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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
Commission file number 0-24986
EMCARE HOLDINGS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3645287
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1717 MAIN STREET, SUITE 5200, DALLAS, TEXAS 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 712-2000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK,
PAR VALUE $.01
PER SHARE (THE
"COMMON STOCK")
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
As of March 21, 1997, the aggregate market value of voting stock held
by non-affiliates was $191,147,817.
As of March 21, 1997, there were shares 8,168,797 of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the 1997 Annual Meeting is incorporated into Part
III of this Form 10-K by reference.
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INDEX TO
ANNUAL REPORT ON FORM 10-K
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PART I
ITEM 1. BUSINESS.............................................. 3
ITEM 2. PROPERTIES............................................ 13
ITEM 3. LEGAL PROCEEDINGS..................................... 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS...................................... 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................... 15
ITEM 6. SELECTED FINANCIAL DATA............................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS......................................... 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.................................................. 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.................................. 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT............................................ *
ITEM 11. EXECUTIVE COMPENSATION................................ *
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................. *
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.......................................... *
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K................................... 42
SIGNATURES ...................................................... 47
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* Incorporated by reference to the Company's Proxy Statement for its 1997
Annual Meeting, which the Company anticipates filing with the Securities
and Exchange Commission on or before April 30, 1997.
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PART I
ITEM 1. BUSINESS.
EmCare Holdings Inc. ("Holdings," together with its
subsidiaries and affiliates the "Company") provides physician practice
management in hospital emergency departments ("EDs") and other practice
settings. The Company has managed emergency physician practices for more than
20 years primarily in hospitals with higher volume EDs. The Company recruits
physicians, evaluates their credentials, and arranges contracts and schedules
for their services. The Company also assists in such operational areas as staff
coordination, quality assurance, departmental accreditation, billing,
recordkeeping, third party payment, and other administrative services.
The Company markets its services primarily to hospitals with
EDs that have more than 12,000 patient visits per year and multi-site systems
(collectively referred to as "hospitals"). At December 31, 1996, the Company
had management contracts relating to 139 EDs in 19 states with approximately
2.5 million patient visits per year. In addition to the Company's higher volume
emergency physician services management, the Company provides physician
services management for lower volume emergency medicine practices and
in-patient physician group practices. The Company also provides billing
services for emergency physician services management contracts and provides
physician placement services, primarily on a locum tenens (temporary) basis,
across a broad range of practice specialties.
The Company is a Delaware corporation, incorporated in
January 1992 for the purpose of effecting a recapitalization in which it became
the parent company of its predecessor, EmCare, Inc. The Company completed its
initial public offering of securities in December 1994. The Company's services
are provided through its corporate and other subsidiaries and under agreements
with certain professional associations and corporations. References to the
"Company" are to the Company or to the Company along with its predecessors,
subsidiaries, and such professional associations and corporations, as the
context indicates.
The principal executive office of the Company is located at
1717 Main Street, Suite 5200, Dallas, Texas 75201. The Company's telephone
number at this office is (214) 712-2000.
This Form 10-K contains both disclosures concerning
historical matters and forward looking statements. For purposes of the Private
Securities Litigation Reform Act of 1995, the reader should consider any
statements not solely addressing historical matters to be forward looking
statements subject to the protection of the act. Such forward looking
statements involve risks and uncertainties that could cause the Company's
actual results to differ significantly from such statements. These risks and
uncertainties include the constantly changing health care environment, the pace
of new business and acquisition activity, the payment rates and coverage for
health care services, and the transition of the Company's billing activities
from outside vendors to a subsidiary of the Company.
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MARKET OVERVIEW
Hospitals have been greatly affected by changes in the United
States health care industry during the last several years, including the
increasing use of capitation and other fixed payment systems that shift
financial risk from payors to providers. The evolving managed care environment
requires hospitals to be more cost effective in all aspects of their
operations, including the recruiting, scheduling, retaining, and managing of
physicians, and billing and collecting for their services. As a result, many
hospitals have turned to outside management organizations like the Company for
physician practice management services.
There are approximately 5,200 hospitals in the United States
that operate EDs. Approximately 80% of these hospitals use outsourced
physicians to staff their EDs. The groups to which ED services are outsourced
are either national groups, regional groups, or small local groups. The
national groups serve approximately 20% of the market. Approximately 40% of EDs
use local physician groups that manage only one or two EDs. The Company
believes that these groups are encountering increasing difficulty in
controlling costs and satisfying recordkeeping and other administrative
requirements as demanded in today's evolving health care industry. As a result,
the Company believes that there are significant consolidation opportunities
within the emergency physician practice management industry.
EDs are typically the hospital's most visible operation to
the public and generate approximately 40% of inpatient admissions. The Company
believes that EDs will continue to be essential to serve the health care needs
of the public in cases of unpredictable, acute, and serious trauma and illness.
Emergency physicians act as primary care physicians both to
patients requiring emergency services and to patients who are less seriously
ill or injured and who do not otherwise have access to a physician. Using the
ED to treat less seriously ill or injured patients is perceived to be
inefficient. Health care organizations such as the Company, however, are
developing express care units within or contiguous to the ED so that physicians
can treat these patients in a more cost effective setting while maximizing the
ED's resources. The Company believes that with proper procedures, staffing, and
configuration, EDs can provide cost effective primary care while maintaining
their essential emergency care function.
In addition to hospitals, the market for physician practice
management includes integrated health care delivery and financing systems.
These systems, which include health maintenance organizations ("HMOs") and
other third party payors, large employers, and hospitals in various
combinations, must address the same issues of recruiting, scheduling, and
managing physicians that hospitals face in managing their EDs. The Company
believes that these systems will increasingly turn to outside organizations,
either on an outsource or joint venture basis, to arrange and manage the
professional component of their services.
Changes in the United States health care industry are also
eroding the traditional relationship between physicians and their patients.
Increasing practice complexity and costs, declining per patient revenues
resulting from new types of payments, and declining patient volume resulting
from steerage of patients to HMOs and other groups have led many physicians to
affiliate themselves with organizations that can provide the capital resources,
information, and practice management expertise that physicians need in today's
environment.
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STRATEGY
The Company's objective is to continue to grow as a high
quality, cost effective provider of emergency physician practice management
services in an increasingly competitive managed care environment. The Company's
strategies to achieve this objective are as follows.
GROWTH THROUGH ACQUISITIONS. The Company intends to continue
to pursue the growth of its physician practice management business by acquiring
local and regional groups. These groups are faced with increasing pressure to
provide systems and services requiring the resources and management expertise
of a larger organization specializing in ED practice management. Since January
1995 the Company has added 74 EDs and seven other practice settings through
acquisitions.
GROWTH THROUGH MARKETING. Through marketing efforts, the
Company intends to obtain new ED contracts both by replacing existing
management companies and by contracting with hospitals that have not previously
outsourced ED practice management. The Company markets its services primarily
to hospitals with higher volume EDs and multi-site systems. Since January 1995
the Company has added 12 EDs through its marketing efforts.
EXPAND SERVICES OF EDS. The Company intends to expand the use
of the facilities and systems of its higher volume EDs to provide cost
effective care to patients who require less urgent services and who do not
otherwise have access to a physician. The Company will therefore continue to
assist its hospital clients in establishing "express care units" within or in
conjunction with their EDs to permit more cost effective treatment of lower
acuity ED patients. In addition, the Company has continuing discussions with
HMOs and other managed care organizations concerning the use of EDs to provide
medical services to their participants. These efforts are designed to expand ED
capabilities and increase patient volume.
ASSIST PHYSICIANS IN A MANAGED CARE ENVIRONMENT. The Company
intends to provide to physicians certain resources necessary to compete in
today's managed care environment, including access to patients, capital
resources, information systems, and expertise in third party payment programs
and practice management. These advantages enhance the Company's ability to
retain high quality physicians.
ASSIST CLIENTS TO CONTROL COSTS. The Company intends to use
its experience in physician practice management to help its hospital clients
control costs while providing consistent high quality care. In addition to the
economic advantages from expanding the uses of ED facilities, these efforts
include assisting clients in developing standardized procedures and protocols
that reduce unnecessary diagnostic testing and aligning the economic interests
of the physicians with the productivity of the ED.
RECENT ACQUISITIONS
In 1996, the Company acquired six physician practice
management companies providing ED services to hospitals in Arkansas,
California, Illinois, Louisiana, Oklahoma, and Texas. The related physician
practices had 627,000 patient visits in 1996. The acquisitions established new
markets for the Company in California, Illinois,
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and Oklahoma. The Company acquired these companies for an aggregate of $39.9
million, which consisted of $29.3 million in cash, $9.1 million of obligations
payable over two to seven years, and 56,355 shares of Common Stock valued at an
average of $26.62 per share, or an aggregate of $1.5 million. One-third of the
shares will be issued and delivered to the respective sellers on each of the
next three anniversaries of the closing date of their transaction. The payment
schedule of the obligations depends upon certain criteria applicable to the
contracts that the respective companies held as of the closings. The sellers of
the acquired companies agreed not to compete against the Company for the three
years immediately after each respective acquisition. The Company allocated $2.0
million of the acquisition consideration to these non-competition agreements.
In 1995, the Company acquired three physician practice
management companies. Two of these companies provide ED services to hospitals
in Arkansas, Maryland, Pennsylvania, and Virginia. The related physician
practices had 237,000 patient visits in 1996. The third company provides
in-patient physician services to hospitals in Maryland. The acquisitions
established new markets for the Company in Arkansas and the mid-Atlantic region
of the United States. In 1995 the Company also acquired an emergency medicine
billing company in Pennsylvania that provides billing services to emergency
physician groups who supply professional services to EDs in eight states. The
Company acquired these companies for an aggregate of $26.9 million, which
consisted of $16.7 million in cash, $2.9 million of obligations payable over
two to seven years, and 433,333 shares of Common Stock valued at $16.88 per
share, or an aggregate of $7.3 million. The sellers of the acquired companies
agreed not to compete against the Company for the three years immediately after
each respective acquisition. The Company allocated $1.3 million of the
acquisition consideration to these non-competition agreements.
EMERGENCY PHYSICIAN PRACTICE MANAGEMENT
The Company's principal activity is providing physician
practice management to EDs. The Company generally is responsible for
recruiting, evaluating credentials, and scheduling qualified emergency
physicians to staff the EDs. The ED coverage provided by the Company generally
includes scheduling a group of physicians to be on duty on a 24-hour, 365-day
basis. The Company also provides administrative support for the hospital and
the physicians. As of December 31, 1996, the Company had contracts to provide
physician practice management in 139 EDs.
During the year ended December 31, 1996, approximately 90% of
the Company's net revenue was attributable to the emergency physician practice
management business. The Company usually experiences a slight increase in net
revenue above its otherwise normal levels in the months of January and
December. This increase is due to the cold and flu season, which increases the
patient volumes in the EDs.
RECRUITING AND CREDENTIALING. Recruiting and evaluating the
credentials of physicians are essential services provided by the Company to its
hospital clients. The Company recruits physicians by: (i) contacting physicians
who reside in or near the location involved or who have expressed an interest
in relocating there, and (ii) mailing opportunity bulletins to a larger group
of physicians residing in adjacent areas. The Company prescreens responses to
determine which candidates satisfy the qualifications established by the
hospital. The Company also verifies the licensing, training, and professional
references of the final candidates. After this qualification
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process, the Company arranges interviews for the physicians with hospital
personnel and coordinates their visits to the community to ensure professional
and personal compatibility. The Company then supervises all arrangements
relating to the commencement of the selected physicians' services, including
their relocation if necessary.
MEDICAL DIRECTORS. The Company generally has a physician
under contract at each ED to be the on-site medical director. This physician
coordinates the delivery of the Company's services and integrates them with the
hospital's operations. The medical director also works with the hospital's
medical staff and administration in such areas as quality assurance, risk
management, and departmental accreditation.
Through the medical director, the Company assists the
hospital's development of clinical protocols to provide consistent diagnostic
and treatment methodologies for ED patients. An example of a protocol is the
laboratory tests routinely given for patients with specific symptoms. As the
Company must develop these protocols with each hospital's medical staff, the
protocols vary from hospital to hospital. The Company believes that its
experience, including its many years of case histories, enables it to provide
assistance in a broad array of clinical settings.
QUALITY ASSURANCE SYSTEM. The Company provides a computerized
quality assurance and improvement system that a number of its hospital clients
use to assist physicians in maintaining the consistency and improving the
quality of services to patients. This system, which allows the ED staff to
review and evaluate the type and quality of care provided, promotes
consistency, objectivity, and confidentiality, while reducing clerical time
spent generating forms or reports. This quality assurance software is revised
and upgraded on a regular basis. This system also facilitates compliance with
the requirements of accreditation agencies and the management of professional
liability exposure.
SUPPORT SERVICES. The Company provides a broad range of
support services and resources to hospitals and physicians. These services
include accounting, billing, recordkeeping, and other administrative services.
In addition, the Company assists its hospital clients in dealing with more
general concerns, including fiscal constraints, marketing the EDs, and using
the EDs as a source of primary medical care. The Company also assists its
hospital clients in negotiations with HMOs and other managed care organizations
when capitation or other risk shifting payment models are involved.
EXPRESS CARE UNITS. In conjunction with its emergency
physician practice management activities, the Company seeks to generate
additional sources of revenue for its hospital clients by utilizing each ED's
existing facilities and systems. The Company has worked with several of its
hospital clients to develop "express care units" in which less serious cases
can be treated on a separate schedule rather than competing for priority with
emergency cases, allowing efficient treatment of additional patients.
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INFORMATION SYSTEMS
The Company recently entered into a contractual agreement
with a software firm for the purchase, training, and maintenance of a
customized Emergency Department Information System ("EDIS"). This system will
enhance the Company's existing internal proprietary Clinical Information System
Repository. As a result, the Company will be able to improve its analysis of
physician practice patterns, develop physician profiles, identify costs and
resource utilization by diagnosis and physician, and use such information to
assist physicians in identifying the most cost efficient patterns of quality
practice. In addition, this system will provide the Company with specific
clinical payment and other data to use in managed care negotiations. The
Company spent $241,000 in 1996 and expects to spend $1.1 million in 1997 in the
rollout of this initiative to 60 identified client sites.
The Company maintains several computer databases. For
physician recruiting, the Company has an extensive proprietary database of
emergency and other physicians. The Company maintains and updates this database
through licensed databases, personal contacts, professional journal
advertising, mail solicitation, and telemarketing. The Company's other online
databases contain hospital, risk management, payment program, financial, and
marketing information that it acquires on a daily basis. The Company believes
that the availability of timely information is essential to its business,
particularly in the rapidly changing medical market of the United States. The
Company intends to continue to invest in technology to develop and enhance its
information systems.
OTHER SERVICES
In addition to its emergency physician practice management
for both higher and lower volume EDs, the Company provides billing services,
locum tenens (temporary) and permanent physician staffing services across a
broad range of medical specialties, and physician practice management in areas
other than emergency medicine. During the year ended December 31, 1996,
approximately 10% of the Company's net revenue was attributable to these
ancillary businesses.
BILLING SUBSIDIARY. In September 1995, the Company acquired
Reimbursement Technologies, Inc. ("RTI"), a billing company. As of January 1,
1996, the Company began to perform internally the billing on some of its
independent billing contracts. Previously the Company engaged third party
billing companies to perform this function. As of December 31, 1996, the
Company had transferred to RTI the billing responsibilities on 37 of the
Company's 59 independent billing contracts previously performed by third party
billing companies. The Company plans to continue transferring to RTI all
remaining third party independent billing contracts as well as newly acquired
independent billing contracts. RTI also performs billing services for 18
outside clients.
PHYSICIAN PLACEMENT SERVICES. The Company provides locum
tenens (temporary) and permanent physician staffing services across a broad
range of specialties, including anesthesia, emergency medicine, family
practice, internal medicine, obstetrics/gynecology, pathology, radiology, and
surgery. Hospitals, clinics, individual physicians, managed care plans, and
other health care organizations require temporary staffing to meet short-term
staffing needs resulting from vacations, continuing medical education, seasonal
shifts in patient volume, and other factors. Temporary physician staffing also
complements the Company's physician practice management. These staffing
services permit the Company to satisfy the staffing needs
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at the EDs, particularly during the start-up stage of managing an ED. The
Company also provides permanent placement for a fixed fee. Physician placement
is largely conducted by the Company in Texas, its contiguous states, and
Florida.
NONEMERGENCY PHYSICIAN PRACTICE MANAGEMENT. The Company uses
the skills that it has developed in its ED activities to support other hospital
based clinical specialties, such as inpatient intensive care. Similar to
emergency medicine, such specialties involve overall responsibility for
hospital patients, and require high quality care and coordination with the
hospital's medical staff and attending physicians.
MARKETING
The Company's marketing efforts are centrally directed and
involve the active participation of the Company's executive officers as well as
a marketing staff of three persons at its Dallas headquarters. In marketing its
emergency physician practice management services, the Company advertises its
services in hospital and health care trade journals, attends various hospital
and physician trade conferences, and organizes meetings for hospital
administrators and medical staff to increase awareness of its services. These
activities also serve as a means of gathering information about potential
clients and obtaining feedback about hospital needs. Marketing leads concerning
new hospital clients generally result from referrals by hospital
administrators, information provided by physicians, and requests for proposals
received directly from hospitals.
The Company's proposal to a prospective hospital client is
based on its analysis of information received from the hospital, including
numbers and acuity levels of patients visiting the ED, payor mix, payment
program rates and likely changes to such rates, desired staffing levels, and
on-site evaluation visits to the ED. A proposal generally includes an overview
of the hospital's current staffing program, an evaluation of the strengths and
weaknesses of the ED, and an analysis of current versus projected revenue and
costs following commencement of the Company's management services.
CONTRACTUAL ARRANGEMENTS
The Company structures its contractual arrangements for
physician practice management in one of two ways. In certain states the Company
provides its services in conjunction with professional associations and
corporations owned by Leonard M. Riggs, Jr., M.D., the Company's Chairman of
the Board and Chief Executive Officer, or another officer of the Company who is
a physician (the "PAs"). The Company uses this structure (the "PA Structure")
to avoid uncertainty as to the scope of laws regulating the corporate practice
of medicine, for regulatory convenience, or because the Company acquired
contracts structured in that manner. Under the PA Structure, a PA enters into a
management agreement with the hospital client and contracts with physicians,
generally on an independent contractor basis, to provide the necessary medical
practice coverage. The Company provides the non-medical portion of the service
under the PA Structure pursuant to a long-term management agreement with the PA
(a "PA Management Agreement"). In other jurisdictions, a wholly owned
subsidiary of the Company contracts directly with both the hospital and the
physicians (the "EmCare Structure"). Under either structure, all decisions
regarding patient care are made exclusively by the physicians.
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HOSPITAL AND BILLING ARRANGEMENTS. Under either the PA
Structure or the EmCare Structure, the management agreement with the hospital
client grants the Company the exclusive right and responsibility to contract
with physicians to provide services at the hospitals. These management
agreements typically have terms of one to three years and renew automatically
for additional one year terms if neither party terminates the agreement at
least 90 days before the end of the then current term. Some of these agreements
require the Company to indemnify the hospital for certain losses that the
hospital may suffer, including losses resulting from a contracted physician's
malpractice.
Services performed by physicians employed by or under
contract with the Company are generally charged on a fee for service basis. The
Company's revenue is based upon such fees. These fees are either: (i) billed
and collected by the related hospital, which remits monthly to the Company a
negotiated amount (a "hospital-based billing contract"), or (ii) billed and
collected separately by the Company (an "independent billing contract"). Under
independent billing contracts, the Company assumes the financial risks related
to collection, including potential uncollectability and delays attendant to
third party payment programs. The trend is for hospitals to move toward
independent billing contracts. At December 31, 1996, approximately 47% of the
Company's hospital contracts provided for independent billing, compared with
approximately 31% at December 31, 1990. In addition, certain hospital contracts
require the hospital to pay specified amounts to supplement the Company's
revenue based upon physician fees.
PHYSICIAN RELATIONSHIPS. The Company contracts with or
employs emergency physicians to provide the medical services necessary to
fulfill the obligations to its hospital clients. The agreements with the
emergency physicians generally have one year terms and are renewable from year
to year. The emergency physicians under contract with the Company are
compensated based upon departmental performance and their individual
contribution to such performance, subject to a guaranteed minimum fixed income.
Each physician assigns to the Company all rights to fees and payments for
medical services that he or she renders. Physicians are required to hold a
currently valid license to practice in the appropriate state and to apply for
and be granted medical staff privileges at the hospital client. Such staff
privileges automatically terminate upon termination of the physician's contract
with the Company.
Hospital clients with higher volume EDs generally demand
board certified emergency physicians. While there is currently a shortage of
board certified emergency physicians, to date the Company has not been
adversely affected by such shortage. Such shortage could adversely affect the
Company in the future.
Physicians that the Company places on a locum tenens basis
generally enter into contracts with the Company that are terminable upon 30
days notice. The contracts with these physicians typically provide that they
will provide temporary services for a minimum number of weeks during a one year
period. These physicians are compensated on a per day or hour basis and
reimbursed for their travel expenses. Under the agreement with the clients, the
Company also receives payment on a per day or hour basis.
The Company considers most of the physicians under contract
with it to be independent contractors, as opposed to employees. Accordingly,
the Company does not: (i) withhold federal or state income or other employment
related taxes from the compensation paid to these independent contractor
physicians, (ii) make federal or
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state unemployment tax or Federal Insurance Contributions Act payments on their
behalf, except as described below, or (iii) provide workers' compensation
insurance to them. The Company considers these items to be the responsibility
of the physicians. No federal or state governmental agency has officially
challenged or accepted the Company's classification of these physicians as
independent contractors except the State of New York's Department of Labor. As
a result of a challenge by the State of New York's Department of Labor, the
Company pays unemployment taxes with respect to New York based physicians under
contract with it. The classification of physicians as independent contractors
depends upon the facts and circumstances of the relationship. If the Company's
classification of the physicians as independent contractors is incorrect, the
Company may be subject to retroactive taxes and penalties, which could be
material.
Under current federal tax law, a "safe harbor" from
reclassification exists if the Company's current treatment is consistent with a
long-standing practice of a significant segment of the Company's industry and
the Company satisfies certain other requirements. No assurance exists that the
Company would prevail in demonstrating the applicability of the safe harbor to
its operations if the physicians would otherwise be classified as employees. In
addition, included in recent national health care reform proposals are
provisions that could provide greater leeway to the federal government to
classify independent contractors as employees, including through elimination of
the safe harbor.
PA MANAGEMENT AGREEMENTS. Under the PA Management Agreements,
the PAs delegate to the Company the administrative, management, and support
functions (but not any functions constituting the practice of medicine) that
the PAs have agreed to provide to the hospital client. In consideration for
these services, the PAs pay the Company a monthly fee, which may be adjusted
from time to time to reflect industry practice, business conditions, and actual
expenses for administrative costs and uncollectible accounts. These fees
approximate the excess of the PAs' revenue over their expenses.
Each PA Management Agreement has a rolling ten year term.
Accordingly, on each anniversary of the PA Management Agreement the term
automatically extends for an additional year unless either party gives notice
to the contrary at least 60 days before such anniversary. The Company also may
terminate each PA Management Agreement as of any such anniversary.
Notwithstanding such termination provisions, the Company and the PAs have
acknowledged that they intend that their arrangements are permanent, subject to
the Company's right to terminate them.
GOVERNMENT REGULATION
The Company's operations and relationships are subject to a
variety of governmental and regulatory requirements, including: (i) the
prohibition of the corporate practice of medicine, and (ii) the requirements of
the Medicare and Medicaid programs. The Company believes that its arrangements
with hospitals, physicians, and the PAs comply in all material respects with
these requirements. No assurance exists, however, that regulatory authorities
will not challenge the Company's compliance with them. Such a challenge could
have a material adverse effect upon the Company.
PROHIBITION OF THE CORPORATE PRACTICE OF MEDICINE. Business
corporations such as the Company are generally prohibited under state law from
practicing medicine, exercising control over the medical decisions of
physicians, or
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engaging in certain practices with physicians, such as fee-splitting. The
Company believes that it has complied with these laws because it only performs
non-medical administrative services, does not represent that it offers medical
services, and does not exercise influence or control over the practice of
medicine by the physicians under contract with it. The Company nevertheless
uses the PA Structure in California, Illinois, Maryland, Mississippi, New
Mexico, New York, Pennsylvania, and Texas because of expansive judicial or
governmental interpretation of the corporate practice of medicine doctrine in
those states or other reasons.
MEDICARE AND MEDICAID. Payments from Medicare, Medicaid, and
other government sponsored health care programs cover a substantial portion of
the patients treated by the physicians under contract with the Company. Any
change in the policies or practices that limit payments under these programs
could adversely affect the Company.
Funds received under the Medicare and Medicaid programs are
subject to audit. Accordingly, retroactive revenue adjustments from these
programs could occur. In addition, a payment program based upon "Resource Based
Relative Value Scale" ("RBRVS") adjusts medical payments among medical
specialties. The RBRVS system became effective on January 1, 1992, with full
implementation in December 31, 1996. The RBRVS system creates a uniform payment
structure for hospital costs and physician charges independent from the
hospitals and physicians. Under the RBRVS system, the aggregate fee payments
from Medicare for certain ED procedures could decrease, which would adversely
affect the Company. If such a decrease occurred, third party payors could
follow this practice and reduce their payment practices.
Finally, federal anti-kickback and self-referral rules
prohibit: (i) the offer, payment, solicitation, or receipt of any form of
remuneration in return for the referral of Medicare or Medicaid beneficiaries
or patient care opportunities, and (ii) the purchase, lease, or order of items
or services that are covered by the Medicare or Medicaid programs in return for
such referrals. In addition, a physician may not refer Medicare or Medicaid
beneficiaries to an entity for laboratory and certain other health services if
the physician has a financial relationship with such entity. A violation of
these rules can result in substantial penalties and exclusion from the Medicare
and Medicaid programs. The Company believes that its operations do not violate
these rules.
COMPETITION
The health care industry is highly competitive. Emergency
physician practice management is subject to especially vigorous competition.
The Company provides emergency physician practice management in Alabama,
Arizona, Arkansas, California, Florida, Georgia, Illinois, Louisiana, Maryland,
Massachusetts, Mississippi, New Mexico, New York, Ohio, Oklahoma, Pennsylvania,
Texas, Virginia, and West Virginia. The Company also provides physician
placement services in Texas, the states contiguous to Texas, and Florida.
Competition in these and other geographic markets for such services is
generally based upon cost, the ability to make available physicians capable of
providing high quality care, and the reputation of the emergency physician
practice management company among hospitals and physicians. In emergency
physician practice management, competition also is based upon the ability to
increase the use of the ED, integrate the ED with the other hospital
departments, and provide value added services.
12
<PAGE> 13
The Company's national competitors in emergency physician
practice management include Spectrum Emergency Care, Inc., Coastal Physician
Group, Inc., InPhyNet Medical Management Inc., National Emergency Services,
Sterling Healthcare Group, a subsidiary of FPA Medical Management. Certain of
these competitors have substantially greater financial or other resources than
the Company. In addition, many local and regional companies exist that
provide emergency physician practice management. Finally, the Company
competes against the traditional hospital structure of internally managing
the ED.
The Company believes that the evolution of the health care
industry will blur the traditional distinctions among industry segments. The
Company expects that other companies in other health care industry segments,
such as managers of other hospital based specialties or physician group
practices, may become competitors in the area of emergency physician practice
management.
INSURANCE COVERAGE
The Company's business entails an inherent risk that the
Company could be held liable for the medical malpractice of a physician under
contract with it. The Company maintains professional liability insurance in
amounts that it considers appropriate based upon its claims experience and the
nature of its business. No assurance exists, however, that a claim will not
exceed the limits of the Company's insurance coverage.
The Company also requires the physicians under contract with
it to obtain professional liability insurance coverage and makes such insurance
available to them. This insurance coverage would cover the Company if the
Company were held liable as a co-defendant in a lawsuit against a physician or
hospital, subject to the policy's coverage limits. Although the majority of the
physicians under contact with the Company have obtained professional liability
insurance in this manner, under certain emergency physician practice management
contracts the physicians have obtained professional liability insurance through
the hospital.
SERVICE MARK
The Company has registered the service mark "EmCare" with the
United States Patent and Trademark Office. The expiration date for this service
mark is January 29, 2005.
EMPLOYEES
As of December 31, 1996, the Company had approximately 583
full-time employees. In addition, as of that date approximately 1,061 full-time
and part-time emergency physicians were under contract with the Company,
primarily on an independent contractor basis.
ITEM 2. PROPERTIES.
The Company leases its corporate headquarters office in
Dallas, Texas, pursuant to a lease expiring in 1999. The Company also leases
office space in
13
<PAGE> 14
connection with its operations in California, Florida, Illinois, Maryland,
Pennsylvania, and Texas. The Company leases such office space for terms of one
to seven years, with options to renew for additional periods.
In April 1996, the Company entered into a lease for new
office space in Pennsylvania because RTI required more space. This new lease
expires in 2003. The Company subleases the prior RTI office space to a
subtenant under a lease expiring in 1998.
The Company considers the leasing arrangements for its
corporate headquarters and its regional operations to be adequate for its
current business needs.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in the following legal proceedings.
DOJ LAWSUIT
The Company has reached an agreement in principle with
the Civil Division of the U.S. Department of Justice ("DOJ") to settle the
claims alleged against it in the civil lawsuit styled United States ex rel.
Theresa Semtner v. Emergency Physician Billing Services, Inc., et al. (Cause
No. 94-617(C)), in the United States District Court for the Western District of
Oklahoma (the "DOJ Lawsuit"). Emergency Physician Billing Services, Inc.
("EPBS") is an outside vendor that provided billing services on a contract
basis for the Company and others. The suit alleges improper coding of charges
for ED services reimbursed under the Medicare, Medicaid, CHAMPUS, and Federal
Employees Health Benefits programs.
Under the agreement in principle, the Company has agreed to
pay $7,750,000 to the United States and the various states for settlement of
the lawsuit. In return the DOJ Lawsuit will be dismissed with prejudice as to
the Company. An additional $250,000 in relator's attorneys' fees and $450,000
in other expenses is also expected to be incurred. The Company does not admit
any of the allegations of the DOJ Lawsuit or any related liability, and the
Company anticipates that the settlement will insure the Company's rights to
participate fully in the future in Medicare, Medicaid, CHAMPUS, and Federal
Employees Health Benefits programs. The agreement is subject to execution of a
definitive settlement agreement after final approval by the DOJ and the states.
OTHER LITIGATION
The Company also is a defendant in various other legal
proceedings arising in the ordinary course of business. Although the Company
cannot predict the results of such other litigation with certainty, the Company
believes that the outcome of such other litigation will not have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
14
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company completed its initial public offering in December
1994. At that time, the Common Stock began trading on the NASDAQ National
Market System under the symbol EMCR. The following table sets forth the high
and low sale prices for the Common Stock during the periods indicated.
<TABLE>
<CAPTION>
Period High Low
1995
<S> <C> <C>
First Quarter...................... $ 20 5/8 $ 13 1/8
Second Quarter..................... 20 1/2 18 1/8
Third Quarter...................... 23 3/4 17 7/8
Fourth Quarter..................... 26 7/8 19 3/8
1996
First Quarter...................... $ 30 1/2 $ 21 1/4
Second Quarter..................... 37 25 1/2
Third Quarter...................... 29 3/4 20 1/2
Fourth Quarter..................... 30 3/4 17 1/4
</TABLE>
As of March 21, 1997, the closing price of the Common Stock
was $275/8. As of that date, the Common Stock was held by approximately 94
holders of record. In addition, the Company believes that on such date there
were approximately 4,200 beneficial holders of the Common Stock.
The Company has not paid any dividends since the initial
public offering and intends to retain future earnings for reinvestment in its
business. Accordingly, the Company does not anticipate paying any cash
dividends in the foreseeable future. In addition, the Company's revolving line
of credit prohibits the Company from paying dividends and under certain
circumstances restricts the Company's subsidiaries from paying dividends.
15
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA.
FIVE YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................. $ 196,257 $ 156,826 $ 118,250 $ 95,793 $ 71,166
Professional expenses................... 156,412 123,935 94,184 75,788 57,506
--------- --------- --------- --------- ---------
Gross profit............................ 39,845 32,891 24,066 20,005 13,660
General and administrative expenses..... 18,099 16,760 13,583 12,218 9,297
Department of Justice settlement(1)..... 8,450 -- -- -- --
Depreciation and amortization(2)........ 4,153 2,503 1,433 5,846 3,566
--------- --------- --------- --------- ---------
Income from operations.................. 9,143 13,628 9,050 1,941 797
Interest income (expense), net.......... (880) 281 (1,913) (2,012) (1,551)
--------- --------- --------- --------- ---------
Income (loss) before income taxes.......
and extraordinary charge............... 8,263 13,909 7,137 (71) (754)
Income tax expense (benefit)............ 2,838 5,216 2,568 28 (53)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
charge................................. 5,425 8,693 4,569 (99) (701)
Extraordinary charge, net of taxes...... -- -- 837 -- --
--------- --------- --------- --------- ---------
Net income (loss)....................... $ 5,425 $ 8,693 $ 3,732 $ (99) (701)
========= ========= ========= ========= =========
Income (loss) per share before
extraordinary charge (3)............... $ 0.64 $ 1.05 $ 0.89 $ (0.05)
========= ========= ========= =========
Net income (loss) per share (3)......... $ 0.64 $ 1.05 $ 0.73 $ (0.05)
========= ========= ========= =========
Weighted average common and
common equivalent shares outstanding... 8,531 8,251 5,138 1,856
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
DECEMBER 31,
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------- ---------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Working capital........................ $ 19,918 $ 18,948 $ 28,041 $ 14,915 12,726
Intangible assets, net................. 72,906 36,543 11,296 6,285 10,189
Total assets........................... 138,063 80,743 55,214 41,233 38,548
Short-term debt........................ 5,589 2,956 2,033 3,402 3,546
Long-term debt......................... 34,879 2,500 2,390 15,097 16,840
Mandatory redeemable convertible
preferred stock....................... -- -- -- 14,500 14,500
Total stockholders' equity (deficit)... 61,728 52,730 34,499 (9,020) (9,622)
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
------------- ------------ ------------ ------------- ---------
OTHER FINANCIAL DATA:
<S> <C> <C> <C> <C> <C>
EBITDA
Net income (loss)...................... $ 5,425 $ 8,693 $ 3,732 $ (99) (701)
Extraordinary charge, net of taxes..... -- -- 837 -- --
Income tax expense (benefit)........... 2,838 5,216 2,568 28 (53)
Interest (income) expense, net......... 880 (281) 1,913 2,012 1,551
Depreciation and amortization.......... 4,153 2,503 1,433 5,846 3,566
----------- --------- --------- -------- --------
EBITDA(4).............................. $ 13,296 $ 16,131 $ 10,483 $ 7,787 4,363
=========== ========= ========= ======== ========
CASH FLOW DATA
Cash provided by (used in) operating
activities............................ $ 1,721 $ 8,071 $ 9,015 $ 5,291 $ (2,229)
Cash provided by (used in) investing
activities............................ (14,878) (12,560) (14,332) 727 (12,014)
Cash provided by (used in)
financing activities.................. 12,705 (1,288) 8,449 (590) 13,992
</TABLE>
(1) Please see Note 14 to the Consolidated Financial Statements in Item 8
for a discussion of the settlement of the DOJ Lawsuit.
(2) For the year ended December 31, 1993, depreciation and amortization
includes the write-off of the remaining assets related to officers'
non-competition agreements of $2.0 million and scheduled amortization of
such assets of $2.1 million.
(3) Per share amounts for 1992 are not comparable to subsequent period amounts
due to the recapitalization of the Company in February 1992 and are
therefore excluded from this table.
16
<PAGE> 17
(4) EBITDA is earnings before interest, taxes, depreciation, amortization, and
extraordinary charges. EBITDA does not represent cash flows from
operations as measured under generally accepted accounting principles. The
reader should not consider EBITDA as an indicator of the Company's cash
flows, liquidity, or operating performance. The Company has calculated its
EBITDA in the above table because certain securities analysts and
investors may use EBITDA when evaluating the Company and comparing it to
other physician practice management companies. Please be aware, however,
that all companies may not calculate EBITDA in the same manner.
Accordingly, the Company's EBITDA shown above may not be comparable to the
EBITDA calculated by other companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
INTRODUCTION
The Company is a leading provider of physician practice
management services in hospital EDs and other practice settings. The Company
recruits and evaluates the credentials of physicians and arranges contracts and
schedules for their services. The Company has managed emergency physician
practices for more than 20 years primarily in larger hospitals with higher
volume EDs. At December 31, 1996, the Company had management contracts relating
to 139 EDs in 19 states with approximately 2.5 million patient visits per year.
In addition to the Company's higher volume emergency physician practice
management services, the Company provides physician management services for
in-patient care, lower volume emergency medicine practices, and a primary care
physician group practice. The Company also provides billing services for
emergency physician practice management contracts and physician placement
services, primarily on a locum tenens basis, across a broad range of practice
specialties.
The table below sets forth for the periods indicated the
percentage of net revenue contributed by emergency physician practice
management and other services.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Emergency Physician Practice Management 90.3% 92.4% 92.8%
Other Services 9.7 7.6 7.2
-------- -------- --------
100.0% 100.0% 100.0%
======== ======== ========
</TABLE>
Management believes its emergency physician practice
management business should continue to realize steady internal growth. Although
the emergency physician practice management business is consolidating, the
market is still highly fragmented. Acquisitions have been a significant part of
the Company's growth in the past and the Company intends to continue to expand
its business through acquiring local and regional groups with high volume
contracts and favorable demographics.
Beginning in January 1994 and continuing through December
1996, the Company completed ten acquisitions involving companies providing
emergency physician practice management, thereby acquiring contracts to provide
services at 76 EDs in six new markets. The EDs associated with these contracts
accounted for net revenue of $86.9 million for the year ended December 31, 1996
(on a pro forma basis assuming the acquisitions in 1996 had been completed on
January 1, 1996). The aggregate consideration in connection with these
acquisitions was $62.1 million, which consisted of $39.2 million in cash, $14.1
million of obligations, and 489,688 shares of
17
<PAGE> 18
Common Stock valued at $8.8 million. The Company allocated $3.6 million of the
consideration to non-competition agreements.
On September 7, 1995, the Company acquired RTI, an emergency
medicine billing company that provides billing services to emergency physician
groups in eight states who supply professional services to 18 EDs. The billing
company generated revenue of $5.5 million and billed 1.2 million patient visits
for the year ended December 31, 1996. The total consideration paid for this
acquisition was $9.5 million. During 1996, the Company transferred 37 of its
independent billing contracts previously performed by third party billing
companies to RTI. The Company plans to continue transferring to RTI all
remaining third-party independent billing contracts as well as newly acquired
independent billing contracts.
The following discussion provides an analysis of the
Company's results of operations and liquidity and capital resources and should
be read in conjunction with the Consolidated Financial Statements of the
Company and the related notes.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net
revenue, certain statement of income data for the periods indicated as well as
percentage changes from period to period in the data presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 1995
----------------------------------- COMPARED COMPARED
1996 1995 1994 TO 1995 TO 1994
--------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 25.1% 32.6%
Professional expenses 79.7 79.0 79.6 26.2 31.6
Gross profit 20.3 21.0 20.4 21.1 36.7
General and administrative expenses 9.2 10.7 11.5 8.0 23.4
Department of Justice settlement 4.3 - - * N/A
Depreciation and amortization 2.1 1.6 1.2 65.9 74.7
Income from operations 4.7 8.7 7.7 (32.9) 50.6
Income before income taxes and
extraordinary charge 4.2 8.9 6.0 (40.6) 94.9
Income before extraordinary charge 2.8 5.5 3.9 (37.6) 90.3
* Not a meaningful figure.
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET REVENUE. Net revenue increased $39.5 million, or 25.1%,
to $196.3 million for the year ended December 31, 1996 from $156.8 million for
the year ended December 31, 1995. Of this increase, $33.2 million was
attributable to increased revenue from the Company's ED contracts. Net revenue
from other services increased $6.3 million, contributing 4.0% of the 25.1%
total period-to-period increase. This consists of $4.2 million attributable to
the Company's billing companies and an increase of $2.1 million attributable to
other non-ED services.
Same ED contract revenue increased $3.6 million, or 3.2%, to
$114.9 million for the year ended December 31, 1996 from $111.3 million for the
year ended December 31, 1995, contributing 2.3% of the 25.1% total
period-to-period increase. "Same ED" revenue consists of revenue derived from
EDs under management from the beginning of the prior period through the end of
the subsequent period. New ED
18
<PAGE> 19
contracts generated by the Company's marketing activities contributed $9.2
million of the increase in net revenue, or 5.9% of the 25.1% total
period-to-period increase. Acquisitions contributed $27.5 million of the
increase in net revenue, or 17.5% of the 25.1% total period-to-period increase.
Included in the period-to-period increase in net revenue is a negative impact
of $7.1 million, or 4.6% of the 25.1% total period-to-period increase, caused
by the loss of contracts.
PROFESSIONAL EXPENSES. Professional expenses primarily
consist of fees paid to physicians under contract with the Company, collection
fees relating to independent billing contracts billed by vendors, operating
expenses for the Company's billing subsidiaries, and professional liability
insurance premiums for physicians under contract. Professional expenses
increased by $32.5 million, or 26.2%, to $156.4 million for the year ended
December 31, 1996 from $123.9 million for the year ended December 31, 1995.
This increase was primarily attributable to the addition of 64 ED contracts in
1996. The increase in professional expenses also includes $5.6 million
attributable to other services of which $3.4 million is due to the Company's
billing subsidiaries. As a percentage of net revenue, professional expenses
increased to 79.7% in 1996 from 79.0% in 1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased by $1.3 million, or 8.0%, to $18.1 million
for the year ended December 31, 1996 from $16.8 million for the year ended
December 31, 1995. As a percentage of net revenue, general and administrative
expenses decreased from 10.7% in 1995 to 9.2% in 1996. The Company in 1996 has
been able to add additional revenue growth with minimal increases in corporate
overhead. The one-time non-recurring charge of $8.45 million relates to the
Company's agreement in principle with the DOJ to settle the claims alleged
against it in the civil lawsuit styled United States ex rel. Theresa Semtner v.
Emergency Physician Billing Services, Inc., et al. (see Note 14 to the
Consolidated Financial Statements for a detailed discussion of this
settlement).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
consists principally of amortization of goodwill, contracts, and non-competition
agreements entered into in connection with business acquisitions. Depreciation
and amortization increased by $1.7 million, or 65.9%, to $4.2 million for the
year ended December 31, 1996 from $2.5 million for the year ended December 31,
1995, principally due to acquisitions.
INTEREST INCOME/EXPENSE. Interest expense increased by
$577,000, or 88.5%, to $1.2 million for the year ended December 31, 1996 from
$652,000 for the year ended December 31, 1995, principally due to interest on
the line of credit as a result of borrowings for acquisitions made in 1996.
Interest income decreased by $584,000, or 62.6%, to $349,000 for the year ended
December 31, 1996 from $933,000 for the year ended December 31, 1995, primarily
due to lower cash balances available for investment as a result of the
Company's acquisitions in 1996.
INCOME TAXES. The Company's effective tax rate decreased to
34.3% for the year ended December 31, 1996 from 37.5% for the year ended
December 31, 1995, due principally to the reversal of a tax valuation
allowance.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET REVENUE. Net revenue increased $38.5 million, or 32.6%,
to $156.8 million for the year ended December 31, 1995 from $118.3 million for
the year ended December 31, 1994. Of this increase, $35.2 million was
attributable to increased
19
<PAGE> 20
revenue from the Company's ED contracts. Net revenue from other services
increased $3.3 million, contributing 2.8% of the 32.6% total period-to-period
increase. This consists of $2.0 million attributable to the Company's acquired
billing company, an increase of $1.5 million attributable to the Company's
management of primary care physician group practices, and a decrease of
$200,000 attributable to other non-ED services.
Same ED contract revenue increased $8.4 million, or 9.1%, to
$100.9 million for the year ended December 31, 1995 from $92.5 million for the
year ended December 31, 1994, contributing 7.1% of the 32.6% total
period-to-period increase. New ED contracts generated by the Company's
marketing activities contributed $15.3 million of the increase in net revenue,
or 12.9% of the 32.6% total period-to-period increase. Acquisitions contributed
$17.5 million of the increase in net revenue, or 14.8% of the 32.6% total
period-to-period increase. Included in the period-to-period increase in net
revenue is a negative impact of $6.0 million, or 5.1% of the 32.6% total
period-to-period increase, caused by the loss of contracts.
PROFESSIONAL EXPENSES. Professional expenses increased by
$29.7 million, or 31.6%, to $123.9 million for the year ended December 31, 1995
from $94.2 million for the year ended December 31, 1994. This increase was
primarily attributable to the addition of new ED contracts. Expenses relating
to other services increased by $3.6 million from period-to-period, including
$2.1 million related to the acquired billing company. As a percentage of net
revenue, professional expenses decreased to 79.0% in 1995 from 79.6% in 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses increased by $3.2 million, or 23.4%, to $16.8 million
for the year ended December 31, 1995 from $13.6 million for the year ended
December 31, 1994. This increase is primarily attributable to the incremental
administrative costs related to the new EDs under management. As a percentage
of net revenue, general and administrative expenses decreased from 11.5% in
1994 to 10.7% in 1995. The Company has been able to add additional revenue
growth with minimal increases to its corporate overhead.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased by $1.1 million, or 74.7%, to $2.5 million for the year ended
December 31, 1995 from $1.4 million for the year ended December 31, 1994,
principally due to the acquisitions.
INTEREST INCOME/EXPENSE. Interest expense decreased by $1.6
million, or 72.7%, to $652,000 for the year ended December 31, 1995 from $2.2
million for the year ended December 31, 1994, principally due to the repayment
of $14.5 million of subordinated debt in December 1994. Interest income
increased by $602,000, or 182%, to $933,000 for the year ended December 31,
1995 from $331,000 for the year ended December 31, 1994, primarily due to
higher cash balances available for investment as a result of the Company's
initial public offering in December 1994 and higher interest rates applicable
to invested cash.
INCOME TAXES. The Company's effective tax rate increased to
37.5% for the year ended December 31, 1995 from 36% for the year ended December
31, 1994, due principally to non-deductible amortization expense arising from
acquisitions.
20
<PAGE> 21
QUARTERLY RESULTS
The following table presents certain quarterly financial
information for the eight quarters ended December 31, 1996. This information
has been prepared on the same basis as the audited Consolidated Financial
Statements of the Company appearing elsewhere in this Annual Report on Form
10-K and include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the quarterly results
when read in conjunction with the audited Consolidated Financial Statements of
the Company and the related notes.
<TABLE>
<CAPTION>
1996 CALENDAR QUARTERS
----------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net revenue $44,235 $47,874 $48,198 $55,950
Gross profit 8,920 9,842 9,832 11,251
Net income (loss)(1) 2,335 2,577 2,726 (2,213)
Net income (loss) per share $0.28 $0.30 $0.32 $(0.26)
Weighted average common and common equivalent shares
outstanding 8,433 8,615 8,553 8,520
(1) The fourth quarter of 1996 has a one time charge of $8.45 million related to
the DOJ settlement (see Note 14 in the Consolidated Financial Statements for
a detailed discussion).
</TABLE>
<TABLE>
<CAPTION>
1995 CALENDAR QUARTERS
----------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net revenue $34,540 $38,062 $40,480 $43,744
Gross profit 7,386 7,904 8,141 9,460
Net income 2,016 2,147 2,145 2,385
Net income per share 0.25 0.26 0.26 0.28
Weighted average common and common equivalent shares
outstanding 7,911 8,308 8,330 8,456
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF LIQUIDITY. At December 31, 1996, the Company had
$19.9 million in working capital, an increase of $1.0 million from December 31,
1995. Working capital decreased $9.1 million in 1995. At December 31, 1996, the
Company's principal sources of liquidity consisted of: (i) cash and cash
equivalents aggregating $7.3 million, (ii) accounts receivable totaling $46.4
million, and (iii) $35.9 million in borrowing capacity under a revolving term
credit facility ("the Revolver") with a bank.
1996. For the year ended December 31, 1996, $1.7 million in
cash was provided by operations as revenue growth from new and existing EDs and
the accrual for the DOJ settlement more than offset the growth in accounts
receivable, the decrease of deferred income taxes, and the decrease in accrued
expenses. Cash of $14.9 million was used in investing activities for the year
ended December 31, 1996 as payments related to business acquisitions and
purchases of furniture and office equipment exceeded proceeds from the maturity
of marketable securities. Cash of $12.7 million was provided by financing
activities for the year ended December 31, 1996 as proceeds on long term debt
and the exercise of stock options exceeded payments on borrowings.
1995. In 1995, $8.1 million in cash was provided by
operations as revenue growth from new and existing EDs and increases in accrued
expenses more
21
<PAGE> 22
than offset the growth in accounts receivable and the decrease of deferred
income taxes. Cash of $12.6 million was used in investing activities for the
year ended December 31, 1995 as payments related to business acquisitions
exceeded proceeds from the maturity of marketable securities. Cash of $1.3
million was used in financing activities for the year ended December 31, 1995
as payments on long-term debt exceeded proceeds from borrowings and the
exercise of stock options.
1994. In 1994, $9.0 million in cash was provided by
operations as revenue growth from new and existing EDs, increases in accrued
expenses, and decreases in prepaid expenses more than offset the growth in
accounts receivable. Cash of $14.3 million was used in investing activities for
the year ended December 31, 1994 primarily to acquire a business, upgrade the
Company's information systems, and acquire marketable securities. Cash of $8.4
million was provided by financing activities for the year ended December 31,
1994 primarily as a result of net proceeds of $25.3 million from the Company's
initial public offering, of which $14.5 million was used to retire the
subordinated notes.
ACCOUNTS RECEIVABLE. Accounts receivable are a key component
of the Company's working capital. Accounts receivable totaled $46.4 million at
December 31, 1996, an increase of $16.6 million over December 31, 1995. The
timing of payments on the Company's accounts receivable can vary significantly
depending on whether the related contract is a hospital-based or independent
billing contract. Independent billing receivables have a significantly longer
collection cycle than hospital-based billing receivables because of the process
of billing and collecting from third-party payor programs and private payors.
The number of days revenue in average receivables was 71 days for the year
ended December 31, 1996, compared to 59 days and 60 days for the years ended
December 31, 1995 and 1994, respectively. This increase is due to the build-up
of accounts receivable as a result of the transition of independent billing
contracts from third-party billing companies to the company's billing
subsidiary as well as accounts receivable acquired through acquisitions. In
connection with independent billing contracts, the Company incurs, and can
expect to incur in the future, negative cash flow during the start-up phase
(typically six months or more after the contract is initiated).
INCREASE IN REVOLVER. On March 7, 1997, the Company entered
into an agreement to increase the borrowing capacity under the Revolver from
$50 million to $100 million. Under the Revolver, a bank acts as the
administrative agent for a syndicate of lenders. The Revolver permits the
Company to borrow up to $100 million for working capital and acquisition
purposes. The Revolver matures on March 7, 2000. Borrowings under the Revolver
bear interest at variable rates based, at the Company's option, on the bank's
base rate or the Eurodollar rate. There was an outstanding balance of $31.6
million under the Revolver as of March 7, 1997.
PROFESSIONAL LIABILITY INSURANCE. The Company currently
procures and partially finances, and expects to continue to procure and
partially finance, professional liability insurance on behalf of most
physicians under contract with the Company. The current policy expires December
31, 1997.
CAPITAL EXPENDITURES. The Company's annual capital
expenditures have typically been for data processing equipment and leasehold
improvements at the Company's corporate offices. Capital expenditures of $2.2
million in 1996 are a result of the Company's commitment to enhance
significantly its information systems. In the foreseeable future, annual
capital expenditures are not expected to exceed $2.0 million per year.
