hereof shall be true and correct
in all material respects at and as of the Closing Date as though then made, and
all covenants of each Management Investor required to be performed at or prior
to the Closing shall have been performed in all material respects.

 

(b)                                 Such Management Investor shall have delivered the
shares of Sheridan Common Stock, together with duly executed stock powers,
and/or cash purchase price required to be delivered by such Management Investor
under this Article I.

 

(c)                                  Such
Management Investor shall have executed and delivered each of the Securities
Holders Agreement and the Registration Rights Agreement.

 

ARTICLE
II

 

REPRESENTATIONS,
WARRANTIES AND

COVENANTS OF THE COMPANY

 

2.1.                              Representations, Warranties and Covenants of the Company.  The Company represents and
warrants to, and covenants and agrees with, each of the Management Investors as
follows:

 

(a)                                  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.

 

(b)                                 The Company has all requisite corporate power and
corporate authority to execute, deliver and perform this Agreement and to
consummate the transactions provided for herein.

 

(c)                                  The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby, including, but not limited to, the issuance
and sale of the Securities to be issued by it hereunder, have been duly
authorized, and this Agreement constitutes the valid and binding obligation of
the Company, enforceable against it in accordance with the terms hereof.

 

(d)                                 The Securities issued to the Management Investors
under Article I hereof, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and non-assessable.

 

(e)                                  As of the date hereof and after giving effect to
the transactions contemplated by this Agreement and the Securities Purchase
Agreement with the Equity Investors, the authorized capital stock of the
Company consists of (i) one million (1,000,000) 

 

5

 

shares
of Common Stock, of which five hundred thousand (500,000) shares are issued and
outstanding, and (ii) one hundred thousand (100,000) shares of Preferred Stock,
of which forty-two thousand (42,000) shares are issued and outstanding.  As of the date hereof, the shares of Common
Stock and Preferred Stock held by the Management Investors, together with the
shares of Common Stock and Preferred Stock issued under the Securities Purchase
Agreement to the Equity Investors, constitute all of the issued and outstanding
shares of the Company’s capital stock.

 

(f)                                    The
Securities offered to the Management Investors under Article I hereof are
offered to those Management Investors in their capacity as employees, officers
or directors of the Company.

 

ARTICLE III

 

REPRESENTATIONS,
WARRANTIES AND

COVENANTS OF MANAGEMENT INVESTORS

 

3.1.                              Representations, Warranties and Covenants of Each Management Investor.  Each of
the Management Investors severally and as to itself represents and warrants to,
and covenants and agrees with, the Company that:

 

(a)                                  Such Management Investor has the requisite legal
right, power and authority (including, if applicable, the due authorization by
all necessary corporate action) to enter into this Agreement and to perform
such Management Investor’s obligations hereunder and to consummate the
transactions provided for herein, including, in the case of the Rollover
Shareholders, the exchange of Sheridan Common Stock for Common Stock and
Preferred Stock as contemplated by Section 1.1 hereof, without the need for the
consent of any other person (other than such consents as have heretofore been
obtained); this Agreement has been duly authorized, executed and delivered by
such Management Investor; and this Agreement constitutes the valid and binding
obligation of such Management Investor, enforceable against such Management Investor
in accordance with the terms hereof.  As
used herein, the term “person” means an individual or a corporation,
partnership, limited liability company, joint venture, trust, regulatory or
governmental agency or authority or other organization or entity of any kind.

 

(b)                                 In
the case of any Rollover Shareholder, such Rollover Shareholder is the record
and beneficial owner of the number of shares Sheridan Common Stock set forth
opposite such Rollover Shareholder’s name on Schedule I hereto, free and
clear of any mortgage, lien, pledge, charge, security interest, encumbrance,
title retention agreement, option, equity or any other adverse claim
thereto.  Such Rollover Shareholder is
not a party to any agreement, contract or instrument that limits or restricts
in any manner such Rollover Shareholder’s right to sell or transfer the shares
of Sheridan Common Stock held by them to the Company as contemplated hereunder.

 

6

 

(c)                                  No
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority is required for the execution and
delivery of this Agreement by such Management Investor or for the consummation
by such Management Investor of the transactions contemplated hereby, except
where the failure to obtain any such consent, approval or authorization or to
so register, qualify or file would not reasonably be expected to materially and
adversely affect such Management Investor’s ability to consummate the transactions
contemplated hereby.

 

(d)                                 No
action, suit, proceeding or investigation is pending or, to such Management
Investor’s knowledge, threatened, against such Management Investor with respect
to his or her execution and delivery of this Agreement or the consummation by
such Management Investor of the transactions contemplated hereby.

 

(e)                                  The Securities are being purchased by such
Management Investor hereunder for investment, and not with a view to any
distribution thereof that would violate the Securities Act or the applicable
state securities laws of any state. 
Such Management Investor will not distribute the Securities in violation
of the Securities Act or the applicable securities laws of any state.

 

(f)                                    Such Management Investor understands that the Securities
have not been registered under the Securities Act or the securities laws of any
state and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available.

 

(g)                                 In formulating a decision to enter into this
Agreement, such Management Investor has relied solely upon (i) the provisions
of this Agreement, (ii) an independent investigation of the Company’s business,
and (iii) consultations with, his or her legal and financial advisors with
respect to this Agreement and the nature of his or her investment; and that in
entering into this Agreement no reliance was placed by the Management Investor
upon any representations or warranties other than those contained in this
Agreement.