22
<PAGE> 23
WORKING CAPITAL REQUIREMENTS. The Company anticipates that
funds generated from operations, together with funds available under the
Revolver, will be sufficient to meet its working capital requirements and debt
obligations and to finance any necessary capital expenditures for the
foreseeable future. Expansion of the Company's business through acquisitions
may require additional funds, which to the extent not provided by internally
generated sources, cash and marketable securities, and the Revolver, would
require the Company to seek additional debt or equity financing.
INFLATION
The Company's business is labor intensive with extensive
reliance on independent contractor physicians. Fees paid to such physicians
tend to increase during periods of inflation and when shortages in the labor
market occur. Restrictions exist on payments by government and private medical
insurance programs and pressure continues to contain the growth in the costs of
such programs. The Company bears the risk that the payment rates set by such
programs will not keep pace with inflation. Although the moderate inflation
rates of the past several years have not posed significant problems for the
Company, a substantial increase in the rate of inflation without a
corresponding increase in payment rates would adversely affect the Company's
business.
23
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
EmCare Holdings Inc.
We have audited the accompanying consolidated balance sheets
of EmCare Holdings Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of EmCare Holdings Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
February 18, 1997,
except for Note 5, as to which the date is
March 7, 1997
24
<PAGE> 25
EMCARE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,329 $ 7,781
Marketable securities -- 1,507
Accounts receivable, net 46,413 29,813
Prepaids and other current assets 2,016 766
-------- --------
Total current assets 55,758 39,867
Furniture and office equipment, net 4,418 3,384
Deferred tax assets 4,981 949
Other assets:
Goodwill 58,488 29,602
Contracts 15,463 7,064
Non-competition agreements 6,104 4,141
Deferred financing costs and other 694 493
-------- --------
80,749 41,300
Less accumulated amortization 7,843 4,757
-------- --------
72,906 36,543
-------- --------
Total assets $138,063 $ 80,743
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 326 $ 254
Accrued expenses:
Physician fees 10,623 8,520
Accrued salaries and other compensation 5,579 3,280
Collection fees 344 1,637
Accrued federal and state income taxes 1,463 1,781
Department of Justice settlement 8,379 --
Other accrued liabilities 3,206 2,242
Deferred tax liabilities 331 249
Current portion of long-term debt 5,589 2,956
-------- --------
Total current liabilities 35,840 20,919
Long-term debt, less current portion 34,879 2,500
Professional liability insurance 5,616 4,594
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares - 5,000,000
No shares issued or outstanding -- --
Common stock, $0.01 par value:
Authorized shares - 25,000,000
Issued and outstanding shares - 8,150,000 and
8,011,000 in 1996 and 1995 82 80
Shares to be issued 1,500 --
Additional paid-in-capital 43,096 41,025
Retained earnings 17,050 11,625
-------- --------
Total stockholders' equity 61,728 52,730
-------- --------
Total liabilities and stockholders' equity $138,063 $ 80,743
======== ========
</TABLE>
See accompanying notes
25
<PAGE> 26
EMCARE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net revenue $ 196,257 $ 156,826 $ 118,250
Professional expenses 156,412 123,935 94,184
--------- --------- ---------
Gross profit 39,845 32,891 24,066
Expenses:
General and administrative 18,099 16,760 13,583
Department of Justice settlement 8,450 -- --
Depreciation 1,124 651 262
Amortization 3,029 1,852 1,171
--------- --------- ---------
30,702 19,263 15,016
--------- --------- ---------
Income from operations 9,143 13,628 9,050
Interest expense (1,229) (652) (2,244)
Interest income 349 933 331
--------- --------- ---------
Income before income taxes and extraordinary charge 8,263 13,909 7,137
Income tax expense 2,838 5,216 2,568
--------- --------- ---------
Income before extraordinary charge 5,425 8,693 4,569
Extraordinary charge from early extinguishment of
debt, net of income tax benefit of $471 -- -- 837
--------- --------- ---------
Net income $ 5,425 $ 8,693 $ 3,732
========= ========= =========
Income per share before extraordinary charge $ 0.64 $ 1.05 $ 0.89
Extraordinary charge, net of taxes -- -- 0.16
--------- --------- ---------
Net income per share $ 0.64 $ 1.05 $ 0.73
========= ========= =========
Weighted average common and common equivalent
shares outstanding 8,531 8,251 5,138
========= ========= =========
</TABLE>
See accompanying notes
26
<PAGE> 27
EMCARE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
COMMON STOCK TO PAID-IN EARNINGS
STOCK BE ISSUED CAPITAL (DEFICIT) TOTAL
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 19 $ -- $ (8,239) $ (800) $ (9,020)
Exercise of stock options -- -- 9 -- 9
Conversion of mandatorily redeemable
convertible preferred stock 29 -- 14,471 -- 14,500
Issuance of 2,587,500 common shares in
public offering 26 -- 25,252 -- 25,278
Net income -- -- -- 3,732 3,732
-------- -------- -------- -------- --------
Balance at December 31, 1994 74 -- 31,493 2,932 34,499
Exercise of stock options, including federal tax benefit 2 -- 2,224 -- 2,226
Issuance of stock related to acquisitions 4 -- 7,308 -- 7,312
Net income -- -- -- 8,693 8,693
-------- -------- -------- -------- --------
Balance at December 31, 1995 80 -- 41,025 11,625 52,730
Exercise of stock options, including federal tax benefit 2 -- 2,071 -- 2,073
Stock to be issued related to acquisitions -- 1,500 -- -- 1,500
Net income -- -- -- 5,425 5,425
-------- -------- -------- -------- --------
Balance at December 31, 1996 $ 82 $ 1,500 $ 43,096 $ 17,050 $ 61,728
======== ======== ======== ======== ========
</TABLE>
See accompanying notes
27
<PAGE> 28
EMCARE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,425 $ 8,693 $ 3,732
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes (6,162) (3,209) 1,865
Noncash interest expense 424 431 666
Extraordinary charge from early extinguishment of debt -- -- 1,308
Depreciation 1,124 651 262
Amortization 3,029 1,852 1,171
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (6,478) (3,557) (2,222)
Prepaids and other current assets (226) 369 2,085
Accounts payable and accrued expenses (3,444) 2,341 390
Department of Justice settlement 8,379 -- --
Professional liability insurance (350) 500 (242)
-------- -------- --------
Net cash provided by operating activities 1,721 8,071 9,015
INVESTING ACTIVITIES
Sales of marketable securities 1,507 6,261 --
Purchases of marketable securities -- -- (7,768)
Purchases of furniture and office equipment (2,212) (919) (1,170)
Payments for acquisitions and related intangibles, net of cash acquired (14,344) (17,515) (4,300)
Payments to stockholders for non-competition agreements -- -- (1,226)
Other 171 (387) 132
-------- -------- --------
Net cash used in investing activities (14,878) (12,560) (14,332)
FINANCING ACTIVITIES
Proceeds from borrowings 22,256 6,321 6,646
Payments on long-term debt (11,624) (9,102) (8,984)
Payment of subordinated debt -- -- (14,500)
Proceeds from exercise of stock options 2,073 1,493 9
Proceeds from issuance of common stock -- -- 25,278
-------- -------- --------
Net cash provided by (used in) financing activities 12,705 (1,288) 8,449
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (452) (5,777) 3,132
Cash and cash equivalents at beginning of year 7,781 13,558 10,426
-------- -------- --------
Cash and cash equivalents at end of year $ 7,329 $ 7,781 $ 13,558
======== ======== ========
</TABLE>
See accompanying notes
28
<PAGE> 29
EMCARE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
The Company is a provider of physician practice management
services in EDs in the United States. The Company recruits and evaluates the
credentials of physicians, arranges contracts for their services, assists in
monitoring their performance and arranges scheduling. In addition, the Company
assists its clients in such operational areas as staff coordination, quality
assurance, departmental accreditation, billing, record keeping, third-party
payment programs, and other administrative services. The Company markets these
services primarily to larger hospitals with higher volume EDs (more than 12,000
patient visits per year) and multi-site systems, where it believes it is able
to attract and retain higher quality physicians and establish more stable
relationships with hospital clients. The Company, through its predecessors and
affiliates, has been engaged in emergency physician practice management for
more than 20 years. As of December 31, 1996, the Company had management
contracts relating to 139 EDs in 19 states.
Emergency physician practice management is the Company's
principal line of business. In addition to the Company's higher volume
emergency physician practice management services, the Company provides
physician practice management services for lower volume emergency medicine
practices and in-patient physician group practices. The Company also provides
billing services for emergency physician practice management contracts and
physician placement services, primarily on a locum tenens basis, across a broad
range of practice specialties.
The Company structures its contractual arrangements for
physician practice management in one of two ways. In certain states, the
Company provides for its services in conjunction with PAs owned by Leonard M.
Riggs, Jr., M.D., the Company's Chairman of the Board and Chief Executive
Officer, or another officer of the Company who is a physician. The Company uses
the PA Structure to avoid uncertainty as to the scope of laws regulating the
corporate practice of medicine, for regulatory convenience, or because the
Company acquired contracts structured in that manner. Under the PA Structure,
the PA enters into a management agreement with the hospital client and
contracts with physicians, generally on an independent contractor basis, to
provide the necessary medical practice coverage. The Company provides the
non-medical portion of the service under the PA Structure pursuant to a PA
Management Agreement with the PA. In other jurisdictions, a wholly owned
subsidiary of the Company contracts directly with both the hospital and the
physicians. Under either structure, all decisions regarding patient care are
made exclusively by the physicians.
Under the PA Management Agreements, the PAs delegate to the
Company the administrative, management, and support functions (but not any
functions constituting the practice of medicine) that the PAs have agreed to
provide to the hospital client. In consideration for these services, the PAs
pay the Company a monthly fee, which may be adjusted from time to time to
reflect industry practice, business conditions, and actual expenses for
administrative costs and uncollectible accounts. These fees approximate the
excess of the PAs' revenue over their expenses.
Each PA Management Agreement has a rolling ten year term.
Accordingly, on each anniversary of the PA Management Agreement, the term
automatically extends for an additional year unless either party gives notice
to the contrary at least 60 days before such anniversary. The Company also may
terminate
29
<PAGE> 30
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
each PA Management Agreement as of any such anniversary. Notwithstanding such
termination provisions, the Company and the PAs have acknowledged that they
intend that their arrangements are permanent, subject to the Company's right to
terminate them.
The consolidated financial statements include the accounts of
Holdings and its subsidiaries and the PAs. The financial statements of the PAs
are consolidated with Holdings and its subsidiaries because Holdings has
unilateral control over the assets and operations of the PAs, and
notwithstanding the lack of technical majority ownership, consolidation of the
PAs is necessary to present fairly the financial position and results of
operations of Holdings because of the existence of a parent-subsidiary
relationship by means other than record ownership of the PAs' voting stock.
Control of the PAs by Holdings is perpetual and other than temporary because
the PAs have agreed with Holdings that they will not terminate any management
agreement or other arrangements established with Holdings, without the prior
written consent of Holdings. All significant intercompany and interaffiliate
accounts and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
NET REVENUE AND PROFESSIONAL EXPENSES. Revenue is recorded in
the period the services are rendered as determined by the respective contracts
with the health care providers. Professional expenses are based on the terms of
the respective contracts with the independent contractor physicians.
Services performed by physicians under contract with the
Company are generally charged on a fee for service basis, and the Company's
revenue is based upon such fees. These fees are either: (i) collected by the
related hospital, which remits a negotiated amount monthly to the Company, or
(ii) billed and collected independently by the Company. In independent billing
contract arrangements, the Company arranges for a subsidiary or a third-party
billing firm to bill and collect directly for services performed by these
physicians. Cost of collections is included in professional expenses.
CASH AND CASH EQUIVALENTS. Money market investments, U.S.
government agency securities, and certificates of deposit with banks with
maturities of three months or less from date of purchase are considered to be
cash equivalents. Money market investments are in overnight investment funds
whose underlying collateral is U.S. government securities.
MARKETABLE SECURITIES. Investments in marketable securities
are stated at cost, which approximates market. These investments are in U.S.
government securities and other federally-insured securities. All marketable
securities purchased by the Company are held to maturity. The marketable
securities held at December 31, 1995 matured in 1996.
ACCOUNTS RECEIVABLE. Accounts receivable are primarily
amounts due from hospitals, amounts due from third-party payors, such as
insurance companies, self-insured employers, and government-sponsored health
care programs (Medicare and Medicaid), and amounts due from patients.
Accounts receivable due under independent billing contracts
include an allowance for contractual adjustments and charity and other
adjustments, which is charged to operations based on an evaluation of potential
losses. Contractual adjustments result from the difference between the rates
for physician services performed and amounts allowed by third-party payors for
such services. Other
30
<PAGE> 31
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adjustments represent services provided to patients that are not expected to be
collected at the time service is provided.
FURNITURE AND OFFICE EQUIPMENT. Furniture and office
equipment are stated at cost. Depreciation is computed using the straight-line
method over estimated useful lives generally ranging from five to seven years.
Property under capital lease is amortized using the straight-line method over
the life of the respective lease. Such amortization is included with
depreciation expense in the accompanying financial statements.
PROFESSIONAL LIABILITY INSURANCE. Professional liability
insurance expense has been accrued based on management's expectation that it
will provide extended reporting period coverage to its independent contractor
physicians. The accruals are based on amounts provided by the Company's
professional liability insurance carriers (see Note 11). Professional liability
insurance expense is included in professional expenses.
OTHER ASSETS. The non-competition agreements, contracts, and
goodwill are recorded at cost on the date of the agreement or acquisition. The
non-competition agreements are being amortized over the terms of the
agreements, which range from two to five years. The amortization is based on
straight-line or an accelerated method, which management believes
systematically recognizes the decline over time in the value of the
non-competition agreement. Contracts acquired in business acquisitions are
valued at the date of acquisition and are being amortized on a straight line
basis over eight to twelve years. Goodwill, which represents the excess
purchase price of acquired businesses over the fair value of net assets
acquired, is being amortized on a straight-line basis over 40 years.
Deferred financing costs, which consist of costs incurred in
obtaining financing, are amortized using the effective interest method over the
term of the related debt, and such amortization is included in interest
expense.
LONG-LIVED ASSETS. The Company reviews the carrying value of
a long-lived asset if facts and circumstances suggest that it may be impaired
or that the amortization period may need to be changed. The Company considers
external factors relating to the long-lived asset, including hospital and
physician contract changes, local market developments, changes in third party
payments, national health care trends, and other publicly available
information. If these external factors indicate the long-lived asset will not
be recoverable, based upon undiscounted cash flows of the long-lived asset over
its remaining life, the carrying value of the long-lived asset will be reduced
by the estimated shortfall of discounted cash flows. The Company does not
believe there are any indicators that would require an adjustment to the
carrying value of its long-lived assets or their remaining useful lives as of
December 31, 1996.
STOCK-BASED COMPENSATION. The Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations in accounting for its
employee stock options. In accordance with APB 25, since the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. The Company
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FASB 123").
31
<PAGE> 32
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES. The Company accounts for income taxes using the
liability method as required by FASB Statement No. 109, "Accounting for Income
Taxes." Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
NET INCOME PER SHARE. Net income per share is calculated by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the dilutive effect of outstanding options calculated using the
treasury stock method.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Laws and regulations governing the Medicare and Medicaid
programs are complex and subject to interpretation. The Company believes it is
in compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing, other than the Department of Justice matter and settlement (see
Note 14). Compliance with such laws and regulations can be subject to future
government review and interpretation as well as significant regulatory action
including fines, penalties, and exclusion from the Medicare and Medicaid
programs.
RECLASSIFICATIONS. Certain prior period amounts have been
reclassified to conform with the 1996 presentation.
3. ACCOUNTS RECEIVABLE AND NET REVENUE
Accounts receivable are recorded at net realizable value. The
allowance for contractual adjustments and charity and other adjustments is
based on historical experience and future expectations. Accounts receivable
consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
---------- ---------
<S> <C> <C>
Independent billing.................................................................. $ 103,016 $61,252
Hospital contracts................................................................... 12,913 8,001
Billing receivables.................................................................. 2,161 2,042
Locum tenens......................................................................... 934 1,316
---------- -------
119,024 72,611
Less allowance for contractual adjustments and charity and other
adjustments....................................................................... 72,611 42,798
---------- -------
$ 46,413 $29,813
========== =======
</TABLE>
32
<PAGE> 33
3. ACCOUNTS RECEIVABLE AND NET REVENUE (CONTINUED)
Concentration of credit risk relating to accounts receivable
is limited by the diversity and number of contracting hospitals, physician
practices, patients, payors, and the geographic dispersion of the Company's
operations. The following is a geographic breakdown, based on hospital
location, of accounts receivable:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1995
----- -----
<S> <C> <C>
Texas ........................ 36% 39%
Maryland ..................... 17 16
Florida ...................... 14 16
Other ........................ 33 29
--- ---
100% 100%
=== ===
</TABLE>
Net revenue consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Gross revenue ............................... $314,828 $259,811 $194,863
Less provision for contractual adjustments and
charity and other adjustments ............ 118,571 102,985 76,613
-------- -------- --------
Net revenue ................................. $196,257 $156,826 $118,250
======== ======== ========
</TABLE>
A significant portion of the Company's net revenue has been
derived from one customer. This customer accounted for 9% of the Company's net
revenue in 1996 and 11% of the Company's net revenue in 1995 and 1994.
4. FURNITURE AND OFFICE EQUIPMENT
Furniture and office equipment, at cost, totaled $7,847,000
and $5,018,000 at December 31, 1996 and 1995, respectively. Accumulated
depreciation and amortization totaled $3,429,000 and $1,634,000 at December 31,
1996 and 1995, respectively.
33
<PAGE> 34
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Line of credit......................................................................... $ 14,300 $ --
Long-term debt related to acquisitions, payable in varying amounts through 2002, with
effective interest rates ranging from 7% to 14%, net of imputed interest discounts
of $1,413,000 and $336,000 at December 31, 1996 and 1995, respectively;
collateralized by accounts receivable and contract rights ($14.7 million of
long-term debt was refinanced using the Company's line of credit in January
1997)............................................................................... 25,779 5,100
Other, including capitalized lease obligations......................................... 389 356
---------- ---------
40,468 5,456
Less current portion................................................................... 5,589 2,956
---------- ----------
$ 34,879 $ 2,500
========== ==========
</TABLE>
During 1996, the Company had a revolving line of credit with
a bank for up to $50 million for working capital and acquisition purposes. On
March 7, 1997, the Company entered into a new Revolver with a bank acting as
administrative agent for a syndicate of lenders under which the Company can
borrow up to $100 million for working capital and acquisition purposes. This
revolving line of credit replaces the one that existed at December 31, 1996.
The Revolver matures on March 7, 2000. Borrowings under the Revolver bear
interest at variable rates based, at the Company's option, on the bank's base
rate or the Eurodollar rate. A per annum commitment fee varying from .1875% to
.375% depending upon the Company's ratio of funded debt to operating cash flow
is required on the unused portion of the commitment. As of March 7, 1997, there
was $31.6 million outstanding on the Revolver.
The Revolver contains covenants which, among other things,
require the Company to maintain certain financial ratios and impose certain
limitations or prohibitions on the Company with respect to the incurrence,
guaranty, or assumption of indebtedness, the payment of dividends, the
redemption or repurchase of, or other payment with respect to, the Company's
capital stock, certain cash transactions with subsidiaries and affiliates,
acquisitions, contract management maintenance, and ownership of the PAs.
Throughout 1996 and at year end the Company was in compliance with all
covenants relative to the Revolver.
As of December 31, 1996, the maturities of long-term debt
were as follows (in thousands):
<TABLE>
<S> <C> <C>
1997........................................................................... $ 6,335
1998........................................................................... 3,244
1999........................................................................... 3,203
2000........................................................................... 14,399
2001........................................................................... 14,399
Thereafter..................................................................... 301
---------
41,881
Less unamortized discount...................................................... 1,413
---------
$ 40,468
=========
</TABLE>
34
<PAGE> 35
5. LONG-TERM DEBT (CONTINUED)
Interest payments were $886,000, $289,000, and $2,317,000 in
1996, 1995, and 1994, respectively. No interest expense was incurred on debt to
stockholders and officers in 1996 or 1995. Interest expense incurred on debt to
stockholders and officers in 1994 totaled $1,672,000. The weighted average
interest rate is 6.33% and 8.07% on short-term borrowings outstanding at
December 31, 1996 and 1995, respectively.
6. BENEFIT PLANS
In 1994, the Company instituted a qualified contributory
savings plan. The plan is qualified under Section 401(k) of the Internal
Revenue Code (the "401(k) Plan"). The 401(k) Plan is open to substantially all
full-time employees of the Company or any affiliate who have completed one year
of eligible service with the Company or such affiliate. The 401(k) Plan permits
participant contributions and requires a contribution from the Company based on
the participant's contribution and the subsidiary or affiliate that employs the
participant. The 401(k) Plan also allows the Company to make other
discretionary contributions, including profit sharing contributions. The
Company contributed $944,000, $325,000, and $321,000 to the 401(k) Plan in
1996, 1995, and 1994, respectively. The contributions in 1994 included $99,000
to a plan subsequently merged into the 401(k) Plan.
The Company's matching contributions on behalf of an eligible
employee generally become fully vested if such employee reaches normal
retirement age, dies, or becomes disabled while an employee, or completes five
years of service. Prior to an eligible employee completing five years of
service, such employee will partially vest at 40%, 60%, and 80%, at the end of
such employee's second, third, and fourth years of service, respectively.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
were as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Change in tax accounting method........................................................ $ 886 $1,731
Acquired tax basis differences......................................................... 3,249 1,020
------ ------
4,135 2,751
Deferred tax assets:
Professional liability reserves........................................................ 2,432 1,575
Book over tax amortization and depreciation............................................ 486 395
Revenue recognition for tax purposes in excess of book income.......................... 2,817 1,787
Department of Justice settlement....................................................... 2,958 -
Other.................................................................................. 92 94
------ ------
8,785 3,851
Valuation allowance for deferred tax assets............................................. - (400)
------ ------
Total deferred tax assets............................................................... 8,785 3,451
------ ------
Net deferred tax assets................................................................. $4,650 $ 700
====== ======
</TABLE>
35
<PAGE> 36
Income Taxes (Continued)
7. INCOME TAXES (CONTINUED)
Significant components of the federal income tax expense were
as follows for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal......................................................... $ 8,938 $ 8,285 $ 647
State........................................................... 62 141 56
--------- --------- ---------
Total current....................................................... 9,000 8,426 703
Deferred:
Federal......................................................... (6,162) (3,210) 1,865
--------- --------- ---------
Total deferred...................................................... (6,162) (3,210) 1,865
--------- --------- ---------
$ 2,838 $ 5,216 $ 2,568
========= ========= =========
</TABLE>
The reconciliation of income tax expense computed at the
federal statutory tax rate to income tax expense is as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- --------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- --------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate....................... $ 2,892 35% $ 4,868 35% $ 2,427 34%
State income tax (net of federal tax
benefit)............................... 40 - 92 1 141 2
Nondeductible amortization.................. 242 3 219 2 - -
Reduction in valuation allowance............ (400) (5) - - - -
Other....................................... 64 1 37 - - -
--------- ---- -------- --- ------- ----
$ 2,838 34% $ 5,216 38% $ 2,568 36%
========= ==== ======== === ======= ==
</TABLE>
Income taxes paid during 1996, 1995, and 1994, were
$8,555,000, $6,124,000, and $330,000, respectively.
8. STOCK OPTIONS
The Company's Stock Option and Restricted Stock Purchase Plan
(the "Stock Option Plan") provides for the granting of stock options and
restricted stock to employees and independent contractors. These options are
issued at exercise prices approximating the market value of the common stock on
the dates of grant and vest over periods of up to five years. The options
issued to date are nonqualified for federal income tax purposes.
36
<PAGE> 37
8. STOCK OPTIONS (CONTINUED)
Pertinent information regarding the Stock Option Plan for
1996, 1995, and 1994:
<TABLE>
<CAPTION>
OPTIONS
-----------------------------------
WEIGHTED AVERAGE
OPTION PRICE RANGE EXERCISE PRICE
1996 1995 1994
-------------------- ------------------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of period $4.93-- $16.88 $10.41 830,007 729,391 501,641
Granted $20.25--$26.88 25.14 528,500 260,000 235,500
Forfeited $4.93-- $25.63 12.75 (136,100) (2,600) (6,700)
Exercised $4.93-- $16.88 9.12 (139,300) (156,784) (1,050)
--------- -------- -------
Outstanding, end of period $4.93-- $26.88 $17.47 1,083,107 830,007 729,391
========= ======== =======
Weighted average fair value of options granted during
the year $ 13.58 $ 7.72
</TABLE>
The following table summarizes information about stock
options outstanding and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------- -----------------------------------
WEIGHTED
AVERAGE REMAINING NUMBER WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL LIFE WEIGHTED AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/96 EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
- ------------------- -------------- ------------------- --------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
$4.93 113,932 5 $ 4.93 72,359 $ 4.93
$11.00-- $13.75 457,175 8 12.08 217,450 11.67
$16.88-- $23.25 118,000 10 22.42 23,000 22.34
$25.63-- $26.88 394,000 9 25.85 76,000 25.79
--------- -------
$4.93-- $26.88 1,083,107 388,809
========= =======
</TABLE>
The Company has adopted the disclosure only provisions of
FASB No. 123. Therefore, no compensation cost has been recognized for the Stock
Option Plan. Had compensation cost for the Company's Stock Option Plan been
accounted for based on the fair value at the grant date consistent with
provisions of FASB No. 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts below:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income-- as reported.................................................... $5,425 $8,693
Net income-- pro forma...................................................... 4,424 8,428
Net income per share-- as reported.......................................... 0.64 1.05
Net income per share-- pro forma............................................ 0.52 1.02
</TABLE>
The effects of applying FASB No. 123 for the presentation of
pro forma disclosures above are not necessarily representative of the effects on
reported net income for future years (i.e. first year reflects expense for only
one year's vesting, while second year will reflect expense for two years'
vesting, etc.).
37
<PAGE> 38
8. STOCK OPTIONS (CONTINUED)
The fair value of the options granted in both 1996 and 1995
were estimated at the grant date using the Black-Scholes option pricing model
with the following weighted average assumptions: expected lives of 6 years;
expected volatility of .487; and expected dividend yield of 0%. A risk-free
interest rate of 6.28% and 7.15% was used for options granted in 1996 and 1995,
respectively.
Effective May 16, 1996, the number of shares of Common Stock
available for issuance under the Stock Option Plan was increased from 1,250,000
to 3,250,000. The Company has reserved 2,952,866 shares of common stock for
issuance upon exercise of stock options. At December 31, 1996, 1,869,759 shares
were available for future grants under the Stock Option Plan.
The exercise of stock options in 1996 and 1995 resulted in a
tax benefit of $850,000 and $733,000, respectively, which was accounted for as
paid-in-capital.
9. STOCKHOLDERS' EQUITY
In December 1994, the Company issued 2,587,500 shares of
Common Stock at $11.00 per share in an initial public common stock offering.
Proceeds from the offering, net of commissions and other related expenses
totaling $3,185,000, were $25,278,000, of which $14,500,000 was used to repay
subordinated debt. In connection with the offering, the mandatorily redeemable
convertible preferred stock was converted into 2,939,976 shares of Common
Stock.
As a result of the early retirement of the subordinated debt
in December 1994, the Company incurred an extraordinary charge of approximately
$837,000 net of taxes. The extraordinary charge, before taxes, is comprised of
approximately $1,022,000 of unamortized original issue discount and $286,000 of
unamortized loan origination fees.
The Company has reserved 56,355 shares of Common Stock for
issuance in conjunction with an acquisition. See Note 13.
10. LEASES
The Company leases office space for primary terms of one to
seven years, with options to renew for additional periods. Future minimum
payments due on these noncancelable operating leases are as follows at December
31, 1996 (in thousands):
<TABLE>
<S> <C> <C>
1997............................................................................. $ 2,231
1998............................................................................. 2,205
1999............................................................................. 1,683
2000............................................................................. 1,209
2001............................................................................. 1,206
Thereafter....................................................................... 2,160
Less: Sublease income............................................................ (337)
-----------
$ 10,357
===========
</TABLE>
Rent expense under operating leases for 1996, 1995, and 1994
was $900,000, $762,000, and $662,000, respectively.
38
<PAGE> 39
11. PROFESSIONAL LIABILITY INSURANCE
The Company requires the physicians with whom it contracts
to obtain professional liability insurance coverage and makes available to the
physicians such insurance. Prior to June 1, 1989, the Company procured
professional liability insurance for the physicians on a claims-made basis and,
effective May 31, 1989, exercised its option for seven-year extended reporting
period coverage. Beginning June 1, 1989, the Company again procured insurance
coverage for professional liability claims on a claims-made basis. The current
policy expires on December 31, 1998. Although the majority of the professional
liability insurance available for physicians is procured in this manner, in
certain cases, these physicians may obtain their own professional liability
insurance directly or through the contracting hospital.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments
at December 31, 1996 and 1995 approximate fair value. The following methods and
assumptions were used by the Company in estimating its fair value disclosures
for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash
equivalents approximates its
fair value.
Marketable securities: The fair values for marketable
securities are based on quoted
market prices.
Long-term debt: The fair values of the Company's
long-term debt are estimated
using discounted cash flow analyses,
based on the Company's current
incremental borrowing rates for
similar types of borrowing arrangements.
13. ACQUISITIONS
In 1996, the Company acquired six physician practice
management companies providing ED services to hospitals in Arkansas,
California, Illinois, Louisiana, Oklahoma, and Texas. The related physician
practices had 627,000 patient visits in 1996. The acquisitions established new
markets for the Company in California, Illinois, and Oklahoma. The Company
acquired these companies for an aggregate of $39.9 million, which consisted of
$29.3 million in cash, $9.1 million of obligations payable over two to seven
years, and 56,355 shares of Common Stock valued at an average of $26.62 per
share, or an aggregate of $1.5 million. One-third of the shares will be issued
and delivered to the respective sellers on each of the next three anniversaries
of the closing date of their transaction. The payment schedule of the
obligations depends upon certain criteria applicable to the contracts that the
respective companies held as of the closings. The sellers of the acquired
companies agreed not to compete against the Company for the three years
immediately after each respective acquisition. The
39
<PAGE> 40
13. ACQUISITIONS (CONTINUED)
Company allocated $2.0 million of the acquisition consideration to these
non-competition agreements.
In 1995, the Company acquired three physician practice
management companies. Two of these companies provide ED services to hospitals
in Arkansas, Maryland, Pennsylvania, and Virginia. The related physician
practices had 237,000 patient visits in 1996. The third company provides
in-patient physician services to hospitals in Maryland. The acquisitions
established new markets for the Company in Arkansas and the mid-Atlantic region
of the United States. In 1995 the Company also acquired an emergency medicine
billing company in Pennsylvania that provides billing services to emergency
physician groups who supply professional services to EDs in eight states. The
Company acquired these companies for an aggregate of $26.9 million, which
consisted of $16.7 million in cash, $2.9 million of obligations payable over
two to seven years, and 433,333 shares of Common Stock valued at $16.88 per
share, or an aggregate of $7.3 million. The sellers of the acquired companies
agreed not to compete against the Company for the three years immediately after
each respective acquisition. The Company allocated $1.3 million of the
acquisition consideration to these non-competition agreements.
All the acquisitions have been accounted for as purchases,
and the net assets and operations are included in the Company's consolidated
financial statements as of the date of acquisition.
The following unaudited pro forma information combines the
results of operations of the Company with the acquired businesses after giving
effect to amortization of non-competition agreements, contracts, and goodwill,
and interest expense on the related long-term obligations as if the
acquisitions had occurred on January 1, 1995:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
1996 1995
------------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net revenue..................................................................... $227,836 $213,780
Net income...................................................................... 5,368 7,537
Net income per share............................................................ 0.63 0.90
</TABLE>
14. CONTINGENCIES
The Company has reached an agreement in principle with the
Civil Division of the U.S. Department of Justice to settle the claims alleged
against it in the civil lawsuit styled United States ex rel. Theresa Semtner v.
Emergency Physician Billing Services, Inc. et al. Emergency Physician Billing
Services, Inc. ("EPBS") is an outside vendor that provided billing services on a
contract basis for the Company and others. The suit alleges improper coding of
charges for ED services reimbursed under the Medicare, Medicaid, CHAMPUS, and
Federal Employees Health Benefits programs.
Under the agreement in principle, the Company has agreed to
pay $7,750,000 to the United States and the various states for settlement of
the lawsuit. In return the DOJ Lawsuit will be dismissed with prejudice as to
the Company. An
40
<PAGE> 41
14. CONTINGENCIES (CONTINUED)
additional $250,000 in relator's attorneys' fees and $450,000 in other expenses
is also expected to be incurred. The Company does not admit any of the
allegations of the DOJ Lawsuit or any related liability, and the Company
anticipates that the settlement will insure the Company's rights to participate
fully in the future in Medicare, Medicaid, CHAMPUS, and Federal Employees
Health Benefits programs. The agreement is subject to execution of a definitive
settlement agreement after final approval by the DOJ and the states. The
related settlement expenses have been accrued for in the 4th quarter in the
accompanying 1996 financial statements.
The Company is also a defendant in various other legal
proceedings arising in the ordinary course of business. Although the results of
litigation cannot be predicted with certainty, management believes that the
outcome of the pending other litigation will not have a material adverse effect
on the Company's consolidated financial statements.
15. RELATED PARTY TRANSACTIONS
In connection with servicing its independent billing
contracts, the Company enters into arrangements with companies that provide
accounts receivable management services. A director of the Company was a
director of a company that provided such services to the Company for the years
1994, 1995, and part of 1996. Management service fees paid by the Company to
this company in 1994, 1995, and 1996 were $1,102,000, $1,140,000, and
$1,167,000, respectively.
The Company believes that these arrangements have been on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Pursuant to General Instruction G(3) to Form 10-K, the
information required by Items 10, 11, 12, and 13 is incorporated by reference
to the Company's Proxy Statement for its 1997 Annual Meeting, which the Company
anticipates filing with the Securities and Exchange Commission on or before
April 30, 1997.
41
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
Financial Statement Schedule--Valuation and Qualifying
Accounts
All other schedules are excluded because they are either
inapplicable or the requested information is included in the Company's
consolidated financial statements.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
2.1 Securities Purchase Agreement, dated as of February 4, 1992, among the
Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D., William F. Miller,
III, WCAS Capital Partners II, L.P., and certain other persons
(incorporated by reference to Exhibit No. 10.17 to the Company's
Registration Statement No. 33-81830 on Form S-1).
2.2 Amendment No. 1 to Securities Purchase Agreement, dated as of May 10,
1993, among the Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D.,
William F. Miller, III, and certain other persons (incorporated by
reference to Exhibit No. 10.18 to the Company's Registration Statement No.
33-81830 on Form S-1).
2.3 Waiver and Release and Agreement Restricting Transfer of Shares, dated as
of January 15, 1994, among the Company, EmCare, Inc., Leonard M. Riggs,
Jr., M.D., William F. Miller, III, and certain other persons (incorporated
by reference to Exhibit No. 10.19 to the Company's Registration Statement
No. 33-81830 on Form S-1.).
2.4 Agreement and Plan of Merger, dated as of February 24, 1995, among the
Company, Capital Equity Associates, LLC, CEA, and its Class A Stockholders
(incorporated by reference to Exhibit No. 2.1 to the Company's Current
Report on Form 8-K filed on March 14, 1995, as amended by a Current Report
on Form 8-K/A filed on May 15, 1995).
2.5 Stock Purchase Agreement, dated September 7, 1995, among EmCare, Inc.,
RTI, and Stuart L. Wolf, the sole stockholder of RTI (incorporated by
reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K
filed on September 22, 1995, as amended by a Current Report on Form 8-K/A
filed on November 7, 1995).
</TABLE>
42
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
2.6 Stock Purchase Agreement, dated as of April 1, 1996, among the Company,
EmCare, Inc., MESA, and the MESA shareholders (incorporated by reference
to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed on
May 15, 1996, as amended by a Current Report on Form 8-K/A filed on July
15, 1996).
3.1 Charter of the Company (incorporated by reference to Exhibit Nos. 3.2 and
3.5 to the Company's Registration Statement No. 33-81830 on Form S-1).
3.2 Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the
Company's Registration Statement No. 33-81830 on Form S-1 ).
4.1 Specimen Common Stock certificate (incorporated by reference to Exhibit
No. 4.1 to the Company's Registration Statement No. 33-81830 on Form S-1).
4.2 Registration Rights Agreement, dated as of February 5, 1992, among Leonard
M. Riggs, Jr., M.D., William F. Miller, III, WCAS Capital Partners II,
L.P., and certain other persons (incorporated by reference to Exhibit No.
4.2 to the Company's Registration Statement No. 33-81830 on Form S-1).
10.1 Amended and Restated Stock Option and Restricted Stock Purchase Plan, as
amended (incorporated by reference to Exhibit No. 4.1 to the Company's
Registration Statement No. 333-12965 on Form S-8).
10.2 Non-Qualified Stock Option Agreement, dated February 4, 1992, between the
Company and Leonard M. Riggs, Jr., M.D. (incorporated by reference to
Exhibit No. 10.7 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.3 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
December 31, 1993, between the Company and Leonard M. Riggs, Jr., M.D.
(incorporated by reference to Exhibit No. 10.8 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.4 Letter Agreement Regarding Additional Non-Qualified Stock Option
Agreement, dated February 4, 1992, between the Company and Leonard M.
Riggs, Jr., M.D. (incorporated by reference to Exhibit No. 10.9 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.5 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
as of December 31, 1993, between the Company and Leonard M. Riggs, Jr.,
M.D. (incorporated by reference to Exhibit No. 10.10 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.6 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
between the Company and Leonard M. Riggs, Jr., M.D. (incorporated by
reference to Exhibit No. 10.15 to the Company's Registration Statement No.
33-81830 on Form S-1).
10.7 Non-Qualified Stock Option Agreement, dated as of February 4, 1992,
between the Company and William F. Miller, III (incorporated by reference
to Exhibit No. 10.11 to the Company's Registration Statement No. 33-81830
on Form S-1).
10.8 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
December 31, 1993, between the Company and William F. Miller, III
(incorporated by reference to Exhibit No. 10.12 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.9 Letter Agreement Regarding Additional Non-Qualified Stock Option
Agreement, dated February 4, 1992, between the Company and William F.
Miller, III (incorporated by reference to Exhibit No. 10.13 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.10 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
as of December 31, 1993, between the Company and William F. Miller, III
(incorporated by reference to Exhibit No. 10.14 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.11 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
between the Company and William F. Miller, III (incorporated by reference
to Exhibit No. 10.16 to the Company's Registration Statement No. 33-81830
on Form S-1).
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.12 Form of Amendment to Non-Qualified Stock Option Agreement issued to
Leonard M. Riggs, Jr., M.D., and William F. Miller, III, as of December
31, 1993 (incorporated by reference to Exhibit No. 10.43 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.13 Amended and Restated Employment Agreement, dated as of February 5, 1992,
between the Company and Leonard M. Riggs, Jr., M.D., with Addendum.
10.14 Amended and Restated Employment Agreement, dated as of February 5, 1992,
between the Company and William F. Miller, III, with Addendum.
10.15 Severance Agreement, dated as of November 1, 1996, between the Company
and Robert F. Anderson, II.
10.16 Third Amended and Restated Loan Agreement, dated March 7, 1997, among
the Company, EmCare, Inc., Texas Commerce Bank National Association, and
certain other banks.
10.17 Lease Agreement, dated May 23, 1989, between Elm Block Development
Limited Partnership and EmCare, Inc., as amended (incorporated by
reference to Exhibit No. 10.43 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.18 Lease Agreement, dated December 27, 1995, between Walroad Associates,
L.P. and RTI (incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.19 Stock Transfer and Option Agreement, dated as of February 24, 1997, among
EmCare, Inc., certain PAs, and Leonard M. Riggs, Jr., M.D.
10.20 Stock Transfer and Option Agreement, dated as of February 24, 1997, among
EmCare, Inc., certain PAs, and Steven W. Cooley, M.D.
10.21 Amended and Restated Memorandum of Understanding among the Company, its
subsidiaries, and certain professional associations and corporations
(incorporated by reference to Exhibit No. 10.44 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.22 Administrative Management Agreement, dated as of December 31, 1993,
between EmCare Medical Services of New York, P.C. and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.22 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.23 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between EmCare Medical Services of New York, P.C., and
EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.38 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.24 Administrative Management Agreement, dated as of December 31, 1993,
between Emergency Health Services Associates and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.23 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.25 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between Emergency Health Services Associates and EmCare
OP, L.P. (incorporated by reference to Exhibit No. 10.39 to the Company's
Registration Statement No. 33-81830 on Form S-1).
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.26 Administrative Management Agreement, dated as of December 31, 1993,
between Emergency Health Services Associates of New Mexico, P.C. and
EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.24 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.27 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between Emergency Health Services Associates of New
Mexico, P.C., and EmCare OP, L.P. (incorporated by reference to Exhibit
No. 10.40 to the Company's Registration Statement No. 33-81830 on Form
S-1).
10.28 Administrative Management Agreement, dated as of December 31, 1993,
between National Primary Care Network, P.A. and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.25 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.29 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between National Primary Care Network, P.A. and EmCare
OP, L.P. (incorporated by reference to Exhibit No. 10.41 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.30 Management Agreement, dated as of July 24, 1995, between Network Family
Physicians, P.A. and Network Family Physicians of McKinney, Inc.
(incorporated by reference to Exhibit 10.38 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.31 Management Agreement, dated as of September 22, 1995, between Bedford
Family Physicians, P.A. and Bedford Family Physicians I, Inc.
(incorporated by reference to Exhibit 10.37 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.32 Management Services Agreement, dated as of September 1, 1996, between
EmCare, Inc. and Emergency Physicians of Northern California, Inc.
10.33 Management Services Agreement, dated as of November 1, 1996, between
EmCare, Inc. and Gould Physicians, P.A.
10.34 Subcontractor Agreement, dated as of December 1, 1993, between EmCare
Medical Services of Pennsylvania, P.C. and EmCare, Inc. (incorporated by
reference to Exhibit No. 10.26 to the Company's Registration Statement No.
33-81830 on Form S-1).
10.35 Texas Operations Management Agreement, dated as of December 31, 1993,
between EmCare, Inc. and EmCare OP, L.P. (incorporated by reference to
Exhibit No. 10.27 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.36 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
Services of New York, P.C., and EmCare OP, L.P. (incorporated by reference
to Exhibit No. 10.31 to the Company's Registration Statement No. 33-81830
on Form S-1).
10.37 Credit Agreement, dated as of July 1, 1994, between Emergency Health
Services Associates, and EmCare OP, L.P. (incorporated by reference to
Exhibit No. 10.32 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.38 Credit Agreement, dated as of July 1, 1994, between Emergency Health
Services Associates of New Mexico, P.C., and EmCare OP, L.P. (incorporated
by reference to Exhibit No. 10.33 to the Company's Registration Statement
No. 33-81830 on Form S-1).
10.39 Credit Agreement, dated as of July 1, 1994, between National Primary Care
Network, P.A. and EmCare OP, L.P. (incorporated by reference to Exhibit
No. 10.30 to the Company's Registration Statement No. 33-81830 on Form
S-1).
10.40 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
Services of Pennsylvania, P.C., and EmCare OP, L.P. (incorporated by
reference to Exhibit No. 10.34 to the Company's Registration Statement No.
33-81830 on Form S-1).
11.1 Statement Re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Company.
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
23.1 Consent of Ernst & Young LLP concerning the incorporation by reference of
its report on the Company's consolidated financial statements into the
Company's Registration Statements Nos. 33-94684 and 333-12965 on Form S-8.
27.1 Financial Data Schedule (EDGAR filing only).
99.1 Financial Statement Schedule--Valuation and Qualifying Accounts.
</TABLE>
REPORTS ON FORM 8-K
None.
[SIGNATURES ON THE NEXT PAGE]
46
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date March 27, 1997 EMCARE HOLDINGS INC.
By: /s/ Leonard M. Riggs, Jr., M.D.
-----------------------------------
Name: Leonard M. Riggs, Jr., M.D.
Title: Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert F. Anderson, II Chief Financial Officer, Senior March 27, 1997
- ---------------------------------- Vice President, Secretary,
ROBERT F. ANDERSON, II and Treasurer
/s/ Andrew G. Buck Chief Accounting Officer and March 27, 1997
- ---------------------------------- Vice President
ANDREW G. BUCK
/s/ Terry Hartshorn Director March 27, 1997
- ----------------------------------
TERRY HARTSHORN
/s/ James T. Kelly Director March 27, 1997
- ----------------------------------
JAMES T. KELLY
/s/ William F. Miller, III President, Chief Operating March 27, 1997
- ---------------------------------- Officer, and Director
WILLIAM F. MILLER, III
/s/ Andrew M. Paul Director March 27, 1997
- ----------------------------------
ANDREW M. PAUL
/s/ Leonard M. Riggs, Jr., M.D. Chairman of the Board, Chief March 27, 1997
- ---------------------------------- Executive Officer, and Director
LEONARD M. RIGGS, JR., M.D.
/s/ Richard H. Stowe Director March 27, 1997
- ----------------------------------
RICHARD H. STOWE
</TABLE>
47
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
2.1 Securities Purchase Agreement, dated as of February 4, 1992, among the
Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D., William F. Miller,
III, WCAS Capital Partners II, L.P., and certain other persons
(incorporated by reference to Exhibit No. 10.17 to the Company's
Registration Statement No. 33-81830 on Form S-1).
2.2 Amendment No. 1 to Securities Purchase Agreement, dated as of May 10,
1993, among the Company, EmCare, Inc., Leonard M. Riggs, Jr., M.D.,
William F. Miller, III, and certain other persons (incorporated by
reference to Exhibit No. 10.18 to the Company's Registration Statement No.
33-81830 on Form S-1).
2.3 Waiver and Release and Agreement Restricting Transfer of Shares, dated as
of January 15, 1994, among the Company, EmCare, Inc., Leonard M. Riggs,
Jr., M.D., William F. Miller, III, and certain other persons (incorporated
by reference to Exhibit No. 10.19 to the Company's Registration Statement
No. 33-81830 on Form S-1.).
2.4 Agreement and Plan of Merger, dated as of February 24, 1995, among the
Company, Capital Equity Associates, LLC, CEA, and its Class A Stockholders
(incorporated by reference to Exhibit No. 2.1 to the Company's Current
Report on Form 8-K filed on March 14, 1995, as amended by a Current Report
on Form 8-K/A filed on May 15, 1995).
2.5 Stock Purchase Agreement, dated September 7, 1995, among EmCare, Inc.,
RTI, and Stuart L. Wolf, the sole stockholder of RTI (incorporated by
reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K
filed on September 22, 1995, as amended by a Current Report on Form 8-K/A
filed on November 7, 1995).
2.6 Stock Purchase Agreement, dated as of April 1, 1996, among the Company,
EmCare, Inc., MESA, and the MESA shareholders (incorporated by reference
to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed on
May 15, 1996, as amended by a Current Report on Form 8-K/A filed on July
15, 1996).
3.1 Charter of the Company (incorporated by reference to Exhibit Nos. 3.2 and
3.5 to the Company's Registration Statement No. 33-81830 on Form S-1).
3.2 Bylaws of the Company (incorporated by reference to Exhibit No. 3.4 to the
Company's Registration Statement No. 33-81830 on Form S-1 ).
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
4.1 Specimen Common Stock certificate (incorporated by reference to Exhibit
No. 4.1 to the Company's Registration Statement No. 33-81830 on Form S-1).
4.2 Registration Rights Agreement, dated as of February 5, 1992, among Leonard
M. Riggs, Jr., M.D., William F. Miller, III, WCAS Capital Partners II,
L.P., and certain other persons (incorporated by reference to Exhibit No.
4.2 to the Company's Registration Statement No. 333-81830 on Form S-1).
10.1 Amended and Restated Stock Option and Restricted Stock Purchase Plan, as
amended.
10.2 Non-Qualified Stock Option Agreement, dated February 4, 1992, between the
Company and Leonard M. Riggs, Jr., M.D. (incorporated by reference to
Exhibit No. 10.7 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.3 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
December 31, 1993, between the Company and Leonard M. Riggs, Jr., M.D.
(incorporated by reference to Exhibit No. 10.8 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.4 Letter Agreement Regarding Additional Non-Qualified Stock Option
Agreement, dated February 4, 1992, between the Company and Leonard M.
Riggs, Jr., M.D. (incorporated by reference to Exhibit No. 10.9 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.5 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
as of December 31, 1993, between the Company and Leonard M. Riggs, Jr.,
M.D. (incorporated by reference to Exhibit No. 10.10 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.6 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
between the Company and Leonard M. Riggs, Jr., M.D. (incorporated by
reference to Exhibit No. 10.15 to the Company's Registration Statement No.
33-81830 on Form S-1).
10.7 Non-Qualified Stock Option Agreement, dated as of February 4, 1992,
between the Company and William F. Miller, III (incorporated by reference
to Exhibit No. 10.11 to the Company's Registration Statement No. 33-81830
on Form S-1).
10.8 Amendment No. 1 to Non-Qualified Stock Option Agreement, dated as of
December 31, 1993, between the Company and William F. Miller, III
(incorporated by reference to Exhibit No. 10.12 to the Company's
Registration Statement No. 33-81830 on Form S-1).
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.9 Letter Agreement Regarding Additional Non-Qualified Stock Option
Agreement, dated February 4, 1992, between the Company and William F.
Miller, III (incorporated by reference to Exhibit No. 10.13 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.10 Amendment No. 1 to Additional Non-Qualified Stock Option Agreement, dated
as of December 31, 1993, between the Company and William F. Miller, III
(incorporated by reference to Exhibit No. 10.14 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.11 Non-Qualified Stock Option Agreement, dated as of December 31, 1993,
between the Company and William F. Miller, III (incorporated by reference
to Exhibit No. 10.16 to the Company's Registration Statement No. 33-81830
on Form S-1).
10.12 Form of Amendment to Non-Qualified Stock Option Agreement issued to
Leonard M. Riggs, Jr., M.D., and William F. Miller, III, as of December
31, 1993 (incorporated by reference to Exhibit No. 10.43 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.13 Amended and Restated Employment Agreement, dated as of February 5, 1992,
between the Company and Leonard M. Riggs, Jr., M.D., with Addendum.
10.14 Amended and Restated Employment Agreement, dated as of February 5, 1992,
between the Company and William F. Miller, III, with Addendum.
10.15 Severance Agreement, dated as of November 1, 1996, between the Company
and Robert F. Anderson, II.
10.16 Third Amended and Restated Loan Agreement, dated March 7, 1997, among
the Company, EmCare, Inc., Texas Commerce Bank National
Association, and certain other banks.
10.17 Lease Agreement, dated May 23, 1989, between Elm Block Development
Limited Partnership and EmCare, Inc., as amended (incorporated by
reference to Exhibit No. 10.43 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
10.18 Lease Agreement, dated December 27, 1995, between Walroad Associates,
L.P. and RTI (incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.19 Stock Transfer and Option Agreement, dated as of February 24, 1997,
among EmCare, Inc., certain PAs, and Leonard M. Riggs, Jr., M.D.
10.20 Stock Transfer and Option Agreement, dated as of February 24, 1997,
among EmCare, Inc., certain PAs, and Steven W. Cooley, M.D.
10.21 Amended and Restated Memorandum of Understanding among the Company, its
subsidiaries, and certain professional associations and corporations
(incorporated by reference to Exhibit No. 10.44 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.22 Administrative Management Agreement, dated as of December 31, 1993,
between EmCare Medical Services of New York, P.C. and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.22 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.23 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between EmCare Medical Services of New York, P.C., and
EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.38 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.24 Administrative Management Agreement, dated as of December 31, 1993,
between Emergency Health Services Associates and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.23 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.25 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between Emergency Health Services Associates and EmCare
OP, L.P. (incorporated by reference to Exhibit No. 10.39 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.26 Administrative Management Agreement, dated as of December 31, 1993,
between Emergency Health Services Associates of New Mexico, P.C. and
EmCare OP, L.P. (incorporated by reference to Exhibit No. 10.24 to the
Company's Registration Statement No. 33-81830 on Form S-1).
10.27 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between Emergency Health Services Associates of New
Mexico, P.C., and EmCare OP, L.P. (incorporated by reference to Exhibit
No. 10.40 to the Company's Registration Statement No. 33-81830 on Form
S-1).
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.28 Administrative Management Agreement, dated as of December 31, 1993,
between National Primary Care Network, P.A. and EmCare OP, L.P.
(incorporated by reference to Exhibit No. 10.25 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.29 Amendment No. 1 to Administrative Management Agreement, dated as of
August 17, 1994, between National Primary Care Network, P.A. and EmCare
OP, L.P. (incorporated by reference to Exhibit No. 10.41 to the Company's
Registration Statement No. 33-81830 on Form S-1).
10.30 Management Agreement, dated as of July 24, 1995, between Network Family
Physicians, P.A. and Network Family Physicians of McKinney, Inc.
(incorporated by reference to Exhibit 10.38 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.31 Management Agreement, dated as of September 22, 1995, between Bedford
Family Physicians, P.A. and Bedford Family Physicians I, Inc.
(incorporated by reference to Exhibit 10.37 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.32 Management Services Agreement, dated as of September 1, 1996, between
EmCare, Inc. and Emergency Physicians of Northern California, Inc.
10.33 Management Services Agreement, dated as of November 1, 1996, between
EmCare, Inc. and Gould Physicians, P.A.
10.34 Subcontractor Agreement, dated as of December 1, 1993, between EmCare
Medical Services of Pennsylvania, P.C. and EmCare, Inc. (incorporated by
reference to Exhibit No. 10.26 to the Company's Registration Statement No.
33-81830 on Form S-1).
10.35 Texas Operations Management Agreement, dated as of December 31, 1993,
between EmCare, Inc. and EmCare OP, L.P. (incorporated by reference to
Exhibit No. 10.27 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.36 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
Services of New York, P.C., and EmCare OP, L.P. (incorporated by reference
to Exhibit No. 10.31 to the Company's Registration Statement No. 33-81830
on Form S-1).
10.37 Credit Agreement, dated as of July 1, 1994, between Emergency Health
Services Associates, and EmCare OP, L.P. (incorporated by reference to
Exhibit No. 10.32 to the Company's Registration Statement No. 33-81830 on
Form S-1).
10.38 Credit Agreement, dated as of July 1, 1994, between Emergency Health
Services Associates of New Mexico, P.C., and EmCare OP, L.P. (incorporated
by reference to Exhibit No. 10.33 to the Company's Registration Statement
No. 33-81830 on Form S-1).
10.39 Credit Agreement, dated as of July 1, 1994, between National Primary Care
Network, P.A. and EmCare OP, L.P. (incorporated by reference to Exhibit
No. 10.30 to the Company's Registration Statement No. 33-81830 on Form
S-1).
10.40 Credit Agreement, dated as of July 1, 1994, between EmCare Medical
Services of Pennsylvania, P.C., and EmCare OP, L.P. (incorporated by
reference to Exhibit No. 10.34 to the Company's Registration Statement No.
33-81830 on Form S-1).
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
11.1 Statement Re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP concerning the incorporation by reference of
its report on the Company's consolidated financial statements into the
Company's Registration Statements Nos. 33-94684 and 333-12965 on Form S-8.
27.1 Financial Data Schedule (EDGAR filing only).
99.1 Financial Statement Schedule--Valuation and Qualifying Accounts.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EMCARE HOLDINGS INC.
STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN
(AMENDED AND RESTATED AS OF NOVEMBER 1, 1996)
Section 1. Purpose. The purpose of the EmCare Holdings Inc.
Stock Option and Restricted Stock Purchase Plan (the "Plan") is to promote the
interests of EmCare Holdings Inc., a Delaware corporation (the "Company"), and
any Subsidiary thereof and the interests of the Company's stockholders by
providing an opportunity to selected employees, officers, directors, trustees,
and consultants and advisors of the Company or any Subsidiary thereof or any
Affiliated PC as of the date of the adoption of the Plan or at any time
thereafter to purchase Common Stock of the Company. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate such employees and
persons and to encourage such employees and persons to devote their best
efforts to the business and financial success of the Company. It is intended
that this purpose will be effected by the granting of "nonqualified stock
options" and/or "incentive stock options" to acquire the Common Stock of the
Company and/or by the granting of "restricted stock." Under the Plan, the
Committee shall have the authority (in its sole discretion) to grant "incentive
stock options" within the meaning of Section 422(b) of the Code, "non-qualified
stock options" as described in Treasury Regulation Section 1.83-7 or any
successor regulation thereto, or "restricted stock" awards.
Section 2. Definitions. For purposes of the Plan, the following
terms used herein shall have the following meanings, unless a different meaning
is clearly required by the context.
2.1. "Award" shall mean an award (other than an option) of a grant
of, or the right to purchase, Common Stock under the provisions of Section 7 of
the Plan.
2.2. "Affiliated PC" shall mean any professional corporation or
professional association which provides the medical component of the services
required in respect of any arrangement where the Company or a Subsidiary of the
Company provides the non-medical component of the services required in respect
of such arrangement.
2.3. "Board of Directors" shall mean the Board of Directors of the
Company.
2.4. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.5. "Committee" shall mean the committee of the Board of Directors
referred to in Section 5 hereof.
2.6. "Common Stock" shall mean the Common Stock, $.01 par value,
of the Company.
2.7. "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
2.8. "Effective Date" shall mean the date the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act.
2.9. "Employee" shall mean (i) with respect to an ISO, any person,
including an officer, director or trustee of the Company or a Subsidiary of the
Company, who, at the time an ISO is granted to such person hereunder, is
employed on a full-time basis
1
<PAGE> 2
by the Company or any Subsidiary of the Company, and (ii) with respect to a
Non-Qualified Option and/or an Award, any person employed by, or performing
services for, the Company or any Subsidiary of the Company or any Affiliated
PC, including, without limitation, trustees, directors and officers.
2.10. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
2.11. "ISO" shall mean an Option granted to a Participant pursuant
to the Plan that constitutes and shall be treated as an "incentive stock
option" as defined in Section 422(b) of the Code.
2.12. "Non-Qualified Option" shall mean an Option granted to a
Participant pursuant to the Plan that is intended to be, and qualifies as, a
"non-qualified stock option" as described in Treasury Regulation Section 1.83-7
or any successor regulation thereto and that shall not constitute nor be
treated as an ISO.
2.13. "Option" shall mean any ISO or Non-Qualified Option granted to
an Employee pursuant to the Plan.
2.14. "Participant" shall mean any Employee to whom an Award and/or
an Option is granted under the Plan.
2.15. "Parent of the Company" shall have the meaning set forth in
Section 424(e) of the Code.
2.16. "Subsidiary of the Company" shall have the meaning set forth
in Section 424(f) of the Code, including however for the purposes of
Non-Qualified Options and/or Awards any business trust (to the extent not
included within the meaning of Section 424(f) of the Code) or limited
partnership owned 100% by the Company and/or its other Subsidiaries.
Section 3. Eligibility. Subject to the requirements of Section
5.1 hereof, Awards and/or Options may be granted to any Employee. The Committee
shall have the sole authority to select the persons to whom Awards and/or
Options are to be granted hereunder, and to determine whether a person is to be
granted a Non-Qualified Option, an ISO or an Award or any combination thereof.
No person shall have any right to participate in the Plan. Any person selected
by the Committee for participation during any one period will not by virtue of
such participation have the right to be selected as a Participant for any other
period.
Section 4. Common Stock Subject to the Plan.
4.1. Number of Shares. The total number of shares of Common Stock
for which Options and/or Awards may be granted under the Plan shall not exceed
in the aggregate three million two hundred fifty thousand (3,250,000) shares of
Common Stock (subject to adjustment as provided in Section 8 hereof).
4.2. Reissuance. The shares of Common Stock that may be subject to
Options and/or Awards granted under the Plan may be either authorized and
unissued shares or shares reacquired at any time and now or hereafter held as
treasury stock as the Board of Directors may determine. In the event that any
outstanding Option expires or is terminated for any reason, the shares
allocable to the unexercised portion of such Option may again be subject to an
Option and/or Award granted under the Plan. If any
2
<PAGE> 3
shares of Common Stock acquired pursuant to an Award or the exercise of an
Option shall have been repurchased by the Company, then such shares shall again
become available for issuance pursuant to the Plan.
4.3. Special ISO Limitations.
(a) The aggregate fair market value (determined as of the date an
ISO is granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of
the Company) shall not exceed $100,000.
(b) No ISO shall be granted to an Employee who, at the time the
ISO is granted, owns (actually or constructively under the provisions of
Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary of the Company, unless the option price is at least 110% of the fair
market value (determined as of the time the ISO is granted) of the shares of
Common Stock subject to the ISO and the ISO by its terms is not exercisable
more than five years from the date it is granted.
4.4. Limitations Not Applicable to Non-Qualified Options or Awards.
Notwithstanding any other provision of the Plan, the provisions of Sections
4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-
Qualified Option or Award granted under the Plan.
Section 5. Administration of the Plan.
5.1. Administration. The Plan shall be administered by a committee
of the Board of Directors (the "Committee") established by the Board of
Directors and consisting of no less than two persons. All members of the
Committee shall be "Non-Employee Directors" within the meaning of Rule 16b-3
promulgated under the Exchange Act, and shall qualify as "outside directors" as
defined in Section 1.162-27(e)(3) of the regulations to Section 162(m) of the
Code. The Committee shall be appointed from time to time by, and shall serve at
the pleasure of, the Board of Directors.
5.2. Grant of Options/Awards.
(a) The Committee shall have the sole authority and discretion
under the Plan (i) to select the Employees who are to be granted Options
hereunder; (ii) to designate whether any Option to be granted hereunder is to
be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of
Common Stock that may be issued under each Option, provided that the maximum
number of shares of Common Stock with respect to which Options may be granted
to any employee in any given year shall be limited to 250,000 shares; (iv) to
determine the time and the conditions subject to which Options may be exercised
in whole or in part; (v) to determine the form of the consideration that may be
used to purchase shares of Common Stock upon exercise of any Option (including
the circumstances under which the Company's issued and outstanding shares of
Common stock may be used by a Participant to exercise an Option); (vi) to
impose restrictions and/or conditions with respect to shares of Common Stock
acquired upon exercise of an Option; (vii) to determine the circumstances under
which shares of Common Stock acquired upon exercise of any Option may be
subject to repurchase by the Company; (viii) to determine the circumstances and
conditions subject to which shares acquired upon exercise of an Option may be
sold or otherwise transferred,
3
<PAGE> 4
including, without limitation, the circumstances and conditions subject to
which a proposed sale of shares of Common Stock acquired upon exercise of an
Option may be subject to the Company's right of first refusal (as well as the
terms and conditions of any such right of first refusal); (ix) to establish a
vesting provision for any Option relating to the time when (or the
circumstances under which) the Option may be exercised by a Participant,
including, without limitation, vesting provisions that may be contingent upon
(A) the Company meeting specified financial goals, (B) a change of control of
the Company or (C) the occurrence of other specified events; (x) to accelerate
the time when outstanding Options may be exercised, provided, however, that any
ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code;
and (xi) to establish any other terms, restrictions and/or conditions
applicable to any Option not inconsistent with the provisions of the Plan.
(b) Awards. The Committee shall have the sole authority and
discretion under the Plan (i) to select the Employees who are to be granted
Awards hereunder; (ii) to determine the amount to be paid by a Participant to
acquire shares of Common Stock pursuant to an Award, which amount may be equal
to, more than, or less than 100% of the fair market value of such shares on the
date the Award is granted (but in no event less than the par value of such
shares); (iii) to determine the time or times and the conditions subject to
which Awards may be made; (iv) to determine the time or times and the
conditions subject to which the shares of Common Stock subject to an Award are
to become vested and no longer subject to repurchase by the Company; (v) to
establish transfer restrictions and the terms and conditions on which any such
transfer restrictions with respect to shares of Common Stock acquired pursuant
to an Award shall lapse; (vi) to establish vesting provisions with respect to
any shares of Common Stock subject to an Award, including, without limitation,
vesting provisions which may be contingent upon (A) the Company meeting
specified financial goals, (B) a change of control of the Company or (C) the
occurrence of other specified events; (vii) to determine the circumstances
under which shares of Common Stock acquired pursuant to an Award may be subject
to repurchase by the Company; (viii) to determine the circumstances and
conditions subject to which any shares of Common Stock acquired pursuant to an
Award may be sold or otherwise transferred, including, without limitation, the
circumstances and conditions subject to which a proposed sale of shares of
Common Stock acquired pursuant to an Award may be subject to the Company's
right of first refusal (as well as the terms and conditions of any such right
of first refusal); (ix) to determine the form of consideration that may be used
to purchase shares of Common Stock pursuant to an Award (including the
circumstances under which the Company's issued and outstanding shares of Common
Stock may be used by a Participant to purchase the Common Stock subject to an
Award); (x) to accelerate the time at which any or all restrictions imposed
with respect to any shares of Common Stock subject to an Award will lapse; and
(xi) to establish any other terms, restrictions and/or conditions applicable to
any Award not inconsistent with the provisions of the Plan.
(c) Maximum Grant. Notwithstanding anything in the Plan to the
contrary, in no event shall the number of shares of Common Stock subject to
Options issued by the Committee to any Covered Employee in any given year
exceed 250,000 shares. Shares of Common Stock subject to Options which are
canceled or forfeited are counted against the maximum number of shares issuable
for the purposes of this calculation. For Options which are repriced, the
repricing transaction shall be treated as a cancellation of the original Option
and an additional grant of the repriced Option, with the shares of Common Stock
subject to both Options being counted against the maximum number of shares
which may be issued under this provision.
4
<PAGE> 5
5.3. Interpretation. The Committee shall be authorized to interpret
the Plan and may, from time to time, adopt such rules and regulations, not
inconsistent with the provisions of the Plan, as it may deem advisable to carry
out the purposes of the Plan.
5.4. Finality. The interpretation and construction by the Committee
of any provision of the Plan, any Option and/or Award granted hereunder or any
agreement evidencing any such Option and/or Award shall be final and conclusive
upon all parties.
5.5. Voting. Members of the Committee may vote on any matter
affecting the administration of the Plan or the granting of Options and/or
Awards under the Plan.
5.6. Expenses, Etc. All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons in
connection with the administration of the Plan. The Company, and its officers
and directors, shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee shall be liable for
any action, determination or interpretation taken or made in good faith with
respect to the Plan or any Option and/or Award granted hereunder.
Section 6. Terms and Conditions of Options.
6.1. ISOs. The terms and conditions of each ISO granted under the
Plan shall be specified by the Committee and shall be set forth in an ISO
agreement between the Company and the Participant in such form as the Committee
shall approve. The terms and conditions of each ISO shall be such that each ISO
issued hereunder shall constitute and shall be treated as an "incentive stock
option" as defined in Section 422(b) of the Code. The terms and conditions of
any ISO granted hereunder need not be identical to those of any other ISO
granted hereunder.
The terms and conditions of each ISO shall include the following:
(a) The option price shall be fixed by the Committee but shall in
no event be less than 100% (or 110% in the case of an Employee referred to in
Section 4.3(b) hereof) of the fair market value of the shares of Common Stock
subject to the ISO on the date the ISO is granted. For purposes of the Plan,
the fair market value per share of Common Stock as of any day shall mean the
average of the closing prices of sales of shares of Common Stock on all
national securities exchanges on which the Common Stock may at the time be
listed or, if there shall have been no sales on any such day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day the Common Stock shall not be so listed, the
average of the representative bid and asked prices quoted in the NASDAQ system
as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock
shall not be quoted on the NASDAQ system, the average of the high bid and low
asked prices, on such day in the over-the-counter market as reported by
National Quotation Bureau Incorporated, or any similar successor organization.
If at any time the Common Stock is not listed on any national securities
exchange or quoted in the NASDAQ system of the over-the-counter market, the
fair market value of the shares of Common Stock subject to an Option on the
date the ISO is granted shall be the fair market value thereof determined in
good faith by the Board of Directors.
(b) ISOs, by their terms, shall not be transferable otherwise than
by will or the laws of descent and distribution, and, during an optionee's
lifetime, an ISO shall be exercisable only by the optionee.
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<PAGE> 6
(c) The Committee shall fix the term of all ISOs granted pursuant
to the Plan (including the date on which such ISO shall expire and terminate),
provided, however, that such term shall in no event exceed ten years from the
date on which such ISO is granted (or, in the case of an ISO granted to an
Employee referred to in Section 4.3(b) hereof, such term shall in no event
exceed five years from the date on which such ISO is granted). Each ISO shall
be exercisable in such amount or amounts, under such conditions and at such
times or intervals or in such installments as shall be determined by the
Committee in its sole discretion.
(d) To the extent that the Company or any Parent or Subsidiary of
the Company is required to withhold any federal, state or local taxes in
respect of any compensation income realized by any Participant as a result of
any "disqualifying disposition" of any shares of Common Stock acquired upon
exercise of an ISO granted hereunder, the Company shall deduct from any
payments of any kind otherwise due to such Participant the aggregate amount of
such federal, state or local taxes required to be so withheld or, if such
payments are insufficient to satisfy such federal, state or local taxes, such
Participant will be required to pay to the Company, or make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of any such taxes. All matters with respect to the total amount of taxes
to be withheld in respect of any such compensation income shall be determined
by the Board of Directors in its sole discretion.
(e) In the sole discretion of the Committee the terms and
conditions of any ISO may (but need not) include any of the following
provisions:
(i) In the event a Participant shall cease to be employed
by the Company or any Parent or Subsidiary of the Company on a full-time basis
for any reason other than as a result of his death or "disability" (within the
meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO
held by such Participant at that time may only be exercised within one month
after the date on which the Participant ceased to be so employed, and only to
the extent that the Participant could have otherwise exercised such ISO as of
the date on which he ceased to be so employed.
(ii) In the event a Participant shall cease to be employed
by the Company or any Parent or Subsidiary of the Company on a full-time basis
by reason of his "disability" (within the meaning of Section 22(e)(3) of the
Code), the unexercised portion of any ISO held by such Participant at that time
may only be exercised within one year after the date on which the Participant
ceased to be so employed, and only to the extent that the Participant could
have otherwise exercised such ISO as of the date on which he ceased to be so
employed.
(iii) In the event a Participant shall die while in the
full-time employ of the Company or a Parent or Subsidiary of the Company (or
within a period of one month after ceasing to be an Employee for any reason
other than his "disability" or within a period of one year after ceasing to be
an Employee by reason of such "disability"), the unexercised portion of any ISO
held by such Participant at the time of his death may only be exercised within
one year after the date of such Participant's death and only to the extent that
the Participant could have otherwise exercised such ISO at the time of his
death. In such event, such ISO may be exercised by the executor or
administrator of the Participant's estate or by any person or persons who shall
have acquired the ISO directly from the Participant by request or inheritance.
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<PAGE> 7
6.2. Non-Qualified Options. The terms and conditions of each
Non-Qualified Option granted under the Plan shall be specified by the Committee
in its sole discretion, and shall be set forth in a written option agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each Non- Qualified Option will be such
(and each Non-Qualified Option agreement shall expressly so state) that each
Non-Qualified Option issued hereunder shall not constitute nor be treated as an
"incentive stock option" as defined in Section 422(b) of the Code but will be a
"nonqualified stock option" for federal, state and local income tax purposes.
The terms and conditions of any Non-Qualified Option granted hereunder need not
be identical to those of any other Non-Qualified Option granted hereunder.
The terms and conditions of each Non-Qualified Option agreement shall
include the following:
(a) The option (exercise) price shall be fixed by the Committee
and may be equal to, more than or less than 100% of the fair market value of
the shares of Common Stock subject to the Non-Qualified Option on the date such
Non- Qualified Option is granted, provided, however, that the option (exercise)
price shall not be less than the par value of such shares of Common Stock.
(b) The Committee shall fix the term of all Non-Qualified Options
granted pursuant to the Plan (including the date on which such Non-Qualified
Option shall expire and terminate). Such term may be more than ten years from
the date on which such Non-Qualified Option is granted. Each Non-Qualified
Option shall be exercisable in such amount or amounts, under such conditions
(including provisions governing the rights to exercise such Non-Qualified
Option), and at such times or intervals or in such installments as shall be
determined by the Committee in its sole discretion.
(c) Non-Qualified Options shall not be transferable otherwise than
by will or the laws of descent and distribution, and during a Participant's
lifetime a Non-Qualified Option shall be exercisable only by the Participant.
(d) To the extent that the Company is required to withhold any
federal, state or local taxes in respect of any compensation income realized by
any Participant in respect of a Non-Qualified Option granted hereunder or in
respect of any shares of Common stock acquired upon exercise of a Non-Qualified
Option, the Company shall deduct from any payments of any kind otherwise due to
such Participant the aggregate amount of such federal, state or local taxes
required to be so withheld or, if such payments are insufficient to satisfy
such federal, state or local taxes, or if no such payments are due or to become
due to such Participant, then, such Participant will be required to pay to the
Company, or make other arrangements satisfactory to the Company regarding
payment to the Company of, the aggregate amount of any such taxes. All matters
with respect to the total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Board of Directors in its sole
discretion.
Section 7. Terms and Conditions of Awards. The terms and
conditions of each Award granted under the Plan shall be specified by the
Committee, in its sole discretion, and shall be set forth in a written
agreement between the Participant and the Company, in such form as the
Committee shall approve. The terms and provisions of any Award granted
hereunder need not be identical to those of any other Award granted hereunder.
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<PAGE> 8
The terms and conditions of each Award shall include the following:
(a) The amount, if any, to be paid by a Participant to acquire the
shares of Common Stock pursuant to an Award shall be fixed by the Committee and
may be equal to, more than or less than 100% of the fair market value of the
shares of Common Stock subject to the Award on the date the Award is granted
(but if required by applicable law, no less than the par value of such shares).
(b) Each Award shall contain such vesting provisions, such
transfer restrictions and such other restrictions and conditions as the
Committee in its sole discretion, may determine, including, without limitation,
the circumstances under which the Company shall have the right and option to
repurchase shares of Common Stock acquired pursuant to an Award.
(c) Stock certificates representing Common Stock acquired pursuant
to an Award shall bear a legend referring to the restrictions imposed on such
stock and such other matters as the Committee may determine.
(d) To the extent that the Company is required to withhold any
federal, state or local taxes in respect of any compensation income realized by
the Participant in respect of an Award granted hereunder, or in respect of any
shares acquired pursuant to an Award; or in respect of the vesting of any such
shares of Common Stock, then the Company shall deduct from any payments of any
kind otherwise due to such Participant the aggregate amount of such federal,
state or local taxes required to be so withheld or, if such payments are
insufficient to satisfy such federal, state or local taxes, or if no such
payments are due or to become due to such Participant, then, such Participant
will be required to pay to the Company, or make other arrangements satisfactory
to the Company regarding payment to the Company of, the aggregate amount of any
such taxes. All matters with respect to the total amount of taxes to be
withheld in respect of any such compensation income shall be determined by the
Committee in its sole discretion.
Section 8. Adjustments. In the event that, after the adoption of
the Plan by the Board of Directors, the outstanding shares of the Company's
Common Stock shall be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation through reorganization, merger or consolidation,
recapitalization, reclassification, stock split, split-up, combination or
exchange of shares or declaration of any dividends payable in Common Stock, the
Board of Directors shall appropriately adjust (i) the number of shares of
Common Stock (and the option price per share) subject to the unexercised
portion of any outstanding Option (to the nearest possible full share),
provided, however, that the limitations of Section 424 of the Code shall apply
with respect to adjustments made to ISOs and (ii) the number of shares of
Common Stock for which Options and/or Awards may be granted under the Plan, as
set forth in Section 4.1 hereof, and such adjustments shall be effective and
binding for all purposes of the Plan.
Section 9. Effect of the Plan on Employment Relationship.
Neither the Plan nor any Option and/or Award granted hereunder to a Participant
shall be construed as conferring upon such Participant any right to continue in
the employ of (or otherwise provide services to) the Company or any Subsidiary
or Parent thereof, or limit in any respect the right of the Company or any
Subsidiary or Parent thereof to terminate such Participant's employment or
other relationship with the Company or any Subsidiary or Parent, as the case
may be, at any time.
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<PAGE> 9
Section 10. Amendment of the Plan. The Board of Directors may
amend the Plan from time to time as it deems desirable; provided, however,
that, without the approval of the holders of a majority of the outstanding
stock of the Company entitled to vote thereon at a meeting, the Board of
Directors may not amend the Plan (i) to increase (except for increases due to
adjustments in accordance with Section 8 hereof) the aggregate number of shares
of Common Stock for which Options and/or Awards may be granted hereunder, (ii)
to decrease the minimum exercise price specified by the Plan in respect of
ISOs, or (iii) to change the class of Employees eligible to receive ISOs under
the Plan.
Section 11. Termination of the Plan. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board of Directors, the Plan shall terminate ten years after
the date of its initial adoption by the Board of Directors. No Option and/or
Award may be granted hereunder after termination of the Plan. The termination
or amendment of the Plan shall not alter or impair any rights or obligations
under any Option and/or Award theretofore granted under the Plan.
Section 12. Effective Date of the Plan. The Plan shall be
effective as of February 4, 1992, the date on which the Plan was adopted by the
Board of Directors of the Company and approved by the holders of all the
outstanding Common Stock of the Company.
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<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 5, 1992, between EMCARE
HOLDINGS INC., a Delaware corporation (the "Company"), and LEONARD M. RIGGS,
M.D. (the "Employee").
W I T N E S S E T H:
WHEREAS the Employee is currently employed by EmCare, Inc., a Texas
corporation and a wholly owned subsidiary of the Company ("EmCare"), in the
capacity of Chief Executive Officer; and
WHEREAS the Employee is a member of the senior management of the
Company and EmCare and has access to proprietary information pertaining to the
business and operations of the Company and EmCare; and
WHEREAS the Company and the Employee desire to enter into an agreement
providing for the continued employment of the Employee in the capacity of
Chairman of the Board and Chief Executive Officer of the Company in accordance
with the terms and conditions, and for the consideration, set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Employee agree as follows:
1. Employment. (a) The Company hereby employs the Employee, and
the Employee hereby accepts such employment with the Company for the period set
forth in paragraph 2 hereof, all upon the terms and conditions hereinafter set
forth.
(b) As a condition to the Employee's employment by the Company,
the Employee affirms and represents that he is under no obligation to any
former employer or other party which is in any way inconsistent with, or which
imposes any restriction upon, the Employee's acceptance of employment hereunder
with the Company, the employment of the Employee by the Company, or the
Employee's undertakings under this Agreement.
2. Term of Employment. Except as otherwise provided in paragraph
10(g) hereof, or unless earlier terminated as hereinafter provided, the term of
the Employee's employment under this Agreement shall be for a period beginning
on the date hereof and ending on the fifth anniversary hereof (the "Employment
Term"). In the event that the Employee continues in the full-time employ of
the Company after the end of the Employment Term (it being expressly understood
and agreed that the Company does not now, nor hereafter shall have, any
obligation to continue the Employee in its employ whether or not on a full-time
basis, after said Employment Term ends), then, unless otherwise agreed by the
Employee and the Company, the Employee's continued employment with the Company
shall, notwithstanding anything to the contrary expressed or implied herein, be
terminable by the Company or the Employee at will, but shall in all other
respects be subject to the terms and conditions of this Agreement.
Notwithstanding anything to the contrary herein, as long as Employee continues
in the employ of the Company
<PAGE> 2
after the end of the Employment Term, all of the terms and conditions of this
Agreement shall remain in full force and effect notwithstanding the end of such
Employment Term.
3. Duties. (a) Office. The Employee shall be employed as the
Chairman of the Board and Chief Executive Officer of the Company and shall
report to the Board of Directors of the Company. The Employee shall perform
such executive duties as the Board of Directors may prescribe so long as such
duties are consistent with the responsibilities of the Employee prior to the
date of this Agreement and are consistent with the office and position of
Chairman of the Board of Directors and Chief Executive Officer of the Company.
The Employee shall be elected to serve as Chairman of the Board of Directors
and Chief Executive Officer of the Company during the Term of Employment, and
any failure of the Employee to be so nominated and elected (other than as a
result of the prior termination of the Employee's employment hereunder pursuant
to paragraph 8 hereof) shall constitute a termination of the Employee's
employment hereunder by the Company pursuant to subparagraph 8(d) hereof.
(b) Place of Business. The Employee's principal place of business
shall be located in Dallas, Texas, and the Employee shall not be required by
the Company to relocate without his consent. The Employee shall devote not
less than forty (40) hours per week on average to the performance of his duties
during the term of this Agreement.
(c) Services Exclusive. Except as may otherwise be approved in
advance by the Board of Directors of the Company, and except during vacation
periods and reasonable periods of absence due to sickness, personal injury or
other disability, the Employee shall devote his full time throughout the
Employment Term to the services required of him hereunder. The Employee shall
render his services exclusively to the Company during the Employment Term, and
shall use his best efforts, judgment and energy, to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position, provided, however, that the Employee may conduct such other
activities during the Employment Term as he deems appropriate and consistent
with his duties hereunder, including serving as a director of other companies
and engaging in civic and social responsibilities.
4. Salary and Bonus. (a) Annual Salary. As compensation for
the services to be performed by the Employee hereunder during the Employment
Term, the Company shall pay the Employee a base salary at the annual rate of
two hundred thousand dollars ($200,000) (the "Basic Salary", and together with
any adjustments or increments thereto being hereinafter referred to as the
"Salary"). Any increase in such salary shall be evidenced by an addendum to
this Agreement signed by the parties hereto and attached to this Agreement.
The payment of any Salary hereunder shall be subject to applicable withholding
and payroll taxes, and such other deductions as may be required under the
Company's employee benefit plans. Any Salary payable hereunder shall be paid
in equal semimonthly installments on the first and fifteenth day of each month.
(b) Salary Adjustments. On January 1, 1993 and on the first
business day of each calendar year thereafter during the Employment Term, the
annual Salary payable to the Employee hereunder for such calendar year will be
increased by an amount equal to the product of (i) the annual Salary paid to
the Employee during the immediately preceding calendar year multiplied by
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<PAGE> 3
(ii) the greater of (x) the percentage increase, if any, in the Consumer Price
Index (All Cities -- All Items) during such calendar year and (y) five percent
(5%).
(c) Bonus. During the Employment Term (and, with respect to any
Bonus payable hereunder with respect to any period prior to the termination of
the Employment Term, as soon as practicable after such termination), subject to
(i) review and approval by the Board of Directors of the Company (which
approval shall not unreasonably be withheld) and (ii) the Company's achieving
earnings from internal growth and profitability at the level specified in the
Company's annual base financial plan approved by the Board of Directors of the
Company for the immediately preceding fiscal year (the "Base Financial Plan"
for such preceding fiscal year), the Company shall pay the Employee a cash
bonus of not less than one hundred thousand dollars ($100,000) (the "Bonus")
for such preceding fiscal year; provided, however, that if the Company achieves
eighty-percent (80%) or more of the operating income specified in the Base
Financial Plan for such preceding fiscal year, the Company shall pay the
Employee a pro rata cash Bonus equal to the percent so achieved multiplied by
the full Bonus he otherwise would have been entitled to receive had the Company
achieved 100% of the operating income specified in said Base Financial Plan.
The payment of the Bonus for any fiscal year hereunder shall be subject to
applicable withholding and payroll taxes, and such other deductions as may be
required under the Company's employee benefit plans. Any Bonus payable
hereunder shall be payable no later than one month after approval by the Board
of Directors of the audited annual financial statements of the Company for the
fiscal year in respect of which such Bonus is payable (the "Financials" for
such fiscal year), and the Company shall use its best efforts to cause its
auditors to deliver such Financials within ninety (90) days after the end of
such fiscal year.
(d) Additional Compensation. At any time during the Employment
Term, the Board of Directors may, in its sole discretion, pay an additional
cash bonus, and/or issue stock options to, the Employee.
(e) Stock Options. Simultaneously with the execution and delivery
of this Agreement by the parties hereto, the Company has (i) granted to the
Employee certain "non-qualified" stock options under the EmCare Holdings Inc.
Stock Option and Restricted Stock Purchase Plan (the "Plan") pursuant to the
Non-Qualified Stock Option Agreement of even date herewith between the Company
and the Employee and (ii) authorized the grant to the Employee of certain
additional stock options under the Plan subject to certain conditions.
5. Expenses. The Company shall upon submission of expense
reports acceptable to the Company, reimburse the Employee for all reasonable
expenses incurred by the Employee in connection with the performance of his
obligations hereunder, subject to submission of supporting documentation in a
form reasonably prescribed by the Company. Reimbursements will be made in a
manner consistent with the historical policies of the Company. The obligations
of the Company under this paragraph 5 in respect of such reasonable expenses
incurred by the Employee prior to the termination of this Agreement and/or the
Employment Term shall survive such termination.
6. Benefits. In addition to the payments required by paragraphs
4 and 5 to be paid to the Employee during the Employment Term, the Employee
shall:
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<PAGE> 4
(a) be eligible to participate in the employee fringe benefits,
pension plan, life or other similar insurance plans and/or medical and health
plans or other employee welfare benefit plans described on Schedule I hereto;
(b) be entitled to six (6) weeks of annual paid vacation in
accordance with Company policy applicable to key executive employees; and
(c) be entitled to sick leave and sick pay in accordance with any
Company policy that may be applicable to key executive employees.
7. Confidentiality. The Employee hereby covenants, agrees and
acknowledges as follows:
(a) The Employee's employment hereunder creates a relationship of
confidence and trust between the Employee and the Company with respect to
certain information applicable to the Business (as such term is defined in
Section 7.01(b) of the Securities Purchase Agreement dated as of February 4,
1992 (the "Purchase Agreement") among the Company, EmCare, Inc., the Employee,
William F. Miller, and the several other individuals and entities named as
parties thereto) of the Company, its subsidiaries from time to time and any
professional associations or professional corporations which are listed on
Schedule II hereto or any other corporation, association or other entity
engaged in the Business which may hereafter be owned or controlled (directly or
indirectly) by the Company, the Employee or William F. Miller (individually, an
"Affiliate", and collectively the "Affiliates") or applicable to the business
of any client or customer of the Company or any of its subsidiaries or
Affiliates.
(b) The Company possesses and will continue to possess information
that has been created, discovered or developed by, or otherwise become known
to, it (including without limitation information created, discovered, developed
or made known by the Employee during the period of or arising out of his
employment hereunder) or in which property rights have been or may be assigned
or otherwise conveyed to the Company which information has commercial value in
the Business and is treated by the Company as confidential.
(c) The Employee also agrees that he will not without the prior
written consent of an appropriate executive officer of the Company (i) use for
his benefit or disclose at any time during his employment by the Company, or
thereafter, except to the extent required by law or by the performance by him
of his duties as an employee of the Company, any information obtained or
developed by him while in the employ of the Company with respect to the
identity of the Company's customers, transactions between the Company and its
customers and suppliers, the products, services, employees, or financial
affairs of the Company or any of its subsidiaries or Affiliates, or any
confidential matter regarding the business of the Company or any of its
subsidiaries or Affiliates, except information which at the time is generally
known within the industry other than as a result of disclosure by him not
permitted hereunder, or (ii) take with him upon leaving the employ of the
Company any document or paper relating to any of the foregoing or any physical
property of the Company or any of its subsidiaries or Affiliates.
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<PAGE> 5
(d) The Employee acknowledges that a remedy at law for any breach
or threatened breach of the provisions of this paragraph 7 would be inadequate
and therefore agrees that the Company shall be entitled to injunctive relief in
addition to any other available rights and remedies in case of any such breach
or threatened breach, provided, however, that nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies available
for any such breach or threatened breach.
(e) The Employee agrees that upon termination of his employment
hereunder for any reason, the Employee shall forthwith return to the Company
all documents and other property in his possession belonging to the Company or
any of its subsidiaries or Affiliates.
(f) Without limiting the generality of paragraph 12 hereof , the
Employee hereby expressly agrees that the foregoing provisions of this
paragraph 7 shall be binding upon the Employee's heirs, successors and legal
representatives.
8. Termination. The Employee's employment hereunder shall be
terminated (without thereby giving rise to a breach of this Agreement solely as
a result of such termination) upon the occurrence of any of the following:
(a) the death of the Employee;
(b) written notice from the Company to the Employee based upon the
inability of the Employee to perform his duties on account of disability or
incapacity for a period of six (6) months, whether or not consecutive, during
any twelve (12)-month period ("Disability");
(c) written notice from the Company to the Employee that his
employment hereunder has been terminated "for cause";
(d) written notice by the Company to the Employee of the
termination of his employment hereunder by the Company at any time other than
pursuant to subparagraphs (a), (b) or (c) hereof;
(e) written notice by the Employee to the Company of a breach by
the Company of any material provision of this Agreement if such breach
continues for thirty (30) days after written notice thereof to the Board of
Directors of the Company; or
(f) written notice by the Employee to the Company of the
termination of the Employee's employment hereunder by the Employee at any time
for any reason whatsoever (including without limitation resignation or
retirement), other than a breach of any material provision of this Agreement by
the Company (as described above in subparagraph 8 (e)).
For purposes of this Agreement, the term "for cause" or "cause" shall
mean a written determination made in good faith by the Board of Directors of
the Company (other than the Employee) that the Employee (i) failed to obey the
reasonable and lawful orders of the Board of Directors of the Company, which
orders were consistent with the duties and rights of the Employee under this
Agreement, after the Employee had been given written notice of such failure and
not less than thirty (30) days to cure it, (ii) acted with gross negligence in
the performance of,
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<PAGE> 6
or willfully disregarded, his obligations hereunder, (iii) habitually neglected
his duty after repeated requests by the Board of Directors, (iv) committed a
felony or any act involving dishonesty or fraud or moral turpitude, or (v)
violated in any material respect the provisions of paragraph 7 hereof or
Section 7.01 of the Purchase Agreement
9. Severance Benefit. (a) Subject to the provisions of
subparagraphs (c) and (d) below, in the event that (i) the Employee's
employment with the Company is terminated by the Company pursuant to
subparagraph 8(d) or by the Employee pursuant to subparagraph 8(e) above, or
(ii) the Employment Term terminates on the fifth anniversary of the date hereof
and the Company elects, by written notice (the "Extension Notice") given to the
Employee not less than ten days prior to such date, to make the payments and to
provide the benefits described in this subparagraph 9(a), then during each
month for a period of one year commencing on the date of such termination or
expiration of the Employment Term the Company shall (A) pay to the Employee, as
severance pay or liquidated damages or both, (x) the Employee's monthly Salary
determined as of the date the Employee's employment so ceases plus (y)
one-twelfth (1/12) of the Employee's Pro Rata Bonus (as hereinafter defined),
if any, in each case in equal semi-monthly installments, on the first and
fifteenth day of each month, and (B) continue to provide the Employee with (x)
medical and health plan coverage, (y) life or other similar insurance plan
coverage (assuming such coverage is available at rates comparable to those in
effect prior to the termination or expiration of the Employment Term) and (z)
disability insurance coverage, all at the benefit levels in effect for the
Employee and his family as of the date the Employee's employment so ceases. As
used in this subparagraph 9(a), the term "Pro Rata Bonus" shall mean the
amount, if any, obtained by (1) calculating the amount of Bonus, if any, that
would be payable to the Employee pursuant to subparagraph 4(c) hereof with
respect to the fiscal year in which the Employment Term terminates or expires
the operating profit achieved for the period from the beginning of such fiscal
year through the last day of the calendar month ending closest to the date of
such termination or expiration is annualized and treated for the purposes of
this subparagraph 9(a) as the operating profit achieved for such fiscal year,
and (2) multiplying such amount by a fraction, the numerator of which consists
of the number of days in such fiscal year prior to the termination or
expiration of the Employment Term, and the denominator of which is 365.
(b) Notwithstanding anything to the contrary expressed or implied
herein, in the event that (i) the Employee's employment with the Company is
terminated by the Company pursuant to subparagraph 8(c) above or (ii) the
Employee violates in any material respect any of the provisions of paragraph 7
hereof and/or Section 7.01 of the Purchase Agreement, then the Employee's
rights to any payments and benefits pursuant to subparagraph (a) above shall
thereupon terminate and the Company's obligations hereunder to make such
payments and to provide such benefits shall thereupon cease. In the event that
the Employee becomes employed by any person, organization or entity other than
the Company, the severance payments and benefits described in subparagraph (a)
above shall be reduced pro rata to the extent of Employee's compensation and
benefits provided by such other employment, provided, however, that nothing in
this sentence shall limit the operation of clause (ii) of this subparagraph
9(b).
(c) Notwithstanding anything to the contrary expressed or implied
herein, except as set forth in subparagraph 9(a) above, paragraph 10 below, and
in Section 7.02 of the Purchase Agreement, and except as may be otherwise
required by law, the Company shall not be obligated
6
<PAGE> 7
to make any severance or other payments or provide any benefits to the Employee
or on his behalf of whatever kind or nature by reason of the Employee's
cessation of employment, other than (i) such amounts, if any, of his Salary
otherwise payable pursuant to subparagraph 4(a) hereof as shall have accrued
and remained unpaid as of the date of said cessation, and (ii) in the event
that the Employee's employment with the Company is terminated pursuant to
subparagraphs 8(a) or 8(b) above, an amount equal to the Employee's Pro Rata
Bonus as shall be determined pursuant to subparagraph 9(a) above.
(d) Any severance payments and benefits provided under this
paragraph 9 shall be subject to applicable payroll and withholding taxes.
10. Change in Control.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings assigned to them herein:
(1) A "Change in Control" of the Company shall be defined
as follows:
(A) an event or series of events by which any
"person" or "group" (as such terms are defined in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934),
together with its or their "affiliates" and "associates" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934), becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, modified to
include, without regard to the 60-day period referred to in
such Rule, all shares that such person or group has the right
to acquire pursuant to any agreement or arrangement, or upon
exercise of conversion rights, warrants or options, or
otherwise), directly or indirectly, of securities of the
Company having 30% of more of the total number of votes
entitled to be cast for the election of the Board of Directors
of the Company, except that "Change in Control" shall not
include an event or series of events described above which
occur pursuant to a transaction or agreement approved by such
Board of Directors prior to the time such person or group
becomes such a 30% beneficial owner, and "Change in Control"
shall not include an event or series of events described above
in which any Company-sponsored employee benefit plan or plans
shall become the "beneficial owner" of such 30% interest; or
(B) a change in a majority of the Board of
Directors of the Company within any 24-month period unless the
election or the nomination for election by the Company
stockholders of each new director was approved by a vote of
least a majority of the directors then still in office who
were directors at the beginning of the period; or
(C) the sale or transfer of 50% or more of the
assets or earning power of the Company and its subsidiaries
(taken as a whole); or
7
<PAGE> 8
(D) at any time (i) the Company shall consolidate
with, or merge with, any other person and the Company shall
not be the continuing or surviving corporation, (ii) any
person shall consolidate with, or merge with the Company, and
the Company shall be the continuing or surviving corporation
and in connection therewith, all or part of the outstanding
Company stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other
property, or (iii) the Company shall be a party to a statutory
share exchange with any other person after which the Company
is a subsidiary of any other person.
(2) The "Change in Control Date" shall mean the date
immediately prior to the effectiveness of the Change in Control.
(3) The Employee shall have "Good Reason" to terminate
employment if: (A) the Employee is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Employee was a director
immediately prior to the Change in Control Date; (B) the Employee's
duties, responsibilities or authority as an employee are materially
reduced or diminished from those in effect on the Change in Control
Date without the Employee's consent; (C) the Employee's compensation
or benefits are reduced; (D) the Company reduces the potential
earnings of the Employee under any performance-based bonus or
incentive plan of the Company in effect immediately prior to the
Change in Control Date; (E) the Company requires that the Employee's
employment be based other than at Dallas, Texas without his consent;
(F) any purchaser, assign, surviving corporation, or successor of the
Company or its business or assets (whether by acquisition, merger,
liquidation, consolidation, reorganization, sale or transfer of assets
or business, or otherwise) fails or refuses to expressly assume in
writing this Agreement and all of the duties and obligations of the
Company hereunder pursuant to paragraph 12 hereof; or (G) the Company
breaches any of the provisions of this Agreement.
(4) For purposes of this Agreement, a "Potential Change
in Control" of the Company shall be deemed to have occurred if the
conditions set forth in any one of the following subparagraphs shall
have been satisfied:
(A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control of the Company;
(B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control of
the Company;
(C) any person other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company (or a corporation owned, directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), who
is or becomes the
8
<PAGE> 9
beneficial owner, directly or indirectly, of securities of the
Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases such
person's beneficial ownership of such securities by 5
percentage points or more over the percentage so owned by such
person on either the date hereof or, if later, the date such
person becomes a 10% or more beneficial owner; or
(D) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this
Agreement, a potential Change in Control of the Company has
occurred; or
(E) commencement of discussions with a third
party that ultimately results in a Change in Control of the
Company.
(5) "Termination of Employment" shall mean the
termination of the Employee's employment by the Company other than
such a termination in connection with an offer of immediate
re-employment by a successor or assign of the Company or purchaser of
the Company or its assets under terms and conditions which would not
permit the Employee to terminate his employment for Good Reason.
(b) Termination Following Change in Control or Potential Change in
Control. If a Change in Control of the Company occurs, Employee shall be
entitled to the benefits provided in subparagraph 10(c) upon the Employee's
subsequent Termination of Employment during the term of this Agreement. If a
Potential Change in Control of the Company occurs, Employee shall be entitled
to the benefits provided in subparagraph 10(d) upon Employee's subsequent
Termination of Employment during the term of this Agreement.
(c) Benefits to be Provided Upon a Change in Control. If during
the term of this Agreement there has been a Change in Control, and during the
two (2) year period commencing on the Change in Control Date the Employee has a
Termination of Employment which is initiated by the Company without cause (as
such term is defined in paragraph 8 above) or by the Employee for Good Reason,
the Company agrees to provide the following benefits and compensation:
(1) Any outstanding stock options, restricted stock, or
other form of stock-based grant or award previously granted to
Employee by the Company, to the extent vested in Employee as of the
date of such Termination of Employment, shall remain exercisable for a
minimum of thirty (30) days after such Termination of Employment,
notwithstanding any provision of such grant or award to the contrary.
(2) For a two-year period following such Termination of
Employment, the Employee shall not lose his eligibility for health,
dental, life, or disability benefits under any employee benefit plan,
policy, arrangement, or program (regardless of whether such program is
maintained for employees in general, highly- compensated employees (as
that term is defined in Section 414(q) of the Internal Revenue Code of
1986, as amended (the "Code"), non-highly compensated employees, or
for a select group of management employees or highly-compensated
employees (described in 29 CFR Section 2520.104-24)). In
9
<PAGE> 10
the event that under the terms of such plan, policy, arrangement, or
program, the Employee's Termination of Employment results in a loss of
such coverage, the Company shall immediately purchase identical
coverage for Employee for any portion of the 24-month period so
remaining. Following this period, Employee shall be entitled to
receive continuation coverage under COBRA, treating the end of this
period as a termination of Employee's employment other than for gross
misconduct.
(3) Immediately following such Termination of Employment,
the Company shall pay to Employee an amount equal to two (2) times the
sum of:
(A) Employee's annual base rate of pay determined
as of the greater of (x) the year in which the Termination of
Employment occurs, or (y) the beginning of the calendar year
coinciding with or next preceding such Change in Control; plus
(B) the greater of (x) the average of the last
three annual incentive bonuses paid to the Employee under the
Company's long-term incentive program immediately prior to
such Change in Control, or (y) the average of the first three
annual incentive bonuses paid to Employee under the Company's
long-term incentive program immediately prior to such
Termination of Employment. Such amount shall be paid in cash
to the Employee within 30 days of such Termination of
Employment.
(4) If, in the written opinion of a national accounting
firm engaged by either the Company or the Employee for this purpose
(at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments hereunder (other than
under this subparagraph 10(c)(4)) would cause the payment of one or
more of such benefits to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Code, then the Company will pay to
the Employee an additional amount in cash (the "Gross-Up Payment")
equal to the amount necessary to cause the net amount retained by the
Employee, after deduction of any (i) excise tax on the payments
hereunder (other than under this subparagraph 10(c)(4)), (ii) federal,
state or local income tax on the Gross-Up Payment, and (iii) excise
tax on the Gross-Up Payment, to be equal to the aggregate remuneration
the Employee would have received hereunder, excluding such Gross-Up
Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. The Gross-Up Payment provided
for in this subparagraph shall be made within thirty (30) days after
the termination of Employee's employment, provided, however, that if
the amount of the payment cannot be finally determined at the time,
the Company shall pay to Employee an estimate as determined in good
faith by the Company of such payments (together with interest at the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the forty
fifth (45th) day after the Termination of Employment date. Any
dispute concerning the application of this Paragraph shall be resolved
pursuant to paragraph 24 of this Agreement.
10
<PAGE> 11
(d) Benefits to be Provided Upon a Potential Change in Control.
If during the term of this Agreement there has been a Potential Change in
Control and during the one (1) year period commencing on the date immediately
prior to the Potential Change in Control, the Employee has a Termination of
Employment which is initiated by the Company without cause (as such term is
defined in paragraph 8 above) or by the Employee for Good Reason (and for
purposes of this subparagraph 10(d), "Good Reason" shall be defined by
substituting "Potential Change in Control" for the phrase "Change in Control"
everywhere it occurs therein), the Company agrees to provide the following
benefits and compensation, provided, however, notwithstanding the above, if an
actual Change in Control of the Company also occurs and Employee incurs a
Termination of Employment under which subparagraph 10(c) hereof would apply,
then subparagraph 10(c) shall supersede this subparagraph and this subparagraph
shall not apply.
(1) Any outstanding stock options, restricted stock, or
other form of stock-based grant or award previously granted to
Employee by the Company, to the extent vested in Employee as of the
date of such Termination of Employment, shall remain exercisable for a
minimum of thirty (30) days after such Termination of Employment,
notwithstanding any provision of such grant or award to the contrary.
(2) For a two-year period following such Termination of
Employment, the Employee shall not lose his eligibility for health,
dental, life, or disability benefits under any employee benefit plan,
policy, arrangement, or program (regardless of whether such program is
maintained for employees in general, highly- compensated employees (as
that term is defined in Section 414(q) of the Code), non-highly
compensated employees, or for a select group of management employees
or highly-compensated employees (described in 29 CFR Section
2520.104-24)). In the event that under the terms of such plan,
policy, arrangement, or program, the Employee's Termination of
Employment results in a loss of such coverage, the Company shall
immediately purchase identical coverage for Employee for any portion
of the 24-month period so remaining. Following this period, Employee
shall be entitled to receive continuation coverage under COBRA,
treating the end of this period as a termination of Employee's
employment other than for gross misconduct.
(3) Immediately following such Termination of Employment,
the Company shall pay to Employee an amount equal to two (2) times the
sum of:
(A) Employee's annual base rate of pay determined
as of the greater of (x) the year in which the Termination of
Employment occurs, or (y) the beginning of the calendar year
coinciding with or next preceding such Potential Change in
Control; plus
(B) the greater of (x) the average of the last
three annual incentive bonuses paid to the Employee under the
Company's long-term incentive program immediately prior to
such Potential Change in Control, or (y) the average of the
last three annual incentive bonuses paid to Employee under the
Company's long-term incentive program immediately prior to
such Termination of Employment.
11
<PAGE> 12
Such amount shall be paid in cash to the Employee within 30
days of such Termination of Employment.
(4) If, in the written opinion of a national accounting
firm engaged by either the Company or the Employee for this purpose
(at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments hereunder (other than
under this subparagraph 10(d)(4)) would cause the payment of one or
more of such benefits to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Code, then the Company will pay to
the Employee an additional amount in cash (the "Gross-Up Payment")
equal to the amount necessary to cause the net amount retained by the
Employee, after deduction of any (i) excise tax on the payments
hereunder (other than under this subparagraph 10(d)(4)), (ii) federal,
state or local income tax on the Gross-Up Payment, and (iii) excise
tax on the Gross-Up Payment, to be equal to the aggregate remuneration
the Employee would have received hereunder, excluding such Gross-Up
Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. The Gross-Up Payment provided
for in this Paragraph shall be made within thirty (30) days after the
termination of Employee's employment, provided, however, that if the
amount of the payment cannot be finally determined at the time, the
Company shall pay to Employee an estimate as determined in good faith
by the Company of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the forty fifth
(45th) day after the Termination of Employment date. Any dispute
concerning the application of this Paragraph shall be resolved
pursuant to paragraph 24 of this Agreement.