 

(h)                                 Such Management Investor is financially able to
hold the Securities for long-term investment, believes that the nature and
amount of the Securities being purchased are consistent with his or her overall
investment program and financial position, and recognizes that there are
substantial risks involved in the purchase of the Securities.

 

(i)                                     Such Management Investor confirms that (i) he or
she or she is familiar with the business of the Company, (ii) he or she or she
has had the opportunity to ask questions of the officers and directors of the
Company and to obtain (and that such Management Investor has received to his or
her satisfaction) such information about the business and financial condition
of the Company as he or she has reasonably requested, and (iii) such Management
Investor, either alone or with a representative (as defined in Rule 501(h)
promulgated under the Securities Act), has such knowledge and experience in
financial and business matters that such Management Investor is capable of
evaluating the merits and risks of the prospective investment in the
Securities.

 

7

 

(j)                                     Such
Management Investor confirms and acknowledges that (i) he or she understands
that the opportunity to purchase the Securities offered to such Management
Investor under this contract are offered in his or her capacity as an employee,
officer or director of the Company and (ii) he or she has received a copy of
this contract in accordance with Rule 701 under the Securities Act.

 

(k)                                  Such
Management Investor’s residence address is as set forth below his or her
signature to this Agreement.

 

ARTICLE IV

 

MISCELLANEOUS

 

4.1.                              Legend.  (a) All certificates representing the
Securities shall bear the following legend in addition to any other legend
required under applicable law:

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE DELIVERY TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED.

 

THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF A SECURITIES
HOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN,
AS AMENDED FROM TIME TO TIME (THE “SECURITIES HOLDERS AGREEMENT”), A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.  THE SALE, TRANSFER, ASSIGNMENT OR OTHER
DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE
SECURITIES ARE TRANSFERABLE OR OTHERWISE DISPOSABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.

 

(b)                                 Management Securities.  In
addition to the legends required by Section 4.1(a) above, the following legend
shall appear on certificates issued by the Company pursuant to this Agreement; provided,
however that the Company’s failure to cause any such certificate to bear
such legend shall not affect the Company’s Purchase Option described in Section
4.3 of the Securities Holders Agreement.

 

8

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO A PURCHASE OPTION OF THE COMPANY APPLICABLE TO “MANAGEMENT
SECURITIES” AS DESCRIBED IN THE SECURITIES HOLDERS AGREEMENT, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

4.2.                              Amendment
and Modification.  This Agreement may be amended or modified,
or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) the Company,
and (ii) the holders of the majority of the shares of Common Stock then held by
the Management Investors; provided, however, that any amendment
of this Agreement which materially adversely affects any Management Investor in
a manner materially different from other Management Investors (other than due
to any difference in the number of shares owned by and such Management
Investor) requires the consent of such Management Investor.  No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.

 

4.3.                              Survival
of Representations and Warranties.  The representations, warranties, covenants
and agreements set forth in this Agreement shall survive the Closing.

 

4.4.                              Successors
and Assigns.  This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and permitted assigns and executors, administrators and heirs
of each party hereto.  This Agreement,
and any rights or obligations existing hereunder, may not be assigned or
otherwise transferred by any party without the prior written consent of the
other parties hereto.

 

4.5.                              Separability.  In the
event that any provision of this Agreement or the application of any provision
hereof is declared to be illegal, invalid or otherwise unenforceable by a court
of competent jurisdiction, the remaining provisions shall remain in full force
and effect unless deletion of such provision causes this Agreement to become
materially adverse to any party, in which event the parties shall use
reasonable efforts to arrive at an accommodation which best preserves for the
parties the benefits and obligations of the offending provision.

 

4.6.                              Notices.  All notices provided for or permitted
hereunder shall be made in writing by hand-delivery, registered or certified
first-class mail, fax or reputable courier guaranteeing overnight delivery to
the other party at the following addresses (or at such other address as shall
be given in writing by any party to the others):

 

9

 

If to the Company, to:

 

TSG Holdings Corp.

11311 McCormick Road

Suite 260

Hunt Valley, MD  21031-1437

Attention:  John A. Saxton

Fax:  (410) 785-7217

 

with a required copy to:

 

Dechert LLP

4000 Bell Atlantic Tower

1717 Arch Street

Philadelphia, PA 19103

Attention:            Carmen
J. Romano, Esq.

David S. Denious, Esq.

Fax:  (215) 994-2222

 

If to any of the Management Investors, to such
Management Investor’s address as set forth on the signature pages hereto.

 

All such notices shall be deemed to have been duly
given: when delivered by hand, if personally delivered; four business days
after being deposited in the mail, postage prepaid, if mailed; when
confirmation of transmission is received, if faxed during normal business hours
(or, if not faxed during normal business hours, the next business day after
confirmation of transmission); and on the next business day, if timely
delivered to a reputable courier guaranteeing overnight delivery.

 

4.7.                              Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without giving effect to principles of conflicts of law.

 

4.8.                              Headings.  The
headings preceding the text of the sections and subsections of this Agreement
are for convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect its meaning, construction or effect.

 

4.9.                              Counterparts.  This
Agreement may be executed in two or more counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original, and all of which taken together shall constitute one and the same
instrument.