(e) Death of the Employee. In the event of the death of the
Employee between a Change in Control or Potential Change in Control and the
payment of the amount determined under subparagraph 10(c) or 10(d) above, such
amount shall be paid to the beneficiary specified in writing by the Employee to
the Company. In the event that the Employee has not specified a beneficiary,
the Company shall pay such amount to the following with the priority as
follows:
(1) any testamentary trust created under the will of
Employee,
(2) Employee's surviving spouse,
(3) Employee's surviving children, or
(4) Employee's estate.
(f) Offset by Other Severance Obligations. For so long as the
Company's obligations under subparagraphs 10(b), 10(c), or 10(d) of this
Agreement cover a termination of the Employee's employment with the Company,
payments under this paragraph 10 shall be offset by any other severance
obligations provided to the Employee under this Agreement, provided that such
severance obligations shall remain effective in accordance with the terms of
this Agreement with respect to any termination of Employee not covered under
subparagraphs 10(b), 10(c), or 10(d) of this Agreement.
12
<PAGE> 13
(g) Automatic Extension. Notwithstanding anything to the contrary
in paragraph 2 or elsewhere herein, if a Potential Change in Control occurs,
the provisions of this paragraph 10 shall be automatically extended and
continue to be in effect for an additional twelve (12) months. Notwithstanding
anything to the contrary in paragraph 2 or elsewhere herein, if a Change in
Control shall have occurred during the original or extended term of this
paragraph 10, the provisions of this paragraph 10 shall continue in effect for
a minimum period of twenty four (24) months beyond the month in which such
Change in Control occurred.
(h) Notwithstanding anything to the contrary herein, and without
limiting Employee's rights at law or in equity, if the Company fails or refuses
to timely pay to Employee the benefits due under subparagraphs 10(c) and/or
10(d) of this Agreement, then the benefits under subparagraphs 10(c)(3) and
10(d)(3) shall be increased and the benefits under subparagraphs 10(c)(1) and
(2) and 10(d)(1) and (2) shall each be continued by one additional day for each
day of any such failure or refusal of the Company to pay. In addition, any
Gross-Up Payment due under subparagraphs 10(c)(4) or 10(d)(4) shall be
increased to take into account any increased benefits under this subparagraph
10(h).
11. Non-Assignability. (a) Neither this Agreement nor any right
or interest hereunder shall be assignable by the Employee, his beneficiaries,
or legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph (a) shall preclude (i) the Employee
from designating a beneficiary to receive any benefit payable hereunder upon
his death, or (ii) the executors, administrators, or other legal representative
of the Employee or his estate from assigning any rights hereunder to the person
or person entitled thereunto.
(b) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
12. Binding Effect. (a) This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and assigns. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company or by any
merger or consolidation where the Company is not the surviving corporation, or
upon any transfer of all or substantially all of the Company's assets, or any
other Change in Control. The Company covenants that it will require any
successor, assign or purchaser of its business (whether direct or indirect, by
purchase, merger, acquisition, asset sale, spinoff, consolidation or otherwise)
to (i) expressly assume and agree to perform under this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place, in writing, the Company's obligations and
responsibilities under this Agreement and (ii) agree to notify Employee in
writing of the assumption of this Agreement within 10 days of such assumption.
Failure of the Company to obtain such assumption and agreement prior to the
effective date of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount and
on the same terms to which Employee would be entitled hereunder if Employee
terminates Employee's employment for Good Reason (as defined in paragraph 10
above) following a Change in Control
13
<PAGE> 14
or Potential Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed to be the date of Employee's termination.
(b) This Agreement shall be binding upon and inure to the benefit
of the Company and any purchaser, assign, surviving corporation or successor to
the Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Company, or otherwise (and such purchaser, assign, surviving corporation or
successor shall thereafter be deemed to be the "Company" for the purposes of
this Agreement). but this Agreement shall not otherwise be assignable,
transferable or delegable by the Company.
(c) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(d) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder (except as
expressly provided hereunder). Without limiting the generality of the
foregoing, the Employee's right to receive payments hereunder shall not be
assignable, transferable, delegable, whether by pledge, creation of a security
interest or otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any claim, debt,
or obligation, or to execution, attachment, levy or similar process , or
assignment by operation of law, other than by a transfer by his will or by the
laws of descent and distribution. Any attempt, voluntarily or involuntarily,
to effect any action prohibited by this paragraph 12 shall be null, void, and
of no effect.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and either delivered in
person, sent by first class certified or registered mail, postage prepaid, or
transmitted by facsimile, if to the Company, at the Company's principal place
of business, and if to the Employee, at his home address most recently filed
with the Company, or to such other address or addresses as either party shall
have designated in writing to the other party hereto.
14. Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
15. Severability. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable in whole or in part, neither
the validity of the remaining part of such provision nor the validity or any
other provision of this Agreement shall in any way be affected thereby. In
lieu of such invalid, illegal or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
invalid, illegal or unenforceable provision as may be possible and be valid,
legal and enforceable.
16. Waiver. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall
14
<PAGE> 15
any waiver or relinquishment of any right or power hereunder at any one or more
times be deemed a waiver or relinquishment of such right or power at any other
time or times.
17. Entire Agreement; Modifications. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior agreements, oral and written, between the parties
hereto with respect to the subject matter hereof. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Relocation. If at any time the Company requests the Employee
to report for the performance of his services hereunder on a regular or
permanent basis at any location or office more than thirty-five (35) miles from
his current home, and if the Employee consents to do so, the Company shall pay
the Employee's reasonable relocation and moving expenses, including, but not
limited to, the cost of moving his immediate family, expenses incurred while
seeking new housing (including travel by the Employee's spouse) and temporary
living expenses incurred by the Employee or his family for up to ninety (90)
days.
20. Indemnification. (a) Indemnification; Liability Insurance.
The Company shall indemnify and hold the Employee (or his legal representative)
harmless to the full extent permitted by applicable law for all legal expenses
and all liabilities, losses, judgments, fines, expenses and amounts paid in
settlement in connection with any proceeding involving him (including any
action by or in the right of the Company) by reason of his being or having been
a director, officer, employee or agent of the Company or any of its
subsidiaries, Affiliates, or any other enterprise if he is serving or has
served therein at the request of the Company. In addition, the Company shall
cause such subsidiary, Affiliate or enterprise also to so indemnify and hold
the Employee harmless to the full extent permitted by applicable law. The
foregoing shall not be deemed to limit any rights of the Employee pursuant to
applicable indemnification provisions of the Company's Certificate of
Incorporation or By-laws or otherwise. In addition, the Company shall acquire
and maintain directors and officers liability insurance for the benefit of the
Employee on at least as favorable terms and coverage amounts as for any other
officer or director of the Company, such insurance to remain in effect for as
long as reasonably necessary to cover all events occurring during the term of
this Agreement (but in no event less than three years after the term of this
Agreement), regardless of when the claim is made.
(b) Advance of Expenses. In the event of any action, proceeding,
or claim against the Employee arising out of his serving or having served in a
capacity specified in subparagraph (a) above, which in the Employee's sole
judgment requires him to retain counsel (such choice of counsel to be made in
his sole and absolute discretion) or otherwise expend his personal funds for
his defense in connection therewith, the Company shall be obligated to advance
to the Employee (or pay directly to his counsel) reasonable counsel fees and
other costs associated with the Employee's defense of such action, proceeding
or claim; provided, however, that in such event the Employee shall first agree
in writing, without posting bond or collateral, to repay all sums paid or
15
<PAGE> 16
advanced to him pursuant to this provision in the event that the final
disposition of such action, proceeding or claim is one for which the Employee
would not be entitled to indemnification pursuant to the provisions hereof.
21. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt or obligation against any payment to
or benefit for the Employee provided for in this Agreement.
22. No Mitigation Required. The Employee's rights hereunder upon
termination of employment shall be cumulative with and in addition to any other
rights or remedies he may be entitled to by reason of any such termination. In
addition, the Employee shall have no obligation to mitigate his damages
hereunder, whether by seeking new employment or otherwise, nor shall the amount
of any payment provided for in this Agreement (except as otherwise provided in
subparagraph 9(b) hereof) be reduced by any compensation earned by the Employee
as the result of employment by another employer after the date of termination
of the Employee's employment with the Company, or otherwise.
23. Survival of Rights and Obligations. The terms and provisions
of paragraphs 7, 9, 10, 12, 20, 21, 22, 23, and 24 of this Agreement shall
survive the expiration of the Employment Term.
24. Disputes. Any dispute or controversy arising under, out of,
in connection with or in relation to this Agreement shall, at the election and
upon written demand of either party, be finally determined and settled by
binding arbitration in the city of Dallas, Texas, using a single arbitrator, in
accordance with the Labor Arbitration rules and procedures of the American
Arbitration Association, and judgment upon the award may be entered in any
court having jurisdiction thereof. The arbitrator shall have the power to
order specific performance, mandamus, or other appropriate legal or equitable
relief to enforce the provisions of this Agreement. The Company shall pay all
costs of the arbitration and all reasonable attorney's and accountant's fees of
the Employee in connection therewith.
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<PAGE> 17
IN WITNESS WHEREOF, the Company and the Employee have duly executed and
delivered this Agreement as of the day and year first above written.
EMCARE HOLDINGS INC.
By /s/ WILLIAM F. MILLER, III
--------------------------------
Name: William F. Miller, III
--------------------------
Title: President
--------------------------
/s/ LEONARD M. RIGGS, M.D.
--------------------------------
Leonard M. Riggs, M.D.
<PAGE> 18
IN WITNESS WHEREOF, the Company and the Employee have duly executed
and delivered this Agreement as of the day and year first above written.
EMCARE HOLDINGS INC.
By /s/ WILLIAM F. MILLER, III
----------------------------------------
Name: William F. Miller, III
-----------------------------------
Title: President
----------------------------------
/s/ LEONARD M .RIGGS, M.D.
------------------------------------------
Leonard M .Riggs, M.D.
17
<PAGE> 19
ADDENDUM TO EMPLOYMENT CONTRACT --
LEONARD M. RIGGS, JR., M.D.
SCHEDULE I
BENEFITS
JANUARY 28, 1992
<TABLE>
<CAPTION>
COMPANY NAME POLICY NUMBER TERM COVERAGE AMOUNT
- ------------ ------------- ---- ---------------
<S> <C> <C> <C>
Provident Life & Accident 179577 Annual Monthly disability payments
179578
Preston Trails annual dues Annual
Dallas Petroleum Club annual dues
Auto & Insurance monthly lease payments and insurance
Young President Organization annual dues & seminar fees
</TABLE>
<PAGE> 20
SCHEDULE II
AFFILIATES
NAME JURISDICTION
---- ------------
Emergency Health Services Associates of New Mexico, P.C. New Mexico
Emergency Health Services Associates, P.A. Texas
EmCare Medical Services of New York, P.C. New York
Emquest Professional Services P.A. Texas
EmCare Radiology Services of Texas, P.A. Texas
<PAGE> 21
ADDENDUM
This Addendum is hereby attached to that certain Employment Agreement,
dated as of February 5, 1992, between EmCare Holdings Inc., a Delaware
corporation and Leonard M. Riggs, M.D., Jr. (the "Agreement").
1. Capitalized terms used herein but not otherwise defined
herein, shall have the meanings ascribed thereto in the
Agreement.
2. As of January 1, 1994 the annual salary shall be increased to
two hundred sixty-five thousand dollars ($265,000) and on
January 1, 1995 and on each succeeding January 1 during the
Employment Term, the annual salary payable to the Employee
hereunder for such calendar year will be increased by an
amount equal to the product of (i) the annual Salary paid to
the Employee during the immediate preceding calendar year
multiplied by (ii) the greater of (x) the percentage increase,
if any in the Consumer Price Index (All Cities-- All Items)
during such calendar year and (y) five percent (5%).
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Addendum effective as of January 1, 1994.
EMCARE HOLDINGS INC.
By: /s/ WILLIAM R. MILLER, III
------------------------------------
Name: William F. Miller, III
Title: President
/s/ LEONARD M. RIGGS, JR., M.D.
---------------------------------------
Leonard M. Riggs, Jr., M.D.
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 5, 1992, between EMCARE
HOLDINGS INC., a Delaware corporation (the "Company"), and WILLIAM F. MILLER
(the "Employee").
W I T N E S S E T H:
WHEREAS the Employee is currently employed by EmCare, Inc., a Texas
corporation and a wholly owned subsidiary of the Company ("EmCare"), in the
capacity of President and Chief Operating Officer; and
WHEREAS the Employee is a member of the senior management of the
Company and EmCare and has access to proprietary information pertaining to the
business and operations of the Company and EmCare; and
WHEREAS the Company and the Employee desire to enter into an agreement
providing for the continued employment of the Employee in the capacity of
President and Chief Operating Officer of the Company in accordance with the
terms and conditions, and for the consideration, set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Employee agree as follows:
1. Employment. (a) The Company hereby employs the Employee, and
the Employee hereby accepts such employment with the Company for the period set
forth in paragraph 2 hereof, all upon the terms and conditions hereinafter set
forth.
(b) As a condition to the Employee's employment by the Company,
the Employee affirms and represents that he is under no obligation to any
former employer or other party which is in any way inconsistent with, or which
imposes any restriction upon, the Employee's acceptance of employment hereunder
with the Company, the employment of the Employee by the Company, or the
Employee's undertakings under this Agreement.
2. Term of Employment. Except as otherwise provided in paragraph
10(g) hereof, or unless earlier terminated as hereinafter provided, the term of
the Employee's employment under this Agreement shall be for a period beginning
on the date hereof and ending on the fifth anniversary hereof (the "Employment
Term"). In the event that the Employee continues in the full-time employ of
the Company after the end of the Employment Term (it being expressly understood
and agreed that the Company does not now, nor hereafter shall have, any
obligation to continue the Employee in its employ whether or not on a full-time
basis, after said Employment Term ends), then, unless otherwise agreed by the
Employee and the Company, the Employee's continued employment with the Company
shall, notwithstanding anything to the contrary expressed or implied herein, be
terminable by the Company or the Employee at will, but shall in all other
respects be subject to the terms and conditions of this Agreement.
Notwithstanding anything to the contrary herein, as long as Employee continues
in the employ of the Company
<PAGE> 2
after the end of the Employment Term, all of the terms and conditions of this
Agreement shall remain in full force and effect notwithstanding the end of such
Employment Term.
3. Duties. (a) Office. The Employee shall be employed as the
President and Chief Operating Officer of the Company and shall report to the
Board of Directors and the Chairman of the Board of the Company. The Employee
shall perform such executive duties as the Chairman of the Board or the Board
of Directors may prescribe so long as such duties are consistent with the
responsibilities of the Employee prior to the date of this Agreement and are
consistent with the office and position of President and Chief Operating
Officer of the Company. The Employee shall be elected to serve as President
and Chief Operating Officer of the Company during the Term of Employment, and
any failure of the Employee to be so nominated and elected (other than as a
result of the prior termination of the Employee's employment hereunder pursuant
to paragraph 8 hereof) shall constitute a termination of the Employee's
employment hereunder by the Company pursuant to subparagraph 8(d) hereof.
(b) Place of Business. The Employee's principal place of business
shall be located in Dallas, Texas, and the Employee shall not be required by
the Company to relocate without his consent. The Employee shall devote not
less than forty (40) hours per week on average to the performance of his duties
during the term of this Agreement.
(c) Services Exclusive. Except as may otherwise be approved in
advance by the Board of Directors of the Company, and except during vacation
periods and reasonable periods of absence due to sickness, personal injury or
other disability, the Employee shall devote his full time throughout the
Employment Term to the services required of him hereunder. The Employee shall
render his services exclusively to the Company during the Employment Term, and
shall use his best efforts, judgment and energy, to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position, provided, however, that the Employee may conduct such other
activities during the Employment Term as he deems appropriate and consistent
with his duties hereunder, including serving as a director of other companies
and engaging in civic and social responsibilities.
4. Salary and Bonus. (a) Annual Salary. As compensation for
the services to be performed by the Employee hereunder during the Employment
Term, the Company shall pay the Employee a base salary at the annual rate of
two hundred thousand dollars ($200,000) (the "Basic Salary", and together with
any adjustments or increments thereto being hereinafter referred to as the
"Salary"). Any increase in such salary shall be evidenced by an addendum to
this Agreement signed by the parties hereto and attached to this Agreement.
The payment of any Salary hereunder shall be subject to applicable withholding
and payroll taxes, and such other deductions as may be required under the
Company's employee benefit plans. Any Salary payable hereunder shall be paid
in equal semimonthly installments on the first and fifteenth day of each month.
(b) Salary Adjustments. On January 1, 1993 and on the first
business day of each calendar year thereafter during the Employment Term, the
annual Salary payable to the Employee hereunder for such calendar year will be
increased by an amount equal to the product of (i) the annual Salary paid to
the Employee during the immediately preceding calendar year multiplied by
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<PAGE> 3
(ii) the greater of (x) the percentage increase, if any, in the Consumer Price
Index (All Cities -- All Items) during such calendar year and (y) five percent
(5%).
(c) Bonus. During the Employment Term (and, with respect to any
Bonus payable hereunder with respect to any period prior to the termination of
the Employment Term, as soon as practicable after such termination), subject to
(i) review and approval by the Board of Directors of the Company (which
approval shall not unreasonably be withheld) and (ii) the Company's achieving
earnings from internal growth and profitability at the level specified in the
Company's annual base financial plan approved by the Board of Directors of the
Company for the immediately preceding fiscal year (the "Base Financial Plan"
for such preceding fiscal year), the Company shall pay the Employee a cash
bonus of not less than one hundred thousand dollars ($100,000) (the "Bonus")
for such preceding fiscal year; provided, however, that if the Company achieves
eighty-percent (80%) or more of the operating income specified in the Base
Financial Plan for such preceding fiscal year, the Company shall pay the
Employee a pro rata cash Bonus equal to the percent so achieved multiplied by
the full Bonus he otherwise would have been entitled to receive had the Company
achieved 100% of the operating income specified in said Base Financial Plan.
The payment of the Bonus for any fiscal year hereunder shall be subject to
applicable withholding and payroll taxes, and such other deductions as may be
required under the Company's employee benefit plans. Any Bonus payable
hereunder shall be payable no later than one month after approval by the Board
of Directors of the audited annual financial statements of the Company for the
fiscal year in respect of which such Bonus is payable (the "Financials" for
such fiscal year), and the Company shall use its best efforts to cause its
auditors to deliver such Financials within ninety (90) days after the end of
such fiscal year.
(d) Additional Compensation. At any time during the Employment
Term, the Board of Directors may, in its sole discretion, pay an additional
cash bonus, and/or issue stock options to, the Employee.
(e) Stock Options. Simultaneously with the execution and delivery
of this Agreement by the parties hereto, the Company has (i) granted to the
Employee certain "non-qualified" stock options under the EmCare Holdings Inc.
Stock Option and Restricted Stock Purchase Plan (the "Plan") pursuant to the
Non-Qualified Stock Option Agreement of even date herewith between the Company
and the Employee and (ii) authorized the grant to the Employee of certain
additional stock options under the Plan subject to certain conditions.
5. Expenses. The Company shall upon submission of expense
reports acceptable to the Company, reimburse the Employee for all reasonable
expenses incurred by the Employee in connection with the performance of his
obligations hereunder, subject to submission of supporting documentation in a
form reasonably prescribed by the Company. Reimbursements will be made in a
manner consistent with the historical policies of the Company. The obligations
of the Company under this paragraph 5 in respect of such reasonable expenses
incurred by the Employee prior to the termination of this Agreement and/or the
Employment Term shall survive such termination.
6. Benefits. In addition to the payments required by paragraphs
4 and 5 to be paid to the Employee during the Employment Term, the Employee
shall:
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<PAGE> 4
(a) be eligible to participate in the employee fringe benefits,
pension plan, life or other similar insurance plans and/or medical and health
plans or other employee welfare benefit plans described on Schedule I hereto;
(b) be entitled to six (6) weeks of annual paid vacation in
accordance with Company policy applicable to key executive employees; and
(c) be entitled to sick leave and sick pay in accordance with any
Company policy that may be applicable to key executive employees.
7. Confidentiality. The Employee hereby covenants, agrees and
acknowledges as follows:
(a) The Employee's employment hereunder creates a relationship of
confidence and trust between the Employee and the Company with respect to
certain information applicable to the Business (as such term is defined in
Section 7.01(b) of the Securities Purchase Agreement dated as of February 4,
1992 (the "Purchase Agreement") among the Company, EmCare, Inc., the Employee,
Leonard M. Riggs, M.D., and the several other individuals and entities named as
parties thereto) of the Company, its subsidiaries from time to time and any
professional associations or professional corporations which are listed on
Schedule II hereto or any other corporation, association or other entity
engaged in the Business which may hereafter be owned or controlled (directly or
indirectly) by the Company, the Employee or Leonard M. Riggs, M.D.
(individually, an "Affiliate", and collectively the "Affiliates") or applicable
to the business of any client or customer of the Company or any of its
subsidiaries or Affiliates.
(b) The Company possesses and will continue to possess information
that has been created, discovered or developed by, or otherwise become known
to, it (including without limitation information created, discovered, developed
or made known by the Employee during the period of or arising out of his
employment hereunder) or in which property rights have been or may be assigned
or otherwise conveyed to the Company which information has commercial value in
the Business and is treated by the Company as confidential.
(c) The Employee also agrees that he will not without the prior
written consent of an appropriate executive officer of the Company (i) use for
his benefit or disclose at any time during his employment by the Company, or
thereafter, except to the extent required by law or by the performance by him
of his duties as an employee of the Company, any information obtained or
developed by him while in the employ of the Company with respect to the
identity of the Company's customers, transactions between the Company and its
customers and suppliers, the products, services, employees, or financial
affairs of the Company or any of its subsidiaries or Affiliates, or any
confidential matter regarding the business of the Company or any of its
subsidiaries or Affiliates, except information which at the time is generally
known within the industry other than as a result of disclosure by him not
permitted hereunder, or (ii) take with him upon leaving the employ of the
Company any document or paper relating to any of the foregoing or any physical
property of the Company or any of its subsidiaries or Affiliates.
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<PAGE> 5
(d) The Employee acknowledges that a remedy at law for any breach
or threatened breach of the provisions of this paragraph 7 would be inadequate
and therefore agrees that the Company shall be entitled to injunctive relief in
addition to any other available rights and remedies in case of any such breach
or threatened breach, provided, however, that nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies available
for any such breach or threatened breach.
(e) The Employee agrees that upon termination of his employment
hereunder for any reason, the Employee shall forthwith return to the Company
all documents and other property in his possession belonging to the Company or
any of its subsidiaries or Affiliates.
(f) Without limiting the generality of paragraph 12 hereof , the
Employee hereby expressly agrees that the foregoing provisions of this
paragraph 7 shall be binding upon the Employee's heirs, successors and legal
representatives.
8. Termination. The Employee's employment hereunder shall be
terminated (without thereby giving rise to a breach of this Agreement solely as
a result of such termination) upon the occurrence of any of the following:
(a) the death of the Employee;
(b) written notice from the Company to the Employee based upon the
inability of the Employee to perform his duties on account of disability or
incapacity for a period of six (6) months, whether or not consecutive, during
any twelve (12)-month period ("Disability");
(c) written notice from the Company to the Employee that his
employment hereunder has been terminated "for cause";
(d) written notice by the Company to the Employee of the
termination of his employment hereunder by the Company at any time other than
pursuant to subparagraphs (a), (b) or (c) hereof;
(e) written notice by the Employee to the Company of a breach by
the Company of any material provision of this Agreement if such breach
continues for thirty (30) days after written notice thereof to the Board of
Directors of the Company; or
(f) written notice by the Employee to the Company of the
termination of the Employee's employment hereunder by the Employee at any time
for any reason whatsoever (including without limitation resignation or
retirement), other than a breach of any material provision of this Agreement by
the Company (as described above in subparagraph 8 (e)).
For purposes of this Agreement, the term "for cause" or "cause" shall
mean a written determination made in good faith by the Board of Directors of
the Company (other than the Employee) that the Employee (i) failed to obey the
reasonable and lawful orders of the Board of Directors of the Company, which
orders were consistent with the duties and rights of the Employee under this
Agreement, after the Employee had been given written notice of such failure and
not less than thirty (30) days to cure it, (ii) acted with gross negligence in
the performance of,
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<PAGE> 6
or willfully disregarded, his obligations hereunder, (iii) habitually neglected
his duty after repeated requests by the Board of Directors, (iv) committed a
felony or any act involving dishonesty or fraud or moral turpitude, or (v)
violated in any material respect the provisions of paragraph 7 hereof or
Section 7.01 of the Purchase Agreement
9. Severance Benefit. (a) Subject to the provisions of
subparagraphs (c) and (d) below, in the event that (i) the Employee's
employment with the Company is terminated by the Company pursuant to
subparagraph 8(d) or by the Employee pursuant to subparagraph 8(e) above, or
(ii) the Employment Term terminates after the second anniversary of the date
hereof but prior to the fifth anniversary of the date hereof and the Company
elects, by written notice (the "Extension Notice") given to the Employee not
less than ten days prior to such date, to make the payments and to provide the
benefits described in this subparagraph 9(a), then during each month for a
period of one year commencing on the date of such termination or expiration of
the Employment Term the Company shall (A) pay to the Employee, as severance pay
or liquidated damages or both, (x) the Employee's monthly Salary determined as
of the date the Employee's employment so ceases plus (y) one-twelfth (1/12) of
the Employee's Pro Rata Bonus (as hereinafter defined), if any, in each case in
equal semi-monthly installments, on the first and fifteenth day of each month,
and (B) continue to provide the Employee with (x) medical and health plan
coverage, (y) life or other similar insurance plan coverage (assuming such
coverage is available at rates comparable to those in effect prior to the
termination or expiration of the Employment Term) and (z) disability insurance
coverage, all at the benefit levels in effect for the Employee and his family
as of the date the Employee's employment so ceases. As used in this
subparagraph 9(a), the term "Pro Rata Bonus" shall mean the amount, if any,
obtained by (1) calculating the amount of Bonus, if any, that would be payable
to the Employee pursuant to subparagraph 4(c) hereof with respect to the fiscal
year in which the Employment Term terminates or expires the operating profit
achieved for the period from the beginning of such fiscal year through the last
day of the calendar month ending closest to the date of such termination or
expiration is annualized and treated for the purposes of this subparagraph 9(a)
as the operating profit achieved for such fiscal year, and (2) multiplying such
amount by a fraction, the numerator of which consists of the number of days in
such fiscal year prior to the termination or expiration of the Employment Term,
and the denominator of which is 365.
(b) Notwithstanding anything to the contrary expressed or implied
herein, in the event that (i) the Employee's employment with the Company is
terminated by the Company pursuant to subparagraph 8(c) above or (ii) the
Employee violates in any material respect any of the provisions of paragraph 7
hereof and/or Section 7.01 of the Purchase Agreement, then the Employee's
rights to any payments and benefits pursuant to subparagraph (a) above shall
thereupon terminate and the Company's obligations hereunder to make such
payments and to provide such benefits shall thereupon cease. In the event that
the Employee becomes employed by any person, organization or entity other than
the Company, the severance payments and benefits described in subparagraph (a)
above shall be reduced pro rata to the extent of Employee's compensation and
benefits provided by such other employment, provided, however, that nothing in
this sentence shall limit the operation of clause (ii) of this subparagraph
9(b).
(c) Notwithstanding anything to the contrary expressed or implied
herein, except as set forth in subparagraph 9(a) above, paragraph 10 below, and
in Section 7.02 of the Purchase
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<PAGE> 7
Agreement, and except as may be otherwise required by law, the Company shall
not be obligated to make any severance or other payments or provide any
benefits to the Employee or on his behalf of whatever kind or nature by reason
of the Employee's cessation of employment, other than (i) such amounts, if any,
of his Salary otherwise payable pursuant to subparagraph 4(a) hereof as shall
have accrued and remained unpaid as of the date of said cessation, and (ii) in
the event that the Employee's employment with the Company is terminated
pursuant to subparagraphs 8(a) or 8(b) above, an amount equal to the Employee's
Pro Rata Bonus as shall be determined pursuant to subparagraph 9(a) above.
(d) Any severance payments and benefits provided under this
paragraph 9 shall be subject to applicable payroll and withholding taxes.
10. Change in Control.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the respective meanings assigned to them herein:
(1) A "Change in Control" of the Company shall be defined
as follows:
(A) an event or series of events by which any
"person" or "group" (as such terms are defined in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934),
together with its or their "affiliates" and "associates" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934), becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, modified to
include, without regard to the 60-day period referred to in
such Rule, all shares that such person or group has the right
to acquire pursuant to any agreement or arrangement, or upon
exercise of conversion rights, warrants or options, or
otherwise), directly or indirectly, of securities of the
Company having 30% of more of the total number of votes
entitled to be cast for the election of the Board of Directors
of the Company, except that "Change in Control" shall not
include an event or series of events described above which
occur pursuant to a transaction or agreement approved by such
Board of Directors prior to the time such person or group
becomes such a 30% beneficial owner, and "Change in Control"
shall not include an event or series of events described above
in which any Company-sponsored employee benefit plan or plans
shall become the "beneficial owner" of such 30% interest; or
(B) a change in a majority of the Board of
Directors of the Company within any 24-month period unless the
election or the nomination for election by the Company
stockholders of each new director was approved by a vote of
least a majority of the directors then still in office who
were directors at the beginning of the period; or
(C) the sale or transfer of 50% or more of the
assets or earning power of the Company and its subsidiaries
(taken as a whole); or
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<PAGE> 8
(D) at any time (i) the Company shall consolidate
with, or merge with, any other person and the Company shall
not be the continuing or surviving corporation, (ii) any
person shall consolidate with, or merge with the Company, and
the Company shall be the continuing or surviving corporation
and in connection therewith, all or part of the outstanding
Company stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other
property, or (iii) the Company shall be a party to a statutory
share exchange with any other person after which the Company
is a subsidiary of any other person.
(2) The "Change in Control Date" shall mean the date
immediately prior to the effectiveness of the Change in Control.
(3) The Employee shall have "Good Reason" to terminate
employment if: (A) the Employee is not elected, reelected, or
otherwise continued in the office of the Company or any of its
subsidiaries which he held immediately prior to the Change in Control
Date, or he is removed as a member of the Board of Directors of the
Company or any of its subsidiaries if the Employee was a director
immediately prior to the Change in Control Date; (B) the Employee's
duties, responsibilities or authority as an employee are materially
reduced or diminished from those in effect on the Change in Control
Date without the Employee's consent; (C) the Employee's compensation
or benefits are reduced; (D) the Company reduces the potential
earnings of the Employee under any performance-based bonus or
incentive plan of the Company in effect immediately prior to the
Change in Control Date; (E) the Company requires that the Employee's
employment be based other than at Dallas, Texas without his consent;
(F) any purchaser, assign, surviving corporation, or successor of the
Company or its business or assets (whether by acquisition, merger,
liquidation, consolidation, reorganization, sale or transfer of assets
or business, or otherwise) fails or refuses to expressly assume in
writing this Agreement and all of the duties and obligations of the
Company hereunder pursuant to paragraph 12 hereof; or (G) the Company
breaches any of the provisions of this Agreement.
(4) For purposes of this Agreement, a "Potential Change
in Control" of the Company shall be deemed to have occurred if the
conditions set forth in any one of the following subparagraphs shall
have been satisfied:
(A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control of the Company;
(B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control of
the Company;
(C) any person other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company (or a corporation owned, directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), who
is or becomes the
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<PAGE> 9
beneficial owner, directly or indirectly, of securities of the
Company representing 10% or more of the combined voting power
of the Company's then outstanding securities, increases such
person's beneficial ownership of such securities by 5
percentage points or more over the percentage so owned by such
person on either the date hereof or, if later, the date such
person becomes a 10% or more beneficial owner; or
(D) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this
Agreement, a potential Change in Control of the Company has
occurred; or
(E) commencement of discussions with a third
party that ultimately results in a Change in Control of the
Company.
(5) "Termination of Employment" shall mean the
termination of the Employee's employment by the Company other than
such a termination in connection with an offer of immediate
re-employment by a successor or assign of the Company or purchaser of
the Company or its assets under terms and conditions which would not
permit the Employee to terminate his employment for Good Reason.
(b) Termination Following Change in Control or Potential Change in
Control. If a Change in Control of the Company occurs, Employee shall be
entitled to the benefits provided in subparagraph 10(c) upon the Employee's
subsequent Termination of Employment during the term of this Agreement. If a
Potential Change in Control of the Company occurs, Employee shall be entitled
to the benefits provided in subparagraph 10(d) upon Employee's subsequent
Termination of Employment during the term of this Agreement.
(c) Benefits to be Provided Upon a Change in Control. If during
the term of this Agreement there has been a Change in Control, and during the
two (2) year period commencing on the Change in Control Date the Employee has a
Termination of Employment which is initiated by the Company without cause (as
such term is defined in paragraph 8 above) or by the Employee for Good Reason,
the Company agrees to provide the following benefits and compensation:
(1) Any outstanding stock options, restricted stock, or
other form of stock-based grant or award previously granted to
Employee by the Company, to the extent vested in Employee as of the
date of such Termination of Employment, shall remain exercisable for a
minimum of thirty (30) days after such Termination of Employment,
notwithstanding any provision of such grant or award to the contrary.
(2) For a two-year period following such Termination of
Employment, the Employee shall not lose his eligibility for health,
dental, life, or disability benefits under any employee benefit plan,
policy, arrangement, or program (regardless of whether such program is
maintained for employees in general, highly- compensated employees (as
that term is defined in Section 414(q) of the Internal Revenue Code of
1986, as amended (the "Code"), non-highly compensated employees, or
for a select group of management employees or highly-compensated
employees (described in 29 CFR Section 2520.104-24)). In
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the event that under the terms of such plan, policy, arrangement, or program,
the Employee's Termination of Employment results in a loss of such coverage,
the Company shall immediately purchase identical coverage for Employee for any
portion of the 24-month period so remaining. Following this period, Employee
shall be entitled to receive continuation coverage under COBRA, treating the
end of this period as a termination of Employee's employment other than for
gross misconduct.
(3) Immediately following such Termination of Employment,
the Company shall pay to Employee an amount equal to two (2) times the
sum of:
(A) Employee's annual base rate of pay determined
as of the greater of (x) the year in which the Termination of
Employment occurs, or (y) the beginning of the calendar year
coinciding with or next preceding such Change in Control; plus
(B) the greater of (x) the average of the last
three annual incentive bonuses paid to the Employee under the
Company's long-term incentive program immediately prior to
such Change in Control, or (y) the average of the first three
annual incentive bonuses paid to Employee under the Company's
long-term incentive program immediately prior to such
Termination of Employment. Such amount shall be paid in cash
to the Employee within 30 days of such Termination of
Employment.
(4) If, in the written opinion of a national accounting
firm engaged by either the Company or the Employee for this purpose
(at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments hereunder (other than
under this subparagraph 10(c)(4)) would cause the payment of one or
more of such benefits to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Code, then the Company will pay to
the Employee an additional amount in cash (the "Gross-Up Payment")
equal to the amount necessary to cause the net amount retained by the
Employee, after deduction of any (i) excise tax on the payments
hereunder (other than under this subparagraph 10(c)(4)), (ii) federal,
state or local income tax on the Gross-Up Payment, and (iii) excise
tax on the Gross-Up Payment, to be equal to the aggregate remuneration
the Employee would have received hereunder, excluding such Gross-Up
Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. The Gross-Up Payment provided
for in this subparagraph shall be made within thirty (30) days after
the termination of Employee's employment, provided, however, that if
the amount of the payment cannot be finally determined at the time,
the Company shall pay to Employee an estimate as determined in good
faith by the Company of such payments (together with interest at the
rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the forty
fifth (45th) day after the Termination of Employment date. Any
dispute concerning the application of this Paragraph shall be resolved
pursuant to paragraph 24 of this Agreement.
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(d) Benefits to be Provided Upon a Potential Change in Control.
If during the term of this Agreement there has been a Potential Change in
Control and during the one (1) year period commencing on the date immediately
prior to the Potential Change in Control, the Employee has a Termination of
Employment which is initiated by the Company without cause (as such term is
defined in paragraph 8 above) or by the Employee for Good Reason (and for
purposes of this subparagraph 10(d), "Good Reason" shall be defined by
substituting "Potential Change in Control" for the phrase "Change in Control"
everywhere it occurs therein), the Company agrees to provide the following
benefits and compensation, provided, however, notwithstanding the above, if an
actual Change in Control of the Company also occurs and Employee incurs a
Termination of Employment under which subparagraph 10(c) hereof would apply,
then subparagraph 10(c) shall supersede this subparagraph and this subparagraph
shall not apply.
(1) Any outstanding stock options, restricted stock, or
other form of stock-based grant or award previously granted to
Employee by the Company, to the extent vested in Employee as of the
date of such Termination of Employment, shall remain exercisable for a
minimum of thirty (30) days after such Termination of Employment,
notwithstanding any provision of such grant or award to the contrary.
(2) For a two-year period following such Termination of
Employment, the Employee shall not lose his eligibility for health,
dental, life, or disability benefits under any employee benefit plan,
policy, arrangement, or program (regardless of whether such program is
maintained for employees in general, highly- compensated employees (as
that term is defined in Section 414(q) of the Code), non-highly
compensated employees, or for a select group of management employees
or highly-compensated employees (described in 29 CFR Section
2520.104-24)). In the event that under the terms of such plan,
policy, arrangement, or program, the Employee's Termination of
Employment results in a loss of such coverage, the Company shall
immediately purchase identical coverage for Employee for any portion
of the 24-month period so remaining. Following this period, Employee
shall be entitled to receive continuation coverage under COBRA,
treating the end of this period as a termination of Employee's
employment other than for gross misconduct.
(3) Immediately following such Termination of Employment,
the Company shall pay to Employee an amount equal to two (2) times the
sum of:
(A) Employee's annual base rate of pay determined
as of the greater of (x) the year in which the Termination of
Employment occurs, or (y) the beginning of the calendar year
coinciding with or next preceding such Potential Change in
Control; plus
(B) the greater of (x) the average of the last
three annual incentive bonuses paid to the Employee under the
Company's long-term incentive program immediately prior to
such Potential Change in Control, or (y) the average of the
last three annual incentive bonuses paid to Employee under the
Company's long-term incentive program immediately prior to
such Termination of Employment.
11
<PAGE> 12
Such amount shall be paid in cash to the Employee within 30
days of such Termination of Employment.
(4) If, in the written opinion of a national accounting
firm engaged by either the Company or the Employee for this purpose
(at the Company's expense), or if so alleged by the Internal Revenue
Service, the aggregate of the benefit payments hereunder (other than
under this subparagraph 10(d)(4)) would cause the payment of one or
more of such benefits to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Code, then the Company will pay to
the Employee an additional amount in cash (the "Gross-Up Payment")
equal to the amount necessary to cause the net amount retained by the
Employee, after deduction of any (i) excise tax on the payments
hereunder (other than under this subparagraph 10(d)(4)), (ii) federal,
state or local income tax on the Gross-Up Payment, and (iii) excise
tax on the Gross-Up Payment, to be equal to the aggregate remuneration
the Employee would have received hereunder, excluding such Gross-Up
Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions
thereto) had not been enacted into law. The Gross-Up Payment provided
for in this Paragraph shall be made within thirty (30) days after the
termination of Employee's employment, provided, however, that if the
amount of the payment cannot be finally determined at the time, the
Company shall pay to Employee an estimate as determined in good faith
by the Company of such payments (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the forty fifth
(45th) day after the Termination of Employment date. Any dispute
concerning the application of this Paragraph shall be resolved
pursuant to paragraph 24 of this Agreement.
(e) Death of the Employee. In the event of the death of the
Employee between a Change in Control or Potential Change in Control and the
payment of the amount determined under subparagraph 10(c) or 10(d) above, such
amount shall be paid to the beneficiary specified in writing by the Employee to
the Company. In the event that the Employee has not specified a beneficiary,
the Company shall pay such amount to the following with the priority as
follows:
(1) any testamentary trust created under the will of
Employee,
(2) Employee's surviving spouse,
(3) Employee's surviving children, or
(4) Employee's estate.
(f) Offset by Other Severance Obligations. For so long as the
Company's obligations under subparagraphs 10(b), 10(c), or 10(d) of this
Agreement cover a termination of the Employee's employment with the Company,
payments under this paragraph 10 shall be offset by any other severance
obligations provided to the Employee under this Agreement, provided that such
severance obligations shall remain effective in accordance with the terms of
this Agreement with respect to any termination of Employee not covered under
subparagraphs 10(b), 10(c), or 10(d) of this Agreement.
12
<PAGE> 13
(g) Automatic Extension. Notwithstanding anything to the contrary
in paragraph 2 or elsewhere herein, if a Potential Change in Control occurs,
the provisions of this paragraph 10 shall be automatically extended and
continue to be in effect for an additional twelve (12) months. Notwithstanding
anything to the contrary in paragraph 2 or elsewhere herein, if a Change in
Control shall have occurred during the original or extended term of this
paragraph 10, the provisions of this paragraph 10 shall continue in effect for
a minimum period of twenty four (24) months beyond the month in which such
Change in Control occurred.
(h) Notwithstanding anything to the contrary herein, and without
limiting Employee's rights at law or in equity, if the Company fails or refuses
to timely pay to Employee the benefits due under subparagraphs 10(c) and/or
10(d) of this Agreement, then the benefits under subparagraphs 10(c)(3) and
10(d)(3) shall be increased and the benefits under subparagraphs 10(c)(1) and
(2) and 10(d)(1) and (2) shall each be continued by one additional day for each
day of any such failure or refusal of the Company to pay. In addition, any
Gross-Up Payment due under subparagraphs 10(c)(4) or 10(d)(4) shall be
increased to take into account any increased benefits under this subparagraph
10(h).
11. Non-Assignability. (a) Neither this Agreement nor any right
or interest hereunder shall be assignable by the Employee, his beneficiaries,
or legal representatives without the Company's prior written consent; provided,
however, that nothing in this subparagraph (a) shall preclude (i) the Employee
from designating a beneficiary to receive any benefit payable hereunder upon
his death, or (ii) the executors, administrators, or other legal representative
of the Employee or his estate from assigning any rights hereunder to the person
or person entitled thereunto.
(b) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
12. Binding Effect. (a) This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and assigns. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company or by any
merger or consolidation where the Company is not the surviving corporation, or
upon any transfer of all or substantially all of the Company's assets, or any
other Change in Control. The Company covenants that it will require any
successor, assign or purchaser of its business (whether direct or indirect, by
purchase, merger, acquisition, asset sale, spinoff, consolidation or otherwise)
to (i) expressly assume and agree to perform under this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place, in writing, the Company's obligations and
responsibilities under this Agreement and (ii) agree to notify Employee in
writing of the assumption of this Agreement within 10 days of such assumption.
Failure of the Company to obtain such assumption and agreement prior to the
effective date of any such succession shall be a breach of this Agreement and
shall entitle Employee to compensation from the Company in the same amount and
on the same terms to which Employee would be entitled hereunder if Employee
terminates Employee's employment for Good Reason (as defined in paragraph 10
above) following a Change in Control
13
<PAGE> 14
or Potential Change in Control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed to be the date of Employee's termination.
(b) This Agreement shall be binding upon and inure to the benefit
of the Company and any purchaser, assign, surviving corporation or successor to
the Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business and/or assets of the
Company, or otherwise (and such purchaser, assign, surviving corporation or
successor shall thereafter be deemed to be the "Company" for the purposes of
this Agreement). but this Agreement shall not otherwise be assignable,
transferable or delegable by the Company.
(c) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(d) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder (except as
expressly provided hereunder). Without limiting the generality of the
foregoing, the Employee's right to receive payments hereunder shall not be
assignable, transferable, delegable, whether by pledge, creation of a security
interest or otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any claim, debt,
or obligation, or to execution, attachment, levy or similar process , or
assignment by operation of law, other than by a transfer by his will or by the
laws of descent and distribution. Any attempt, voluntarily or involuntarily,
to effect any action prohibited by this paragraph 12 shall be null, void, and
of no effect.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and either delivered in
person, sent by first class certified or registered mail, postage prepaid, or
transmitted by facsimile, if to the Company, at the Company's principal place
of business, and if to the Employee, at his home address most recently filed
with the Company, or to such other address or addresses as either party shall
have designated in writing to the other party hereto.
14. Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
15. Severability. If any provision of this Agreement shall be
determined to be invalid, illegal or unenforceable in whole or in part, neither
the validity of the remaining part of such provision nor the validity or any
other provision of this Agreement shall in any way be affected thereby. In
lieu of such invalid, illegal or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
invalid, illegal or unenforceable provision as may be possible and be valid,
legal and enforceable.
16. Waiver. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver of such
term, covenant or condition, nor shall
14
<PAGE> 15
any waiver or relinquishment of any right or power hereunder at any one or more
times be deemed a waiver or relinquishment of such right or power at any other
time or times.
17. Entire Agreement; Modifications. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior agreements, oral and written, between the parties
hereto with respect to the subject matter hereof. This Agreement may be
modified or amended only by an instrument in writing signed by both parties
hereto.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Relocation. If at any time the Company requests the Employee
to report for the performance of his services hereunder on a regular or
permanent basis at any location or office more than thirty-five (35) miles from
his current home, and if the Employee consents to do so, the Company shall pay
the Employee's reasonable relocation and moving expenses, including, but not
limited to, the cost of moving his immediate family, expenses incurred while
seeking new housing (including travel by the Employee's spouse) and temporary
living expenses incurred by the Employee or his family for up to ninety (90)
days.
20. Indemnification. (a) Indemnification; Liability Insurance.
The Company shall indemnify and hold the Employee (or his legal representative)
harmless to the full extent permitted by applicable law for all legal expenses
and all liabilities, losses, judgments, fines, expenses and amounts paid in
settlement in connection with any proceeding involving him (including any
action by or in the right of the Company) by reason of his being or having been
a director, officer, employee or agent of the Company or any of its
subsidiaries, Affiliates, or any other enterprise if he is serving or has
served therein at the request of the Company. In addition, the Company shall
cause such subsidiary, Affiliate or enterprise also to so indemnify and hold
the Employee harmless to the full extent permitted by applicable law. The
foregoing shall not be deemed to limit any rights of the Employee pursuant to
applicable indemnification provisions of the Company's Certificate of
Incorporation or By-laws or otherwise. In addition, the Company shall acquire
and maintain directors and officers liability insurance for the benefit of the
Employee on at least as favorable terms and coverage amounts as for any other
officer or director of the Company, such insurance to remain in effect for as
long as reasonably necessary to cover all events occurring during the term of
this Agreement (but in no event less than three years after the term of this
Agreement), regardless of when the claim is made.
(b) Advance of Expenses. In the event of any action, proceeding,
or claim against the Employee arising out of his serving or having served in a
capacity specified in subparagraph (a) above, which in the Employee's sole
judgment requires him to retain counsel (such choice of counsel to be made in
his sole and absolute discretion) or otherwise expend his personal funds for
his defense in connection therewith, the Company shall be obligated to advance
to the Employee (or pay directly to his counsel) reasonable counsel fees and
other costs associated with the Employee's defense of such action, proceeding
or claim; provided, however, that in such event the Employee shall first agree
in writing, without posting bond or collateral, to repay all sums paid or
15
<PAGE> 16
advanced to him pursuant to this provision in the event that the final
disposition of such action, proceeding or claim is one for which the Employee
would not be entitled to indemnification pursuant to the provisions hereof.
21. No Set-Off. There shall be no right of set-off or
counterclaim in respect of any claim, debt or obligation against any payment to
or benefit for the Employee provided for in this Agreement.
22. No Mitigation Required. The Employee's rights hereunder upon
termination of employment shall be cumulative with and in addition to any other
rights or remedies he may be entitled to by reason of any such termination. In
addition, the Employee shall have no obligation to mitigate his damages
hereunder, whether by seeking new employment or otherwise, nor shall the amount
of any payment provided for in this Agreement (except as otherwise provided in
subparagraph 9(b) hereof) be reduced by any compensation earned by the Employee
as the result of employment by another employer after the date of termination
of the Employee's employment with the Company, or otherwise.
23. Survival of Rights and Obligations. The terms and provisions
of paragraphs 7, 9, 10, 12, 20, 21, 22, 23, and 24 of this Agreement shall
survive the expiration of the Employment Term.
24. Disputes. Any dispute or controversy arising under, out of,
in connection with or in relation to this Agreement shall, at the election and
upon written demand of either party, be finally determined and settled by
binding arbitration in the city of Dallas, Texas, using a single arbitrator, in
accordance with the Labor Arbitration rules and procedures of the American
Arbitration Association, and judgment upon the award may be entered in any
court having jurisdiction thereof. The arbitrator shall have the power to
order specific performance, mandamus, or other appropriate legal or equitable
relief to enforce the provisions of this Agreement. The Company shall pay all
costs of the arbitration and all reasonable attorney's and accountant's fees of
the Employee in connection therewith.
16
<PAGE> 17
IN WITNESS WHEREOF, the Company and the Employee have duly executed
and delivered this Agreement as of the day and year first above written.
EMCARE HOLDINGS INC.
By /s/ LEONARD M. RIGGS, JR., M.D.
--------------------------------------
Name: Leonard M. Riggs, Jr., M.D.
--------------------------------
Title: Chief Executive Officer
-------------------------------
/s/ WILLIAM F. MILLER
--------------------------------------
William F. Miller
17
<PAGE> 18
<TABLE>
<CAPTION>
SCHEDULE I
BENEFITS
COMPANY NAME POLICY NUMBER TERM COVERAGAMOUNT
- ------------ ------------- ---- -------------
<S> <C> <C> <C>
United Life & Accident (Chubb) 805113 Annual $500,000
New York Life 41309058 Annual 250,000
Security Mutual 1007665 Annual 250,000
Provident Life & Accident 6334-643484 Annual Monthly disability payments
Northwood Club annual dues
Premier Club annual dues
Auto & Insurance monthly lease payments and insurance
</TABLE>
<PAGE> 19
SCHEDULE II
AFFILIATES
NAME JURISDICTION
---- ------------
Emergency Health Services Associates of New Mexico, P.C. New Mexico
Emergency Health Services Associates, P.A. Texas
EmCare Medical Services of New York, P.C. New York
Emquest Professional Services P.A. Texas
EmCare Radiology Services of Texas, P.A. Texas
<PAGE> 20
ADDENDUM
This Addendum is hereby attached to that certain Employment Agreement,
dated as of February 5, 1992, between EmCare Holdings Inc., a Delaware
corporation and William F. Miller, III (the "Agreement").
1. Capitalized terms used herein but not otherwise defined
herein, shall have the meanings ascribed thereto in the
Agreement.
2. As of January 1, 1994 the annual salary shall be increased to
two hundred forty-five thousand dollars ($245,000) and on
January 1, 1995 and on each succeeding January 1 during the
Employment Term, the annual salary payable to the Employee
hereunder for such calendar year will be increased by an
amount equal to the product of (i) the annual Salary paid to
the Employee during the immediate preceding calendar year
multiplied by (ii) the greater of (x) the percentage increase,
if any in the Consumer Price Index (All Cities-- All Items)
during such calendar year and (y) five percent (5%).
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Addendum effective as of January 1, 1994.
EMCARE HOLDINGS INC.
By: /s/ LEONARD M. RIGGS, JR., M.D.
-------------------------------------
Name: Leonard M. Riggs, Jr., M.D.
Title: Chief Executive Officer
/s/ WILLIAM F. MILLER, III
----------------------------------------
William F. Miller, III
<PAGE> 1
EXHIBIT 10.15
SEVERANCE AGREEMENT
This Severance Agreement (this "Agreement"), dated as of
November 1, 1996, is between Robert F. Anderson, II (the "Employee") and
EmCare Holdings Inc., a Delaware corporation (the "Employer").
RECITALS
WHEREAS, the Employer desires to provide a severance
arrangement for the Employee under certain circumstances, and the Employee
desires to accept such arrangement, upon the terms and conditions set forth in
this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and
the terms and conditions of this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound by this Agreement, the Employee and the
Employer agree as follows:
I. SEVERANCE PAYMENT
SECTION 1.1 SEVERANCE PAYMENT. The Employer shall pay to
the Employee $190,000 (the "Severance Payment") if a Change in Control occurs
and the Employee's employment with the Employer terminates because: (a) the
Employer terminates the Employee without Cause within 180 days after such
Change in Control, or (b) the Employee tenders his resignation for Good Reason
within 180 days after such Change in Control, which resignation takes effect 30
days after the Employee tenders it. The Employer shall make any such Severance
Payment within 30 days after the termination of the Employee's employment with
the Employer.
SECTION 1.2 TERM. This Agreement shall apply only to the
first Change in Control that occurs after the date of this Agreement. If the
Employee's employment with the Employer does not terminate as specified in
Section 1.1 after such first Change in Control, this Agreement shall terminate.
SECTION 1.3 NO DUTY TO MITIGATE. The Severance Payment
shall be in addition to any other amounts owed to the Employee at the time of
the termination of the Employee's employment. Under no circumstances shall the
Severance Payment be subject to any duty to mitigate or offset.
1
<PAGE> 2
SECTION 1.4 CONTINUATION OF CERTAIN BENEFITS. If the
termination of the Employee's employment with the Employer requires the
Employer to make the Severance Payment, then the Employer shall continue to
provide the Employee with all disability, health, and life insurance benefits
that the Employer provided to the Employee at the time of such termination on
the same terms as provided at that time until the earlier of: (a) the first
anniversary of such termination, or (b) the date when the Employee becomes
re-employed with another employer on a full- time basis. If the Employer is
unable to provide certain of these benefits to the Employee because he no
longer has the status of an employee, the Employer shall provide the Employee
with substantially similar benefits and make any adjustment necessary to cause
the after-tax value to the Employee of such similar benefits to be
substantially equivalent to the after-tax value to the Employee of the benefits
that the Employer cannot provide.
II. DEFINITIONS
SECTION 2.1 CHANGE IN CONTROL. The term "Change in Control"
shall mean: (a) any merger, consolidation, reorganization, or recapitalization
of the Company, or any similar transaction involving the Company, in which the
stockholders of the Company immediately before the merger, consolidation,
reorganization, recapitalization, or similar transaction, fail to own
securities in the surviving or new entity that represent more than 50% of the
voting power of the equity holders of such entity immediately after the merger,
consolidation, reorganization, recapitalization, or similar transaction, (b)
any person or group, as determined in accordance with Rule 13d-3 under the
Securities and Exchange Act of 1934, as in effect from time to time,
beneficially owning securities of the Company that represent more than 50% of
the voting power of the security holders of the Company as determined under
Rule 13d-3, other than any such ownership by an employee benefit plan sponsored
or maintained by the Company or any of its subsidiaries or affiliates, or any
trusts related to any such employee benefit plan, (c) any sale of all or
substantially all of the aggregate assets of the Company and its subsidiaries,
(d) any election of an individual as a director of the Company who the Board of
Directors of the Company or a committee of such Board of Directors did not
nominate, (e) any filing of a voluntary petition by the Company under the
federal bankruptcy laws or any filing of an involuntary petition against the
Company under such laws, which involuntary petition is not dismissed within 30
days after it was filed, or (f) any adoption of a plan of dissolution or
liquidation of the Company. For purposes of a Change in Control, voting power
shall mean the power to vote in the election of an entity's directors or
similar functionaries. If an entity's equity security holders vote in classes
in such elections, however, voting power shall be determined based upon the
voting power within any class of equity securities entitled to elect one-half
or more of such entity's directors or similar functionaries.
SECTION 2.2 CAUSE. The term "Cause" shall mean: (a) any
chronic alcoholism or drug addiction by the Employee as evidenced by a specific
event, (b) any conviction of the Employee of a felony involving moral
turpitude, (c) any dishonest act by the Employee from which the Employee
personally profits at the expense of the Employer, or (d) any intentional
misconduct of the Employee in his service to the Employer.
2
<PAGE> 3
SECTION 2.3 GOOD REASON. The term "Good Reason" shall mean:
(a) any dimmunition of the Employee's authority, duties, or responsibilities,
or any assignment to the Employee of duties and responsibilities inconsistent
with his position as the Chief Financial Officer of the Employer, (b) any
failure to elect the Employee to the office of Chief Financial Officer of the
Employer, (c) any decrease in the Employee's annual salary, or (d) any
relocation of the Employer's chief executive offices outside the metropolitan
area of Dallas and Fort Worth, Texas, including the areas within a radius of 50
miles of each of those cities.
III. GENERAL
SECTION 3.1 AMENDMENT. No amendment or modification of
any of the provisions of this Agreement shall be effective unless in a writing
signed by the Employee and the Employer.
SECTION 3.2 COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
agreement, but all of which shall constitute one and the same agreement.
SECTION 3.3 ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement and understanding between the Employee and the Employer
and supersedes all prior agreements and understandings, both written and oral,
with respect to the subject matter of this Agreement.
SECTION 3.4 GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE
OF TEXAS, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER THE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW OF THE STATE OF TEXAS.
SECTION 3.5 HEADINGS. Article and section headings are
used in this Agreement only as a matter of convenience, are not a part of this
Agreement, and shall not have any effect upon the construction or
interpretation of this Agreement.
SECTION 3.6 NO ASSIGNMENT. Neither the Employee nor the
Employer may assign its rights or delegate its duties under this Agreement
without the written consent of the other person.
SECTION 3.7 PERFORMANCE ON BUSINESS DAYS. If any event or
the expiration of any period provided for in this Agreement is scheduled to
occur or expire on a day that is not a Business Day, such event shall occur or
such period shall expire on the next succeeding day that is a Business Day.
The term "Business Day" shall mean a day that is not a Sunday, Saturday, or
holiday when banks in the State of Texas are required or permitted to be
closed.
3
<PAGE> 4
SECTION 3.8 SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability (but shall be construed and given effect to the extent
possible) without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 3.9 SUCCESSORS. This Agreement shall be binding
upon and enure to the benefit of the Employee and his legal representatives and
permitted assigns and the Employer and its successors and permitted assigns.
The Employer shall cause any successor to it or to substantially all of its
assets to assume the Employer's obligations under this Agreement.
SECTION 3.10 WAIVER. No provision of this Agreement shall
be considered waived unless such waiver is in a writing signed by the party to
this Agreement that benefits from the enforcement of such provision. No waiver
of any provision of this Agreement, however, shall be deemed a waiver of a
subsequent breach of such provision (or right arising under such provision) or
a waiver of a similar provision. In addition, a waiver of any breach or a
failure to enforce any term or condition of this Agreement shall not in any way
affect, limit, or waive a party's rights under this Agreement at any time to
enforce strict compliance thereafter with every term and condition of this
Agreement.
IN WITNESS WHEREOF, the Employee and the Employer have each
executed and delivered this Agreement as of the date first written above.
/s/ ROBERT F. ANDERSON, II
-------------------------------------
ROBERT F. ANDERSON, II
EMCARE HOLDINGS INC.
By: /s/ WILLIAM F. MILLER, III
---------------------------------
Name: William F. Miller, III
Title: President
4
<PAGE> 1
================================================================================
EXHIBIT 10.16
THIRD
AMENDED AND RESTATED
LOAN AGREEMENT
among
EMCARE, INC.,
EMCARE HOLDINGS INC.,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
individually and as agent
and
the other banks named herein
dated
as of
7 March 1997
================================================================================
CHASE SECURITIES INC.,
as Arranger
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2 - Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 The Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.5 Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.7 Conversions and Continuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.8 Commitment Fee; Reduction, Termination and Extension of Commitment . . . . . . . . . . . . 17
Section 2.9 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.10 Procedure for Issuing Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.11 Drawing on Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.12 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.13 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.14 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 3 - Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.1 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.2 Optional Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.3 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.4 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.5 Withholding Taxes and Other Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.6 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.2 Limitation on Types of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4 Substitute Base Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5 - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 All Advances and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.1 Existence; Place of Business; Chief Executive Office . . . . . . . . . . . . . . . . . . . 29
Section 6.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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<TABLE>
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Section 6.3 Corporate Action; No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.5 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.6 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.7 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.8 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.11 Use of Proceeds; Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.14 Organizational Structure and Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.15 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7 - Positive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.2 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.10 Further Assurances; Additional Affiliate Guaranties . . . . . . . . . . . . . . . . . . . . 37
Section 7.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.12 Administration Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 8 - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.3 Mergers, Acquisitions and Dissolutions . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.4 Restricted Payments; Consent to Dividend . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.6 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.7 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.8 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.9 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.10 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 9 - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.1 Combined Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.2 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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<TABLE>
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Section 9.3 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 10 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.2 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.3 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.4 Performance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 10.5 Continuance of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 11 - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Rights of Agent as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.8 Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 12 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 12.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.5 Agent and Banks Not Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.6 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.7 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.10 ENTIRE AGREEMENT; AMENDMENT AND RESTATEMENT MODIFICATION OF LOAN DOCUMENTS . . . . . . . . 55
Section 12.11 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.12 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.13 Applicable Law; Venue; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.16 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.17 Non-Application of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . 57
Section 12.18 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.19 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.20 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
<PAGE> 5
INDEX TO EXHIBITS
Exhibit Description of Exhibit
------- ----------------------
"A" Note
"B" Credit Request Form
"C" Compliance Certificate
"D" Assignment and Acceptance
"E" Subsidiary Pledge Agreement
"F" Affiliate Guaranty
INDEX TO SCHEDULES
Schedule Description of Schedule
-------- -----------------------
1.1(A) Commitments
1.1(B) Existing Guaranties
6.1 Principal Place of Business;
Chief Executive Office
6.5 Existing Litigation
6.14 List of Subsidiaries and PAs
8.1 Existing Debt
8.2 Existing Liens
<PAGE> 6
THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement"),
dated as of March 7, 1997, is among EMCARE, INC., a Delaware corporation
("EmCare"), EMCARE HOLDINGS INC., a Delaware corporation ("Parent"), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association and
successor in interest by merger to Texas Commerce Bank, National Association
("Texas Commerce"), the other banks or lending institutions which are or which
may from time to time become signatories hereto or any successor or assignee
thereof (individually, including Texas Commerce, a "Bank" and collectively the
"Banks") and Texas Commerce as agent for itself and the other Banks (in such
capacity, the "Agent").
R E C I T A L S:
a. EmCare, Parent and Texas Commerce
have entered into that certain Amended and
Restated Loan Agreement dated as of February
3, 1995 (as amended, the "Original Loan
Agreement") pursuant to which Texas Commerce
made a revolving credit loan available to
EmCare.
b. Texas Commerce assigned portions of
its commitment under the Original Loan
Agreement to certain other Banks (the "1996
Banks") pursuant to the Assignment Agreements
each such 1996 Bank has entered into with
Texas Commerce, all of which are dated
February 21, 1996.
C. EmCare, Parent, the 1996 Banks, and Texas Commerce entered
into that certain Second Amended and Restated Loan Agreement dated as of
February 16, 1996, which amended and restated the original Loan Agreement in
its entirety (as the same has been modified, the "Second Loan Agreement").
D. EmCare and Parent have requested that the 1996 Banks increase
the amount of credit available to Parent under the Second Loan Agreement. The
1996 Banks, along with the additional Banks named herein, are willing to
increase the amount of credit made available to Parent, subject to the terms
and provisions of the Second Loan Agreement as amended and restated in its
entirety in accordance with the terms hereof.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:
<PAGE> 7
"Acquisition" means the acquisition (by purchase, agreements
to make payments in the future, merger, consolidation or otherwise) of
(i) all or a substantial part of the assets of any Person or any
shares or other evidence of beneficial ownership of any Person; (ii)
any contract to manage the physician staffing, recruiting and/or
scheduling for an emergency department of a hospital or to manage any
other aspect of the healthcare services of another Person to the
extent Parent, a Subsidiary or a PA was not the original party
thereto; or (iii) the right to manage (pursuant to an Administrative
Management Agreement) a Person who, immediately prior to the
acquisition, was not a Subsidiary or PA and who was engaged in the
business of managing physician staffing, recruiting and/or scheduling
for emergency departments of hospitals or engaged in the business of
managing any other healthcare services of another Person. If Parent, a
Subsidiary or a PA is selected by a hospital to manage the physician
staffing, recruiting and/or scheduling for an emergency department or
any other aspect of the healthcare services of another Person and
neither Parent, any Subsidiary nor any PA is required to make any
payment to any Person, whether now or in the future, as a condition to
the award of the applicable contract (other than payments made in
connection with the purchase of equipment or materials which are
required to be obtained to perform under such contract), then the
acquisition of such contract shall not be deemed to be an
"Acquisition."
"Additional Costs" has the meaning specified in Section 4.1.
"Adjusted Base Rate" means, for any day, a rate per annum
(rounded upwards to the nearest 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plusone percent (1%) or (c) the Federal Funds Rate
in effect on such day plus one-half of one percent (.50%). If for any
reason Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Rate, or both, for any reason,
including the inability or failure of Texas Commerce to obtain
sufficient quotations in accordance with the definitions thereof, the
Adjusted Base Rate shall be determined without regard to clause (b) or
(c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no
longer exist. Any change in the Adjusted Base Rate due to a change in
the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Rate, respectively. As used herein, this definition and the following
terms have the following meanings:
"Assessment Rate" means, at any time, the rate
(rounded upwards, if necessary, to the nearest 1/16 of 1%)
then charged by the Federal Deposit Insurance Corporation (or
any successor) to Texas Commerce for deposit insurance for
Dollar time deposits with Texas Commerce at the Principal
Office as determined by Agent.
"Base CD Rate" means the sum of (a) the quotient of
(i) the Three-Month Secondary CD Rate divided by (ii) the
remainder of 1.00 minus the Reserve Requirement plus (b) the
Assessment Rate; the Base CD Rate shall be
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 8
<PAGE> 8
adjusted automatically on and as of the effective date of any
change in the Reserve Requirement, the Assessment Rate or the
Three-Month Secondary CD Rate.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by the Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if
the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and
(ii) if such rate is not so published on such next succeeding
Business Day, the Federal Funds Rate for any day shall be the
average rate charged to Texas Commerce on such day on such
transactions.
"Prime Rate" shall mean the rate of interest per
annum then most recently established by Texas Commerce as its
prime rate in effect from day to day at the Principal Office;
each change in the Prime Rate shall be effective on the date
of such change. The Prime Rate may not be Texas Commerce's
best or favored rate and the Banks may make other loans to
other Persons at rates lower than the Prime Rate.
"Three-Month Secondary CD Rate" means, for any day,
the secondary market rate for three-month certificates of
deposit reported as being in effect on such day (or, if such
day shall not be a Business Day, the next preceding Business
Day) by the Board of Governors of the Federal Reserve System
(or any successor governmental agency) through the public
information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the
Board of Governors of the Federal Reserve System, be published
in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the
average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business
Day, on the next preceding Business Day) by Texas Commerce
from three New York City negotiable certificate of deposit
dealers of recognized standing selected by Texas Commerce.
"Adjusted Eurodollar Rate" means, for any Eurodollar Advance
for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/16 of 1%) determined by Agent to be
equal to the Eurodollar Rate for such Eurodollar Advance for such
Interest Period divided by 1 minus the Reserve Requirement for such
Eurodollar Advance for such Interest Period.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 9
<PAGE> 9
"Administrative Management Agreement" means, as of the date of
determination, an agreement then in effect pursuant to which a
professional association or corporation engaged in the practice of
medicine has agreed to permit a Subsidiary to perform comprehensive
management and related administrative services to such Person for the
nonmedical aspects of such Person's business.
"Advance" means each advance of funds by the Banks to Parent
pursuant to Article 2.
"Affiliate" means, as to any Person, any other Person (i) that
directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such Person;
(ii) that directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of such Person; or
(iii) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Person in
question. The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise; provided, however, in no
event shall the Agent or any Bank be deemed an Affiliate of Parent or
any of its Subsidiaries.
"Affiliate Guaranty" means an Existing Guaranty or the
guaranty of EmCare, any other Subsidiary or a PA in favor of Agent in
substantially the form of Exhibit "F", as the same may be amended,
supplemented, or otherwise modified.
"Agent" has the meaning set forth in the Introduction of this
Agreement.
"Agreement" has the meaning specified in the introduction to
this Agreement.
"Applicable Lending Office" means for each Type of Advance,
the Lending Office of a Bank (or of an Affiliate of such Bank)
designated for such Type of Advance below its name on the signature
pages hereof or such other office of a Bank (or of an Affiliate of
such Bank) as a Bank may from time to time specify to Agent as the
office by which its Advances of such Type are to be made and
maintained.
"Applicable Rate" has the meaning specified in subsection
2.4(a).
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Bank and its assignee and accepted by the Agent and,
if applicable, Parent pursuant to Section 12.8 in substantially the
form of Exhibit "D" hereto.
"Bank Accounts" has the meaning specified in subsection 10.3.
"Base Margin" has the meaning specified in subsection 2.4(a).
"Base Rate Advances" means Advances that bear interest at
rates based upon the Adjusted Base Rate.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 10
<PAGE> 10
"Business Day" means (i) any day on which commercial banks are
not authorized or required to close in Texas, and (ii) with respect to
all borrowings, payments, Conversions, Continuations, Interest Periods
and notices in connection with Eurodollar Advances, any day which is a
Business Day described in clause (i) above and which is also a day on
which dealings in Dollar deposits are carried out in the London
interbank market.
"Capital Lease Obligation" means obligations under any lease
of real or personal property that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount
of such obligations shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Closing Date" means March 7, 1997.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated and rulings issued thereunder.
"Combined Funded Debt" means, at any particular time, the sum
of the following for Parent and the Subsidiaries (determined on a
consolidated basis) and any ER Management Party that is not otherwise
a Subsidiary determined on a combined basis in accordance with GAAP
(without duplication): (i) the sum of (a) current maturities of long
term Debt; and (b) long term Debt (the items described in clause (a)
and (b) herein the "Funded Debt"); minus (ii) the sum of (a) all
Funded Debt which is owed to an Affiliate and which is permitted by
the terms of subsection 8.1(d) and (b) all Funded Debt permitted by
subsection 8.1(c).
"Combined Interest Expense" means, for any period, all cash
interest paid or payable for such period by Parent and the
Subsidiaries (determined on a consolidated basis), and any ER
Management Party that is not a Subsidiary (calculated on a combined
basis in accordance with GAAP).
"Combined Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
stockholders' equity on a combined balance sheet of Parent and the
Subsidiaries (determined on a consolidated basis) and any ER
Management Party that is not otherwise a Subsidiary.
"Commitment" means, as to any Bank, the obligation of such
Bank to make Advances hereunder in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount set forth
opposite the name of such Bank on Schedule 1.1(A) hereto or in the
applicable Assignment and Acceptance as such amount may be reduced
pursuant to Section 2.8. The aggregate Commitments on the Closing
Date equal One Hundred Million Dollars ($100,000,000).
"Commitment Fee Rate" has the meaning specified in Section 2.8.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 11
<PAGE> 11
"Compliance Certificate" means a certificate, in substantially
the form of Exhibit "C", properly completed and signed by an
authorized financial officer of Parent.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.7 of a Eurodollar Advance as a
Eurodollar Advance from one Interest Period to the next Interest
Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Section 2.7 or Article 4 of one Type of Advance
into another Type of Advance.
"Credit Request Form" means a certificate, in substantially
the form of Exhibit "B", properly completed and signed by an
authorized officer of Parent requesting an Advance or the issuance of
a Letter of Credit.
"Debt" means as to any Person at any time (without
duplication): (i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, notes,
debentures, or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services
(including for the deferred purchase price for an Acquisition, whether
paid under the terms of a non-compete or consulting agreement or
otherwise) except trade accounts payable of such Person arising in the
ordinary course of business which are not past due by more than ninety
(90) days unless such trade accounts payable are being contested in
good faith by appropriate proceedings, (iv) all Capital Lease
Obligations of such Person, (v) all Debt or other obligations of
others Guaranteed by such Person, (vi) all obligations secured by a
Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are
non-recourse to the credit of such Person, (vii) all reimbursement
obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other
bonds and similar instruments, and (viii) all liabilities of such
Person in respect of unfunded vested benefits under any Plan.
"Default Rate" means the Maximum Rate or, if no Maximum Rate
exists, the sum of the Adjusted Base Rate in effect from day to day
plus four percent (4%).
"Dollars" and "$" mean lawful money of the United States of
America.
"EBIT" means for any period, Net Income for such period plus
(i) the sum of, but without duplication and only in each case to the
extent deducted in determining Net Income for such period (a) Combined
Interest Expense, (b) all taxes based on income of Parent and the
Subsidiaries (determined on a consolidated basis) and any ER
Management Party that is not otherwise a Subsidiary accrued during
such period, (c) all non-operating charges, (d) all extraordinary
non-cash charges, and (e) all non-recurring non-cash charges and (f)
all cash charges attributable to the settlement of the United States
Department of Justice civil lawsuit pending as of the Closing Date
against EmCare, relating to claims under the False Claims Act arising
from reimbursements under the Medicare, Medicaid and CHAMPUS programs,
provided that the aggregate
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 12
<PAGE> 12
amount added to Net Income pursuant to this clause (f) during the
entire term of this Agreement shall not exceed Eight Million Dollars
($8,000,000), minus (ii) the sum of but without duplication and only
in each case to the extent added in determining Net Income for such
period (a) all non-cash revenue items, (b) all non- operating revenue
items and/or (c) any extraordinary or non-recurring revenue items.
"EmCare" has the meaning set forth in the Introduction hereto.
"EmCare Pledge Agreement" means the Amended and Restated
Pledge Agreement between EmCare and Agent dated February 16, 1996 and
as the same has been and may hereafter be amended, supplemented or
otherwise modified.
"EMTAC Pledge Agreement" means that certain Pledge Agreement
between EMTAC, INC. and Texas Commerce dated as of December 31, 1993,
as modified by the Second Loan Agreement as the same may hereafter be
amended, supplemented or otherwise modified.
"ER Management Contract" means, as of the date of
determination, an agreement then in effect between an ER Management
Party and a hospital pursuant to which the ER Management Party manages
the physician staffing, recruiting and/or scheduling for the emergency
department of the hospital.
"ER Management Parties" means each Subsidiary and each PA
engaged in the business of managing physician staffing, recruiting
and/or scheduling for the emergency departments of hospitals.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of the same controlled group of corporations (within
the meaning of Section 414(b) of the Code) as any Obligated Party or
is under common control (within the meaning of Section 414(c) of the
Code) with any Obligated Party.
"Eurodollar Advances" means Advances the interest rates on
which are determined on the basis of the rates referred to in the
definition of "Adjusted Eurodollar Rate" in this Section 1.1.
"Eurodollar Margin" has the meaning specified in subsection
2.4(a).
"Eurodollar Rate" means, for any Eurodollar Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) quoted by Texas Commerce at
approximately 11:00 A.M. London time (or as soon thereafter as
practicable) two Business Days prior to the first day of such Interest
Period that Texas Commerce is offered by leading banks in the London
interbank market for Dollar deposits in immediately available funds
having a term comparable to such Interest
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 13
<PAGE> 13
Period and in an amount comparable to the principal amount of the
Eurodollar Advance to which such Interest Period relates.
"Event of Default" has the meaning specified in Section 10.1.
"Existing Collateral Documents" means the EmCare Pledge
Agreement, Parent Pledge Agreement, the Network Pledge Agreement,
EMTAC Pledge Agreement and the Trust Pledge Agreement.
"Existing Guaranties" means the documents described on
Schedule 1.1(B).
"Federal Funds Rate" has the meaning set forth in the
definition of Adjusted Base Rate.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards
Board and/or their respective successors and which are applicable in
the circumstances as of the date in question. Accounting principles
are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt
or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect the obligee
against loss in respect thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used
as a verb has a corresponding meaning.
"Guarantors" means EmCare, each PA and each Subsidiary.
"Insignificant Subsidiary" has the meaning specified in
Section 7.10.
"Interest Period" means with respect to any Eurodollar
Advances, each period commencing on the date such Advances are made or
Converted from Advances of another Type or, in the case of each
subsequent, successive Interest Period applicable to a Eurodollar
Advance, the last day of the next preceding Interest Period with
respect to such Advance, and ending on the numerically corresponding
day in the first, second, third or sixth calendar month thereafter, in
each case as Parent may select as provided in Section 2.5 or 2.7
hereof, except that each such Interest Period which commences on the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 14
<PAGE> 14
last Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (i) each
Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day or, if such
succeeding Business Day falls in the next succeeding calendar month,
on the next preceding Business Day; (ii) any Interest Period which
would otherwise extend beyond the Revolving Termination Date shall end
on the Revolving Termination Date; (iii) no more than four (4)
Interest Periods shall be in effect at the same time; and (iv) no
Interest Period shall have a duration of less than one (1) month and,
if the Interest Period for any Eurodollar Advances would otherwise be
a shorter period, such Advances shall not be available hereunder.
"Letter of Credit" means any standby letter of credit issued
by Agent pursuant to Article 2 of this Agreement.
"Letter of Credit Liabilities" means, at any time, the
aggregate face amounts of all outstanding Letters of Credit.
"Leverage Ratio" means, at any particular time, the ratio of
Combined Funded Debt as of such time to Operating Cash Flow computed
for the completed four (4) fiscal quarters ending as of the date of
calculation.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement, the Note, the Affiliate
Guaranties, the Pledge Agreements and other promissory notes, security
agreements, deeds of trust, assignments, guaranties, and other
instruments, agreements, and other documentation executed and
delivered pursuant to or in connection with this Agreement, the Second
Loan Agreement, and the Original Loan Agreement, as such instruments,
agreements and other documentation may be amended, modified, renewed,
extended, supplemented, or otherwise modified from time to time.
"Material Adverse Effect" means any material adverse effect
(i) on the business, condition (financial or otherwise), operations,
prospects or properties of the Obligated Parties taken as a whole or
(ii) on the ability of any Obligated Party to pay and perform its
obligations under the Loan Documents to which it is a party, any
material Administrative Management Agreements to which it is a party
or the material ER Management Contracts to which it is a party.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
5069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes),
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 15
<PAGE> 15
but otherwise without limitation, that rate based upon the "indicated
rate ceiling" and calculated after taking into account any and all
relevant fees, payments, and other charges which are contracted for,
charged or received in connection with the Loan Documents which are
deemed to be interest under applicable law.
"Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made
by any Obligated Party or any ERISA Affiliate and which is covered by
Title IV of ERISA.
"Net Income" means, for any period, the net income of Parent
and the Subsidiaries (determined on a consolidated basis in accordance
with GAAP) and any ER Management Party that is not otherwise a
Subsidiary determined in accordance with GAAP on a combined basis.
"Network Pledge Agreement" means that certain Pledge Agreement
between EmCare Physicians Network, Inc. and Agent dated February 16,
1996, as modified by that certain Consent Letter dated as of November
21, 1996, that certain Consent Letter dated as of December 31, 1996,
and as the same may hereafter be amended, supplemented or otherwise
modified.
"Note" means a promissory note of Parent payable to the order
of a Bank, in substantially the form of Exhibit "A" hereto, and all
extensions, renewals, and other modifications thereof.
"Obligated Party" means Parent and each Subsidiary and each PA
that has executed an Affiliate Guaranty or any other Person who is or
becomes party to any agreement that guarantees or secures payment and
performance of the Obligations or any part thereof.
"Obligations" means all obligations, indebtedness, and
liabilities of Parent to Agent and the Banks under this Agreement and
the other Loan Documents, now existing or hereafter arising, whether
direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, all interest accruing thereon and all attorneys' fees and
other expenses incurred in the enforcement or collection thereof.
"Operating Cash Flow" means for any period, Net Income for
such period plus (i) the sum of, but without duplication and only in
each case to the extent deducted in determining Net Income for such
period (a) depreciation and amortization expenses for such period; (b)
Combined Interest Expense; (c) all taxes based on income of Parent and
the Subsidiaries (determined on a consolidated basis) and any ER
Management Party that is not otherwise a Subsidiary accrued during
such period; (d) all other non-cash or non-operating charges
(including without limitation, all extraordinary non-cash charges and
all non-recurring non-cash charges); and (e) all cash charges
attributable to the settlement of the United States Department of
Justice civil lawsuit pending as of the Closing Date against EmCare,
relating to claims under the False Claims Act arising from
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 16
<PAGE> 16
reimbursements under the Medicare, Medicaid and CHAMPUS programs,
provided that the aggregate amount added to Net Income during the
entire term of this Agreement pursuant to this clause (e) shall not
exceed Eight Million Dollars ($8,000,000), minus (ii) the sum of but
without duplication and only in each case to the extent added in
determining Net Income for such period (a) all non-cash revenue items,
(b) all non-operating revenue items and/or (c) any extraordinary or
non-recurring revenue items.
"Original Loan Agreement" has the meaning specified in the
Recitals.
"PA" means any professional association or professional
corporation engaging in the practice of medicine which is (i) an
Affiliate of Parent and (ii) has entered into an Administrative
Management Agreement with Parent or a Subsidiary; provided that, if
such Administrative Management Agreement is terminated, such
association or corporation shall no longer be considered a PA for
purposes of this Agreement.
"Parent" has the meaning specified in the Introduction hereto.
"Parent Property" has the meaning specified in Section 10.3.
"Parent Pledge Agreement" means the Amended and Restated
Pledge Agreement between Parent and Agent dated February 16, 1996, as
the same has been and may be amended, supplemented or otherwise
modified.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental
authority, or other entity.
"Plan" means any employee benefit or other plan established or
maintained by any Obligated Party or any ERISA Affiliate and which is
covered by Title IV of ERISA.
"Pledge Agreements" means the Subsidiary Pledge Agreements and
the Parent Pledge Agreement.
"Potential Default" means any condition or event which, after
notice or lapse of time or both, would constitute an Event of Default.
"Principal Office" means the office of Agent located at 1111
Fannin, Houston, Texas.
"Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Pro Rata" means, as to any Bank, its ratable share expressed
as a percentage obtained by multiplying by one hundred (100) the ratio
obtained by either (a) dividing the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 17
<PAGE> 17
Commitment of the Bank in question by the total Commitments of all the
Banks or (b) dividing the aggregate principal amount of the Advances
and/or Letter of Credit Liabilities outstanding which were made by or,
with respect to Letter of Credit Liabilities, participated in by the
Bank in question, by the aggregate principal amount of the Advances
and/or Letter of Credit Liabilities outstanding hereunder.
"Quarterly Payment Date" means the last day of March, June,
September, and December of each year.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented
from time to time.
"Regulatory Change" means, with respect to any Bank, any
change after the date of this Agreement in United States federal,
state, or foreign laws or regulations (including Regulation D) or the
adoption or making after such date of any interpretations, directives,
or requests applying to a class of banks including any Bank of or
under any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
"Required Banks" means at any time while no Advances or Letter
of Credit Liabilities are outstanding, Banks holding at least
sixty-six and two thirds percent (66 2/3%) of the aggregate amount of
the Commitments and, at any time while Advances and/or Letter of
Credit Liabilities are outstanding, Banks holding at least sixty-six
and two thirds percent (66 2/3%) of the outstanding aggregate
principal amount of the Advances and/or Letter of Credit Liabilities.
"Reserve Requirement" means, for any Eurodollar Advance for
any Interest Period therefor or with respect to the calculation of the
Adjusted Base Rate, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period or as of such
calculation date under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion
Dollars against (i) in the case of Eurodollar Advances "Eurocurrency
Liabilities" as such term is used in Regulation D or (ii) in the case
of the calculation of the Adjusted Base Rate, three-month non-personal
Dollar time deposits in an amount of One Hundred Thousand Dollars
($100,000) or more. Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks by reason of any Regulatory Change
against (i) any category of liabilities which includes deposits by
reference to which the Adjusted Eurodollar Rate is to be determined or
(ii) any category of extensions of credit or other assets which
include Eurodollar Advances or Base Rate Advances.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 18
<PAGE> 18
"Revolving Termination Date" means 11:00 A.M. Houston, Texas
time on March 7, 2000, or such earlier or later date and time on which
the Commitments terminate as provided in this Agreement.
"RICO" means the Racketeer Influenced and Corrupt Organization
Act of 1970, as amended from time to time.
"Second Loan Agreement" has the meaning specified in the
Recitals.
"Subsidiary" means (a) any corporation of which more than
fifty percent (50%) of the issued and outstanding securities having
ordinary voting power for the election of a majority of directors is
owned or controlled, directly or indirectly, by Parent, by Parent and
one or more other Subsidiaries, or by one or more other Subsidiaries
and (b) any business trust, association, partnership, joint venture or
other entity of which more than fifty percent (50%) of the ownership
interest thereof having ordinary voting or management power is owned
or controlled, directly or indirectly, by Parent and one or more other
Subsidiaries, or by one or more other Subsidiaries.
"Subsidiary Pledge Agreement" means a Pledge Agreement
substantially in the form of Exhibit "E" hereto executed by a
Subsidiary, as the same may be amended, supplemented or otherwise
modified. The Subsidiary Pledge Agreements include the EmCare Pledge
Agreement, the EMTAC Pledge Agreement, the Trust Pledge Agreement and
the Network Pledge Agreement.
"Succession Agreements" means that certain Stock Transfer and
Option Agreement dated February 24, 1997 among EmCare, the PAs that
are or are to become a party thereto in accordance with its terms and
Leonard M. Riggs, Jr., M.D., and that certain Stock Transfer and
Option Agreement dated February 24, 1997 among EmCare, the PAs that
are or are to become a party thereto in accordance with its terms and
Steven W. Cooley, M.D., as each such agreement exists as of the
Closing Date without further amendment or other modification unless
amended with the consent of the Required Banks.
"Texas Commerce" has the meaning set forth in the Introduction
to this Agreement.
"Trust Pledge Agreement" means that certain Pledge Agreement
between EMTAC Business Trust and Texas Commerce dated December 31,
1993, as modified by the Second Loan Agreement and as the same may
hereafter be amended, supplemented or otherwise modified.
"Type" means any type of Advance (i.e., Base Rate Advance or
Eurodollar Advance).
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof", "herein", and "hereunder" and
words of similar import referring to this Agreement refer to this
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 19
<PAGE> 19
Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all Article, Exhibit and Section references pertain
to this Agreement. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. Terms used herein that are defined in
the Uniform Commercial Code as adopted by the State of Texas, unless otherwise
defined herein, shall have the meanings specified in the Uniform Commercial
Code as adopted by the State of Texas.
ARTICLE 2
Advances
Section 2.1 Commitment. Subject to the terms and conditions of
this Agreement, each Bank severally agrees to make one or more Advances to
Parent from time to time from the Closing Date to and including the Revolving
Termination Date in an aggregate amount at any time outstanding up to but not
exceeding the amount of such Bank's Commitment as then in effect minus such
Bank's interest in all the outstanding Letter of Credit Liabilities. Subject
to the foregoing limitations, and the other terms and provisions of this
Agreement, Parent may borrow, repay, and reborrow hereunder the amount of the
Commitments by means of Base Rate Advances and Eurodollar Advances until the
Revolving Termination Date and, until the Revolving Termination Date, Parent
may Convert all or part of one Type of Advance into another Type of Advance or
Continue all or part of any Eurodollar Advance. Each Type of Advance shall be
made and maintained at the Banks' Applicable Lending Office for such Type of
Advance.
Section 2.2 The Note. The obligation of Parent to repay a Bank
for Advances made by such Bank and interest thereon shall be evidenced by a
Note executed by Parent, payable to the order of such Bank in the principal
amount of such Bank's Commitment as originally in effect.
Section 2.3 Repayment of Advances. Parent shall repay the unpaid
principal amount of all outstanding Advances on the Revolving Termination Date.
Section 2.4 Interest.
(a) Rate. The unpaid principal amount of the Advances
shall bear interest prior to maturity at a varying rate per annum
equal from day to day to the lesser of (i) the Maximum Rate or (ii)
the Applicable Rate, each such change in the rate of interest charged
on the Advances to become effective, without notice to Parent, on the
effective date of each change in the Applicable Rate or the Maximum
Rate, as the case may be; provided, however, if at any time the rate
of interest specified in clause (ii) preceding shall exceed the
Maximum Rate, thereby causing the interest on the Advances to be
limited to the Maximum Rate, then any subsequent reduction in the
Applicable Rate shall not reduce the rate of interest on the Advances
below the Maximum Rate until the aggregate amount of interest accrued
on the Advances equals the aggregate amount of interest which would
have accrued on the Advances if the interest rate specified in clause
(ii) preceding had at all times been in effect. All past due
principal and interest shall bear
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 20
<PAGE> 20
interest at the Default Rate. As used in this subsection 2.4(a), the
following terms shall have the meanings set forth below:
"Applicable Rate" means: (i) during the period that
an Advance is a Base Rate Advance, the Adjusted Base Rate plus
the Base Margin and (ii) during the period that an Advance is
a Eurodollar Advance, the Adjusted Eurodollar Rate plus the
Eurodollar Margin. Upon delivery of the Compliance
Certificate accompanying the financial statements delivered in
accordance with subsections 7.1(b) as of the end of each
fiscal quarter, commencing with the Compliance Certificate
delivered for the quarter ending March 31, 1997, the Base
Margin and the Eurodollar Margin shall be automatically
adjusted in accordance with the Parent's actual Leverage Ratio
set forth therein and the table set forth in the applicable
definition, such adjustment to be retroactive to the first day
of the fiscal quarter in which such Compliance Certificate is
delivered. If Parent fails to deliver such Compliance
Certificate which sets forth the Leverage Ratio during any
fiscal quarter, the Base Margin and Eurodollar Margin during
the quarter for which such Compliance Certificate was not
delivered shall automatically be adjusted to one-half of one
percent (0.50%) and two percent (2.00%), respectively,
retroactively to the first day of such quarter.
"Base Margin" means, during each fiscal quarter, the
percent set forth in the table below opposite the Parent's
actual Leverage Ratio determined as of the last day of the
preceding fiscal quarter:
<TABLE>
<CAPTION>
---------------------------------------------------
LEVERAGE RATIO BASE MARGIN
-------------- -----------
---------------------------------------------------
<S> <C>
Less than or equal to 2.5 to 1.0 .00%
---------------------------------------------------
Greater than 2.5 to 1.0 .25%
---------------------------------------------------
</TABLE>
; provided that, prior to the delivery of the first quarter
end Compliance Certificate hereunder, the Base Margin shall be
zero percent (0%) unless and until it is retroactively
adjusted in accordance with the definitions of Applicable Rate
and Base Margin.
"Eurodollar Margin" means, during each fiscal
quarter, the percent set forth in the table below opposite the
Parent's actual Leverage Ratio determined as of the last day
of the preceding fiscal quarter:
<TABLE>
<CAPTION>
---------------------------------------------------------
LEVERAGE RATIO EURODOLLAR MARGIN
-------------- -----------------
---------------------------------------------------------
<S> <C>
Less than 1.0 to 1.0 .75%
---------------------------------------------------------
Less than or equal to 1.5 to 1.0
but greater than or equal to 1.0 1.00%
to 1.0
---------------------------------------------------------
Greater than 1.5 to 1.0 but less
than or equal to 2.0 to 1.0 1.25%
---------------------------------------------------------
Greater than 2.0 to 1.0 but less 1.50%
than or equal to 2.5 to 1.0
---------------------------------------------------------
Greater than 2.5 to 1.0 1.75%
---------------------------------------------------------
</TABLE>
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 21
<PAGE> 21
; provided that, prior to the delivery of the first
quarter end Compliance Certificate hereunder, the Eurodollar
Margin shall be one percent (1%) unless and until it is
retroactively adjusted in accordance with the definitions of
Applicable Rate and Eurodollar Margin.
(b) Payment. Accrued and unpaid interest on the Advances
shall be due and payable as follows: (i) in the case of Base Rate
Advances, on each Quarterly Payment Date; (ii) in the case of each
Eurodollar Advance, on the last day of the Interest Period with
respect thereto and, in the case of an Interest Period with a duration
greater than three months, at three-month intervals after the first
day of such Interest Period; and (iii) on the Revolving Termination
Date.
(c) Computation. Interest on the Eurodollar Advances
shall be computed on the basis of a year of 360 days and the actual
number of days elapsed (including the first day but excluding the last
day) unless such calculation would result in a usurious rate, in which
case interest shall be calculated on the basis of a year of 365 or 366
days, as the case may be. Interest on the Base Rate Advances shall be
computed on the basis of (i) a year of 365 or 366 days as the case may
be and the actual number of days elapsed (including the first days but
excluding the last) when the Prime Rate (as defined in the definition
of Adjusted Base Rate) is the applicable Adjusted Base Rate and (ii) a
year of 360 days and the actual number of days elapsed (including the
first day but excluding the last) when the Base CD Rate or Federal
Funds Rate (both as defined in the definition of Adjusted Base Rate)
is the applicable Adjusted Base Rate unless such calculation would
result in a usurious rate, in which case interest shall be calculated
on the basis of a year of 365 or 366 days, as the case may be.
Section 2.5 Requests for Advances. Parent shall give Agent
notice by means of a Credit Request Form of each requested Advance, at least
one (1) business day before the requested date of each Base Rate Advance and at
least three (3) Business Days before the requested date of each Eurodollar
Advance, specifying: (i) the requested date of such Advance (which shall be a
Business Day), (ii) the amount of such Advance, (iii) the Type of the Advance,
and (iv) in the case of a Eurodollar Advance, the duration of the Interest
Period for such Advance. Agent at its option may accept telephonic requests
for Advances, provided that such acceptance shall not constitute a waiver of
Agent's right to delivery of a Credit Request Form in connection with
subsequent Advances. Any telephonic request for an Advance by Parent shall be
promptly confirmed by submission of a properly completed Credit Request Form to
Agent. Each Advance shall be in a minimum principal amount of Five Hundred
Thousand Dollars ($500,000). The aggregate principal amount of Eurodollar
Advances having the same Interest Period shall be at least equal to One Million
Dollars ($1,000,000). The Agent shall promptly notify each Bank of each notice
received by Agent under this Section 2.5. Not later than 1:00 P.M. Houston,
Texas time on the date specified for each Advance hereunder, each Bank will
make available to the Agent at the Principal Office in immediately available
funds, for the account of Parent, its Pro Rata (calculated based on the
Commitments) share of each Advance. After the Agent's receipt of such funds
and subject to the other terms and conditions of this Agreement, the Agent will
make such Advance available to Parent by depositing the same, in immediately
available funds, in an account of Parent (designated by Parent) maintained with
the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 22
<PAGE> 22
Agent at the Principal Office. All notices by Parent under this Section shall
be irrevocable and shall be given not later than 11:00 A.M. Houston, Texas,
time on the day which is not less than the number of Business Days specified
above for such notice.
Section 2.6 Use of Proceeds. The advances outstanding under the
Second Loan Agreement on the Closing Date shall be repaid with the initial
Advances hereunder but the commitments under the Second Loan Agreement shall
not be extinguished but shall continue uninterrupted under the terms of this
Agreement. The proceeds of any additional Advances shall be used for general
corporate purposes including to finance (a) the working capital and capital
expenditure needs of Parent and the Subsidiaries and (b) Acquisitions permitted
hereunder.
Section 2.7 Conversions and Continuations. Parent shall have the
right from time to time to Convert all or part of one Type of Advance into
another Type of Advance or to Continue all or part of any Eurodollar Advance by
giving Agent written notice at least one (1) Business Day before Conversion
into a Base Rate Advance and at least three (3) Business Days before Conversion
into or Continuation of a Eurodollar Advance, specifying: (i) the conversion or
Continuation date, (ii) the amount of the Advance to be Converted or Continued,
(iii) in the case of Conversions, the Type of Advance to be Converted into, and
(iv) in the case of a Continuation of or Conversion into a Eurodollar Advance,
the duration of the Interest Period applicable thereto; provided that (a)
Eurodollar Advances may only be Converted on the last day of the Interest
Period, and (b) except for Conversions to Base Rate Advances, no Conversions
shall be made while an Event of Default or Potential Default has occurred and
is continuing. The Agent shall promptly notify each Bank of any notice
received under this Section 2.7. All notices given by Parent under this
Section shall be irrevocable and shall be given not later than 11:00 A.M.
Houston, Texas time on the day which is not less than the number of Business
Days specified above for such notice. If Parent shall fail to give Agent the
notice as specified above for Continuation or Conversion of a Eurodollar
Advance prior to the end of the Interest Period with respect thereto, such
Eurodollar Advance shall automatically be Converted into a Base Rate Advance on
the last day of the Interest Period for such Eurodollar Advance.
Section 2.8 Commitment Fee; Reduction, Termination and Extension
of Commitment.
(a) Commitment Fee. Parent agrees to pay to the Agent
for the benefit of each Bank a commitment fee on the average daily
unused portion of the Commitments, from and including the Closing
Date, to and including the Revolving Termination Date, at the rate
equal to the Commitment Fee Rate per annum based on a 360 day year and
the actual number of days elapsed, payable on each Quarterly Payment
Date, and on the Revolving Termination Date. The term "Commitment Fee
Rate" means, during each fiscal quarter, the basis points set forth in
the table below opposite the Parent's actual Leverage Ratio determined
as of the last day of the preceding fiscal quarter:
<TABLE>
<CAPTION>
===========================================================
COMMITMENT FEE RATE
LEVERAGE RATIO (IN BASIS POINTS)
--------------
-----------------------------------------------------------
<S> <C>
Less than 1.0 to 1.0 18.75
-----------------------------------------------------------
Greater than or equal to 1.0 to 22.00
1.0 but less than or equal to 1.5
to 1.0
-----------------------------------------------------------
</TABLE>
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 23
<PAGE> 23
<TABLE>
<CAPTION>
-----------------------------------------------------------
COMMITMENT FEE RATE
LEVERAGE RATIO (IN BASIS POINTS)
--------------
-----------------------------------------------------------
<S> <C>
Greater than 1.5 to 1.0 but less 25.00
than or equal to 2.0 to 1.0
-----------------------------------------------------------
Greater than 2.0 to 1.0 but less 31.25
than or equal to 2.5 to 1.0
-----------------------------------------------------------
Greater than 2.5 to 1.0 37.50
===========================================================
</TABLE>
; provided that, prior to the delivery of the first quarter end
Compliance Certificate hereunder, the Commitment Fee Rate shall be
22.00 basis points unless and until it is retroactively adjusted in
accordance with this definition. Upon delivery of the Compliance
Certificate accompanying the financial statements delivered in
accordance with subsections 7.1(b) as of the end of each fiscal
quarter, commencing with the Compliance Certificate delivered for the
quarter ending March 31, 1997, the Commitment Fee Rate shall be
automatically adjusted in accordance with the Parent's actual Leverage
Ratio set forth therein and the table set forth above, such adjustment
to be retroactive to the first day of the fiscal quarter in which such
Compliance Certificate is delivered. If Parent fails to deliver such
Compliance Certificate which sets for the Leverage Ratio during any
fiscal quarter, the Commitment Fee Rate during the quarter for which
such Compliance Certificate was not delivered shall automatically be
adjusted to 37.5 basis points retroactively to the first day of such
quarter.
(b) Reduction or Termination. Parent shall have the
right at any time to terminate in whole or from time to time to
irrevocably reduce in part the Commitments upon at least five (5)
Business Days prior notice to the Agent specifying the effective date
thereof, whether a termination or reduction is being made, and the
amount of any partial reduction, provided that each partial reduction
shall be in the amount of One Million Dollars ($1,000,000) or an
integral multiple thereof and Parent shall simultaneously prepay the
amount by which the unpaid principal amount of the Advances exceeds
the Commitments (after giving effect to such notice) plus accrued and
unpaid interest on the principal amount so prepaid and any amounts due
under Section 4.5. The Commitments may not be reinstated after they
have been terminated or reduced.
(c) Extension of Commitment/Revolving Termination Date.
The Banks have no obligation or commitment to extend the Revolving
Termination Date. However, on or before October 31 of 1998 and 1999
the Parent may request that the Banks conduct a review of the
Obligated Parties to determine whether to extend the Revolving
Termination Date for another one-year period from the then current
Revolving Termination Date. If the Parent makes such a request by
such date, the Banks will conduct the review of the Obligated Parties
and will advise the Parent on or before January 15 of the next
calendar year of their decision whether to extend the Revolving
Termination Date. The Banks' determination as to the extension of the
Revolving Termination Date shall be made by the Banks in their sole
discretion, will only be considered if the financial condition of the
Obligated Parties is satisfactory to the Banks and no Event of Default
or Potential Default shall have occurred and be continuing and will
only be effective if all the Banks agree.
Section 2.9 Letters of Credit. Subject to the terms and
conditions of this Agreement, Agent agrees to issue one or more Letters of
Credit for the account of Parent from time to time
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 24
<PAGE> 24
from the Closing Date to and including the Revolving Termination Date;
provided, however, that (i) the outstanding Letter of Credit Liabilities shall
not at any time exceed Five Million Dollars ($5,000,000) and (ii) the sum of
the outstanding Letter of Credit Liabilities plus the aggregate outstanding
amount of the Advances shall not at any time exceed the aggregate Commitments.
Each Letter of Credit shall have an expiration date not later than forty-five
(45) days prior to the Revolving Termination Date, shall be payable in Dollars,
shall have a minimum face amount of Fifty Thousand Dollars ($50,000), must
support a transaction that is entered into in the ordinary course of Parent's,
any Subsidiary's or any PA's business, must otherwise be satisfactory in form
and substance to Agent and shall be issued pursuant to such documentation
(including, without limitation, Agent's standard application for issuance of
letters of credit as then in effect) as Agent may require; provided, that, in
the event of any conflict between the terms of such agreement and the other
Loan Documents, the terms of the other Loan Documents shall control. No Letter
of Credit shall require any payment by Agent to the beneficiary thereunder
pursuant to a drawing prior to the third Business Day following presentment of
a draft and any related documentation to Agent. Upon the date of issue of a
Letter of Credit, the Agent shall be deemed, without further action by any
party hereto, to have sold to each other Bank, and each other Bank shall be
deemed, without further action by any party hereto, to have purchased from the
Agent a participation to the extent of such Bank's Pro Rata (calculated based
on the Commitments) share of such Letter of Credit and the related Letter of
Credit Liabilities.
Section 2.10 Procedure for Issuing Letters of Credit. Each Letter
of Credit shall be issued on at least three (3) Business Days prior notice from
Parent to Agent by means of a Credit Request Form describing the transaction
proposed to be supported thereby and specifying (a) the date on which such
Letter of Credit is to be issued (which shall be a Business Day), and (b) the
terms of such Letter of Credit. Agent at its option may accept telephonic
requests for Letters of Credit, provided that such acceptance shall not
constitute a waiver of Agent's right to require delivery of a Credit Request
Form in connection with subsequent Letters of Credit. Any telephonic request
for a Letter of Credit by Parent shall be promptly confirmed by submission of a
properly completed Credit Request Form to Agent. Upon fulfillment of the
applicable conditions precedent in Article 5, Agent shall make the applicable
Letter of Credit available to Parent or, if so requested by Parent, to the
beneficiary of the Letter of Credit and shall provide a copy thereof to each
Bank.
Section 2.11 Drawing on Letters of Credit.