 

4.10.                        Further
Assurances.  (a) 
Each party shall cooperate and take such action as may be reasonably
requested by another party in order to carry out the provisions and purposes of
this Agreement and the transactions contemplated hereby.

 

10

 

(b)                                 Each
Rollover Shareholder hereby acknowledges and agrees that, pursuant to the terms
of the Stock Purchase Agreement, such Rollover Shareholder may be required to
make an additional capital contribution, in cash, to the Company to reflect
such Rollover Shareholder’s pro rata portion of any purchase price adjustment
required by the terms of the Stock Purchase Agreement, it being understood,
however, that this Section 4.10(b) does not create any additional obligation for
any Rollover Shareholder that does not already exist under the terms of the
Stock Purchase Agreement.

 

4.11.                        Entire Agreement.  This Agreement sets forth the entire
agreement and understanding among the parties and supersedes all prior
agreements and understandings, written or oral, relating to the subject matter
of this Agreement, it being understood the Management Investors are
contemporaneously entering into other agreements and instruments in connection
with the consummation of the transactions contemplated by the Stock Purchase
Agreement, including the Securities Holders Agreement and the Registration
Rights Agreement.

 

11

 

IN WITNESS WHEREOF, the parties hereto have executed
this Securities Purchase Agreement the day and year first above written.

 

 

	
   

  	
  TSG HOLDINGS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Rice Edmonds

  
	
   

  	
   

  	
  Name: J. Rice Edmonds

  
	
   

  	
   

  	
  Title:   Vice
  President

  

 

12

 

	
   

  	
  MANAGEMENT INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John A. Saxton

  
	
   

  	
  John A. Saxton

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David C. Hewitt

  
	
   

  	
  David C. Hewitt

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ G. Paul Bozuwa

  
	
   

  	
  G. Paul Bozuwa

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert M. Jakobe

  
	
   

  	
  Robert M. Jakobe

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Joan B. Weisman

  
	
   

  	
  Joan B. Weisman

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

13

 

	
   

  	
  /s/ John M. Elliot

  
	
   

  	
  John M. Elliot

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Chris M. Azbill

  
	
   

  	
  Chris M. Azbill

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Douglas R. Ehmann

  
	
   

  	
  Douglas R. Ehmann

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ J. Kenneth Garner

  
	
   

  	
  J. Kenneth Garner

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael E. Klauer

  
	
   

  	
  Michael E. Klauer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

14

 

	
   

  	
  /s/ James W. Stirling

  
	
   

  	
  James W. Stirling

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Patricia A. Stricker

  
	
   

  	
  Patricia A. Stricker

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert M. Moore

  
	
   

  	
  Robert M. Moore

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gary J. Kittredge

  
	
   

  	
  Gary J. Kittredge

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Edward H. Hartman

  
	
   

  	
  Edward H. Hartman

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

15

 

	
   

  	
  /s/ Arthur R. Myers

  
	
   

  	
  Arthur R. Myers

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jennifer A. Bedell

  
	
   

  	
  Jennifer A. Bedell

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Cynthia L. Beauchamp

  
	
   

  	
  Cynthia L. Beauchamp

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael J. Sartorelli

  
	
   

  	
  Michael J. Sartorelli

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David T. Merchant

  
	
   

  	
  David T. Merchant

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

16

 

	
   

  	
  /s/ Kenneth W. Raker

  
	
   

  	
  Kenneth W. Raker

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jeffrey S. Cohen

  
	
   

  	
  Jeffrey S. Cohen

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ J. Dennis Smith

  
	
   

  	
  J. Dennis Smith

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Catherine R. Budd

  
	
   

  	
  Catherine R. Budd

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ George A. Whaling

  
	
   

  	
  George A. Whaling

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

17

 

	
   

  	
  /s/ J.M. Dryden Hall, Jr.

  
	
   

  	
  J.M. Dryden Hall, Jr.

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gary T. DiCamillo

  
	
   

  	
  Gary T. DiCamillo

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Craig H. Deery

  
	
   

  	
  Craig H. Deery

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone No.: 

  

 

18

 

Schedule
I

 

Management Investors and
Securities Purchased and Exchanged

 

	
  Management Investor

  	
   

  	
  Shares of
  Sheridan Common Stock Being Exchanged

  	
   

  	
  Cash
  Investment

  	
   

  	
  Common
  Stock Purchase Price ($10 per share)

  	
   

  	
  Preferred
  Stock Purchase Price ($1,000 per share)

  	
   

  	
  Number of
  Shares of Common Stock Received

  	
   

  	
  Number of
  Shares of Preferred Stock Received

  	
   

  	
  Aggregate
  Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John A. Saxton*

  	
   

  	
  6,319.3789

  	
   

  	
  $

  	
  0.00

  	
   

  	
  $

  	
  159,574.47

  	
   

  	
  $

  	
  1,340,425.53

  	
   

  	
  15,957.447

  	
   

  	
  1,340.42553

  	
   

  	
  $

  	
  1,500,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David C. Hewitt*

  	
   

  	
  2,527.7516

  	
   

  	
  0.00

  	
   

  	
  63,829.79

  	
   

  	
  536,170.21

  	
   

  	
  6,382.979

  	
   