(a) Funding of Drawings. Upon receipt from the
beneficiary of any Letter of Credit of any demand for payment or other
drawing under such Letter of Credit, the Agent shall promptly notify
the Parent and each Bank as to the amount to be paid as a result of
such demand or drawing and the respective payment date. Not later
than 1:00 P.M. on the applicable payment date, each Bank will make
available to the Agent, at the Principal Office, in immediately
available funds, an amount equal to such Bank's Pro Rata (calculated
based on the Commitments) share of the amount to be paid as a result
of such demand or drawing even if the conditions to an Advance under
Article 5 hereof have not been satisfied.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 25
<PAGE> 25
(b) Reimbursements. The Parent shall be irrevocably and
unconditionally obligated to immediately reimburse the Agent for any
amounts paid by the Agent or the Banks upon any demand for payment or
drawing under any Letter of Credit, without presentment, demand,
protest, or other formalities of any kind on the date of the
corresponding payment under the Letter of Credit. Subject to the
other terms and conditions of this Agreement, such reimbursement may
be made by Parent requesting an Advance in accordance with Section 2.5
the proceeds of which shall be credited against the Parent's
obligations under this Section 2.11. The Agent will pay to each Bank
such Bank's Pro Rata (calculated based on the applicable Letter of
Credit Liabilities) share of all amounts received from the Parent for
application in payment, in whole or in part, to the reimbursement
obligation in respect of any Letter of Credit, but only to the extent
such Bank has made payment to the Agent in respect of such Letter of
Credit pursuant to clause (a) of this Section 2.11.
Section 2.12 Letter of Credit Fee. Parent shall pay to Agent for
the account of each Bank a letter of credit fee payable on the date each Letter
of Credit is issued in an amount equal to the greater of (a) such Bank's Pro
Rata (calculated based on the Commitments) share of Two Hundred Dollars ($200)
or (b) the Eurodollar Margin (as defined in Section 2.4) in effect on the date
of issuance (without giving effect to any retroactive change thereto) per annum
of such Bank's Pro Rata (calculated based on the Commitments) share of the
stated amount of such Letter of Credit, for the period during which such Letter
of Credit will remain outstanding, based on a 360-day year and the actual
number of days to elapse. After receiving any payment of any letter of credit
fees under this Section 2.12, the Agent will promptly pay to each Bank the
letter of credit fees then due such Bank. With respect to each Letter of
Credit, the Parent will also pay to the Agent for its account only and on the
date of issuance of the Letter of Credit an issuance fee per annum equal to one
quarter of one percent (.25%) of the stated amount of the Letter of Credit.
The Parent will also pay to the Agent for its account only, all customary fees
for amendments to and processing of the Letters of Credit.
Section 2.13 Obligations Absolute. The obligations of Parent to
reimburse Agent and the Banks for draws under any Letter of Credit shall be
absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and the other Loan Documents under
all circumstances whatsoever, including without limitation the following
circumstances: (a) any lack of validity or enforceability of any Letter of
Credit or any other Loan Document; (b) any amendment or waiver of or any
consent to departure from any Loan Document; (c) the existence of any claim,
set-off, counterclaim, defense or other rights which any Obligated Party or any
other Person may have at any time against any beneficiary of any Letter of
Credit, Agent, any Bank, or any other Person, whether in connection with this
Agreement or any other Loan Document or any unrelated transaction; (d) any
statement, draft, or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid, or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect whatsoever; (e)
payment by Agent under any Letter of Credit against presentation of a draft or
other document which does not comply with the terms of such Letter of Credit;
or (f) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 26
<PAGE> 26
Section 2.14 Limitation of Liability. Parent and EmCare assume
all risks of the acts or omissions of any beneficiary of any Letter of Credit
with respect to its use of such Letter of Credit. Neither Agent, any Bank nor
any of their respective officers or directors shall have any responsibility or
liability to any Obligated Party or any other Person for: (a) the failure of
any draft to bear any reference or adequate reference to any Letter of Credit,
or the failure of any documents to accompany any draft at negotiation, or the
failure of any Person to surrender or to take up any Letter of Credit or to
send documents apart from drafts as required by the terms of any Letter of
Credit, or the failure of any Person to note the amount of any instrument on
any Letter of Credit, each of which requirements, if contained in any Letter of
Credit itself, it is agreed may be waived by Agent, (b) errors, omissions,
interruptions, or delays in transmission or delivery of any messages, (c) the
validity, sufficiency, or genuineness of any draft or other document, or any
endorsement(s) thereon, even if any such draft, document or endorsement should
in fact prove to be in any and all respects invalid, insufficient, fraudulent,
or forged or any statement therein is untrue or inaccurate in any respect, (d)
the payment by the Agent to the beneficiary of any Letter of Credit against
presentation of any draft or other document that does not comply with the terms
of the Letter of Credit, or (e) any other circumstance whatsoever in making or
failing to make any payment under a Letter of Credit. The applicable Obligated
Party shall have a claim against Agent, and Agent shall be liable to the
applicable Obligated Party, to the extent of any direct, but not consequential,
damages suffered by the applicable Obligated Party which were caused by (i)
Agent's willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit complied with the terms thereof or (ii)
Agent's willful failure to pay under any Letter of Credit after presentation to
it of documents strictly complying with the terms and conditions of such Letter
of Credit. Agent may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary.
ARTICLE 3
Payments
Section 3.1 Method of Payment. All payments of principal,
interest, and other amounts to be made by any Obligated Party under this
Agreement, the Note, and the other Loan Documents shall be made to Agent at its
Principal Office for the account of the Banks' Applicable Lending Offices in
Dollars and in immediately available funds, without setoff, deduction, or
counterclaim, not later than 11:00 A.M. Houston, Texas time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day). Each Obligated Party shall, at the time of making each such payment,
specify to Agent the Advances or other sums payable under this Agreement, the
Note, or other Loan Document to which such payment is to be applied (and in the
event that the Obligated Party fails to so specify, or if an Event of Default
has occurred and is continuing, Agent may apply such payment to the Obligations
in such order and manner as it may elect in its sole discretion, subject to
Section 3.3). Whenever any payment under this Agreement, the Note, or any
other Loan Document shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of the
payment of interest and fee, as the case may be. Agent agrees to pay to the
Banks their respective shares of
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 27
<PAGE> 27
all payments received under the Loan Documents to which the Banks are entitled.
Any such payment by the Agent to a Bank shall be made on or before 3:00 P.M.,
Houston, Texas time on the Business Day on which Agent is deemed to receive the
corresponding payment under the Loan Documents. If the Agent fails to send a
Bank its share of a payment received under the Loan Documents on such Business
Day and by such time, the Agent shall pay to such Bank interest on its share of
such payment for the period commencing on the date such payment was required to
be made to the Bank until the Bank receives such payment at a rate per annum
equal to the Federal Funds Rate for such period.
Section 3.2 Optional Payment. Parent may, at any time in the
case of Base Rate Advances and with at least three (3) Business Days prior
notice to Agent in the case of Eurodollar Advances prepay or repay, as
applicable, the outstanding Advances in whole at any time or from time to time
in part without premium or penalty, provided that (i) Eurodollar Advances may
be prepaid or repaid only on the last day of the Interest Period for such
Advances unless Parent pays the amounts owing in connection with Section 4.5,
(ii) each partial prepayment or repayment shall be in the principal amount of
Five Hundred Thousand Dollars ($500,000) or an integral multiple thereof, and
(iii) each prepayment or repayment shall be accompanied with unpaid interest
accrued on the principal amount paid.
Section 3.3 Pro Rata Treatment. Except to the extent otherwise
provided herein: (i) each Advance shall be by the Banks under Section 2.1 and
2.11, each payment of fees under Sections 2.8 and 2.12 shall be made for the
account of the Banks, and each termination or reduction of the Commitments
under Section 2.8 shall be applied to the Commitments of the Banks, Pro Rata
(calculated based on the Commitments); (ii) each Conversion of Advances of a
particular Type (other than Conversions provided for by Section 4.4), shall be
made Pro Rata among the Banks holding Advances of such Type according to the
respective principal amounts of such Advances held by such Banks; (iii) each
payment and prepayment of principal of or interest on Advances by Parent of a
particular Type shall be made to the Agent for the account of the Banks holding
Advances of such Type Pro Rata in accordance with the respective unpaid
principal amounts of such Advances held by such Banks; and (iv) Interest
Periods for Advances of a particular Type shall be allocated among the Banks
holding Advances of such Type Pro Rata according to the respective principal
amounts held by such Banks.
Section 3.4 Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or Parent (the "Payor") prior to the date on
which such Bank is to make payment to the Agent of the proceeds of an Advance
to be made by it hereunder or Parent is to make a payment to the Agent for the
account of one or more of the Banks, as the case may be (such payment being
herein called the "Required Payment"), which notice shall be effective upon
receipt, that the Payor does not intend to make the Required Payment to the
Agent, the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date and, if the Payor has
not in fact made the Required Payment to the Agent, the recipient of such
payment shall, on demand, pay to the Agent the amount made available to it
together with interest thereon in respect of the period commencing on the date
such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such period.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 28
<PAGE> 28
Section 3.5 Withholding Taxes and Other Costs. All payments by
Parent of principal of and interest on the Notes and of all fees and other
amounts payable under any Loan Document are payable without deduction for or on
account of any present or future taxes, duties or other charges levied or
imposed by the United States of America or by the government of any
jurisdiction outside the United States of America or by any political
subdivision or taxing authority of or in any of the foregoing through
withholding or deduction with respect to any such payments, excluding taxes,
duties or other charges on, or measured by, overall net income (including
franchise taxes) of Agent or any Bank. If any such taxes, duties or other
charges are so levied or imposed, Parent will pay additional interest or will
make additional payments in such amounts so that every net payment of principal
of and interest on the Notes and of all other amounts payable by it under any
Loan Document, after withholding or deduction for or on account of any such
present or future taxes, duties or other charges, will not be less than the
amount provided for herein or therein, provided that Parent, shall have no
obligation to pay such additional amounts to any Bank to the extent that such
taxes, duties, or other charges are levied or imposed by reason of the failure
of such Bank to comply with the provisions of Section 3.6. Parent shall
furnish promptly to the Agent for distribution to each affected Bank, as the
case may be, official receipts evidencing any such withholding or reduction.
Agent and each Bank agrees that it will take all reasonable actions (including,
without limitation, changing the jurisdiction of its lending office) to avoid
or to minimize amounts payable by Parent pursuant to this Section 3.5.
Section 3.6 Withholding Tax Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to Parent and the Agent two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Bank is entitled to receive payments from Parent under
any Loan Document without deduction or withholding of any United States federal
income taxes. Each Bank which so delivers a Form 1001 or 4224 further
undertakes to deliver to Parent and the Agent two additional copies of such
form (or a successor form) on or before the date such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by Parent or the Agent, in each
case certifying that such Bank is entitled to receive payments from Parent
under any Loan Document without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises Parent and the Agent that it is
not capable of receiving such payments without any deduction or withholding of
United States federal income tax.
ARTICLE 4
Yield Protection and Illegality
Section 4.1 Additional Costs.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 29
<PAGE> 29
(a) Parent shall pay directly to a Bank from time to time
such amounts as such Bank may determine to be necessary to compensate
it for any out-of-pocket costs incurred by such Bank which such Bank
determines are attributable to its making or maintaining of any
Eurodollar Advances hereunder or its obligation to make any of such
Advances hereunder, or any actual reduction in any amount receivable
by such Bank hereunder in respect of any such Advances or such
obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which:
(i) changes the basis of taxation of any amounts
payable to such Bank under this Agreement or the Note in
respect of any of such Advances (other than taxes imposed on
the overall net income of such Bank or its Applicable Lending
Office for any of such Advances by the jurisdiction in which
such Bank has its principal office or such Applicable Lending
Office);
(ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio, or similar
requirement relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or
commitments of, such Bank (including any of such Advances or
any deposits referred to in the definition of "Eurodollar
Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this
Agreement or the Note or any of such extensions of credit,
liabilities or commitments.
A Bank will notify Parent (with a copy to Agent) of any event
occurring after the date of this Agreement which will entitle such
Bank to compensation pursuant to this Section 4.1 (a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable
Lending Office for the Advances affected by such event if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Bank, violate
any law, rule, or regulation or be in any way disadvantageous to such
Bank. A Bank will furnish Parent with a certificate setting forth the
basis and the amount of each of its requests for compensation under
this Section 4.1(a). If a Bank requests compensation from Parent under
this Section 4.1(a), Parent may, by notice to such Bank (with a copy
to Agent) suspend the obligation of such Bank to make additional
Advances of the Type with respect to which such compensation is
requested until the Regulatory Change giving rise to such request
ceases to be in effect (in which case the provisions of Section 4.4
shall be applicable).
(b) Without limiting the effect of the foregoing
provisions of this Section 4.1, in the event that, by reason of any
Regulatory Change, a Bank either (i) incurs Additional Costs based on
or measured by the excess above a specified level of the amount of a
category of deposits or other liabilities of such Bank which includes
deposits by reference to which the interest rate on Eurodollar
Advances is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 30
<PAGE> 30
includes Eurodollar Advances or (ii) becomes subject to restrictions
on the amount of such a category of liabilities or assets which it may
hold, then, if such Bank so elects by notice to Parent (with a copy to
Agent) the obligation of such Bank to make additional Advances of such
Type hereunder shall be suspended until such Regulatory Change ceases
to be in effect (in which case the provisions of Section 4.4 hereof
shall be applicable).
(c) Determinations and allocations by a Bank for purposes
of this Section 4.1 of the effect of any Regulatory Change on its
costs of maintaining its obligations to make Advances or of making or
maintaining Advances or on amounts receivable by it in respect of
Advances, and of the additional amounts required to compensate it in
respect of any Additional Costs, shall be conclusive, provided that
such determinations and allocations are made on a reasonable basis.
Section 4.2 Limitation on Types of Advances. Anything herein to
the contrary notwithstanding, if with respect to any Eurodollar Advances for
any Interest Period therefor:
(a) the Agent reasonably determines (which determination
shall be conclusive) that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate"
in Section 1.1 hereof are not being provided in the relative amounts
or for the relative maturities for purposes of determining the rate of
interest for such Advances as provided in this Agreement; or
(b) the Required Banks reasonably determine (which
determination shall be conclusive) that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Advances
for such Interest Period is to be determined do not accurately reflect
the cost to the Banks of making or maintaining such Advances for such
Interest Period;
then Agent shall give Parent prompt notice thereof specifying the relevant
amounts or periods, and so long as such condition remains in effect, the Banks
shall be under no obligation to make additional Eurodollar Advances or to
Convert Base Rate Advances into Eurodollar Advances and Parent shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Advances, either prepay such Advances or Convert such Advances into
Base Rate Advances in accordance with the terms of this Agreement.
Section 4.3 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Bank or its
Applicable Lending Office to (a) honor its obligation to make Eurodollar
Advances hereunder or (b) maintain Eurodollar Advances hereunder, then such
Bank shall promptly notify the Parent thereof (with a copy to Agent) and such
Bank's obligation to make or maintain Eurodollar Advances and to Convert other
Types of Advances into Eurodollar Advances hereunder shall be suspended until
such time as such Bank may again make and maintain Eurodollar Advances (in
which case the provisions of Section 4.4 hereof shall be applicable).
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 31
<PAGE> 31
Section 4.4 Substitute Base Rate Advances. If the obligation of
a Bank to make Eurodollar Advances shall be suspended pursuant to Section 4.1,
4.2, or 4.3 hereof, all Advances which would be otherwise made by such Bank as
Eurodollar Advances shall be made instead as Base Rate Advances and all
Advances which would otherwise be Converted into Eurodollar Advances shall be
Converted instead into (or shall remain as) Base Rate Advances (and, if an
event referred to in Section 4.1(b) or 4.3 hereof has occurred and such Bank so
requests by notice to Parent, with a copy to Agent, all Eurodollar Advances of
such Bank then outstanding shall be automatically Converted into Base Rate
Advances on the date specified by such Bank in such notice) and, to the extent
that Eurodollar Advances are so made as (or Converted into) Base Rate Advances,
all payments and prepayments of principal which would otherwise be applied to
such Bank's Eurodollar Advances shall be applied instead to its Base Rate
Advances.
Section 4.5 Compensation. Parent shall pay to a Bank, upon the
request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any actual loss, out-of-
pocket cost, or out-of-pocket expense incurred by it as a result of:
(a) Any payment, prepayment or Conversion of a Eurodollar
Advance for any reason (including, without limitation, the
acceleration of outstanding Advances pursuant to Section 10.2) on a
date other than the last day of an Interest Period for such Advance;
or
(b) Any failure by Parent for any reason (including,
without limitation, the failure of any conditions precedent specified
in Article 5 to be satisfied) to borrow, Convert, or repay a
Eurodollar Advance on the date for such borrowing, Conversion, or
repayment, specified in the relevant notice of borrowing, repayment,
or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or Converted
or not borrowed for the period from the date of such payment, Conversion, or
failure to borrow to the last day of the Interest Period for such Advance (or,
in the case of a failure to borrow, the Interest Period for such Advance which
would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Advance provided for herein over (ii) the
interest component of the amount such Bank would have bid in the London
interbank market for Dollar deposits of leading banks and amounts comparable to
such principal amount and with maturities comparable to such period.
Section 4.6 Capital Adequacy. If after the date hereof, a Bank
shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank (or its parent) with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's (or its
parent's) capital as a consequence of its obligations hereunder or the
transactions
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 32
<PAGE> 32
contemplated hereby to a level below that which such Bank (or its parent) could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount reasonably deemed by such Bank to be material, then from time to time,
within ten (10) Business Days after demand by such Bank, Parent shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its parent) for such reduction. A certificate of a Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be
paid to it hereunder shall be conclusive, provided that the determination
thereof is made on a reasonable basis. In determining such amount or amounts,
such Bank may use any reasonable averaging and attribution methods.
ARTICLE 5
Conditions Precedent
Section 5.1 Initial Advance. The effectiveness of this Agreement
and the obligation of each Bank to make Advances or issue Letters of Credit is
subject to the condition precedent that Agent shall have received on or before
the day of such Advance or issuance of such Letter of Credit, all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to Agent:
(a) Resolutions. Resolutions of the Board of Directors
of each Obligated Party or similar evidence of authority, certified by
its Secretary, an Assistant Secretary or other authorized Person which
authorize the execution, delivery, and performance of the Loan
Documents to which it is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency
certified by the Secretary, an Assistant Secretary or other authorized
Person of each Obligated Party certifying the names of its
representatives authorized to sign each of the Loan Documents to which
it is or is to be a party (including the certificates contemplated
herein) together with specimen signatures of such representatives;
(c) Articles of Incorporation or Association. The
articles of incorporation, association or organization (or similar
document) of each Obligated Party certified by the Secretary of State
of the state of its incorporation, association or organization and
dated a current date or, a certification from an authorized
representative that its articles of incorporation, association or
organization (or similar document) have not been amended or otherwise
modified since the last date on which such document had been provided
to Texas Commerce;
(d) Bylaws; Operating Agreement. The bylaws or operating
agreement of each Obligated Party certified by its Secretary, an
Assistant Secretary or other authorized Person or a certification from
an authorized representative that its bylaws or operating agreement
have not been amended or otherwise modified since the last date on
which such document had been provided to Texas Commerce;
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 33
<PAGE> 33
(e) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation,
association or organization of each Obligated Party as to the
existence and good standing of each Obligated Party, each dated a
current date;
(f) Note. The Notes executed by Parent, one payable to
each Person that is a Bank dated the date hereof in the amount of its
Commitment;
(g) Affiliate Guaranty. A duly executed Affiliate
Guaranty for each Subsidiary and each PA that has not executed an
Existing Guaranty;
(h) EmCare Pledge Amendment. An amendment to the EmCare
Pledge Agreement covering the equity interests in each Subsidiary
directly owned by EmCare and not otherwise pledged thereunder as of
the Closing Date, duly executed together with the original
certificates evidencing the equity interests pledged pursuant thereto
and blank executed stock powers or assignments relating to such equity
interests;
(i) Search. The results of Uniform Commercial Code, tax
and judgment lien searches showing all liens on file against each
Obligated Party who is granting Liens in any property or providing an
Affiliate Guaranty for the first time in connection with this
Agreement in each jurisdiction in which it conducts business, such
searches to be as of a current date;
(j) Opinion of Counsel. A favorable opinion of legal
counsel to the Obligated Parties, as to such matters as the Agent may
reasonably request;
(k) Attorneys' Fees and Expenses. Evidence that the
costs and expenses (including attorneys' fees) referred to in Section
12.1, to the extent incurred, shall have been paid in full by Parent;
(l) Fees. Evidence that the fees described in that
certain fee letter from Texas Commerce and Chase Securities, Inc. to
Parent dated January 23, 1997 shall have been paid to Agent in full
and that each Bank shall have been paid the up front and renewal fees
to which it is entitled; and
(m) Interest and Fees Under Second Loan Agreement.
Evidence that all unpaid interest and fees accrued under the Second
Loan Agreement and all eurodollar breakage costs arising thereunder as
a result of the refinancing of any advances made under the Second Loan
Agreement shall be paid in full on the Closing Date.
Section 5.2 All Advances and Letters of Credit. The obligation
of each Bank to make any Advance (including the initial Advance under this
Agreement) or issue any Letter of Credit (including the initial Letter of
Credit under this Agreement) is subject to the following additional conditions
precedent:
(a) Credit Request Form. Agent shall have received, in
accordance with Section 2.5 or 2.10, as applicable, a Credit Request
Form, dated the date of such Advance
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 34
<PAGE> 34
or the date of the issuance of such Letter of Credit, executed by an
authorized officer of Parent, all of the statements in which shall be
true and correct on and as of such date whether or not such Credit
Request Form is actually delivered; and
(b) Additional Documentation. Agent and the Banks shall
have received such additional approvals or other documentation as
Agent or its legal counsel, Jenkens & Gilchrist, a Professional
Corporation, may request.
ARTICLE 6
Representations and Warranties
To induce Agent and each Bank to enter into this Agreement, EmCare and
Parent each represent and warrant to Agent and each Bank that:
Section 6.1 Existence; Place of Business; Chief Executive Office.
Each of Parent and each Subsidiary (a) is a corporation, business trust or
limited partnership (as specified on Schedule 6.14 or elsewhere in this
Agreement) duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation or organization, as applicable;
(b) has all requisite power and authority to own its assets and carry on its
business as now being or as proposed to be conducted; and (c) is qualified to
do business in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. Each PA (a) is a professional association or professional
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its association or incorporation; (b) has all
requisite power and authority to own its assets and to carry on its business as
now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. Each Obligated Party has the power and authority to execute,
deliver, and perform its obligations under the Loan Documents, the
Administrative Management Agreements and the ER Management Contracts to which
it is a party. The principal place of business and chief executive office of
each of Parent, EmCare, EMTAC, INC., the EMTAC Business Trust, EmCare
Physicians Network, Inc., and Capital Emergency Associates, L.L.C. is set forth
on Schedule 6.1 hereto.
Section 6.2 Financial Statements. Parent has delivered to Agent
and each Bank audited consolidated financial statements of Parent and its
Subsidiaries as at and for the fiscal year ended December 31, 1995, unaudited
consolidated financial statements of Parent and the Subsidiaries for the nine
(9) month period ended September 30, 1996 and unaudited financial statements of
Parent and the Subsidiaries on a consolidating line of business basis for the
fiscal year ended December 31, 1995. Such financial statements have been
prepared in accordance with GAAP, and fairly and accurately present, on a
consolidated or consolidating line of business basis (as applicable), the
financial condition of the Persons the subject thereof as of the respective
dates indicated therein and the results of operations for the respective
periods indicated therein. Neither Parent, any Subsidiary nor any PA has any
material contingent liabilities, liabilities for taxes, material forward or
long-term commitments, or unrealized or
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 35
<PAGE> 35
anticipated losses from any unfavorable commitments not reflected in such
financial statements. There has been no material adverse change in the
business, condition (financial or otherwise), operations, prospects, or
properties of Parent, the Subsidiaries and the PAs, taken as a whole, since the
effective date of the most recent financial statements referred to in this
Section.
Section 6.3 Corporate Action; No Breach. The execution,
delivery, and performance by each Obligated Party of the Loan Documents, the
Administrative Management Agreements and the ER Management Contracts to which
each is a party have been duly authorized by all requisite action on the part
of each Obligated Party and do not and will not violate or conflict with the
articles of incorporation or association, bylaws, partnership agreement or
trust agreement of any Obligated Party or any law, rule, or regulation or any
order, writ, injunction, or decree of any court, governmental authority, or
arbitrator, and do not and will not conflict with, result in a breach of, or
constitute a default under, or result in the creation or imposition of any Lien
(except a Lien in favor of Agent) upon any of the revenues or assets of any
Obligated Party pursuant to the provisions of any indenture, mortgage, deed of
trust, security agreement, franchise, permit, license, or other instrument or
agreement by which any Obligated Party or any of their respective properties is
bound.
Section 6.4 Operation of Business. Each Obligated Party
possesses all licenses, permits, franchises, patents, copyrights, trademarks,
and tradenames, or rights thereto, to conduct their respective businesses
substantially as now conducted, where the failure to possess such license,
permit, franchise, patent, copyright, tradename, tradename, or rights would
have a Material Adverse Effect and no Obligated Party is in material violation
of any valid rights of others with respect to any of the forgoing.
Section 6.5 Litigation and Judgments. Except as disclosed on
Schedule 6.5 or pursuant to a notice given in accordance with Section 7.1(f) or
7.1(c), (a) there is no action, suit, investigation, or proceeding before or by
any court, governmental authority, arbitrator or mediator pending, or to the
knowledge of Parent or EmCare, threatened against or affecting any Obligated
Party which, if determined adversely to such Obligated Party, could result in
any liability owed by such Obligated Party in an amount in excess of One
Hundred Thousand Dollars ($100,000) and (b) there are no outstanding judgments
against any Obligated Party which if not discharged or stayed would create an
Event of Default under Section 10.1(g). None of the matters disclosed on
Schedule 6.5 are reasonably expected to have a Material Adverse Effect.
Section 6.6 Rights in Properties; Liens. Parent, each Subsidiary
and each PA have good and indefeasible title to or valid leasehold interests in
their respective properties and assets, real and personal, including the
properties, assets, and leasehold interests reflected in the financial
statements described in Section 6.2, and none of the properties, assets, or
leasehold interests of Parent, any Subsidiary or any PA is subject to any Lien,
except as permitted by Section 8.2. None of the Liens disclosed on Schedule
8.2 attached to any collateral securing the Obligations.
Section 6.7 Enforceability. The Loan Documents, Administrative
Management Agreements and ER Management Contracts to which each Obligated Party
is party constitute the legal, valid, and binding obligations of such Obligated
Party, enforceable against such Obligated
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 36
<PAGE> 36
Party in accordance with their respective terms, except as limited by
bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.
Section 6.8 Approvals. No authorization, approval, or consent
of, and no filing or registration with, any court, governmental authority, or
third party is or will be necessary for the execution, delivery, or performance
by any Obligated Party of the Loan Documents, Administrative Management
Agreements and ER Management Contracts to which it is a party or for the
validity or enforceability thereof.
Section 6.9 Debt. Parent, the Subsidiaries and the PAs have no
Debt, except as permitted by Section 8.1.
Section 6.10 Taxes. Each Obligated Party has filed all tax
returns (federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales taxes, and have paid all of their
respective liabilities for taxes, assessments, governmental charges, and other
levies that are due and payable, and Parent knows of no pending investigation
of any Obligated Party by any taxing authority or of any pending but unassessed
tax liability of any Obligated Party. The federal income tax liability of each
Obligated Party has never been audited by the Internal Revenue Service.
Section 6.11 Use of Proceeds; Margin Securities. Neither Parent,
any Subsidiary nor any PA is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations G, T, U, or X of
the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock.
Section 6.12 ERISA. Each Obligated Party is in compliance in all
material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate or
appoint a trustee to administer a Plan, nor has the PBGC instituted any such
proceedings. Neither any Obligated Party nor any ERISA Affiliate has
completely or partially withdrawn from a Multiemployer Plan. Each Obligated
Party and each ERISA Affiliate have met their minimum funding requirements
under ERISA with respect to all of their Plans, and the present value of all
vested benefits under each Plan do not exceed the fair market value of all Plan
assets allocable to such benefits, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of ERISA. Neither any
Obligated Party nor any ERISA Affiliate has incurred any liability to the PBGC
under ERISA.
Section 6.13 Disclosure. No statement, information, report,
certification, representation, or warranty made by any Obligated Party in any
Loan Document or furnished to Agent or any Bank in connection with any Loan
Document or any transaction contemplated hereby contains any untrue statement
of a material fact or omits to state any material fact
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 37
<PAGE> 37
necessary to make the statements herein or therein not misleading. There is no
fact known to either Parent or EmCare which has a Material Adverse Effect, or
which reasonably could be expected, in the judgment of either Parent or EmCare,
to have a Material Adverse Effect in the future.
Section 6.14 Organizational Structure and Capitalization.
(a) Subsidiaries. Parent has no Subsidiaries other than
those listed on Schedule 6.14 hereto and those otherwise permitted to
be acquired or created under the terms hereof, and Schedule 6.14 sets
forth with respect to the Subsidiaries listed thereon, the
jurisdiction of incorporation or organization, as applicable, of each
Subsidiary, the type of each such Subsidiary, the percentage of
Parent's and its Subsidiaries' ownership of the outstanding voting
stock of each such corporate Subsidiary, the authorized and
outstanding capital stock of each such corporate Subsidiary, and the
type and percentage of Parent's and its Subsidiaries' ownership
interest in each other such Subsidiary. All of the outstanding
capital stock of, or other ownership interest in, each Subsidiary has
been validly issued, is fully paid, is nonassessable and is not
subject to any restriction on transfer except for restrictions imposed
by applicable federal and state securities laws and those contained in
the limited partnership agreement of EmCare OP, L.P. and the deed of
trust of EMTAC Business Trust. All the issued and outstanding shares
of capital stock of, or other ownership interest in, each Subsidiary
are free and clear of all Liens other than those in favor of the Agent
granted in accordance with the terms of the Loan Documents and such
shares or other ownership interests have been issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. There are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Subsidiary of
any shares of capital stock, other securities or other ownership
interests of any Subsidiary. The Obligated Parties who have executed
a Pledge Agreement in accordance with the provisions hereof have the
unrestricted right to pledge their respective interests in each of the
Subsidiaries pursuant to and in accordance with the terms of the Loan
Documents.
(b) PAs. There are no PAs other than as set forth on
Schedule 6.14 and those otherwise permitted to be acquired or created
under the terms hereof and Schedule 6.14 sets forth the jurisdiction
of association or incorporation of each PA listed thereon. Leonard M.
Riggs, Jr., M.D. owns the percentage of each PA reflected on Schedule
6.14. Except as reflected on Schedule 6.14, all the issued and
outstanding shares of capital stock of each PA are duly authorized and
validly issued, fully paid, are non-assessable and are not subject to
any restriction on transfer except for restrictions imposed by
applicable federal and state securities and antitrust laws and
applicable laws restricting the transfer of stock of a professional
association or professional corporation to individuals duly licensed
and engaged in the practice of medicine. All issued and outstanding
shares of each PA are free and clear of all Liens and were issued in
compliance with all applicable state and federal laws concerning the
issuance of securities. Except as set forth in the Succession
Agreements, there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 38
<PAGE> 38
understandings for the purchase or acquisition from any PA, Steven W.
Cooley, M.D., or Leonard M. Riggs, Jr., M.D. of any shares of capital
stock or other securities of any PA.
Section 6.15 Agreements. No Obligated Party is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction which reasonably
could, in the judgment of either EmCare or Parent, have a Material Adverse
Effect. No Obligated Party is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it
is a party including, without limitation or in addition, any Administrative
Management Agreements or any ER Management Contracts to which it is a party.
Section 6.16 Compliance with Laws. Neither Parent, any Subsidiary
nor any PA is in violation in any material respect of any law, rule,
regulation, order, or decree of any court, governmental authority, or
arbitrator.
Section 6.17 Investment Company Act. Neither Parent, any
Subsidiary nor any PA is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 6.18 Public Utility Holding Company Act. Neither Parent,
any Subsidiary nor any PA is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
ARTICLE 7
Positive Covenants
Parent covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, Parent
will perform and observe the following positive covenants, unless the Required
Banks shall otherwise consent in writing:
Section 7.1 Reporting Requirements. Parent will furnish to Agent
and each Bank:
(a) Annual Financial Statements. As soon as available,
and in any event within one hundred twenty (120) days after the end of
each fiscal year of Parent, beginning with the fiscal year ending
December 31, 1996:
(i) a copy of the annual audit report of Parent
and the Subsidiaries on a consolidated basis for such fiscal
year, containing a balance sheet, statement of income,
statement of stockholder's equity, and statement of cash flows
as at the end of such fiscal year and for the twelve (12)
month period then ended, setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable
detail and audited and certified by Ernst & Young, or other
independent certified public accountants of recognized
standing acceptable to the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 39
<PAGE> 39
Agent, to the effect that such reports have been prepared in
accordance with GAAP; and
(ii) a certificate of such independent certified
public accountants to Agent and the Banks (A) stating that to
their knowledge no Event of Default or Potential Default has
occurred and is continuing, or if in their opinion an Event of
Default or Potential Default has occurred and is continuing, a
statement as to the nature thereof, and (B) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith.
(b) Quarterly and Semi-Annual Financial Statements. As
soon as available, and in any event within forty-five (45) days after:
(i) the end of each quarter of each fiscal year
of Parent (excluding, with respect to clause (A) below only,
the last quarter of each fiscal year) beginning with the
quarter ending March 31, 1997:
(A) a copy of an unaudited financial
report of Parent and the Subsidiaries on a
consolidated basis as of the end of such quarter and
for the portion of the fiscal year then ended and
containing a balance sheet, statement of income and
statement of cash flow, all in reasonable detail
certified by the chief financial officer of Parent to
have been prepared in accordance with GAAP and to
fairly and accurately present (subject to year-end
audit adjustments) the financial condition and
results of operations of Parent and the Subsidiaries,
on a consolidated basis, at the date and for the
periods indicated therein; and
(B) a copy of an unaudited report of
Parent and the Subsidiaries on a consolidating line
of business basis, as of the end of such quarter and
for the portion of the fiscal year then ended, and
containing balance sheets, statements of income and
statements of cash flows and setting forth in
comparative form the forecasted figures for the
quarter and portion of the fiscal year then ended as
set forth in the annual operating plan delivered in
accordance with subsection 7.1(d), all in reasonable
detail certified by the chief financial officer of
Parent to have been prepared in accordance with GAAP
and to fairly and accurately present the financial
condition and results of operations of the Parent and
the Subsidiaries, on a consolidating line of business
basis, at the date and for the periods indicated
therein; and
(ii) each June 30 and December 30 of each fiscal
year of Parent beginning June 30, 1997, a copy of the
unaudited financial reports of each PA and each other ER
Management Party as of the end of such month and for the
portion of the fiscal year then ended, containing on an
individual basis, a balance sheet and statement of income, all
in reasonable detail and certified by the chief financial
officer of Parent to have been prepared in accordance with
GAAP
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 40
<PAGE> 40
and to fairly and accurately present the financial condition
and results of operation of the PA and each other ER
Management Party at the date and for the periods indicated
therein;
(c) Compliance Certificate and Malpractice Liability
Claim Management Report. Concurrently with the delivery of each of
the financial statements referred to in subsections 7.1(a) and 7.1(b),
a Compliance Certificate and a malpractice liability claims management
report in form acceptable to Agent;
(d) Annual Operating Plan. Concurrently with the
delivery of each of the financial statements delivered in accordance
with subsection 7.1(a), forecasted (on a quarter by quarter basis)
balance sheets, profit and loss statements and cash flow statements
(together with appropriate supporting details and a statement of
underlying assumptions) for the Parent and the Subsidiaries on a
consolidating line of business basis for the fiscal year in which such
balance sheets and statements are delivered;
(e) Management Letters. Promptly upon receipt thereof, a
copy of any management letter or written report submitted to Parent,
any Subsidiary or any PA by independent certified public accountants
with respect to the business, condition (financial or otherwise),
operations, prospects, or properties of Parent, any Subsidiary or any
PA;
(f) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and proceedings
before any court or governmental department, commission, board,
bureau, agency, arbitration or mediation panel or other
instrumentality, domestic or foreign, affecting any Obligated Party
which (a), if determined adversely to such Obligated Party, could
result in any liability owed by such Obligated Party in an amount in
excess of One Hundred Thousand Dollars ($100,000) in any single case
or in excess of One Million Dollars ($1,000,000.00) in the aggregate,
and (b) is not disclosed in the malpractice claims management report
delivered in accordance with Section 7.1(c);
(g) Notice of Default. As soon as possible and in any
event within five (5) days after the discovery by Parent or EmCare of
each Event of Default and each Potential Default, a written notice
setting forth the details of such Event of Default or Potential
Default and the action which Parent or EmCare has taken and proposes
to take with respect thereto;
(h) ERISA Reports. Promptly after the filing or receipt
thereof, copies of all reports, including annual reports, and notices
which any Obligated Party files with or receives from the PBGC or the
U.S. Department of Labor under ERISA; and as soon as possible and in
any event within five (5) days after Parent or EmCare knows or has
reason to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC any Obligated Party
has instituted or will institute proceedings under Title IV of ERISA
to terminate any Plan, a certificate of the chief financial officer of
Parent or EmCare setting forth the details as to such Reportable Event
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 41
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or Prohibited Transaction or Plan termination and the action that the
applicable Obligated Party proposes to take with respect thereto;
(i) Reports to Other Creditors. Promptly after the
furnishing thereof, copies of any statement or report furnished to any
other party pursuant to the terms of any indenture, loan, or credit or
similar agreement to which any Obligated Party is a party and not
otherwise required to be furnished to Agent and the Banks pursuant to
any other clause of this Section;
(j) Notice of Material Adverse Effect. As soon as
possible and in any event within five (5) days after the discovery by
Parent or EmCare thereof, written notice of any matter that could, in
the judgment of Parent or EmCare, have a Material Adverse Effect;
(k) Malpractice Liability Insurance Certificates. Within
the ten (10) day period prior to the expiration of any malpractice
liability insurance policy covering Parent, any Subsidiary or any PA,
a certificate executed by an authorized financial officer of Parent
certifying to the amount and types of risks covered by the policy of
malpractice liability insurance to become effective at such
expiration;
(l) Proxy Statements, Etc. As soon as available, one
copy of each financial statement, report, notice or proxy statement
sent by Parent or any Subsidiary to its stockholders generally and one
copy of each regular, periodic or special report, registration
statement, or prospectus filed by Parent or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any
successor agency; and
(m) General Information. Promptly, such other
information concerning any Obligated Party as Agent or any Bank may
from time to time reasonably request, including, without limitation,
copies of any ER Management Contract that Agent or any Bank may
reasonably request.
Section 7.2 Maintenance of Existence; Conduct of Business.
Except as permitted by Section 8.3, (a) Parent will preserve and maintain, and
will cause each Subsidiary and each PA to preserve and maintain, its existence;
(b) Parent will preserve and maintain, and will cause each Subsidiary and each
PA to preserve and maintain all of its privileges, licenses, permits,
franchises, qualifications and rights that are necessary in the ordinary
conduct of its business; provided that, neither Parent, any Subsidiary nor any
PA shall have any obligation to preserve and maintain a privilege, license,
permit, franchise qualification or right if the failure to preserve and
maintain the privilege, license, permit, franchise, qualification or right in
question would not create a Material Adverse Effect; and (c) Parent will
conduct, and cause each Subsidiary and each PA to conduct, its business as
presently conducted in an orderly and efficient manner in accordance with good
business practices.
Section 7.3 Maintenance of Properties. Parent will maintain,
keep, and preserve, and cause each Subsidiary and each PA to maintain, keep,
and preserve, all of its properties (tangible and intangible) necessary in the
proper conduct of its business in good working order and
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 42
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condition; provided neither Parent, any Subsidiary nor any PA shall have any
obligation to maintain, keep, and preserve a property if the failure to
maintain, keep and preserve such property would not create a Material Adverse
Effect.
Section 7.4 Taxes and Claims. Parent will pay or discharge, and
will cause each Subsidiary and each PA to pay or discharge, at or before
maturity or before becoming delinquent (a) all taxes, levies, assessments, and
governmental charges imposed on it or its income or profits or any of its
property, and (b) all lawful claims for labor, material, and supplies, which,
if unpaid, could reasonably be expected to become a Lien upon any of its
property; provided, however, that neither Parent, any Subsidiary nor any PA
shall be required to pay or discharge any tax, levy, assessment, or
governmental charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves have been
established.
Section 7.5 Insurance. Parent will maintain, and will cause each
Subsidiary and each PA to maintain, with financially sound and reputable
insurance companies malpractice liability insurance and other insurance on its
property, assets, and business at least in such amounts and against such risks
as are usually insured against by Persons engaged in similar businesses.
Section 7.6 Inspection Rights. Upon three (3) days prior notice
and at any reasonable time during normal business hours, Parent will permit,
and will cause each Subsidiary and each PA to permit, representatives of Agent
and any Bank to examine and make copies of the books and records of, and visit
and inspect the properties of Parent, any Subsidiary or any PA, and to discuss
the business, operations, and financial condition of Parent and the other
Obligated Parties with their respective officers and employees and with their
independent certified public accountants.
Section 7.7 Keeping Books and Records. Parent will maintain, and
will cause each Subsidiary and each PA to maintain, proper books of record and
account of all dealings and transactions in relation to its business and
activities in conformity with GAAP.
Section 7.8 Compliance with Laws. Parent will comply, and will
cause each Subsidiary and each PA to comply, in all material respects with all
applicable laws, rules, regulations, orders, and decrees of any court,
governmental authority, or arbitrator.
Section 7.9 Compliance with Agreements. Parent will comply, and
will cause each Subsidiary and each PA to comply, in all material respects with
all agreements, contracts, and instruments binding on it or affecting its
properties or business, including, without limitation, each ER Management
Contract and each Administrative Management Agreement to which it is a party.
Section 7.10 Further Assurances; Additional Affiliate Guaranties.
Parent will execute and deliver, and will cause each Subsidiary and each PA to
execute and deliver, such further documentation as may be requested by Agent to
carry out the provisions and purposes of this Agreement and the other Loan
Documents and to preserve and perfect the Liens of Agent in the collateral
provided to secure the obligations of the Obligated Parties under the Loan
Documents. In furtherance of the foregoing, Parent will cause each Subsidiary
and each PA created or
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 43
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acquired after the date hereof to execute and deliver to Agent an Affiliate
Guaranty and deliver to Agent any Administrative Management Agreement to which
such Subsidiary or PA is a party, promptly after such creation or acquisition
or in any event within thirty (30) days after Agent's request; provided that,
if a Subsidiary is established for the purposes of obtaining a federal tax
identification number, such Subsidiary has no assets other than such federal
tax identification number and such Subsidiary's initial capitalization (which
may not exceed One Thousand Dollars ($1,000.00) in the aggregate) and such
Subsidiary does not generate any revenue, then as long as all of the foregoing
conditions are satisfied, such Subsidiary shall not be required to execute and
deliver an Affiliate Guaranty (if and as long as all of the foregoing
conditions are satisfied with respect to a Subsidiary such Subsidiary shall be
an "Insignificant Subsidiary"). If any one of the foregoing conditions become
not applicable to a Subsidiary, Parent will comply with its obligations set
forth in the foregoing sentence. Parent will, and will cause each Subsidiary,
to promptly and in any event within thirty (30) days after Agent's request
pledge to the Agent to secure the Obligations (or in the case of a Subsidiary,
to secure its obligations under the Loan Documents to which it is a party), all
the capital stock or other ownership interests in any Subsidiary it acquires or
establishes after the date hereof other than an Insignificant Subsidiary and
other than Capital Billing Services, Inc. If a Subsidiary which was an
Insignificant Subsidiary is no longer an Insignificant Subsidiary or if the
Agent requests with respect to Capital Billing Services Inc., Parent will, and
will cause each Subsidiary that has any ownership interest in such Subsidiary,
to promptly and in any event within thirty (30) days after Agent's request
pledge to Agent to secure the Obligations (or in the case of a Subsidiary, to
secure its obligations under the Loan Documents to which it is a party) all
capital stock or other ownership interests in such Subsidiary.
Section 7.11 ERISA. Parent will comply, and will cause each
Subsidiary and each PA to comply, with all minimum funding requirements, and
all other material requirements, of ERISA, if applicable, so as not to give
rise to any liability thereunder.
Section 7.12 Administration Management Agreements. Parent will,
and will cause each Subsidiary and each PA to maintain in effect each
Administrative Management Agreement now existing or hereafter entered into
except an Administrative Management Agreement may be terminated if the assets
of the PA that is a party thereto are disposed of in a transaction permitted by
Section 8.3 or Section 8.7.
ARTICLE 8
Negative Covenants
Parent covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, Parent
will perform and observe the following negative covenants, unless the Required
Banks shall otherwise consent in writing:
Section 8.1 Debt. Parent will not incur, create, assume, or
permit to exist, and will not permit any Subsidiary or any PA to incur, create,
assume, or permit to exist, any Debt, except:
(a) Debt to Agent and the Banks arising under the Loan
Documents;
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 44
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(b) Debt which is secured by a purchase money Lien, the
proceeds of which is used to acquire assets which are (i) utilized in
the ordinary course of business of Parent, the Subsidiaries or the PAs
and (ii) not acquired in an Acquisition;
(c) Debt incurred in connection with the financing of
medical malpractice premiums provided that at no time shall the
maturity of any such Debt extend past a date which is twelve (12)
months from the date such Debt is incurred;
(d) Debt of a Subsidiary or a PA owed to Parent or
another Subsidiary; provided that any such Debt is subordinated to the
obligations arising under the Loan Documents on terms acceptable to
the Agent;
(e) Debt of the type described in clauses (i), (ii),
(iii), (iv) and (v) of the definition thereof incurred in order to
finance an Acquisition after the Closing Date but only if such Debt is
(i) owed to the seller who is a party to the Acquisition in question,
or a party related to such seller, (ii) does not require the payment
of interest, and (iii) is not secured by any Lien;
(f) Existing Debt described on Schedule 8.1 hereto and
any extensions, renewals or refinancings of such Debt on substantially
similar terms that applied to such Debt immediately prior to such
extension, renewal or refinancing so long as (i) the principal amount
of such Debt after such renewal, extension or refinancing shall not
exceed the principal amount of such Debt which was outstanding
immediately prior to such renewal, extension or refinancing, and (ii)
such Debt shall not be secured by any assets other than assets
securing such Debt, if any, prior to such renewal, extension or
refinancing; and
(g) Debt, other than Debt described under subsections
8.1(a) through (f), in an amount not to exceed, in the aggregate, Five
Million Dollars ($5,000,000) at any time outstanding.
Section 8.2 Limitation on Liens. Parent will not incur, create,
assume, or permit to exist, and will not permit any Subsidiary or any PA to
incur, create, assume, or permit to exist, any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except the
following, none of which shall encumber the collateral pledged under the Pledge
Agreements except the Liens described in clause (b) below:
(a) Liens disclosed on Schedule 8.2 hereto and any
renewal or modification of such Liens in a transaction permitted by
Section 8.1(f);
(b) Liens in favor of Agent arising under the Loan
Documents;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that
do not (individually or in the aggregate) materially affect the value
of the assets encumbered thereby or materially impair the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 45
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ability of Parent, the Subsidiary or the PAs to use such assets in
their respective businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;
(d) Liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory Liens securing obligations that
are not yet due and are incurred in the ordinary course of business or
which are being contested in good faith and for which adequate
reserves have been established;
(f) Liens resulting from good faith deposits to secure
payments of workmen's compensation or other social security programs
or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, or contracts (other than for payment of Debt)
in the ordinary course of business;
(g) Liens for purchase money obligations permitted by
Section 8.1(b); provided that: (i) the purchase of the asset subject
to any such Lien is otherwise permitted hereunder and (ii) any such
Lien encumbers only the asset so acquired;
(h) Leases or subleases granted to others in the ordinary
course of business; and
(i) Liens on any property existing at the time, and not
created in anticipation of, an Acquisition permitted by Section 8.3;
provided such Liens do not encumber any property required to be
pledged to the Agent under the terms hereof.
Section 8.3 Mergers, Acquisitions and Dissolutions. Parent will
not, and will not permit any Subsidiary or any PA to, become a party to a
merger or consolidation, or make any other Acquisitions, or dissolve or
liquidate; provided, however, (i) any Subsidiary may merge or consolidate with
another Subsidiary or with any other Person if the surviving Person assumes the
obligations under any applicable Affiliate Guaranty (subject to the limitations
set forth in clause (v) below) and other Loan Documents to which such
Subsidiary is a party or may merge or consolidate into Parent if Parent is the
surviving Person; (ii) any Subsidiary may dissolve or liquidate if its assets
are transferred to Parent or a Subsidiary or otherwise disposed of in
accordance with Section 8.7; (iii) any PA may merge, consolidate, dissolve or
liquidate if it is no longer a party to an Administrative Management Agreement
(and thus no longer a PA hereunder); (iv) any PA who continues to be a party to
an Administrative Management Agreement may merge or consolidate with another
professional association or professional corporation involved in the practice
of medicine if the surviving Person assumes the obligations under any
applicable Affiliate Guaranty and applicable Administrative Management
Agreement and if the surviving Person otherwise becomes a PA after such
transaction (subject to the limitations set forth in clause (v) below); and (v)
Parent, any Subsidiary or any PA may make Acquisitions if the aggregate Dollar
amount of the total consideration paid (whether cash, property or estimated
future payments under consulting, noncompete or other agreements,
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 46
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including the value of any capital stock of the Parent issued to the seller in
connection therewith) by Parent, the Subsidiaries and the PAs in connection
with any one such transaction does not exceed Twenty Million Dollars
($20,000,000).
Section 8.4 Restricted Payments; Consent to Dividend. Parent
will not, and will not permit any Subsidiary or any PA to, declare or pay any
dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock or other equity interest, or
redeem, purchase, retire, or otherwise acquire any of its capital stock or
other equity interest, or set apart any money for a sinking or other analogous
fund for any dividend or other distribution on its capital stock or other
equity interest or for any redemption, purchase, retirement, or other
acquisition of any of its capital stock or other equity interest, or grant or
issue any capital stock or other equity interest or any warrant, right, or
option pertaining to its capital stock or other equity interest, or issue any
security convertible into capital stock or other equity interest, or permit any
of its Subsidiaries to purchase any capital stock or other equity interest of
Parent or any Subsidiary; provided, however, (a) any Subsidiary that is one
hundred percent owned by any one or more Obligated Parties may declare and pay
cash dividends on account of its capital stock or make distributions to its
owners so long as no Potential Default or Event of Default exists or would
result therefrom, (b) any Subsidiary may issue capital stock or other equity
interest if such capital stock or other equity interest is issued to Parent or
the Obligated Party that directly owns such Subsidiary and pledged by such
Obligated Party to Agent in accordance with the applicable Pledge Agreement,
and (c) Parent may issue capital stock or any warrant, right or option
pertaining to its capital stock or any securities convertible into its capital
stock.
Section 8.5 Loans and Investments. Parent will not make, and
will not permit any Subsidiary or any PA to make, any advance, loan, extension
of credit, or capital contribution to or investment in, or purchase or own, or
permit any Subsidiary or any PA to purchase or own, any stock, bonds, notes,
debentures, or other securities of any Person, except:
(a) readily marketable direct obligations of the United
States of America and mortgage participation certificates or other
securities issued and guaranteed as to timely payment by any
governmental agency of the United States of America, including without
limitation, or in addition, the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation, Student Loan Marketing
Association or the Government National Mortgage Association;
(b) readily marketable direct obligations of any state or
municipality of the United States of America if at the time of
purchase such obligations are rated in one of the two highest rating
categories of Standard and Poor's Corporation or Moody's Investors
Service;
(c) fully insured certificates of deposit with maturities
of one year or less from the date of acquisition of any commercial
bank operating in the United States having capital and surplus in
excess of $50,000,000.00;
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 47
<PAGE> 47
(d) commercial paper of a domestic issuer if at the time
of purchase such paper is rated in one of the two highest rating
categories of Standard and Poor's Corporation or Moody's Investors
Service;
(e) Acquisitions to the extent permitted by Section 8.3;
(f) loans permitted in accordance with subsection 8.1(d);
(g) money market or mutual funds that invest primarily in
any of the investments permitted under subsections 8.5(a), (b), (c)
and (d);
(h) loans made in connection with an Acquisition (of the
type described in clauses (i) or (iii) of the definition of
Acquisition and which is permitted by Section 8.3) to the seller who
is a party to such Acquisition which are fully secured by accounts
receivable relating to the contract or rights acquired; provided that
the aggregate amount of such loans at any time outstanding shall not
exceed One Million Dollars ($1,000,000); and
(i) capital contributions to or investments in an
existing or to be created Subsidiary provided that the aggregate
amount contributed to or invested in any one Subsidiary shall not
exceed either (i) in the aggregate One Thousand Dollars ($1,000.00) or
(ii) if such Subsidiary is utilized to make an Acquisition, the
aggregate Dollar amount of the total cash consideration paid to the
seller in such Acquisition less any amount loaned to such Subsidiary
by Parent or any other Subsidiary for such purpose, provided such
contribution or investment under this clause (ii) is made only in
connection with the closing of the related Acquisition.
Section 8.6 Transactions With Affiliates. Except for the
transactions contemplated by the Administrative Management Agreements, Parent
will not enter into, and will not permit any Subsidiary or any PA to enter
into, any transaction, including, without limitation, the purchase, sale, or
exchange of property or the rendering of any service, with any Affiliate of
Parent, such Subsidiary or such PA, except in the ordinary course of and
pursuant to the reasonable requirements of Parent's, such Subsidiary's or such
PA's business and upon fair and reasonable terms no less favorable to Parent,
such Subsidiary or such PA than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate of Parent, such Subsidiary or such
PA.
Section 8.7 Disposition of Assets. Parent will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any
Subsidiary or any PA to do so with any of its assets except (a) the disposition
of obsolete or worn out equipment or other assets no longer necessary in the
Parent's, the Subsidiaries or the PA's business, as applicable, (b) other
dispositions of assets in the ordinary course of business, and (c) other
disposition of assets provided that the book value of the assets disposed of
under the permissions of this clause (c) shall not exceed Two Million Dollars
($2,000,000) in the aggregate during the period from the Closing Date through
the Revolving Termination Date and, as of the date of any such disposition, no
Potential Default or Event of Default exists or would result therefrom.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 48
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Section 8.8 Sale and Leaseback. Parent will not enter into, and
will not permit any Subsidiary or any PA to enter into, any arrangement with
any Person pursuant to which it leases from such Person real or personal
property that has been or is to be sold or transferred, directly or indirectly,
by it to such Person.
Section 8.9 Nature of Business. Parent will not, and will not
permit any Subsidiary or PA to, engage in any business other than the
businesses in which they are engaged as of the date hereof and any business
relating to physician management, staffing, recruiting, billing and/or
scheduling or other management of health care services.
Section 8.10 Accounting. Parent will not make, and will not
permit any Subsidiary or any PA to make, any change in accounting treatment or
reporting practices, except as required or permitted by GAAP.
ARTICLE 9
Financial Covenants
Parent covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or any Bank has any Commitment hereunder, Parent
will observe and perform the following financial covenants, unless the Required
Banks shall otherwise consent in writing:
Section 9.1 Combined Net Worth. Parent will at all times
maintain Combined Net Worth in an amount not less than the sum of (a)
Fifty-Five Million Dollars ($55,000,000); plus (b) an amount equal to
seventy-five percent (75%) of Net Income for each fiscal quarter, beginning
with the Net Income for the fiscal quarter ending March 31, 1997; plus (c) an
amount equal to eighty percent (80%) of all contributions made to the capital
of Parent after December 31, 1996. If Net Income for a fiscal quarter is
negative, no adjustment to the requisite level of Combined Net Worth shall be
made.
Section 9.2 Interest Coverage Ratio. As of the last day of each
fiscal quarter of Parent, Parent shall maintain a ratio of EBIT to Combined
Interest Expenses of not less than 3.0 to 1.0 computed on the basis of the EBIT
and Combined Interest Expenses for the four (4) fiscal quarters ending on the
date of calculation.
Section 9.3 Leverage Ratio. Parent will maintain a Leverage
Ratio of not greater than 3.0 to 1.0 as of the last day of each fiscal quarter.
ARTICLE 10
Default
Section 10.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 49
<PAGE> 49
(a) Parent shall fail to pay (i) when due any principal
installment due under the terms of the Loan Documents, any
reimbursement obligation under Section 2.11(b) or any part of either
of the foregoing; (ii) within three (3) days of the date due, any
interest or commitment fee due under the terms of the Loan Documents
or any part thereof; and (iii) within ten (10) days of the date due,
any other Obligations or any part thereof.
(b) Any certification, representation or warranty made or
deemed made by any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report, notice,
or financial statement furnished at any time in connection with this
Agreement shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
(c) Any Obligated Party shall fail to perform, observe,
or comply with any covenant, agreement, or term contained in Sections
or subsections 7.1(a), 7.1(b), 7.1(c), 7.1(g), 7.2(a), 7.4, 7.5, 7.10,
Article 8 or Article 9 of this Agreement, Sections 2.2, 2.3, or 2.4 of
any Pledge Agreement or the subordination provisions of any Affiliate
Guaranty.
(d) Any Obligated Party shall fail to perform, observe,
or comply with any covenant, agreement or term contained in any
section of this Agreement or any other Loan Document other than those
covenants, agreements and terms listed in subsections 10.1(a) and
10.1(c) and such failure shall continue for a period of ten (10) days
after the earlier of (A) the date the Agent notifies Parent of such
failure or (B) the date Parent should have notified Agent of such
failure under subsection 7.1(h).
(e) Parent, any Subsidiary, or any other Obligated Party
shall commence a voluntary proceeding seeking liquidation,
reorganization, or other relief with respect to itself or its debts
under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or a
substantial part of its property or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it or shall
make a general assignment for the benefit of creditors or shall
generally fail to pay its debts as they become due or shall take any
corporate action to authorize any of the foregoing.
(f) An involuntary proceeding shall be commenced against
Parent, any Subsidiary, or any other Obligated Party seeking
liquidation, reorganization, or other relief with respect to it or its
debts under any bankruptcy, insolvency, or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for it or a
substantial part of its property, and such involuntary proceeding
shall remain undismissed and unstayed for a period of thirty (30)
days.
(g) Parent, any Subsidiary, or any other Obligated Party
shall fail to discharge within a period of thirty (30) days after the
commencement thereof any attachment, sequestration, or similar
proceeding or proceedings involving an aggregate amount in
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 50
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excess of One Hundred Thousand Dollars ($100,000) against any of its
assets or properties.
(h) A final judgment or judgments for the payment of
money in excess of One Hundred Thousand Dollars ($100,000) in the
aggregate shall be rendered by a court or courts against Parent, any
Subsidiaries, or any other Obligated Party and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within thirty (30)
days from the date of entry thereof and Parent or the relevant
Subsidiary or other Obligated Party shall not, within said period of
thirty (30) days, or such longer period during which execution of the
same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
(i) Parent, any Subsidiary, or any other Obligated Party
shall fail to pay when due any principal of or interest on any Debt
(other than the Obligations) in an aggregate amount equal to or in
excess of One Hundred Thousand Dollars ($100,000), or the maturity of
any such Debt shall have been accelerated, or any such Debt shall have
been required to be prepaid prior to the stated maturity thereof, or
any event shall have occurred that permits (or, with the giving of
notice or lapse of time or both, would permit) any holder or holders
of such Debt or any Person acting on behalf of such holder or holders
to accelerate the maturity thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease
to be in full force and effect or shall be declared null and void or
the validity or enforceability thereof shall be contested or
challenged by Parent, any Subsidiary, any other Obligated Party or any
of their respective owners, or Parent or any other Obligated Party
shall deny that it has any further liability or obligation under any
of the Loan Documents.
(k) Any of the following events shall occur or exist with
respect to any Obligated Party or any ERISA Affiliate: (i) any
Prohibited Transaction involving any Plan; (ii) any Reportable Event
with respect to any Plan; (iii) the filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that could reasonably be expected
to constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution
by the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer
Plan or the reorganization, insolvency, or termination of any
Multiemployer Plan; and in each case above, such event or condition,
together with all other events or conditions, if any, have subjected
or could in the reasonable opinion of Agent subject any Obligated
Party to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination
thereof) which in the aggregate exceed or could reasonably be expected
to exceed One Hundred Thousand Dollars ($100,000).
(l) Parent, any Subsidiaries, or any other Obligated
Party, or any of their properties, revenues, or assets, shall become
the subject of an order of forfeiture, seizure,
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 51
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or divestiture (whether under RICO or otherwise) and the same shall
not have been discharged within thirty (30) days from the date of
entry thereof.
(m) Agent shall fail to have, for any reason except its
own negligence, a valid perfected and first priority security interest
in any of the collateral securing the Obligations.
(n) A majority of the outstanding capital stock of any PA
with the power to elect a majority of the board of directors of such
PA shall fail to be owned by Leonard M. Riggs, Jr., M.D., any other
physician who is an officer, director, employee or medical director of
Parent or a Subsidiary and has a financial interest in Parent and/or
any other physician who acquires ownership in a PA under the terms of
the Succession Agreements (any of the foregoing herein a "Permitted
Physician"); provided that, (i) if in creating or acquiring a PA,
Permitted Physicians do not own such majority because no Permitted
Physician is licensed to practice in the jurisdiction in which such PA
is established, no Event of Default shall occur as long as the PA has
executed and delivered an Affiliate Guaranty and one or more Permitted
Physicians are diligently pursuing a license to practice in such
jurisdiction and have the right to acquire such majority interest, and
after obtaining such license Permitted Physicians acquire such
majority interest, and (ii) this clause (n) shall not apply to any
professional association or corporation which is no longer a party to
an Administrative Management Agreement.
(o) Leonard M. Riggs, Jr., M.D. shall fail to own and
control directly the shares of each PA which are owned by him on the
Closing Date except for (i) transfers contemplated by the Succession
Agreement to which he is a party, (ii) any PA which is no longer in
existence as a result of a transaction permitted by Section 8.3 and
(iii) any professional association or corporation no longer a party to
an Administrative Management Agreement.
Section 10.2 Remedies Upon Default. If any Event of Default shall
occur, Agent may (and if directed by the Required Banks, shall) do any one or
more of the following:
(a) Acceleration. By written notice to Parent, declare
all Obligations immediately due and payable, and the same shall
thereupon become immediately due and payable, without any other
notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other
formalities of any kind, all of which are hereby expressly waived by
Parent and EmCare.
(b) Termination of Commitments. By written notice to
Parent, terminate the Commitments.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of the Banks to secure payment
and performance of the Obligations in accordance with the terms of the
Loan Documents.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 52
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(e) Cash Collateral. By written notice to Parent,
require Parent to immediately deposit with and pledge to Agent for the
benefit of the Banks, cash or cash equivalent investments in an amount
equal to the outstanding Letter of Credit Liabilities as security for
the Obligations.
(f) Rights. Exercise any and all rights and remedies
afforded by the law of the State of Texas or any other jurisdiction,
by any of the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
Section 10.1(e) or 10.1(f), the Commitments of all of the Banks shall
automatically terminate, and the outstanding principal of and accrued and
unpaid interest on the Notes and all other obligations of Parent under the Loan
Documents shall thereupon become immediately due and payable without notice,
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of which
are hereby expressly waived by Parent.
Section 10.3 Setoff. If any Event of Default shall occur, Agent
and each Bank shall also have the right to setoff and apply against the
Obligations, at any time and without notice to Parent, any and all deposits
(general or special, time or demand, provisional or final) or other sums at any
time credited by or owing from Agent or any such Bank to Parent whether or not
the Obligations are then due. As further security for the Obligations, Parent
hereby grants to Agent and each Bank a security interest in all money,
instruments, and other property of Parent now or hereafter held by Agent or any
such Bank, including, without limitation, property held in safekeeping (all
such property herein the "Parent Property"). In addition to the Agent's right
of setoff and as further security for the Obligations, Parent hereby grants to
Agent and each Bank a security interest in all deposits (general or special,
time or demand, provisional or final) and other accounts of Parent now or
hereafter on deposit with or held by Agent or any such Bank and all other sums
at any time credited by or owing from Agent or any such Bank to Parent (all
such deposits and sums herein the "Bank Accounts"). Prior to the occurrence of
any Event of Default, Parent may have access to and use in the ordinary course
of business all of the Parent Property and all of the Bank Accounts but after
the occurrence and during the continuance of an Event of Default, (i) Parent
shall not, without the written consent of Agent, withdraw or otherwise use any
of the Parent Property or any of the funds in the Bank Accounts and (ii) Agent
and each Bank shall be entitled to exercise all rights and remedies of a
secured party under the Uniform Commercial Code as adopted by the State of
Texas in respect of such Parent Property and Bank Accounts and the Agent's and
Banks' security interest therein.
Section 10.4 Performance by Agent. If any Obligated Party shall
fail to perform any covenant, duty, or agreement contained in any of the Loan
Documents, Agent may provide Parent written notice of such failure and if the
applicable Obligated Party shall not have remedied such failure (or shall
otherwise not have taken action satisfactory to Agent to remedy such failure)
within five (5) days of receipt by Parent of such notice, then Agent may
perform or attempt to perform such covenant, duty, or agreement on behalf of
the applicable Obligated Party. In such event, Parent shall, at the request of
Agent, promptly pay any amount expended by Agent in such performance or
attempted performance to Agent, together with interest thereon
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 53
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at the Default Rate from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly agreed that neither Agent nor
any Bank shall have any liability or responsibility for the performance of any
obligation of any Obligated Party under any Loan Document.
Section 10.5 Continuance of Event of Default. For purposes of all
Loan Documents, an Event of Default shall be deemed to have continued until the
Agent shall have actually received evidence satisfactory to Agent that such
Event of Default has been remedied.
ARTICLE 11
The Agent
Section 11.1 Appointment, Powers and Immunities. In order to
expedite the various transactions contemplated by this Agreement, the Banks
hereby irrevocably appoint and authorize Texas Commerce to act as their Agent
hereunder and under each of the other Loan Documents and confirm and continue
the appointment of Texas Commerce as Agent pursuant to the Second Loan
Agreement on the terms herein set forth. Texas Commerce consents to such
appointment and agrees to perform the duties of the Agent as specified herein.
The Banks authorize and direct the Agent to take such action in their name and
on their behalf under the terms and provisions of the Loan Documents and to
exercise such rights and powers thereunder as are specifically delegated to or
required of the Agent for the Banks, together with such rights and powers as
are reasonably incidental thereto. The Agent is hereby expressly authorized to
act as the Agent on behalf of itself and the other Banks:
(a) To receive on behalf of each of the Banks any payment
of principal, interest, fees or other amounts paid pursuant to this
Agreement and the Notes and to distribute to each Bank its share of
all payments so received as provided in this Agreement;
(b) To receive all documents and items to be furnished
under the Loan Documents to the extent provided herein;
(c) To act as nominee for and on behalf of the Banks in
and under the Loan Documents;
(d) To arrange for the means whereby the funds of the
Banks are to be made available to Parent;
(e) To distribute to the Banks information, requests,
notices, payments, prepayments, documents and other items received
from any Obligated Party;
(f) To execute and deliver to the Obligated Parties, and
other Persons, all requests, demands, approvals, notices, and consents
received from the Banks;
(g) To the extent permitted by the Loan Documents, to
exercise on behalf of each Bank all rights and remedies of Banks upon
the occurrence of any Event of Default;
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 54
<PAGE> 54
(h) To be the secured party on behalf of the Banks under
any document securing payment of the Obligations, including without
limitation, the Existing Collateral Documents and to accept, execute,
and deliver such documents as the secured party; and
(i) To take such other actions as may be requested by
Required Banks.
Neither the Agent nor any of its Affiliates, officers, directors,
employees, attorneys, or agents shall be liable for any action taken or omitted
to be taken by any of them hereunder or otherwise in connection with this
Agreement or any of the other Loan Documents except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
preceding sentence, the Agent (i) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Bank;
(iii) shall not be required to initiate any litigation or collection
proceedings hereunder or under any other Loan Document except to the extent
requested by Required Banks; (iv) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this Agreement
or any other Loan Document, or any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Loan Document, or for the value, validity, effectiveness, enforceability, or
sufficiency of this Agreement or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by any Person
to perform any of its obligations hereunder or thereunder; (v) may consult with
legal counsel (including counsel for the Parent), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters
not expressly provided for by this Agreement, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Required Banks, and such instructions of
Required Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to any Loan Document or applicable law.
Section 11.2 Rights of Agent as a Bank. With respect to its
Commitment, the Advances made by it and the Note issued to it, Texas Commerce
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent
and its Affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, act as trustee under indentures of, provide
merchant banking services to, and generally engage in any kind of business with
any Obligated Party, and any other Person who may do business with or own
securities of any Obligated Party, all as if it were not acting as the Agent
and without any duty to account therefor to the Banks.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 55
<PAGE> 55
Section 11.3 Sharing of Payments, Etc. If any Bank shall obtain
any payment of any principal of or interest on any Advance made by it under
this Agreement or payment of any other obligation under the Loan Documents then
owed by any Obligated Party to such Bank, whether voluntary, involuntary,
through the exercise of any right of setoff, banker's lien, counterclaim or
similar right, or otherwise, in excess of its Pro Rata (calculated based on the
outstanding Advances and Letter of Credit Liabilities) share such Bank shall
promptly purchase from the other Banks participation in the Advances held by
them hereunder in such amounts, and make such other adjustments from time to
time as shall be necessary to cause such purchasing Bank to share the excess
payment ratably with each of the other Banks in accordance with its Pro Rata
(calculated based on the outstanding Advances and Letter of Credit Liabilities)
portion thereof. To such end, all of the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if all or any portion of such excess payment is thereafter rescinded
or must otherwise be restored. Parent agrees, to the fullest extent it may
effectively do so under applicable law, that any Bank so purchasing a
participation in the Advances made by the other Banks may exercise all rights
of setoff, banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Advances to the
Parent in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right of any
Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of any Obligated Party;
provided, however, if a Bank exercises the right of set-off against any
property of an Obligated Party, it shall exercise such rights first with
respect to the Obligations until the Obligations are satisfied in full before
exercising such right with respect to any other indebtedness or obligation of
such Obligated Party.
Section 11.4 INDEMNIFICATION. THE BANKS HEREBY AGREE TO INDEMNIFY
THE AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT
REIMBURSED UNDER SECTIONS 12.1 AND 12.2, BUT WITHOUT LIMITING THE OBLIGATIONS
OF PARENT UNDER SECTIONS 12.1 AND 12.2), PRO RATA IN ACCORDANCE WITH THEIR
RESPECTIVE COMMITMENTS, ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED,
FURTHER, THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE
EXTENT CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE BANKS THAT THE
AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), AND
DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT. Without
limiting any
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 56
<PAGE> 56
other provision of this Section, each Bank agrees to reimburse the Agent
promptly upon demand for its Pro Rata (calculated on the basis of the
Commitments) share of any and all out-of-pocket expenses (including attorneys'
fees) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings, or otherwise) of, or legal advice in
respect of rights or responsibilities under, the Loan Documents, to the extent
that the Agent is not reimbursed for such expenses by Parent.
Section 11.5 Independent Credit Decisions. Each Bank agrees that
it has independently and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Obligated Parties and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent
or any other Bank, and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions
in taking or not taking action under this Agreement or any of the other
Documents. The Agent shall not be required to keep itself informed as to the
performance or observance by any Obligated Party of this Agreement or any other
Loan Document or to inspect the properties or books of any Obligated Party.
Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent hereunder or under the other
Loan Documents, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other financial information concerning the affairs,
financial condition or business of any Obligated Party (or any of their
Affiliates) which may come into the possession of the Agent or any of its
Affiliates.
Section 11.6 Several Commitments. The Commitments and other
obligations of the Banks under this Agreement are several. The default by any
Bank in making an Advance in accordance with its Commitment shall not relieve
the other Banks of their obligations under this Agreement. In the event of any
default by any Bank in making any Advance, each nondefaulting Bank shall be
obligated to make its Advance but shall not be obligated to advance the amount
which the defaulting Bank was required to advance hereunder. In no event shall
any Bank be required to advance an amount or amounts which shall in the
aggregate exceed such Bank's Commitment. No Bank shall be responsible for any
act or omission of any other Bank.
Section 11.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks and Parent and the Agent may be
removed by the Required Banks, at any time if it has materially failed to
fulfill any obligation as Agent hereunder. Upon any such resignation or
removal, Required Banks, subject to Parent's approval, will have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by Required Banks and shall have accepted such appointment within thirty (30)
days after the Agent's giving of notice of resignation or the Required Banks'
removal of the retiring Agent, then the Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized under the
laws of the United States of America or any State thereof and having combined
capital and surplus of at least One Hundred Million Dollars ($100,000,000.00).
Upon the acceptance of its appointment as successor Agent, such successor Agent
shall thereupon succeed to and become vested with all rights, powers,
privileges, immunities, and duties of the resigning or removed
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 57
<PAGE> 57
Agent, and the resigning or removed Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents. After any
Agent's resignation or removal as Agent, the provisions of this Article 11
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was the Agent.
Section 11.8 Administration Fee. On each anniversary of the
Closing Date, Parent agrees to pay to Agent the annual administration fee
described in that certain fee letter from Chase Securities, Inc. and Texas
Commerce to Parent dated January 23, 1997.
ARTICLE 12
Miscellaneous
Section 12.1 Expenses. Parent hereby agrees to pay on demand:
(i) all reasonable out- of-pocket costs and expenses incurred by the Agent in
connection with the preparation, negotiation, and execution of this Agreement
and the other Loan Documents and any and all amendments, modifications,
renewals, extensions, and supplements thereof and thereto, including, without
limitation, the reasonable out-of-pocket fees and expenses of Agent's legal
counsel, (ii) all reasonable out-of-pocket costs and expenses incurred by the
Agent and the Banks in connection with the enforcement of this Agreement or any
other Loan Document, including, without limitation, the reasonable
out-of-pocket fees and expenses of legal counsel for the Agent and the Banks,
and (iii) all other reasonable out-of-pocket costs and expenses incurred by the
Agent in connection with this Agreement or any other Loan Document, including,
without limitation, all out-of-pocket costs and expenses and all taxes (other
than income taxes), assessments, filing fees, and other charges levied by a
governmental authority or otherwise payable in respect of this Agreement
(whether or not reasonable) or any other Loan Document or in obtaining any
appraisal in respect of the collateral securing the obligations of any
Obligated Party under the Loan Documents.
SECTION 12.2 INDEMNIFICATION. PARENT HEREBY INDEMNIFIES THE AGENT
AND EACH BANK AND EACH AFFILIATE THEREOF (INCLUDING WITHOUT LIMITATION, CHASE
SECURITIES, INC.) AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND
ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, COSTS, AND
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME
SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (I) THE
NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT
OF ANY OF THE LOAN DOCUMENTS OR THE ORIGINAL LOAN AGREEMENT, (II) ANY BREACH BY
ANY OBLIGATED PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER
AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, OR (III) ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS, INCLUDING,
WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER
PROCEEDING RELATING TO ANY OF THE FOREGOING EXCEPT TO THE EXTENT ANY LOSS,
LIABILITY, CLAIM, DAMAGE, PENALTY, JUDGMENT, COST OR
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 58
<PAGE> 58
EXPENSE IS FOUND TO HAVE RESULTED FROM SUCH INDEMNIFIED PERSON'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF THIS
AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE
PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE
INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, COSTS, AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED.
Section 12.3 Limitation of Liability. Neither Agent, any Bank nor
any Affiliate, officer, director, employee, attorney, or agent of Agent or any
Bank shall have any liability with respect to, and Parent and EmCare (and, by
its execution of the Loan Documents to which it is a Party, each other
Obligated Party) hereby waives, releases, and agrees not to sue any of them
upon, any claim for any special, indirect, incidental, or consequential damages
suffered or incurred by any Obligated Party in connection with, arising out of,
or in any way related to, the Original Loan Agreement, the Second Loan
Agreement or any of the Loan Documents, or any of the transactions contemplated
by the Original Loan Agreement, the Second Loan Agreement or any of the Loan
Documents, unless such special, indirect, incidental or consequential damages
arose as a result of acts or omissions on the part of the applicable party
which constitute gross negligence or willful misconduct. Parent and EmCare
(and by its execution of the Loan Documents to which it is a party, each other
Obligated Party) hereby waives, releases, and agrees not to sue Agent, any Bank
or any Affiliate, officer, director, employee, attorney, or agent for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, the Original Loan Agreement, the Second Loan Agreement or any
of the other Loan Documents, or any of the transactions contemplated by the
Original Loan Agreement, the Second Loan Agreement or any of the other Loan
Documents, unless such claim arose as a result of acts or omissions on the part
of the applicable party which constitute gross negligence or willful
misconduct.
Section 12.4 No Duty. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by Agent or any Bank shall
have the right to act exclusively in the interest of the Agent or the
applicable Bank and shall have no duty of disclosure, duty of loyalty, duty of
care, or other duty or obligation of any type or nature whatsoever to any
Obligated Party or any other Person.
Section 12.5 Agent and Banks Not Fiduciary. The relationship
between the Obligated Parties, on the one hand and the Agent and the Banks, on
the other hand, is solely that of debtor and creditor, and neither Agent nor
any Bank has any fiduciary or other special relationship with any Obligated
Party, and no term or condition of any of the Loan Documents shall be construed
so as to deem the relationship between the Obligated Parties, on the one hand
and the Agent and the Banks, on the other hand, to be other than that of debtor
and creditor.
Section 12.6 Equitable Relief. Parent and EmCare recognize that
in the event any Obligated Party fails to pay, perform, observe, or discharge
any or all of the obligations, any remedy at law may prove to be inadequate
relief to the Agent and the Banks. Parent and EmCare
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 59
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(and by its execution of the Loan Documents to which it is a party, each other
Obligated Party) therefore agree that Agent or any Bank, if they so request,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
Section 12.7 No Waiver; Cumulative Remedies. No failure on the
part of Agent or any Bank to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power, or privilege under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in the Loan Documents are
cumulative and not exclusive of any rights and remedies provided by law.
Section 12.8 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Neither Parent nor EmCare may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Agent and all of the Banks.
(a) Participations. Any Bank may sell participations to
one or more banks or other institutions in or to all or a portion of its rights
and obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Commitments and the Advances owing
to it); provided, however, that (i) such Bank's obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Commitment) shall remain unchanged, (ii) such Bank shall remain solely
responsible to Parent for the performance of such obligations, (iii) such Bank
shall remain the holder of its Note for all purposes of this Agreement, (iv)
Parent shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement and the other Loan
Documents, and (v) such Bank shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under this Agreement
or any other Loan Document, other than the right to vote upon or consent to (1)
any increase of such Bank's Commitment, (2) any reduction of the principal
amount of, or interest to be paid on, the Advances or the Note of such Bank,
(3) any reduction of any commitment fee or other amount payable to such Bank
under any Loan Document, or (4) any postponement of any date for the payment of
any amount payable in respect of the Advances or Note of such Bank.
(b) Assignments. Parent, EmCare and each of the Banks
agree that any Bank (the "Assigning Bank") may at any time assign to one or
more banks or other institutions all, or a proportionate part of all, of its
rights and obligations under this Agreement and the other Loan Documents
(including, without limitation, its Commitment and Advances) (each an
"Assignee"); provided that the Assigning Bank obtains the prior written consent
of Agent and if the assignment is made prior to the occurrence of an Event of
Default or to a Person who is not an Affiliate of the Assigning Bank, the prior
written consent of Parent which shall not be unreasonably withheld. In
connection with any such assignment, the Assignor and Assignee shall execute
and deliver to the Parent and Agent, for their acceptance (when required) and
the Agent's recording, an Assignment and Acceptance, together with the Note
subject to such assignment. Upon such execution, delivery, acceptance, and
recording, from and after the effective date specified in the Assignment and
Acceptance, the Assignee's rights and obligations
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 60
<PAGE> 60
under this Agreement and the other Loan Documents shall be established or
increased, as the case may be, to the extent set forth in the Assignment and
Acceptance and the Assigning Bank's rights and obligations under this Agreement
and the other Loan Documents shall be released and reduced by a corresponding
amount. Upon its receipt of an Assignment and Acceptance executed by an
Assigning Bank and Assignee, together with the Note subject to such assignment,
the Agent shall (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register (hereafter defined), and (iii)
give prompt written notice thereof to Parent. Within five (5) Business Days
after its receipt of such notice, Parent shall at its own expense (i) execute
and deliver to the Agent a Note payable to the order of the Assignee in an
amount equal to such Assignee's new or increased Commitment and (ii) execute
and deliver to the Agent a new Note payable to the order of the Assigning Bank
in an amount equal to the Commitment retained by the Assigning Bank hereunder.
After its receipt of such new Notes and the effective date of the Assignment
and Acceptance, the Assigning Bank shall cancel and return the old Note to
Parent. In connection with any such Assignment and Acceptance, the Assigning
Bank shall pay to the Agent an administration fee for processing such
assignment in the amount of Three Thousand Dollars ($3,000.00); provided that
such administration fee shall not be payable to Agent if the Assigning Bank is
making an assignment to one of its Affiliates. Upon compliance with the
procedures and limitations set forth in this Section 12.8, each Assignee shall
become a "Bank" for purposes of this Agreement from and after the effective
date of the Assignment and Acceptance. Each Assigning Bank shall give the
Agent and Parent at least ten (10) Business Days prior written notice of each
proposed assignment. Each assignment shall be in the minimum principal amount
of Five Million Dollars ($5,000,000). The Agent shall maintain at its address
referred to on the signature pages hereto a copy of each Assignment and
Acceptance delivered to and accepted by it in a register for the recordation of
the names and addresses of the Assignees under this Section 12.8 and the
Commitments of, and the principal amount of the Advances owing to, each such
Assignee from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and Parent,
the Banks, and the Assignees may treat each Person whose name is recorded in
the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Parent, any Assigning Bank, or
any Assignee at any reasonable time and from time to time upon reasonable prior
notice.
(c) Information. Any Bank may furnish any information
concerning Parent or any other Obligated Party in the possession of such Bank
from time to time to assignees and participants (including prospective
assignees and participants).
Section 12.9 Survival. All representations and warranties made in
any Loan Document shall survive the execution and delivery of the Loan
Documents, and no investigation by Agent or any Bank or any closing shall
affect the representations and warranties or the right of Agent or any Bank to
rely upon them. Without prejudice to the survival of any other obligation
hereunder, the obligations under Article 4 and Sections 11.4, 12.1 and 12.2
shall survive repayment of the Notes and terminations of the Commitment.
Section 12.10 ENTIRE AGREEMENT; AMENDMENT AND RESTATEMENT
MODIFICATION OF LOAN DOCUMENTS. EFFECTIVE AS OF THE CLOSING DATE, THIS
AGREEMENT AMENDS AND RESTATES IN IT ENTIRETY THE SECOND LOAN
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 61
<PAGE> 61
AGREEMENT EXCEPT TO THE EXTENT THE SECOND LOAN AGREEMENT MODIFIED LOAN
DOCUMENTS OTHER THAN THE ORIGINAL LOAN AGREEMENT. THE LOAN DOCUMENTS (OTHER
THAN THE SECOND LOAN AGREEMENT) EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF (INCLUDING THE SECOND LOAN AGREEMENT) AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO. EmCare, Parent, Agent and each Bank
ratify and confirm each of the Loan Documents entered into prior to the Closing
Date (other than the Original Loan Agreement, the Second Loan Agreement and the
Parent Guaranty, as defined in the Original Loan Agreement, but including the
Existing Collateral Documents and the Existing Guaranties) and agree that such
Loan Documents shall continue to be legal, valid, binding and enforceable in
accordance with their respective terms except as limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of
creditor's rights. Without limiting the generality of the foregoing and
notwithstanding any Loan Document to the contrary, EmCare, Parent, Agent and
each Bank agree and acknowledge that as of the Closing Date:
(a) the term "Loan Agreement" as used in each Loan
Document means this Agreement;
(b) the term "Guarantied Indebtedness" as used in the
Existing Guaranties means the Obligations as defined herein;
(c) the term "Obligations" or "Secured Obligations" as
used in the Existing Collateral Documents means the Obligations as
defined herein;
(d) the term "Secured Party" as used in any Existing
Collateral Documents means Texas Commerce in its capacity as Agent
hereunder for the benefit of itself and the other Banks; and
(e) the term "Lender" as used in any Existing Guaranty
means Texas Commerce in its capacity as Agent hereunder for the
benefit of itself and the other Banks and the Banks.
To facilitate the foregoing, Texas Commerce confirms its assignment to
the Agent for the benefit of itself and the other Banks of all of its right,
title and interest in and to the Existing Collateral Documents and Existing
Guaranties.
Section 12.11 Maximum Interest Rate. No provision of any Loan
Document shall require the payment or the collection of interest in excess of
the maximum permitted by applicable law. If any excess of interest in such
respect is hereby provided for, or shall be adjudicated to be so provided, in
any Loan Document or otherwise in connection with this loan transaction, the
provisions of this Section shall govern and prevail and neither Parent nor the
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 62
<PAGE> 62
sureties, guarantors, successors, or assigns of Parent shall be obligated to
pay the excess amount of such interest or any other excess sum paid for the
use, forbearance, or detention of sums loaned pursuant hereto. In the event
any Bank ever receives, collects, or applies as interest any such sum, such
amount which would be in excess of the maximum amount permitted by applicable
law shall be applied as a payment and reduction of the principal of the
indebtedness evidenced by its Note and, if the principal of its Note has been
paid in full, any remaining excess shall forthwith be paid to Parent. In
determining whether or not the interest paid or payable exceeds the Maximum
Rate, Parent and each Bank shall, to the extent permitted by applicable law,
(i) characterize any nonprincipal payment as an expense, fee, or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the
total amounts of interest throughout the entire contemplated term of the
indebtedness evidenced by its Note so that interest for the entire term does
not exceed the Maximum Rate.
Section 12.12 Notices. All notices and other communications
provided for in any Loan Documents to which any Obligated Party is a party
shall be given or made in writing and telecopied, mailed by certified mail
return receipt requested, or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof
and with respect to each Obligated Party, at the Parent's "Address for Notices"
or, as to any party at such other address as shall be designated by such party
in a notice to each other party given in accordance with this Section. Except
as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopy, subject to
telephone confirmation of receipt, or when personally delivered or, in the case
of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, notices to Agent pursuant to Article
2 shall not be effective until received by Agent.
Section 12.13 Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement shall be performable for all purposes in Harris County, Texas. Any
action or proceeding against any Obligated Party under or in connection with
any of the Loan Documents may be brought in any state or federal court in
Harris County, Texas. EmCare and Parent (and by execution of the Loan
Documents to which it is a party, each other Obligated Party) each hereby
irrevocably (i) submits to the nonexclusive jurisdiction of such courts, and
(ii) waives any objections it may now or hereafter have as to the venue of any
such action or proceeding brought in any such court or that any such court is
an inconvenient forum. EmCare and Parent (and by execution of the Loan
Documents to which it is a party, each other Obligated Party) each agree that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified or determined in accordance with
the provisions of Section 12.12. Nothing herein or in any of the other Loan
Documents shall affect the right of Agent or any Bank to serve process in any
other manner permitted by law or shall limit the right of Agent or any Bank to
bring any action or proceeding against any Obligated Party or with respect to
any of its property in courts in other jurisdictions. Any action or proceeding
by any Obligated Party against Agent or any Bank shall be brought only in a
court located in Harris County, Texas.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 63
<PAGE> 63
Section 12.14 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
Section 12.15 Severability. Any provision of this Agreement held
by a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 12.16 Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 12.17 Non-Application of Chapter 15 of Texas Credit Code.
The provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transaction contemplated hereby.
Section 12.18 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, the Notes, or any other Loan Document to which any
Obligated Party is a party, nor any consent to any departure by Obligated Party
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by Required Banks and the applicable Obligated Party, and each
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, that no amendment, waiver, or
consent shall, unless in writing and signed by all of the Banks and Parent, do
any of the following: (a) increase the Commitments of the Banks; (b) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder; (c) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder; (d)
waive any of the conditions specified in Article 5; (e) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Notes or
the number of Banks which shall be required for the Banks or any of them to
take any action under this Agreement; (f) change any provision contained in
this Section 12.18; or (g) release any collateral or any Guarantor; except that
Agent may release, without the consent or agreement of any Bank, (i) any Lien
in collateral which secures the Obligations if such collateral is permitted to
be disposed of under this Agreement and (ii) any Obligated Party from their
obligations under the Loan Documents if such Obligated Party is no longer a PA
or is no longer owned by Parent or a Subsidiary as a result of a transaction
permitted by this Agreement. Notwithstanding anything to the contrary
contained in this Section, no amendment, waiver, or consent shall be made with
respect to Article 11 hereof without the prior written consent of the Agent.
Section 12.19 Construction. The Obligated Parties (by execution of
the Loan Documents to which they are a party), Agent and each Bank acknowledge
that each of them has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Obligated Parties,
Agent and the Banks.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 64
<PAGE> 64
Section 12.20 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, PARENT, AGENT AND EACH BANK (AND BY EXECUTION OF
THE LOAN DOCUMENTS TO WHICH IT IS A PARTY, EACH OTHER OBLIGATED PARTY), HEREBY
IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PARENT:
EMCARE HOLDINGS INC.
EMCARE, INC.
By: /s/ ROBERT F. ANDERSON
----------------------------------------------
Robert F. Anderson
Senior Vice President of each company
Address for Notices:
1717 Main Street, Suite 5200
Dallas, Texas 75201
Fax No.: (214) 712-2002
Telephone No.: (214) 712-2071
Attention: Chief Financial Officer
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 65
<PAGE> 65
AGENT:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Agent and individually as a Bank
By: /s/ MARK DENTON
-----------------------------------------------
Mark Denton
Senior Vice President
Address for Notices:
Loan Syndication Services
1111 Fannin, 9th Floor, MS46
Houston, Texas 77002
Attention: Gale Manning
Telephone No.: (713) 750-2784
Fax No.: (713) 750-3810
With a copy to:
2200 Ross Avenue
Third Floor
Dallas, Texas 75201
Fax No.: (214) 965-2044
Telephone No.: (214) 965-2612
Attention: Dallas Corporate Banking Group
Lending Office for Base Rate Advances:
1111 Fannin
Houston, Texas 77002
Lending Office for Eurodollar Advances:
1111 Fannin
Houston, Texas 77002
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 66
<PAGE> 66
OTHER BANKS:
CORESTATES BANK, N.A.
By: /s/ GEOFFREY C. SMITH
------------------------------------------------
Name: Geoffrey C. Smith
----------------------------------------------
Title: Commercial Officer
---------------------------------------------
Address for Notices:
F.C. 1-8-3-22
1339 Chestnut Street
Philadelphia, PA 19101
Telephone No.: 215-786-4363
Fax No.: 215-973-2738
Attention: Geoffrey C. Smith
Lending Office for Base Rate Advances:
1339 Chestnut Street
Philadelphia, PA 19101
Lending Office for Eurodollar Advances:
1339 Chestnut Street
Philadelphia, PA 19101
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 67
<PAGE> 67
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ ERIK C. BACK
------------------------------------------------
Erik C. Back
Corporate Banking Officer
Address for Notices:
One First National Plaza, Suite 0091
Chicago, Illinois 60670
Telephone No.: 312-732-4406
Fax No.: 312-732-2016
Attention: Erik C. Back
Lending Office for Base Rate Advances:
One First National Plaza, Suite 0091
Chicago, Illinois 60670
Lending Office for Eurodollar Advances:
One First National Plaza, Suite 0091
Chicago, Illinois 60670
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 68
<PAGE> 68
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: /s/ MARY JO HOCH
-------------------------------------------------
Name: Mary Jo Hoch
----------------------------------------------
Title: Vice President
---------------------------------------------
Address for Notices:
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Telephone No.: 214-740-1551
Fax No.: 214-740-1543
Attention: Mary Jo Hoch
Lending Office for Base Rate Advances:
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Lending Office for Eurodollar Advances:
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 69
<PAGE> 69
COMERICA BANK - TEXAS
By: /s/ STEPHEN F. GRAHAM
------------------------------------------------
Name: Stephen F. Graham
-------------------------------------
Title: Vice President
------------------------------------
Address for Notices:
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
Telephone No.: 214-965-8982
Fax No.: 214-965-8980
Attention: Stephen F. Graham
Vice President
Lending Office for Base Rate Advances:
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
Lending Office for Eurodollar Advances:
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 70
<PAGE> 70
HIBERNIA NATIONAL BANK
By: /s/ CHRISTOPHER B. PITRE
------------------------------------------------
Name: Christopher B. Pitre
-------------------------------------
Title: Assistant Vice President
------------------------------------
Address for Notices:
313 Carondelet Street
New Orleans, Louisiana 70130
Telephone No.: 504-533-2878
Fax No.: 504-533-5344
Attention: Chris Pitre
Assistant Vice President
Lending Office for Base Rate Advances:
313 Carondelet Street
New Orleans, Louisiana 70130
Lending Office for Eurodollar Advances:
313 Carondelet Street
New Orleans, Louisiana 70130
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 71
<PAGE> 71
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By: /s/ JANET P. SAMMONS
------------------------------------------------
Name: Janet P. Sammons
-------------------------------------
Title: Vice President
------------------------------------
Address for Notices:
200 S. Orange Avenue
Orlando, Florida 32801
Telephone No.: 407-237-4541
Fax No.: 407-237-2991
Attention: Jeffrey R. Dickson
First Vice President
Lending Office for Base Rate Advances:
200 S. Orange Avenue
Orlando, Florida 32801
Lending Office for Eurodollar Advances:
200 S. Orange Avenue
Orlando, Florida 32801
STATE OF GEORGIA Section
Section
COUNTY OF FULTON Section
On the 6th day of March 1997 personally appeared Janet P. Sammons, as
the Vice President of SunTrust Bank, Central Florida, National Association, and
before me executed the attached THIRD AMENDED AND RESTATED LOAN AGREEMENT dated
as of March ___, 1997 between EmCare, Inc., EmCare Holdings Inc., Texas Commerce
Bank National Association as Agent and the other banks names herein (including
SunTrust Bank, Central Florida, National Association, as Lender).
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in
the state and county aforesaid.
/s/ MARIAN C. MOLDONADO
--------------------------------------------
Signature of Notary Public, State of Georgia
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 72
<PAGE> 72
(Print, Type or Stamp Commissioned Name of Notary Public)
Personally known X ; OR Produced identification
---
________
Type of identification
produced:_________________________________________
(Notary Seal)
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 73
<PAGE> 73
BANQUE PARIBAS HOUSTON AGENCY
By: /s/ [ILLEGIBLE]
------------------------------------------------
Name: [ILLEGIBLE]
-------------------------------------
Title: Vice President
------------------------------------
By: /s/ GLENN MEALEY
------------------------------------------------
Glenn Mealey
Vice President
Address for Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telephone No.: 713-659-4811
Fax No.: 713-659-5234
Attention: Glenn Mealey
Vice President
Lending Office for Base Rate Advances:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Lending Office for Eurodollar Advances:
1200 Smith Street, Suite 3100
Houston, Texas 77002
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 74
<PAGE> 74
Obligated Party Consent and Contribution
Each undersigned Obligated Party hereby consents and agrees to this
Agreement (including, without limitation, Section 12.10 hereof) and the Loan
Documents executed pursuant hereto and the transactions contemplated hereby and
agrees that the Loan Documents to which it is a party (including, without
limitation, the Existing Guaranties and the Existing Collateral Documents)
shall remain in full force and effect and shall continue to be legal, valid and
binding obligations, enforceable against it in accordance with their respective
terms except as limited by bankruptcy, insolvency or other laws of general
application relating to the enforcement of creditor's rights. Without limiting
the generality of the foregoing and notwithstanding any Loan Document to the
contrary, each undersigned Obligated Party, Agent and each Bank agree and
acknowledge that as of the Closing Date:
(a) the term "Loan Agreement" as used in each Loan
Document means this Agreement;
(b) the term "Guarantied Indebtedness" as used in the
Existing Guaranties means the Obligations as defined herein;
(c) the term "Obligations" or "Secured Obligations" as
used in the Existing Collateral Documents means the Obligations as
defined herein;
(d) the term "Secured Party" as used in any Existing
Collateral Documents means Texas Commerce in its capacity as Agent
hereunder for the benefit of itself and the other Banks; and
(e) the term "Lender" as used in any Existing Guaranty
means Texas Commerce in its capacity as Agent hereunder for the
benefit of itself and the other Banks and the Banks.
In order to effect an equitable sharing of the risks in borrowing the
Advances as contemplated hereunder but without impairing any right or remedy of
the Agent or the Banks under the Loan Documents, each of the undersigned
Obligated Parties (and by execution of the Loan Documents to which it is or may
be a party, each other Obligated Party) hereby agrees that if an Obligated
Party makes a payment under the Loan Documents to which it is a party in excess
of the reasonable equivalent value actually received by it under the terms or
as a result of the other Loan Documents (the "Value Received"), it shall be
subrogated to the rights of the Agent and the Banks against the other Obligated
Parties with respect to such payment and shall have the right of contribution
set forth below against the other Obligated Parties; provided that such
Obligated Party shall not enforce its rights to any payment by way of
subrogation or by exercising its rights of contribution until all the
Obligations shall have been paid in full.
If any Obligated Party makes a payment under the Loan Documents that
is more than an amount equal to the Value Received by such Obligated Party,
each other Obligated Party that
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 75
<PAGE> 75
has not made payments equal to its Value Received shall, when permitted by the
foregoing sentence, pay to each Obligated Party that paid more than its Value
Received an amount such that the net payments made by the Obligated Parties
under the Loan Documents shall be shared among the Obligated Parties pro rata
in proportion to their Value Received. If any Obligated Party receives any
payment by way of subrogation that is in excess of the amount of its Value
Received, the Obligated Party receiving such excess payments shall, when
permitted by this consent and contribution provision, pay to the other
Obligated Parties an amount such that the subrogation payments received by the
Obligated Parties shall be shared among the Obligated Parties in proportion to
their respective amounts of the Value Received.
EMTAC, INC.
EMTAC BUSINESS TRUST
MEDICAL EMERGENCY SERVICES
ASSOCIATES (MESA), INC.
AEP-EMCARE MEDICAL GROUP, INC.
By: /s/ WILLIAM F. MILLER, III
--------------------------------------------
William F. Miller, III
Authorized officer of all the foregoing
companies
EMCARE OP, L.P.
By: EmCare, Inc., its general partner
By: /s/ ROBERT F. ANDERSEN
----------------------------------------
Robert F. Andersen
Senior Vice President
EMERGENCY HEALTH SERVICES ASSOCIATES
EMCARE MEDICAL SERVICES OF NEW YORK, P.C.
NATIONAL PRIMARY CARE NETWORK, P.A.
EMERGENCY HEALTH SERVICES ASSOCIATES
OF NEW MEXICO, P.C.
EMCARE MEDICAL SERVICES OF
PENNSYLVANIA, P.C.
CAPITAL EMCARE, P.A.
NETWORK FAMILY PHYSICIANS, P.A.
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 76
<PAGE> 76
CAPITAL BILLING SERVICES, INC.
EMCARE RECEIVABLES CORPORATION
REIMBURSEMENT TECHNOLOGIES, INC.
EMCARE PHYSICIANS NETWORK, INC.
CAPITAL EMERGENCY ASSOCIATES, L.L.C.
SEMS, INC.
AEP MANAGEMENT SERVICES, INC.
DOCTORS BILLING SERVICE, INC.
COPENHAVER, BELL & ASSOCIATES, M.D.'S, INC.
THE GOULD GROUP, INC.
EMERGENCY SPECIALISTS OF ARKANSAS, INC. II
JASPER EMERGENCY PHYSICIANS, INC.
HOUSTON EMERGENCY PHYSICIANS, INC.
GOULD PHYSICIANS, PA
ADAMS EMERGENCY PHYSICIANS, P.A.
JONES EMERGENCY PHYSICIANS, P.A.
By: /s/ LEONARD M. RIGGS, JR., M.D.
--------------------------------------------------
Leonard M. Riggs, Jr., M.D.
authorized officer for all companies
MESA EMCARE, S.C.
By: /s/ STEVEN W. COOLEY, M.D.
--------------------------------------------------
Steven W. Cooley, M.D.
Vice President
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 77
<PAGE> 77
INDEX TO EXHIBITS
Exhibit Description of Exhibit
"A" Note
"B" Credit Request Form
"C" Compliance Certificate
"D" Assignment and Acceptance
"E" Subsidiary Pledge Agreement
"F" Affiliate Guaranty
INDEX TO SCHEDULES
Schedule Description of Schedule
1.1(A) Commitments
1.1(B) Existing Guaranties
6.1 Principal Place of Business;
Chief Executive Office
6.5 Existing Litigation
6.14 List of Subsidiaries and PAs
8.1 Existing Debt
8.2 Existing Liens
THIRD AMENDED AND RESTATED LOAN AGREEMENT, Page 78
<PAGE> 78
EXHIBITS OMITTED
<PAGE> 79
SCHEDULE 1.1(A)
TO
EMCARE
THIRD AMENDED AND RESTATED
LOAN AGREEMENT
COMMITMENTS
<TABLE>
<CAPTION>
Bank Commitment
---- ----------
<S> <C> <C>
1. Texas Commerce Bank National Association $18,000,000
2. Corestates Bank, N.A. $14,000,000
3. The First National Bank of Chicago $14,000,000
4. Wells Fargo Bank (Texas), National Association $14,000,000
5. Comerica Bank - Texas $10,000,000
6. Banque Paribas Houston Agency $10,000,000
7. Hibernia National Bank $10,000,000
8. SunTrust Bank, Central Florida, National Association $ 10,000,000
-----------
Total $100,000,000
============
</TABLE>
<PAGE> 80
SCHEDULE 1.1(B)
TO
EMCARE
THIRD AMENDED AND RESTATED
LOAN AGREEMENT
EXISTING GUARANTIES
Guaranty Agreements in favor of Texas Commerce or the Agent dated the date set
forth below and executed by the following Obligated Parties:
<TABLE>
<CAPTION>
Obligated Party Date
--------------- ----
<S> <C> <C>
1. Emergency Health Services Associates October 27, 1993
2. Emergency Health Services of New Mexico, P.C. October 27, 1993
3. Emergency Medical Services of New York, P.C. October 27, 1993
4. National Primary Care Network, P.A. October 27, 1993
5. EMTAC, Inc. December 31, 1993
6. EmCare OP, L.P. December 31, 1993
7. EMTAC Business Trust December 31, 1993
8. EmCare Medical Services of Pennsylvania, P.C. December 31, 1993
9. EmCare Receivables Corporation February 3, 1995
10. EmCare Physicians Network, Inc. February 3, 1995
11. Capital Emergency Associates, L.L.C. March 15, 1995
12. Capital EmCare, P.A. March 15, 1995
13. Reimbursement Technologies, Inc. August 31, 1995
14. Medical Emergency Service Associates ("MESA"), Inc. May 15, 1996
15. MESA EmCare, S.C. May 15, 1996
16. Capital Billing Services, Inc. May 31, 1996
17. Emergency Specialist of Arkansas, Inc. II. February 16, 1996
18. Jasper Emergency Physicians, Inc. February 16, 1996
19. Houston Emergency Physicians, Inc. February 16, 1996
20. EmCare February 16, 1996
</TABLE>
<PAGE> 81
SCHEDULE 6.1
TO
EMCARE, INC.