  	
  536.17021

  	
   

  	
  600,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G. Paul Bozuwa*

  	
   

  	
  1,263.8758

  	
   

  	
  0.00

  	
   

  	
  31,914.89

  	
   

  	
  268,085.11

  	
   

  	
  3,191.489

  	
   

  	
  268.08511

  	
   

  	
  300,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert M. Jakobe*

  	
   

  	
  125.0000

  	
   

  	
  70,329.36

  	
   

  	
  10,638.30

  	
   

  	
  89,361.70

  	
   

  	
  1,063.830

  	
   

  	
  89.36170

  	
   

  	
  100,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Joan B. Weisman*

  	
   

  	
  68.8042

  	
   

  	
  58,668.28

  	
   

  	
  7,978.72

  	
   

  	
  67,021.28

  	
   

  	
  797.872

  	
   

  	
  67.02128

  	
   

  	
  75,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John M. Elliot

  	
   

  	
  0

  	
   

  	
  50,000.00

  	
   

  	
  5,319.15

  	
   

  	
  44,680.85

  	
   

  	
  531.915

  	
   

  	
  44.68085

  	
   

  	
  50,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chris M. Azbill

  	
   

  	
  0

  	
   

  	
  50,000.00

  	
   

  	
  5,319.15

  	
   

  	
  44,680.85

  	
   

  	
  531.915

  	
   

  	
  44.68085

  	
   

  	
  50,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Douglas R. Ehmann*

  	
   

  	
  206.4125

  	
   

  	
  0.00

  	
   

  	
  5,212.25

  	
   

  	
  43,782.88

  	
   

  	
  521.225

  	
   

  	
  43.78288

  	
   

  	
  48,995.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J. Kenneth Garner*

  	
   

  	
  96.3259

  	
   

  	
  20,000.00

  	
   

  	
  4,560.04

  	
   

  	
  38,304.36

  	
   

  	
  456.004

  	
   

  	
  38.30436

  	
   

  	
  42,864.40

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael E. Klauer

  	
   

  	
  0

  	
   

  	
  40,000.00

  	
   

  	
  4,255.32

  	
   

  	
  35,744.68

  	
   

  	
  425.532

  	
   

  	
  35.74468

  	
   

  	
  40,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  James W. Stirling

  	
   

  	
  0

  	
   

  	
  35,000.00

  	
   

  	
  3,723.40

  	
   

  	
  31,276.60

  	
   

  	
  372.340

  	
   

  	
  31.27660

  	
   

  	
  35,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Patricia A. Stricker*

  	
   

  	
  68.8042

  	
   

  	
  15,000.00

  	
   

  	
  3,333.16

  	
   

  	
  27,998.55

  	
   

  	
  333.316

  	
   

  	
  27.99855

  	
   

  	
  31,331.71

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert M. Moore

  	
   

  	
  0

  	
   

  	
  25,000.00

  	
   

  	
  2,659.57

  	
   

  	
  22,340.43

  	
   

  	
  265.957

  	
   

  	
  22.34043

  	
   

  	
  25,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gary J. Kittredge

  	
   

  	
  0

  	
   

  	
  25,000.00

  	
   

  	
  2,659.58

  	
   

  	
  22,340.42

  	
   

  	
  265.958

  	
   

  	
  22.34042

  	
   

  	
  25,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Edward H. Hartman

  	
   

  	
  0

  	
   

  	
  20,000.00

  	
   

  	
  2,127.66

  	
   

  	
  17,872.34

  	
   

  	
  212.766

  	
   

  	
  17.87234

  	
   

  	
  20,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Arthur R. Myers

  	
   

  	
  0

  	
   

  	
  20,000.00

  	
   

  	
  2,127.66

  	
   

  	
  17,872.34

  	
   

  	
  212.766

  	
   

  	
  17.87234

  	
   

  	
  20,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jennifer A. Bedell

  	
   

  	
  0

  	
   

  	
  15,000.00

  	
   

  	
  1,595.74

  	
   

  	
  13,404.26

  	
   

  	
  159.574

  	
   

  	
  13.40426

  	
   

  	
  15,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cynthia L. Beauchamp

  	
   

  	
  0

  	
   

  	
  10,000.00

  	
   

  	
  1,063.83

  	
   

  	
  8,936.17

  	
   

  	
  106.383

  	
   

  	
  8.93617

  	
   

  	
  10,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael J. Sartorelli

  	
   

  	
  0

  	
   

  	
  10,000.00

  	
   

  	
  1,063.83

  	
   

  	
  8,936.17

  	
   

  	
  106.383

  	
   

  	
  8.93617

  	
   

  	
  10,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David T. Merchant

  	
   

  	
  0

  	
   

  	
  5,000.00

  	
   

  	
  531.91

  	
   

  	
  4,468.09

  	
   

  	
  53.191

  	
   

  	
  4.46809

  	
   

  	
  5,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kenneth W. Raker

  	
   

  	
  0

  	
   

  	
  10,000.00

  	
   

  	
  1,063.83

  	
   

  	
  8,936.17

  	
   

  	
  106.383

  	
   

  	
  8.93617

  	
   

  	
  10,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jeffrey S. Cohen

  	
   

  	
  0

  	
   

  	
  7,500.00

  	
   

  	
  797.87

  	
   

  	
  6,702.13

  	
   

  	
  79.787

  	
   

  	
  6.70213

  	
   

  	
  7,500.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J. Dennis Smith

  	
   

  	
  0

  	
   

  	
  5,000.00

  	
   

  	
  531.91

  	
   

  	
  4,468.09

  	
   

  	
  53.191

  	
   

  	
  4.46809

  	
   

  	
  5,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Catherine R. Budd

  	
   

  	
  0

  	
   

  	
  3,000.00

  	
   

  	
  319.15

  	
   

  	
  2,680.85

  	
   

  	
  31.915

  	
   

  	
  2.68085

  	
   

  	
  3,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  George A. Whaling*

  	
   

  	
  1,282.5211

  	
   

  	
  0.00

  	
   

  	
  32,385.74

  	
   

  	
  272,040.01

  	
   

  	
  3,238.574

  	
   

  	
  272.04001

  	
   

  	
  304,425.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J.M. Dryden Hall, Jr.*

  	
   

  	
  421.2919

  	
   

  	
  0.00

  	
   

  	
  10,638.30

  	
   

  	
  89,361.70

  	
   

  	
  1,063.830

  	
   

  	
  89.36170

  	
   

  	
  100,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gary T. DiCamillo*

  	
   

  	
  1,263.8758

  	
   

  	
  0.00

  	
   

  	
  31,914.89

  	
   

  	
  268,085.11

  	
   

  	
  3,191.489

  	
   

  	
  268.08511

  	
   

  	
  300,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Craig H. Deery*

  	
   

  	
  100.0000

  	
   

  	
  250,000.00

  	
   

  	
  29,120.91

  	
   

  	
  244,615.60

  	
   

  	
  2,912.091

  	
   

  	
  244.61560

  	
   

  	
  273,736.51

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  13,744.0419

  	
   

  	
  $

  	
  744,497.64

  	
   

  	
  $

  	
  426,261.02

  	
   

  	
  $

  	
  3,580,592.48

  	
   

  	
  42,626.102

  	
   

  	
  3,580.59248

  	
   

  	
  $

  	
  4,006,853.50

  	
   

  
																					

 

* Denotes Rollover ShareholderExhibit 10.7

 

Execution Copy

 

MANAGEMENT AGREEMENT

 

MANAGEMENT AGREEMENT (this "Agreement") made as of
this 21st day of August, 2003 by and among Bruckmann, Rosser,
Sherrill & Co., LLC, a Delaware limited liability company ("BRS"),
FS Private Investments III LLC (d/b/a Jefferies Capital Partners), a Delaware
limited liability company ("Jefferies" and, together with BRS,
the "Service Providers" and each individually, a "Service
Provider"), and Sheridan Acquisition Corp. (the "Company"),
a Delaware corporation to be merged with and into The Sheridan Group, Inc., a
Maryland corporation ("TSG").

 

W  I  T  N
E  S  S  E  T  H:

 

WHEREAS, the Company desires to retain the Service Providers to provide
business and organizational strategy, financial and investment management and
advisory services to the Company upon the terms and conditions hereinafter set
forth, and the Service Providers are willing to undertake such obligations.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties, intending to be legally bound, agree as
follows:

 

1.                                               Appointment.  The Company hereby engages the Service
Providers, and the Service Providers hereby agree, upon the terms and subject
to the conditions set forth herein, to provide certain services to the Company
as described in Section 3 hereof.

 

2.                                               Term.  The term of this Agreement (the "Term")
shall be for an initial term expiring ten years after the date hereof.  Such term shall be renewed automatically for
additional one-year terms thereafter unless the Service Providers or the
Company shall give notice in writing within 90 days before the expiration of
the initial term or any one-year renewal thereof of its desire to terminate
this Agreement.  The provisions of Section
6 and such other provisions of this Agreement as the context so requires shall
survive the termination of this Agreement.

 

3.                                               Duties
of the Service Providers.  The
Service Providers shall provide the Company with business and organizational
strategy, financial and investment management and advisory services, as the
Company may reasonably request from time to time, as well as investment banking
and financial advisory services in connection with the closing of the
transactions under the Stock Purchase Agreement dated August 21, 2003 (the
"Purchase Agreement") by and among the Company, TSG and the
shareholders, optionholders and warrantholders of TSG (collectively, the "Services").

 

The Company will use the Services of the Service Providers and the
Service Providers will make themselves available for the performance of the
Services upon reasonable notice.  The
Service Providers will perform the Services at the times and places reasonably
requested by the Company to meet its needs and requirements, taking into
account other engagements that the Service Providers may have.

 

 

3.1.                                  Exclusions
from Services.  Notwithstanding
anything in the foregoing to the contrary, the following services are
specifically excluded from the definition of "Services":

 

(i)                                           Independent
Accounting Services.  Accounting
services rendered to the Company or the Service Providers by an independent
accounting firm or accountant (i.e., an accountant who is not an employee of
the Service Providers);

 

(ii)                                      Legal
Services.  Legal services rendered
to the Company or the Service Providers by an independent law firm or attorney
(i.e., an attorney who is not an employee of the Service Providers);

 

(iii)                                 Transaction
Services.  Except in connection with
the Purchase Agreement, Services rendered in connection with any transaction
(including, without limitation, any merger, acquisition, recapitalization,
divestiture or financing) in which the Company or any of its subsidiaries or
affiliates may be, or may consider becoming, involved ("Transaction
Services"); it being understood that before the Company or any of its
subsidiaries or affiliates engages any person or entity to provide any
Transaction Services, BRS and Jefferies shall be first approached and shall
have a 30 day period during which they may decide (upon the mutual agreement of
the Service Providers) to perform (either jointly or severally), for an
additional fee to be established at such time, any such Transaction Services;
and

 

(iv)                                    Independent
Actuarial Services.  Actuarial
services rendered to the Company or the Service Providers by an independent
actuarial firm or actuary (i.e., an actuary who is not an employee of the
Service Providers).

 

4.                                               Powers
of the Service Providers.  So that
they may properly perform their duties hereunder, the Service Providers shall,
subject to Section 7 hereof, have the authority to do all things necessary and
proper to carry out the duties set forth in Section 3.

 

5.                                               Compensation
and Reimbursement for Services.

 

(a)                                         As
consideration payable to the Service Providers or any of their affiliates for
providing the Services to the Company, the Company shall pay to the Service
Providers fees as follows:

 

(1)                                       for
the Services in connection with the closing of the Purchase Agreement (the
"Closing Fee"), $1.0 million to BRS and $1.0 million to Jefferies;
such amounts to be payable on the date hereof; and

 

(2)                                       (A)                                     for
the Services for the period commencing on the date hereof and ending on
December 31st of the current fiscal year of the Company (the "Interim
Period"), an amount (the "Interim Period Fee") equal
to the greater of:  (1) the product of
$500,000 and a fraction, the numerator of which shall be the number of days in
the Interim Period and the denominator of which shall be 365, or (2) 2.0% of
the EBITDA of the Company (as hereinafter defined) for the Interim Period; such
amount to be payable on the date hereof (such payment on the date hereof, if
based on subclause (A)(2), to be calculated based on the projected EBITDA of
the Company for the Interim Period).  As
used herein, "EBITDA" of the Company, for any period, shall
mean the net income attributable to continuing operations of the

 

2

 

Company and its subsidiaries on a consolidated basis for such period
adjusted to add thereto (to the extent deducted for purposes of determining
such net income for such period), (i) interest expense, (ii) income tax
expense, (iii) depreciation and amortization expense, (iv) losses which are
either extraordinary or are unusual and non-recurring, (v) any write-down of
goodwill or other intangible assets or other non-cash charges that reduced net
income for such period, (vi) any expenses for Management Fees hereunder, (vii)
any loss on the disposal of property or equipment and (viii) any fair value
adjustment to any interest rate collar expense;

 

(B)                                     for the Services
for each fiscal year commencing after the date hereof, an amount (the "Annual
Fee" and, with the Interim Period Fee and the Closing Fee,
collectively, the "Management Fees") equal to the greater
of:  (1) $500,000 or (2) 2.0% of the
EBITDA of the Company for such fiscal year; such amount to be payable in
advance in two installments on the third day of each January and July (a "Fee
Payment Date") of each such fiscal year, commencing on January 3rd
of the fiscal year immediately subsequent to the Interim Period (each such
installment to be the greater of:  (x)
$250,000 or (y) 2.0% of the EBITDA of the Company projected for the six-month
period commencing on the Fee Payment Date);

 

(C)                                     Both the Interim
Period Fee and the Annual Fee shall be paid 50% to BRS and 50% to Jefferies;
and

 

(D)                                    the amount of each
such payment or installment under subclause (A) or subclause (B) is to be
estimated (for purposes of payment on the date hereof or on any Fee Payment
Date, as the case may be) based on a current budget of the Company to be
approved by the Board of Directors of the Company; however, the actual amount
owed with respect to the Interim Period or any full fiscal year shall be
finally determined on or before the earlier of (1) the 60th day
following the end of the Interim Period or each such fiscal year or (2) the 15th
day following the preparation of the audited financial statements of the
Company for the Interim Period or such fiscal year (as the case may be); and if
the actual amount determined to be owed for the Interim Period or any such full
fiscal year differs from the amount of the Interim Period Fee or the Annual Fee
theretofore paid (or accrued) with respect to the Interim Period or such fiscal
year, (x) any additional amount owed to the Service Providers shall be promptly
paid to the Service Providers (or, if the current payment of the Interim Period
Fee or the Annual Fee is then prohibited as hereinafter provided, shall be
accrued as the date hereof in the case of the Interim Period Fee or, in the
case of an Annual Fee, as of January 3rd of the fiscal year with
respect to which the final determination has been made), and (y) any amount
theretofore paid by the Company in excess of the finally determined Interim
Period Fee or Annual Fee for such fiscal year to be credited against the amount
of the Annual Fee payable on the next Fee Payment Date (or, if the current
payment of the Interim Period Fee or the Annual Fee was prohibited as
hereinafter provided, an adjustment in the accrual therefor shall be
appropriately made).

 

Notwithstanding the foregoing, the Company shall not be required to
make any current payment of the Interim Period Fee or the Annual Fee if and for
so long as the Company is prohibited from paying any portion of the Interim
Period Fee or the Annual Fee due to restrictive covenants contained in the
[Revolving Credit Agreement, of even date herewith (the "Revolving
Credit

 

3

 

Agreement"), by and among the Company and
Fleet National Bank, a national banking association, as agent and
administrative agent for itself and such other lending institutions listed on
Schedule I thereto, as the foregoing may be amended, modified or supplemented,
from time to time]; provided that the Interim Period Fee or
the Annual Fee shall continue to accrue with interest calculated at the rate of
12% per annum (computed on the basis of a 360-day year and the actual number of
days elapsed in any year) (the "Applicable Rate"), and
compounded as of each Fee Payment Date if not paid, and shall become payable
immediately upon the earlier of:

 

(i)                                           the
Company being no longer prohibited under the [Revolving Credit Agreement] from
making the payment currently of the Interim Period Fee or the Annual Fee and
interest thereon (including, without limitation, any portion thereof which has
accrued and remains unpaid);

 

(ii)                                      the
occurrence of any payment acceleration, prior to scheduled maturity date, of
the obligations of the Company under the [Revolving Credit Agreement];

 

(iii)                                 the
payment in full of all outstanding obligations of the Company under the
[Revolving Credit Agreement];

 

(iv)                                    the
occurrence of any [Insolvency Event] (as defined in the [Revolving Credit
Agreement])  with respect to the
Company;

 

(v)                                         the
end of the Term; or

 

(vi)                                    any
Change of Control (as defined in the[Revolving Credit Agreement]).

 

Also, interest shall accrue (and shall compound as aforesaid) and be
payable by the Company on the Interim Period Fee or the Annual Fee, until paid,
if and to the extent that the Interim Period Fee or the Annual Fee is not paid
for any other reason after the date hereof.

 

(b)                                        In
addition to the payments required under Section 5(a) above, the Company
shall, at the direction of the Service Providers, pay directly or reimburse
each Service Provider for Out-of-Pocket Expenses (as hereinafter defined).  For purposes of this Agreement, the term
"Out-of-Pocket Expenses" shall mean the reasonable amounts
incurred by each Service Provider and/or their personnel in connection with the
Services including, without limitation, (i) fees and disbursements of any
independent professionals and organizations, including, without limitation,
independent auditors and outside legal counsel, investment bankers or other
financial advisors or consultants, (ii) costs of any outside services of
independent contractors such as financial printers, couriers, business
publications or similar services and (iii) transportation, per diem, telephone
calls, entertainment and all other reasonable expenses actually incurred by
each Service Provider in rendering the Services.  All direct payments and reimbursements for Out-of-Pocket Expenses
shall be made promptly upon or as soon as practicable after presentation by
each Service Provider to the Company of a statement in connection therewith.

 

4

 

6.                                               Indemnification.  The Company will indemnify and hold harmless
each of the Service Providers and their officers, directors, principals,
partners, members, employees, agents, representatives and affiliates (each
being an "Indemnified Party") from and against any and all
losses, claims, actions, damages and liabilities, joint or several, to which
such Indemnified Party may become subject under any applicable federal or state
law, made by any third party or otherwise, relating to or arising out of the
Services or other matters referred to in or contemplated by this Agreement or
the engagement of such Indemnified Party pursuant to, and the performance by
such Indemnified Party, of the Services or other matters referred to or
contemplated by this Agreement, and the Company will reimburse any Indemnified
Party for all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatening
claim, or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto. 
The Company will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability, cost or
expense is determined by a court, in a final judgment from which no further
appeal may be taken, to have resulted solely from the gross negligence or
willful misconduct of such Indemnified Party. 
The reimbursement and indemnity obligations of the Company under this Section
6 shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any affiliate of the Service
Providers and the stockholders, officers, directors, principals, partners,
members, employees, agents, representatives, affiliates and controlling persons
(if any), as the case may be, of the Service Providers and any such affiliate
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Service Providers, any
such affiliate and any such person.  The
provisions of this Section 6 shall survive the termination of this
Agreement.

 

7.                                               Independent
Contractors.  Nothing herein shall
be construed to create a joint venture or partnership between the parties
hereto or an employee/employer relationship. 
The Service Providers shall be independent contractors pursuant to this
Agreement.  Neither party hereto shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other party or to bind the other
party to any contract, agreement or undertaking with any third party.  Nothing in this Agreement shall be deemed or
construed to enlarge the fiduciary duties and responsibilities, if any, of the
Service Providers or any of their affiliates, officers, directors, partners,
employees or agents, including without limitation in any of their respective
capacities as stockholder or directors of the Company.

 

8.                                               Notices.  Any notice or other communications required
or permitted to be given hereunder shall be in writing and delivered by hand or
mailed by registered or certified mail, return receipt requested, or by
telecopier to the party to whom it is to be given at its address set forth
herein, or to such other address as the party shall have specified by notice
similarly given and the mailing date shall be deemed the date from which all
time periods pertaining to a date of notice shall run.

 

(i)                                           If
to the Company, to it at:

Sheridan Acquisition Corp.

 

5

 

11311 McCormick Road

Suite 260

Hunt Valley, MD  21031-1437

Attention:  John A. Saxton

Telephone:                 410-785-7277

Fax:                                                             410-785-7217

 

(ii)                                      If
to BRS, to it at:

 

Bruckman, Rosser, Sherrill & Co., Inc.

126 East 56th Street

New York, NY 10022

Attention:  Paul Kaminski

Telephone:                 212-521-3700

Fax:                                                             212
521-3799

 

with a copy to:

 

Dechert LLP

4000 Bell Atlantic Tower

1717 Arch Street

Philadelphia, PA  19103

Attention:                     Carmen
J. Romano

David S. Denious

Telephone:                 215-994-4000

Fax:                                                             215-994-2222

 

(iii)                                 If
to Jefferies, to it at:

 

Jefferies Capital Partners

520 Madison Avenue

8th Floor

New York, NY 10022

Attention:  James Luikart

Telephone:                 212-284-1700

Fax:                                                             212-284-1717

 

6

 

with a copy to:

 

Dechert LLP

4000 Bell Atlantic Tower

1717 Arch Street

Philadelphia, PA  19103

Attention:                     Carmen J. Romano

David S. Denious

Telephone:                 215-994-4000

Fax:                                                             215-994-2222

 

9.                                               Assignment.  This Agreement shall inure to the benefit of
and be binding upon the parties and their successors and assigns.  Upon the merger of the Company with and into
TSG, TSG, as the surviving corporation of such merger, shall succeed to all of
the Company's obligations and rights hereunder.  However, neither this Agreement nor any of the rights of the parties
hereunder may otherwise be transferred or assigned by any party hereto, except
that (i) if the Company shall merge or consolidate with or into, or sell or
otherwise transfer substantially all its assets to, another corporation which
assumes the Company's obligations under this Agreement, the Company may assign
its rights hereunder to that corporation, (ii) Jefferies may assign its rights
and obligations hereunder to any other person or entity controlled, directly or
indirectly, by Brian P. Friedman and/or James L. Luikart and (iii) BRS may assign
its rights and obligations hereunder to any other person or entity controlled,
directly or indirectly, by Bruce Bruckmann, Harold O. Rosser II, Stephen C.
Sherrill, Thomas J. Baldwin, and/or Paul Kaminski.  Any attempted transfer or assignment in violation of this Section
9 shall be void.

 

10.                                      Permissible
Activities.  Nothing herein shall in
any way preclude the Service Providers or their affiliates or their respective
officers, directors and partners from engaging in any business activities or
from performing services for its or their own account or for the account of
others, including, without limitation, companies which may be in competition
with the business conducted by the Company.

 

11.                                      General.  No amendment or waiver of any provision of
this Agreement, or consent to any departure by any party from any such
provision, shall in any event be effective unless the same shall be in writing
and signed by each of the parties to this Agreement and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.  The
waiver of any party of any breach of this Agreement shall not operate or be
construed to be a waiver of any subsequent breach.

 

12.                                      Entire
Agreement.  This Agreement contains the
entire agreement between the parties hereto and supersedes all prior agreements
and understandings, oral and written, among the parties hereto with respect to
the subject matter hereof.

 

13.                                      Section
Headings; Counterparts.  The section
headings contained herein are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.  The Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

7

 

14.                                      Applicable
Law.  This agreement and the rights
and obligations of the parties hereunder shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of New York,
without giving effect to the conflict of laws principals thereof.  Each of the parties hereto hereby
irrevocably submits to the exclusive jurisdiction of any Federal court sitting
in the Southern District of New York over any suit, action or proceeding
arising out of or relating to this agreement. 
Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted or not prohibited by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient
forum.  Each of the parties hereto
hereby irrevocably consents to the service of process in any suit, action or
proceeding by sending the same by certified mail, return receipt requested or
by overnight courier service, to the address of such party set forth in Section
8 or in the records of the Company.  EACH PARTY
HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION BROUGHT
HEREUNDER OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

15.                                      Severability.  Any section, subsection, clause, sentence,
provision, subparagraph or paragraph of this Agreement held by a court of
competent jurisdiction to be invalid, illegal or ineffective shall not impair,
invalidate or nullify the remainder of this Agreement, but the effect thereof
shall be such section, subsection, clause, sentence, provision, subparagraph or
paragraph so held to be invalid, illegal or ineffective.

 

8

 

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.

 

	
  BRUCKMANN, ROSSER, SHERRILL & CO., LLC

  
	
   

  
	
  By:

  	
  /s/ Thomas Baldwin

  	
   

  
	
          Name: Thomas Baldwin

  
	
          Title:   Managing Director

  
	
   

  
	
  FS PRIVATE INVESTMENTS III, LLC

  
	
   

  
	
  By:

  	
  /s/ James Luikart

  	
   

  
	
          Name: James Luikart

  
	
          Title:   Executive Vice President

  
	
   

  
	
   

  
	
  SHERIDAN ACQUISITION CORP.

  
	
   

  
	
  By:

  	
   /s/ J. Rice Edmonds

  	
   

  
	
          Name: J. Rice Edmonds

  
	
          Title    Vice President

  

 

*     *     *

 

The undersigned, as the surviving corporation in the merger of the
undersigned and Sheridan Acquisition Corp., hereby acknowledges that as a
result of such merger it has succeeded to all the rights and obligations of
Sheridan Acquisition Corp. under the foregoing Agreement.

 

	
  THE SHERIDAN GROUP, INC.

  
	
   

  
	
  By:

  	
  /s/ John A. Saxton

  	
   

  
	
          Name: John A. Saxton

  
	
          Title:   President and Chief Executive Officer

  

 

9

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