THIRD AMENDED AND RESTATED
LOAN AGREEMENT
PRINCIPAL PLACE OF BUSINESS; CHIEF EXECUTIVE OFFICE
<TABLE>
<CAPTION>
==============================================================================================
Place of Business;
Obligated Party Chief Executive Office
--------------- ----------------------
----------------------------------------------------------------------------------------------
<S> <C> <C>
1. EmCare 1717 Main Street, Suite 5200
Dallas, Dallas County, Texas 75201
----------------------------------------------------------------------------------------------
2. Parent 1717 Main Street, Suite 5200
Dallas, Dallas County, Texas 75201
----------------------------------------------------------------------------------------------
3. EMTAC, INC. 1013 Centre Road
Wilmington, New Castle County, Delaware 19805
----------------------------------------------------------------------------------------------
4. EmTac Business Trust 300 South 4th Street, Suite 1100
Las Vegas, Nevada 89101
----------------------------------------------------------------------------------------------
5. EmCare Physicians Network, Inc. 1717 Main Street, Suite 5200
Dallas, Dallas County, Texas 75201
----------------------------------------------------------------------------------------------
6. Capital Emergency Associates, LLC. 575 Main Street, Suite 355
Laurel, Prince Georges County, Maryland 20707
==============================================================================================
</TABLE>
<PAGE> 82
SCHEDULE 6.5
TO
EMCARE, INC.
AMENDED AND RESTATED
LOAN AGREEMENT
EXISTING LITIGATION
1. United States v. EmCare and other contract management
companies - claims under the False Claims Act relating to reimbursement under
Medicare, Medicaid, and CHAMPUS programs. As of February 12, 1996, EmCare
Holding, Inc. announced an agreement in principle with the Civil Division of
the United States Department of Justice to settle civil claims alleged against
it in the civil lawsuit.
2. Medical malpractice litigation described on Annex 1 hereto.
<PAGE> 83
SCHEDULE 6.14
TO
EMCARE, INC.
AMENDED AND RESTATED
LOAN AGREEMENT
A. LIST OF SUBSIDIARIES
<PAGE> 84
<TABLE>
<CAPTION>
===================================================================================================================================
Jurisdiction Authorized Stock Outstanding Stock
of or Approved or
Name and Type of Subsidiary Incorporation Percentage of Ownership Ownership Interest Ownership
or Interests
Organization
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EMTAC, INC. Delaware 100% by EmCare 1,000 share of Common 1,000 Shares
(corporation) Stock Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
EMTAC Business Trust Pennsylvania 100% by EMTAC, INC. 1,000 shares 1,000 Shares
(business trust) Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
EmCare OP, L.P. Texas 100% of general general partnership All
(limited partnership) partner interest interests
owned by EmCare
100% of the limited partnership
limited partnership interest
interest owned by
EMTAC Business Trust
- -----------------------------------------------------------------------------------------------------------------------------------
EmCare, Inc. Delaware 100% by Parent 1,000 shares of Common 1,000 Shares
(corporation) Stock Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
EmCare Receivables Corporation Nevada 75% by EmCare 1,000 shares of Common 1,000 Shares
(corporation) 25% by Emergency Health Stock Par Value $.01
Services Associates
- -----------------------------------------------------------------------------------------------------------------------------------
EmCare Physicians Network, Inc. Delaware 100% by Parent 1,000 shares of Common 1,000 Shares
(corporation) Stock Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
Reimbursement Technologies, Inc. Pennsylvania 100% by EmCare 1,000 shares of Common 150 Shares
(corporation) Stock Par Value $1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Billing Services, Inc. Maryland 100% by Capital Emergency 1,000 shares of Common 200 Shares
(corporation) Associates LLC Stock no Par Value
- -----------------------------------------------------------------------------------------------------------------------------------
Emergency Specialists of Arkansas, Texas 100% by EmCare 1,000 shares of Common 1,000 Shares
Inc. II Stock Par Value $.01
(corporation)
- -----------------------------------------------------------------------------------------------------------------------------------
Jasper Emergency Physicians, Inc. Missouri 100% by EmCare 1,000 shares of Common 1,000 Shares
(corporation) Stock Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
Houston Emergency Physicians, Inc. Georgia 100% by EmCare 1,000 shares of Common 1,000 Shares
(corporation) Stock Par Value $.01
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Emergency Associates, LLC Maryland 99% by Parent N/A 1,000 Membership
(limited liability company) 1% by EmCare Interests
- -----------------------------------------------------------------------------------------------------------------------------------
Medical Emergency Service Associates Illinois 100% by EmCare 100,000 shares of Common 3,000 Shares
(MESA), Inc. Stock
(corporation) $10. par value
5,000 shares of 1,650 Shares
Preferred A Shares
no par value
- -----------------------------------------------------------------------------------------------------------------------------------
SEMS, Inc. Georgia 100% by EmCare 1,000 authorized shares 100 Shares
(corporation) of Common Stock no par
value
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
===================================================================================================================================
Jurisdiction Authorized Stock Outstanding Stock
of or Approved or
Name and Type of Subsidiary Incorporation Percentage of Ownership Ownership Interest Ownership
or Interests
Organization
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AEP Management Services, Inc. California 100% by EmCare 75,000 shares of Common 1,000 Shares
(corporation) Stock $1.00 par value
- -----------------------------------------------------------------------------------------------------------------------------------
Doctors Billing Service, Inc. California 100% by EmCare 50,000 shares of Common 1,000 Shares
(corporation) Stock no par value
- -----------------------------------------------------------------------------------------------------------------------------------
Copenhaver, Bell & Associates, M.D.'s, Florida 100% by EmCare 5,000 shares of Common 1,000 Shares
Inc. Stock $1.00 par value
(corporation)
- -----------------------------------------------------------------------------------------------------------------------------------
The Gould Group, Inc. Texas 100% by EmCare 1,000,000 shares of 1,000 Shares
(corporation) Common Stock
$.10 par value
===================================================================================================================================
</TABLE>
B. LIST OF PAS
<TABLE>
<CAPTION>
=======================================================================================================
Name of PA Ownership Jurisdiction of
Association
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Emergency Health Services Associates Dr. Riggs 100% Texas
-------------------------------------------------------------------------------------------------------
Emergency Health Services Associates of New Mexico, Dr. Riggs 100% New Mexico
P.C.
-------------------------------------------------------------------------------------------------------
EmCare Medical Services of New York, P.C. Dr. Riggs 100% New York
-------------------------------------------------------------------------------------------------------
National Primary Care Network, P.A. Dr. Riggs 100% Texas
-------------------------------------------------------------------------------------------------------
EmCare Medical Services of Pennsylvania, P.C. Dr. Riggs 100% Pennsylvania
-------------------------------------------------------------------------------------------------------
Capital EmCare, P.A. Dr. Riggs 100% Texas
-------------------------------------------------------------------------------------------------------
MESA EmCare, S.C. 2/3 Dr. Cooley; 1/3 Illinois
Dr. Zydlo
-------------------------------------------------------------------------------------------------------
Network Family Physicians, P.A. 66 2/3 Dr. Riggs; 33 1/3 Texas
Dr. Cooley
-------------------------------------------------------------------------------------------------------
Adams Emergency Physicians, P.A. 100% Dr. Riggs Texas
-------------------------------------------------------------------------------------------------------
Jones Emergency Physicians, P.A. 100% Dr. Riggs Texas
-------------------------------------------------------------------------------------------------------
AEP EmCare Medical Group, Inc. 100% Dr. Cooley California
-------------------------------------------------------------------------------------------------------
Gould Physicians, P.A. 100% Dr. Riggs Texas
=======================================================================================================
</TABLE>
<PAGE> 86
SCHEDULE 8.1
TO
EMCARE
AMENDED AND RESTATED
LOAN AGREEMENT
EXISTING DEBT
<TABLE>
<CAPTION>
=========================================================================================================
Holder Principal Amount as of December 31, 1996
=========================================================================================================
<S> <C> <C>
EmCare OP, L.P.
- ---------------------------------------------------------------------------------------------------------
Capital Leases $ 9,346
- ---------------------------------------------------------------------------------------------------------
EmCare, Inc.
- ---------------------------------------------------------------------------------------------------------
Houston Emergicare, Inc. 882,231
- ---------------------------------------------------------------------------------------------------------
Houston Emergency Physicians, Inc. 306,104
- ---------------------------------------------------------------------------------------------------------
Suburban Houston Emergency Physicians Association 375,000
- ---------------------------------------------------------------------------------------------------------
Medical Emergency Service Associates, Inc. 1,935,085
- ---------------------------------------------------------------------------------------------------------
Southern Emergency Medical Specialists 308,934
- ---------------------------------------------------------------------------------------------------------
Associated Emergency Physicians Management Services, 1,129,340
Inc.
- ---------------------------------------------------------------------------------------------------------
Doctors Billing Service, Inc. 266,800
- ---------------------------------------------------------------------------------------------------------
Professional Emergency Services, Inc. 1,499,714
- ---------------------------------------------------------------------------------------------------------
The Gould Group, Inc. 2,746,895
- ---------------------------------------------------------------------------------------------------------
Capital Emergency Associates, LLC
- ---------------------------------------------------------------------------------------------------------
Capital Leases 26,075
- ---------------------------------------------------------------------------------------------------------
Reimbursement Technologies
- ---------------------------------------------------------------------------------------------------------
Capital Leases 28,992
- ---------------------------------------------------------------------------------------------------------
The Gould Group, Inc.
- ---------------------------------------------------------------------------------------------------------
TIFCO - Malpractice Insurance Note 258,066
- ---------------------------------------------------------------------------------------------------------
Line of Credit 200,000
- ---------------------------------------------------------------------------------------------------------
Emergency Specialists of Arkansas, Inc. II
- ---------------------------------------------------------------------------------------------------------
Emergency Specialists of Arkansas, Inc. 300,000
- ---------------------------------------------------------------------------------------------------------
EmCare Holdings Inc.
- ---------------------------------------------------------------------------------------------------------
Capital Emergency Associates, P.A. 1,280,923
- ---------------------------------------------------------------------------------------------------------
Doctors Billing Service, Inc.
- ---------------------------------------------------------------------------------------------------------
Notes Payable 60,000
- ---------------------------------------------------------------------------------------------------------
AEP Management Services, Inc.
- ---------------------------------------------------------------------------------------------------------
Notes Payable - Dr. Uhl 56,235
=========================================================================================================
</TABLE>
<PAGE> 87
SCHEDULE 8.2
TO
EMCARE, INC.
AMENDED AND RESTATED
LOAN AGREEMENT
EXISTING LIENS
<TABLE>
<CAPTION>
==============================================================================================================
DEBTOR SECURED PARTY COLLATERAL
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. EmCare Lane, Enrlich & Accounts receivable from certain contracts
Chalpin, Ltd., as agent assigned to EmCare by Emergency Medicine
Consultants, Ltd., Emergency Medicine Consultants
Partnership and Lincoln Emergency Physicians Ltd.
- --------------------------------------------------------------------------------------------------------------
2. EmCare Tucker Leasing - Computer and other office equipment*
Capital Corp.*
- --------------------------------------------------------------------------------------------------------------
3. EmCare Orlando Regional Accounts receivable from operations at Orlando
Medical Center, Inc. Regional Medical Center
- --------------------------------------------------------------------------------------------------------------
4. EmCare Vanguard Financial Office equipment
Service Corp.
- --------------------------------------------------------------------------------------------------------------
5. Emergency Health F. David Prentice, M.D. Accounts receivable from certain contract at
Services Memorial Hospital System
Associates, P.A.,
a dba for
Emergency Health
Services
Associates
==============================================================================================================
</TABLE>
- ---------------------------------
* Multiple filings on record covering similar equipment
<PAGE> 1
EXHIBIT 10.19
STOCK TRANSFER AND OPTION AGREEMENT
THIS STOCK TRANSFER AND OPTION AGREEMENT (this "Agreement"), is
executed and delivered as of February 24, 1997 (the "Effective Date"), by and
among EMCARE, INC., a Delaware corporation ("EmCare"); the other entities
executing this Agreement (each a "PA" and collectively, the "PAs"); and
Leonard M. Riggs, Jr., M.D., individually ("Shareholder").
R E C I T A L S:
A. Each of the PAs is a professional association or professional
corporation under the laws of its respective jurisdiction.
B. Each of the PAs has the number of shares of stock authorized
and issued and outstanding as set forth on Schedule A attached hereto.
C. Shareholder is (i) a director of the PAs; (ii) a shareholder
of a number of shares of stock in certain PAs set forth on Schedule A attached
hereto (the "Shares"); and (iii) an officer of the PAs.
D. EmCare provides management, administrative and other services
to the PAs.
E. The parties hereto desire to promote their mutual interests by
providing for the acquisition of the Shares in certain events, thereby
promoting the continued successful operation of the PAs and their Management by
EmCare.
F. Each of the parties hereto has agreed to be bound by the
covenants and agreements set forth herein, all of which are for the mutual
benefit of the parties hereto, collectively and individually.
NOW, THEREFORE,in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
1.1 "Attorney-in-Fact" means such person designated by
Shareholder as Shareholder's attorney-in-fact pursuant to Section 13
below.
1.2 "Effective Date" means the date of this Agreement as
set forth in the introductory paragraph of this Agreement.
1.3 "Period of Designation" means the period beginning,
as to Shareholder, on the Effective Date or, as to a Successor
Shareholder, on the date Successor Shareholder is
<PAGE> 2
designated as such pursuant to Section 11 below, and in each case
continuing until Shareholder or Successor Shareholder (as the case may
be) dies, resigns or ceases to serve as Shareholder in accordance with
Section 4.3 or Section 16 below.
1.4 "Purchase Price" means, for the Shares of each PA,
the Shareholders or the Successor Shareholders (as the case may be),
the original investment in such Shares as set forth on Schedule A.
1.5 "Successor Shareholder" means such person designated
pursuant to Section 11 below by EmCare.
1.6 "Transfer Event" means any of the following events:
(a) The death of Shareholder or any Successor
Shareholder;
(b) The incompetence or permanent disability of
Shareholder or any Successor Shareholder such
that Shareholder or any Successor Shareholder
is unable to render professional services on
behalf of the PAs;
(c) The disqualification under state law of any
Shareholder or any Successor Shareholder to
be a shareholder of any PA;
(d) The resignation of Shareholder or any
Successor Shareholder pursuant to Section 4.2
below;
(e) The termination of Shareholder's or any
Successor Shareholder's employment with
EmCare;
(f) Any attempt by Shareholder or any Successor
Shareholder, or by any other person to
transfer the Shares, whether voluntarily or
involuntarily, by operation of law or
otherwise, to any person who is not the
Successor Shareholder;
(g) The filing of any petition for or another
document causing or intended to cause a
judicial, administrative, voluntary or
involuntary dissolution of any PA; or
(h) The designation of a Successor Shareholder
pursuant to Section 11 below, whether or not
such designation has become effective under
that provision.
2. EFFECTIVE DATE; TERM; CONTINUANCE AND QUALIFICATION OF PAS.
2.1 Effective Date; Term. This Agreement shall be
effective as of the Effective Date, and shall continue for as long as
Shareholder or any Successor Shareholder owns any shares of any PA or until
terminated in accordance with the provisions of Section 2.2 below.
2
<PAGE> 3
2.2 Written Agreement Required. This Agreement may be
terminated only upon the written direction of EmCare, or upon the execution of
a succeeding version of this Agreement with a Successor Shareholder.
2.3 Continuance and Qualification of PAs. Shareholder
shall take (unless otherwise directed by EmCare or EmCare's affiliates, in
writing) all measures necessary (legal and/or otherwise) to maintain the
existence of each of the PAs under the laws of the jurisdiction in which it is
organized. Shareholder shall also take all steps necessary to ensure that each
of the PAs qualifies or obtains a license to do business in each foreign
jurisdiction in which the conduct of its business requires it to be so
qualified or licensed.
3. SHAREHOLDER'S RECORD TITLE TO SHARES. During the Period of
Designation of Shareholder, Shareholder shall be the shareholder of record of
the Shares and shall be entitled to exercise the right to vote in person or by
proxy in respect of any and all of the Shares in accordance herewith.
4. TRANSFER OF SHARES.
4.1 Attorney-in-Fact. Shareholder hereby appoints
Attorney-in-Fact (designated pursuant to Section 13 below) and
Attorney-in-Fact's successors and assigns as Shareholder's attorney-in-fact
with full power and authority to execute all documents and do all things
necessary to effectuate the transfer to Successor Shareholder of record
ownership of the Shares held in the name of Shareholder when Shareholder's
Period of Designation has expired. Such appointment shall be irrevocable. In
furtherance of such appointment, Shareholder has caused, or shall promptly
cause upon commencement of the Period of Designation, the Shares and all
certificates representing the same and all securities resulting from a merger
or consolidation of any PA or a split-up or reclassification of the equity of
any PA to be delivered to Attorney-in-Fact, accompanied by an executed stock
power, endorsed in blank.
4.2 Resignation. Shareholder shall have the right to
resign as an officer or director of any PA for any reason by giving thirty (30)
days prior written notice to Attorney-in-Fact, which resignation shall become
effective upon the expiration of the thirty (30) day period following receipt
of such notice by Attorney-in-Fact. In no event shall Shareholder have a right
to resign prior to the end of the notice period specified in the previous
sentence.
4.3 Automatic Transfer. The Shares shall be deemed to
have been transferred to Successor Shareholder, without further action by
Shareholder, immediately upon the occurrence of any Transfer Event; provided,
however, that until the designation of Successor Shareholder has been made
effective pursuant to Section 11 below, Shareholder shall continue to hold the
Shares in trust for the benefit of Successor Shareholder, subject to the
limitations imposed by Section 10.3 below.
4.4 Certain Transfer Events. Notwithstanding any
statement to the contrary in this Section 4, a Transfer Event under Section
1.6(c) or Section 1.6(g) above shall be deemed to cause the transfer under
Section 4.3 above only of those Shares representing stock in the PA or
3
<PAGE> 4
PAs affected by such event, provided that such Transfer Event is the only
Transfer Event which has occurred.
4.5 Effect of Transfer. Upon the transfer of the Shares,
Shareholder shall immediately resign, or be deemed to have resigned, as a
director of the PAs and from any and all corporate offices of any PA at the
time held by Shareholder. Notwithstanding anything to the contrary herein,
upon the occurrence of a Transfer Event, the Shares will be immediately
transferred, or deemed to be transferred, to Successor Shareholder upon the
date such Transfer Event is effective. Successor Shareholder shall have, from
and after such Transfer Event, all ownership and voting rights as to the Shares
in accordance with this Agreement, irrespective of receipt of a certificate for
such Shares, receipt by Shareholder of payment for the Shares, or any other act
or matter. Upon the transfer of the Shares, Shareholder shall be released in
writing from all obligations under this Agreement. Notwithstanding the
foregoing, upon the occurrence of a Transfer Event described in Section 1.6(c)
or Section 1.6(g), if no other Transfer Event has occurred, then the effects of
transfer described in this Section 4.5 shall apply only with respect to the PA
or PAs affected by such Transfer Event.
4.6 Purchase Price. The Shares transferred to Successor
Shareholder shall be transferred for the Purchase Price (as defined in Section
1.4 above) of such Shares. Shareholder's only remedy with regard to claims
relating to the Purchase Price for the Shares shall be money damages, and in no
way shall such failure jeopardize the temporary or permanent transfer of any
rights as to the Shares.
5. VOTING OF SHARES.
5.1 Election of Directors of the PAs
5.1.1 Election. Shareholder agrees to consult with
Attorney-in-Fact in accordance with Section 13 below with respect to the
election of all directors of the PAs. Any person elected to the board of
directors of any PA shall, in all cases, be a person qualified to serve as a
director of such PA under all applicable laws, statutes, regulations and bylaws
of such PA, including, but not limited to, those laws, statutes, and
regulations affecting the practice of medicine.
5.1.2 Vacancies. In the event of a vacancy for any
reason in the office of a director for any PA, Shareholder shall affirmatively
vote the Shares so that a replacement director is elected in the same manner
(and subject to the same limitations) as provided in Section 5.1.1 above for
the election of such director.
5.2 Voting on All Other Matters. Shareholder agrees that
on any other proposal to be voted upon by holders of the shares of stock of any
PA that Shareholder shall vote the Shares, or sign consents taking action on
such matter, only after consultation with Attorney-in-Fact in accordance with
Section 13 of this Agreement, except only to the extent the same requires the
exercise of professional medical judgment. Shareholder shall consult with
Attorney-in-Fact from time to time as necessary and appropriate to obtain
advice with respect to matters to be voted upon by holders of the shares of
stock of the PAs.
4
<PAGE> 5
6. VOTING AS A DIRECTOR.
6.1 Business Judgment. In voting and otherwise acting as
a member of the board of directors of any PA, Shareholder shall act in good
faith, in a manner Shareholder reasonably believes to be in the best interests
of such PA, and with such care as an ordinarily prudent person in a like
position would use in similar circumstances.
6.2 Obligation to Consult with Attorney-in-Fact. In
voting with respect to matters, the approval of which by the board of directors
of any PA requires the affirmative vote of Shareholder, Shareholder shall
consult in advance with Attorney-in-Fact with respect to such matters before
voting on such matters.
7. PROFESSIONAL MEDICAL JUDGMENT. Any other provisions of this
Agreement notwithstanding, Shareholder shall be unfettered in the exercise of
Shareholder's professional medical judgment in Shareholder's capacity as a
shareholder and as a director of each PA to the extent that the matters under
consideration require the exercise of such judgment.
8. NOTICES, REPORTS AND INFORMATION. Shareholder shall promptly
deliver to Attorney-in-Fact, on receipt, copies of all written materials
received by Shareholder in such capacity and, consistent with such
Shareholder's fiduciary obligations as a director of the PAs, all written
materials received by Shareholder in Shareholder's capacity as a member of the
boards of directors of the PAs.
9. DISTRIBUTIONS AND PROCEEDS. Shareholder shall promptly give
prior notice to Attorney-in-Fact of any event giving rise to the receipt of any
shares, securities, moneys or property representing a dividend, distribution or
return of capital with respect to the Shares.
10. DESIGNATION AND STATUS OF SHAREHOLDER.
10.1 Period of Designation of Shareholder. Shareholder
who executes this Agreement or an amendment hereto, accepting the designation
as a "Shareholder" hereunder, shall serve as such for the duration of the
Period of Designation.
10.2 No Compensation. Shareholder shall not be entitled
to receive compensation for services as a Shareholder hereunder.
10.3 Limitation on Authority. Other than as provided
herein, Shareholder shall not sell, transfer, assign or otherwise dispose of,
or pledge, mortgage, hypothecate or otherwise encumber, or permit or suffer any
encumbrance, of all or any part of the Shares, except on the express written
consent of Attorney-in-Fact. Upon the occurrence of a Transfer Event,
Shareholder shall hold the Shares in trust for the benefit of the Successor
Shareholder until the designation of a Successor Shareholder becomes effective,
but Shareholder shall have no authority to act on behalf of or bind any PA.
11. SUCCESSOR SHAREHOLDER. EmCare shall designate a Successor
Shareholder immediately upon the occurrence of any Transfer Event.
Notwithstanding the foregoing, at any time, regardless of whether a Transfer
Event shall have occurred, EmCare may at its sole
5
<PAGE> 6
discretion designate a Successor Shareholder to serve in accordance with this
Agreement and with applicable provisions of the bylaws of the respective PAs
and applicable law. Such Successor Shareholder shall be a physician licensed
to practice medicine in the state or states of incorporation of the PA or PAs
whose shares have been transferred to such Successor Shareholder and party to
an employment agreement with either a PA or with EmCare. In order to make such
designation effective, Successor Shareholder shall accept such designation by
executing a written amendment to this Agreement and expressly, in writing,
assuming all of Shareholder's obligations under this Agreement.
12. RESTRICTIONS ON CERTIFICATE. Upon the execution of this
Agreement, Shareholder shall surrender Shareholder's certificates representing
the Shares to the respective PAs issuing such Shares, which PAs shall place on
such certificates a notice of the restrictions on the transfer of such Shares
imposed by this Agreement. Such notice shall be printed or typed on the
certificate in boldface substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS IMPOSED BY THE LAWS GOVERNING PROFESSIONAL [CORPORATIONS
/ ASSOCIATIONS], THE [CORPORATION'S / ASSOCIATION'S] ARTICLES OF
ORGANIZATION AND BYLAWS AND THE TERMS OF A SHAREHOLDER DESIGNATION AND
STOCK TRANSFER AGREEMENT BY AND AMONG THE SHAREHOLDER NAMED HEREIN,
THE [CORPORATION / ASSOCIATION] AND ANOTHER PARTY (A COPY OF WHICH IS
ON FILE WITH THE [CORPORATION / ASSOCIATION] AND AVAILABLE WITHOUT
CHARGE). NO TRANSFER OF THE SHARES REPRESENTED HEREBY OR OF SHARES
ISSUED IN EXCHANGE THEREFOR SHALL BE VALID OR EFFECTIVE UNTIL THE
TERMS AND CONDITIONS OF SUCH LAWS, ORGANIZATIONAL DOCUMENTS AND
AGREEMENT SHALL HAVE BEEN FULFILLED IN THE JUDGMENT OF THE
[CORPORATION / ASSOCIATION].
13. ATTORNEY-IN-FACT. Shareholder hereby designates EmCare as
Attorney-in-Fact for the purposes of this Agreement. Shareholder may act upon
the advice of EmCare as Attorney-in-Fact in all matters arising with respect to
this Agreement. On notice to Shareholder from EmCare, Shareholder will execute
a written amendment to this Agreement changing the designation of
Attorney-in-Fact to another person or entity designated by EmCare.
14. NO JOINT VENTURE. The relationship created by this Agreement
is not intended to be, shall not be deemed to be, and shall not be treated as a
general partnership, limited partnership, joint venture, corporation or joint
stock company or association.
15. BREACH; REMEDIES. Any action by Shareholder in violation of
any of the provisions of this Agreement, or any attempted sale, transfer,
assignment, pledge or other encumbrance or disposition of any of the Shares by
Shareholder in violation of this Agreement, shall be considered a breach of
this Agreement. A breach of this Agreement that is not cured within seven (7)
days following written notice from Attorney-in-Fact shall constitute "cause",
as
6
<PAGE> 7
such term is defined in any employment agreement with EmCare or with any PA to
which Shareholder is a party.
16. OPTION.
16.1 Grant of Option. Shareholder hereby grants to EmCare
and EmCare hereby accepts from Shareholder, an option to purchase the Shares,
or to appoint a designee (the "Designee") to purchase the Shares in accordance
with the provisions hereof (the "Option").
16.2 Exercise. The Option is immediately exercisable from
and after the Effective Date and may be exercised, in full or in part, at any
time by EmCare or its Designee with respect to all or any of the PAs. EmCare
or its Designee shall exercise the Option by delivering written notice of such
exercise to Shareholder, such notice stating the date (the "Closing Date") on
which the purchase and sale of the Shares shall occur.
16.3 Resignation as Director and Officer. Shareholder
hereby agrees that if the Option is exercised with respect to any PA,
Shareholder will immediately resign as director and officer of that PA and sign
a resolution electing either Designee or a legally qualified representative
designated by EmCare to the board of directors of that PA.
16.4 Exercise Price; Payment. The exercise price of the
Option shall be equal to the Purchase Price. The exercise price shall be paid
on the Closing Date by EmCare or its Designee, as the case may be, to
Shareholder by check, electronic wire transfer, or other method reasonably
acceptable to Shareholder. Upon payment of the Purchase Price, the
Attorney-in-Fact shall deliver the Shares and all accompanying stock powers to
EmCare or its Designee.
16.6 Exercise of Shareholder's Purchase Rights. In
connection with any exercise of any Option granted hereunder, EmCare or its
Designee, as the case may be, may require Shareholder to exercise any right
Shareholder may have to acquire any stock of any corporation held by a third
party and to deliver such stock together with the Shares held by Shareholder.
In any such event, the exercise price of the Option exercised hereunder shall
include the amount required to be paid by Shareholder to acquire such third
party stock.
17. COMMUNITY PROPERTY INTERESTS. Shareholder agrees that he
shall cause his spouse to execute this Agreement or a counterpart hereto to
evidence such spouse's consent to this Agreement and such spouse's agreement
that any rights that spouse may have, as a result of a community property
interest in the Shares or otherwise, shall be subject to the provisions of this
Agreement. Shareholder and his spouse expressly agree to subject their entire
interest in the Shares to the terms of this Agreement, irrespective of any
community property interest of either spouse.
18. NEW PROFESSIONAL ASSOCIATIONS OR PROFESSIONAL CORPORATIONS.
In the event that Shareholder acquires shares of stock in a professional
association or professional corporation after the Effective Date (each a "New
PA"), Shareholder agrees to execute an amendment to this Agreement (an
"Amendment") substantially in the form of Exhibit A attached hereto.
Additionally, Shareholder shall cause New PA to execute such Amendment, which
Amendment
7
<PAGE> 8
shall (i) make New PA a party to this Agreement; (ii) include the shares of
stock in New PA to be acquired by Shareholder in the definition of "Shares"
herein; and (iii) otherwise make all the provisions of this Agreement apply to
Shareholder's interest in New PA.
19. MISCELLANEOUS PROVISIONS.
19.1 Successors and Assigns. This Agreement shall be
binding upon the parties and their respective successors, assigns, heirs,
transferees, executors and administrators, and except as otherwise expressly
provided in any particular provision of this Agreement, any subsequent holder
or holders of any of the Shares.
19.2 Notices or other Communications. Except as otherwise
specified in this Agreement, any notice or other communication required to be
given pursuant to this Agreement shall be given in writing (including
telecopier, telegraphic, telex or cable communication) or mailed (by
first-class mail, postage prepaid) to the parties at the addresses set forth
below. All such notices and communications shall, when mailed (by first-class
mail, postage prepaid), telecopied, telegraphed, telexed, cabled, or faxed be
effective when deposited in the mails, telecopied, sent by the telegraph
company, confirmed by telex answerback, delivered to the cable company, or
confirmed received in the case of a telecopy or facsimile, respectively.
Alternatively, all such notices and communications shall be deemed effective
when personally delivered to the party at its address below.
19.3 Address for Notices or Other Communications. Any
notice which this Agreement requires to be sent, shall be delivered to the
parties hereto to the following addresses (or, as to each party hereto, to such
other address as shall be designated by such party in a written notice to the
other parties):
If to EmCare:
EmCare, Inc.
1717 Main Street, Suite 5200
Dallas, Texas 75201
Attention: Robert F. Anderson
facsimile: (214) 712-2444
If to any PA:
1717 Main Street, Suite 5200
Dallas, Texas 75201
Attention: Robert F. Anderson
facsimile: (214) 712-2444
If to Shareholder:
Leonard M. Riggs, Jr., M.D.
1717 Main Street, Suite 5200
Dallas, Texas 75201
8
<PAGE> 9
19.4 Resolution of Disputes. In the event of any dispute
with respect to any matter under this Agreement, all matters in controversy
shall be submitted for binding arbitration to an alternative dispute resolution
firm agreed upon by the parties to such dispute. The arbitrator shall proceed
under rules and regulations agreed upon by the parties or, if there is no such
agreement, established by the arbitrator. EmCare, the PAs and Shareholder each
expressly covenants and agrees to be bound by the decision of the arbitrator as
a final determination of the matter in dispute. The cost of the arbitration
shall be divided equally among the parties to the dispute participating in such
arbitration proceeding. Unless the parties otherwise agree, arbitration shall
take place in Dallas, Texas.
19.5 Waiver. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure
of any party to require the performance of any term or obligation of this
Agreement, or the waiver by any party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation nor be deemed
a waiver of any subsequent breach.
19.6 Severability. If any provision of this Agreement is
held for any reason to be unenforceable by a court of competent jurisdiction,
the remainder of this Agreement shall nevertheless remain in full force and
effect.
19.7 Further Assurances. Each of the parties hereto
agrees to execute and deliver any and all additional papers, documents, and
other assurances, and shall do any and all acts and things reasonably necessary
in connection with the performance of his obligations hereunder to carry out
the intent of the parties hereto.
19.8 Modifications or Amendments. No amendment, change,
or modification of this Agreement shall be valid, unless in writing and signed
by all of the parties hereto.
19.9 Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties hereto with respect to its
subject matter and any and all prior agreements, understandings, or
representations with respect to its subject matter are hereby terminated and
canceled in their entirety and are of no further force or effect.
19.10 Headings. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
19.11 GOVERNING LAW. THIS AGREEMENT IS MADE IN, AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS.
19.12 Counterparts. This Agreement may be executed in
three (3) or more counterparts, each of which shall be deemed an original but
all of which taken together shall constitute one and the same instrument.
[SIGNATURES ON THE NEXT PAGE]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
EMCARE, INC., a Delaware corporation
By: /s/ WILLIAM F. MILLER, III
--------------------------------------------
Name: William F. Miller, III
Title: President
PAs:
EMERGENCY HEALTH SERVICES ASSOCIATES, a Texas
professional association
EMERGENCY HEALTH SERVICES ASSOCIATES OF NEW
MEXICO, P.C., a New Mexico professional
corporation
EMCARE MEDICAL SERVICES OF NEW YORK, P.C., a New
York professional corporation
NATIONAL PRIMARY CARE NETWORK, P.A., a Texas
professional association
EMCARE MEDICAL SERVICES OF PENNSYLVANIA, P.C.,
a Pennsylvania professional corporation
CAPITAL EMCARE, P.A., a Texas professional
association
NETWORK FAMILY PHYSICIANS, P.A., a Texas
professional association
ADAMS EMERGENCY PHYSICIANS, P.A., a Texas
professional association
JONES EMERGENCY PHYSICIANS, P.A., a Texas
professional association
GOULD PHYSICIANS, P.A., a Texas professional
association
By: /s/ LEONARD M. RIGGS, JR., M.D.
---------------------------------------------
Name: Leonard M. Riggs, Jr., M.D.
Title: President
10
<PAGE> 11
SHAREHOLDER:
/s/ LEONARD M. RIGGS, JR., M.D.
------------------------------------------------
Leonard M. Riggs, Jr., M.D., individually
Spouse Consent:
/s/ PEGGY ANN RIGGS
------------------------------------------------
11
<PAGE> 12
SCHEDULE A
STOCK OWNERSHIP OF SHAREHOLDER
<TABLE>
<CAPTION>
NUMBER OF AUTHORIZED SHARES OF NUMBER OF SHARES OF STOCK HELD
NAME OF PROFESSIONAL ASSOCIATION STOCK OF
OR PROFESSIONAL CORPORATION ISSUED AND OUTSTANDING RECORD BY SHAREHOLDER
-------------------------------- ------------------------------ ------------------------------
<S> <C> <C>
Emergency Health Services Associates 100,000 Authorized Shares 300 Shares
300 Issued and Outstanding
Emergency Health Services Associates of 10,000 Authorized Shares 1,000 Shares
New Mexico, P.C. 1,000 Issued and Outstanding
EmCare Medical Services of New York, 200 Authorized Shares 10 Shares
P.C. 10 Issued and Outstanding
National Primary Care Network, P.A. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
EmCare Medical Services of Pennsylvania, 1,000 Authorized Shares 1,000 Shares
P.C. 1,000 Issued and Outstanding
Capital EmCare, P.A. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
Network Family Physicians, P.A. 1,000 Authorized Shares 400 Shares
600 Issued and Outstanding
Adams Emergency Physicians, P.A. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
Jones Emergency Physicians, P.A. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
Gould Physicians P.A. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
</TABLE>
12
<PAGE> 13
EXHIBIT A
FORM OF
AMENDMENT TO SHAREHOLDER DESIGNATION
AND STOCK TRANSFER AGREEMENT
This _____ AMENDMENT TO SHAREHOLDER DESIGNATION AND STOCK TRANSFER
AGREEMENT (this "Amendment") is made and entered into this ___ day of ____,
19__ by and among EMCARE, INC. ("EmCare"); _____________, individually
("Shareholder"); _________, a _________ professional [corporation/association]
("PAs"); and [New PA], a ________ professional [corporation/association] ("New
PA").
R E C I T A L S:
A. EmCare, Shareholder and the PAs have entered into a Stock
Transfer and Option Agreement dated ________, 19__ (said agreement, as amended,
shall be referred to herein as the "Agreement"; capitalized terms used but not
defined herein shall have the meanings assigned to them in the Agreement), to
provide for the acquisition of the shares of the PAs in certain events and to
otherwise promote the continued and successful operation of the businesses of
the PAs.
B. Shareholder contemplates acquiring ____ shares, par value $__,
of stock of New PA (the "New PA Shares"). Pursuant to Section 18 of the
Agreement, EmCare, Shareholder, the PAs, and New PA desire to execute this
Amendment to include the New PA Shares in the definition of "Shares" in the
Agreement and to subject all of Shareholder's interest in New PA to the
Agreement.
NOW, THEREFORE,in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. AMENDMENT OF THE AGREEMENT. The Agreement is,
effective as of the date hereof, hereby amended by (i)
amending the definition of "Shares" to include the New PA
Shares; and (ii) amending the definition of "PA" or "PAs" to
include New PA.
2. REFERENCE TO AND EFFECT ON THE AGREEMENT.
(a) On and after the date hereof, each reference in the Agreement
to "this Agreement", "hereunder", "hereof" or words of like import referring to
the Agreement, shall mean and be a reference to the Agreement as amended
hereby.
(b) Except as specifically amended above, the Agreement is and
shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed.
IN WITNESS WHEREOF,the parties hereto have caused this Amendment to be
duly executed and delivered by an officer thereunto duly authorized as of the
date first above written.
13
<PAGE> 14
EMCARE, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
SHAREHOLDER
---------------------------------------------
, individually
-----------------
Spouse consent:
---------------------------------------------
[PAs]
[New PA]
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
14
<PAGE> 1
EXHIBIT 10.20
STOCK TRANSFER AND OPTION AGREEMENT
THIS STOCK TRANSFER AND OPTION AGREEMENT (this "Agreement"), is
executed and delivered as of February 24, 1997 (the "Effective Date"), by and
among EMCARE, INC., a Delaware corporation ("EmCare"); the other entities
executing this Agreement (each a "PA" and collectively, the "PAs"); and Steven
W. Cooley, M.D., individually ("Shareholder").
R E C I T A L S:
A. Each of the PAs is a professional association or professional
corporation under the laws of its respective jurisdiction.
B. Each of the PAs has the number of shares of stock authorized
and issued and outstanding as set forth on Schedule A attached hereto.
C. Shareholder is (i) a director of the PAs; (ii) a shareholder
of a number of shares of stock in certain PAs set forth on Schedule A attached
hereto (the "Shares"); and (iii) an officer of the PAs.
D. EmCare provides management, administrative and other services
to the PAs.
E. The parties hereto desire to promote their mutual interests by
providing for the acquisition of the Shares in certain events, thereby
promoting the continued successful operation of the PAs and their Management by
EmCare.
F. Each of the parties hereto has agreed to be bound by the
covenants and agreements set forth herein, all of which are for the mutual
benefit of the parties hereto, collectively and individually.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
1.1 "Attorney-in-Fact" means such person designated by
Shareholder as Shareholder's attorney-in- fact pursuant to Section 13
below.
1.2 "Effective Date" means the date of this Agreement as
set forth in the introductory paragraph of this Agreement.
1.3 "Period of Designation" means the period beginning,
as to Shareholder, on the Effective Date or, as to a Successor
Shareholder, on the date Successor Shareholder is
<PAGE> 2
designated as such pursuant to Section 11 below, and in each case
continuing until Shareholder or Successor Shareholder (as the case may
be) dies, resigns or ceases to serve as Shareholder in accordance with
Section 4.3 or Section 16 below.
1.4 "Purchase Price" means, for the Shares of each PA,
the Shareholders or the Successor Shareholders (as the case may be),
the original investment in such Shares as set forth on Schedule A.
1.5 "Successor Shareholder" means such person designated
pursuant to Section 11 below by EmCare.
1.6 "Transfer Event" means any of the following events:
(a) The death of Shareholder or any Successor
Shareholder;
(b) The incompetence or permanent disability of
Shareholder or any Successor Shareholder such
that Shareholder or any Successor Shareholder
is unable to render professional services on
behalf of the PAs;
(c) The disqualification under state law of any
Shareholder or any Successor Shareholder to
be a shareholder of any PA;
(d) The resignation of Shareholder or any
Successor Shareholder pursuant to Section 4.2
below;
(e) The termination of Shareholder's or any
Successor Shareholder's employment with
EmCare;
(f) Any attempt by Shareholder or any Successor
Shareholder, or by any other person to
transfer the Shares, whether voluntarily or
involuntarily, by operation of law or
otherwise, to any person who is not the
Successor Shareholder;
(g) The filing of any petition for or another
document causing or intended to cause a
judicial, administrative, voluntary or
involuntary dissolution of any PA; or
(h) The designation of a Successor Shareholder
pursuant to Section 11 below, whether or not
such designation has become effective under
that provision.
2. EFFECTIVE DATE; TERM; CONTINUANCE AND QUALIFICATION OF PAS.
2.1 Effective Date; Term. This Agreement shall be
effective as of the Effective Date, and shall continue for as long as
Shareholder or any Successor Shareholder owns any shares of any PA or until
terminated in accordance with the provisions of Section 2.2 below.
2
<PAGE> 3
2.2 Written Agreement Required. This Agreement may be
terminated only upon the written direction of EmCare, or upon the execution of
a succeeding version of this Agreement with a Successor Shareholder.
2.3 Continuance and Qualification of PAs. Shareholder
shall take (unless otherwise directed by EmCare or EmCare's affiliates, in
writing) all measures necessary (legal and/or otherwise) to maintain the
existence of each of the PAs under the laws of the jurisdiction in which it is
organized. Shareholder shall also take all steps necessary to ensure that each
of the PAs qualifies or obtains a license to do business in each foreign
jurisdiction in which the conduct of its business requires it to be so
qualified or licensed.
3. SHAREHOLDER'S RECORD TITLE TO SHARES. During the Period of
Designation of Shareholder, Shareholder shall be the shareholder of record of
the Shares and shall be entitled to exercise the right to vote in person or by
proxy in respect of any and all of the Shares in accordance herewith.
4. TRANSFER OF SHARES.
4.1 Attorney-in-Fact. Shareholder hereby appoints
Attorney-in-Fact (designated pursuant to Section 13 below) and
Attorney-in-Fact's successors and assigns as Shareholder's attorney-in-fact
with full power and authority to execute all documents and do all things
necessary to effectuate the transfer to Successor Shareholder of record
ownership of the Shares held in the name of Shareholder when Shareholder's
Period of Designation has expired. Such appointment shall be irrevocable. In
furtherance of such appointment, Shareholder has caused, or shall promptly
cause upon commencement of the Period of Designation, the Shares and all
certificates representing the same and all securities resulting from a merger
or consolidation of any PA or a split-up or reclassification of the equity of
any PA to be delivered to Attorney-in-Fact, accompanied by an executed stock
power, endorsed in blank.
4.2 Resignation. Shareholder shall have the right to
resign as an officer or director of any PA for any reason by giving thirty (30)
days prior written notice to Attorney-in-Fact, which resignation shall become
effective upon the expiration of the thirty (30) day period following receipt
of such notice by Attorney-in-Fact. In no event shall Shareholder have a right
to resign prior to the end of the notice period specified in the previous
sentence.
4.3 Automatic Transfer. The Shares shall be deemed to
have been transferred to Successor Shareholder, without further action by
Shareholder, immediately upon the occurrence of any Transfer Event; provided,
however, that until the designation of Successor Shareholder has been made
effective pursuant to Section 11 below, Shareholder shall continue to hold the
Shares in trust for the benefit of Successor Shareholder, subject to the
limitations imposed by Section 10.3 below.
4.4 Certain Transfer Events. Notwithstanding any
statement to the contrary in this Section 4, a Transfer Event under Section
1.6(c) or Section 1.6(g) above shall be deemed to cause the transfer under
Section 4.3 above only of those Shares representing stock in the PA or
3
<PAGE> 4
PAs affected by such event, provided that such Transfer Event is the only
Transfer Event which has occurred.
4.5 Effect of Transfer. Upon the transfer of the Shares,
Shareholder shall immediately resign, or be deemed to have resigned, as a
director of the PAs and from any and all corporate offices of any PA at the
time held by Shareholder. Notwithstanding anything to the contrary herein,
upon the occurrence of a Transfer Event, the Shares will be immediately
transferred, or deemed to be transferred, to Successor Shareholder upon the
date such Transfer Event is effective. Successor Shareholder shall have, from
and after such Transfer Event, all ownership and voting rights as to the Shares
in accordance with this Agreement, irrespective of receipt of a certificate for
such Shares, receipt by Shareholder of payment for the Shares, or any other act
or matter. Upon the transfer of the Shares, Shareholder shall be released in
writing from all obligations under this Agreement. Notwithstanding the
foregoing, upon the occurrence of a Transfer Event described in Section 1.6(c)
or Section 1.6(g), if no other Transfer Event has occurred, then the effects of
transfer described in this Section 4.5 shall apply only with respect to the PA
or PAs affected by such Transfer Event.
4.6 Purchase Price. The Shares transferred to Successor
Shareholder shall be transferred for the Purchase Price (as defined in Section
1.4 above) of such Shares. Shareholder's only remedy with regard to claims
relating to the Purchase Price for the Shares shall be money damages, and in no
way shall such failure jeopardize the temporary or permanent transfer of any
rights as to the Shares.
5. VOTING OF SHARES.
5.1 Election of Directors of the PAs
5.1.1 Election. Shareholder agrees to consult with
Attorney-in-Fact in accordance with Section 13 below with respect to the
election of all directors of the PAs. Any person elected to the board of
directors of any PA shall, in all cases, be a person qualified to serve as a
director of such PA under all applicable laws, statutes, regulations and bylaws
of such PA, including, but not limited to, those laws, statutes, and
regulations affecting the practice of medicine.
5.1.2 Vacancies. In the event of a vacancy for any
reason in the office of a director for any PA, Shareholder shall affirmatively
vote the Shares so that a replacement director is elected in the same manner
(and subject to the same limitations) as provided in Section 5.1.1 above for
the election of such director.
5.2 Voting on All Other Matters. Shareholder agrees that
on any other proposal to be voted upon by holders of the shares of stock of any
PA that Shareholder shall vote the Shares, or sign consents taking action on
such matter, only after consultation with Attorney-in-Fact in accordance with
Section 13 of this Agreement, except only to the extent the same requires the
exercise of professional medical judgment. Shareholder shall consult with
Attorney-in- Fact from time to time as necessary and appropriate to obtain
advice with respect to matters to be voted upon by holders of the shares of
stock of the PAs.
4
<PAGE> 5
6. VOTING AS A DIRECTOR.
6.1 Business Judgment. In voting and otherwise acting as
a member of the board of directors of any PA, Shareholder shall act in good
faith, in a manner Shareholder reasonably believes to be in the best interests
of such PA, and with such care as an ordinarily prudent person in a like
position would use in similar circumstances.
6.2 Obligation to Consult with Attorney-in-Fact. In
voting with respect to matters, the approval of which by the board of directors
of any PA requires the affirmative vote of Shareholder, Shareholder shall
consult in advance with Attorney-in-Fact with respect to such matters before
voting on such matters.
7. PROFESSIONAL MEDICAL JUDGMENT. Any other provisions of this
Agreement notwithstanding, Shareholder shall be unfettered in the exercise of
Shareholder's professional medical judgment in Shareholder's capacity as a
shareholder and as a director of each PA to the extent that the matters under
consideration require the exercise of such judgment.
8. NOTICES, REPORTS AND INFORMATION. Shareholder shall promptly
deliver to Attorney-in-Fact, on receipt, copies of all written materials
received by Shareholder in such capacity and, consistent with such
Shareholder's fiduciary obligations as a director of the PAs, all written
materials received by Shareholder in Shareholder's capacity as a member of the
boards of directors of the PAs.
9. DISTRIBUTIONS AND PROCEEDS. Shareholder shall promptly give
prior notice to Attorney-in-Fact of any event giving rise to the receipt of any
shares, securities, moneys or property representing a dividend, distribution or
return of capital with respect to the Shares.
10. DESIGNATION AND STATUS OF SHAREHOLDER.
10.1 Period of Designation of Shareholder. Shareholder
who executes this Agreement or an amendment hereto, accepting the designation
as a "Shareholder" hereunder, shall serve as such for the duration of the
Period of Designation.
10.2 No Compensation. Shareholder shall not be entitled
to receive compensation for services as a Shareholder hereunder.
10.3 Limitation on Authority. Other than as provided
herein, Shareholder shall not sell, transfer, assign or otherwise dispose of,
or pledge, mortgage, hypothecate or otherwise encumber, or permit or suffer any
encumbrance, of all or any part of the Shares, except on the express written
consent of Attorney-in-Fact. Upon the occurrence of a Transfer Event,
Shareholder shall hold the Shares in trust for the benefit of the Successor
Shareholder until the designation of a Successor Shareholder becomes effective,
but Shareholder shall have no authority to act on behalf of or bind any PA.
11. SUCCESSOR SHAREHOLDER. EmCare shall designate a Successor
Shareholder immediately upon the occurrence of any Transfer Event.
Notwithstanding the foregoing, at any time, regardless of whether a Transfer
Event shall have occurred, EmCare may at its sole
5
<PAGE> 6
discretion designate a Successor Shareholder to serve in accordance with this
Agreement and with applicable provisions of the bylaws of the respective PAs
and applicable law. Such Successor Shareholder shall be a physician licensed
to practice medicine in the state or states of incorporation of the PA or PAs
whose shares have been transferred to such Successor Shareholder and party to
an employment agreement with either a PA or with EmCare. In order to make such
designation effective, Successor Shareholder shall accept such designation by
executing a written amendment to this Agreement and expressly, in writing,
assuming all of Shareholder's obligations under this Agreement.
12. RESTRICTIONS ON CERTIFICATE. Upon the execution of this
Agreement, Shareholder shall surrender Shareholder's certificates representing
the Shares to the respective PAs issuing such Shares, which PAs shall place on
such certificates a notice of the restrictions on the transfer of such Shares
imposed by this Agreement. Such notice shall be printed or typed on the
certificate in boldface substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS IMPOSED BY THE LAWS GOVERNING PROFESSIONAL [CORPORATIONS
/ ASSOCIATIONS], THE [CORPORATION'S / ASSOCIATION'S] ARTICLES OF
ORGANIZATION AND BYLAWS AND THE TERMS OF A SHAREHOLDER DESIGNATION AND
STOCK TRANSFER AGREEMENT BY AND AMONG THE SHAREHOLDER NAMED HEREIN,
THE [CORPORATION / ASSOCIATION] AND ANOTHER PARTY (A COPY OF WHICH IS
ON FILE WITH THE [CORPORATION / ASSOCIATION] AND AVAILABLE WITHOUT
CHARGE). NO TRANSFER OF THE SHARES REPRESENTED HEREBY OR OF SHARES
ISSUED IN EXCHANGE THEREFOR SHALL BE VALID OR EFFECTIVE UNTIL THE
TERMS AND CONDITIONS OF SUCH LAWS, ORGANIZATIONAL DOCUMENTS AND
AGREEMENT SHALL HAVE BEEN FULFILLED IN THE JUDGMENT OF THE
[CORPORATION / ASSOCIATION].
13. ATTORNEY-IN-FACT. Shareholder hereby designates EmCare as
Attorney-in-Fact for the purposes of this Agreement. Shareholder may act upon
the advice of EmCare as Attorney-in-Fact in all matters arising with respect to
this Agreement. On notice to Shareholder from EmCare, Shareholder will execute
a written amendment to this Agreement changing the designation of
Attorney-in-Fact to another person or entity designated by EmCare.
14. NO JOINT VENTURE. The relationship created by this Agreement
is not intended to be, shall not be deemed to be, and shall not be treated as a
general partnership, limited partnership, joint venture, corporation or joint
stock company or association.
15. BREACH; REMEDIES. Any action by Shareholder in violation of
any of the provisions of this Agreement, or any attempted sale, transfer,
assignment, pledge or other encumbrance or disposition of any of the Shares by
Shareholder in violation of this Agreement, shall be considered a breach of
this Agreement. A breach of this Agreement that is not cured within seven (7)
days following written notice from Attorney-in-Fact shall constitute "cause",
as
6
<PAGE> 7
such term is defined in any employment agreement with EmCare or with any PA to
which Shareholder is a party.
16. OPTION.
16.1 Grant of Option. Shareholder hereby grants to EmCare
and EmCare hereby accepts from Shareholder, an option to purchase the Shares,
or to appoint a designee (the "Designee") to purchase the Shares in accordance
with the provisions hereof (the "Option").
16.2 Exercise. The Option is immediately exercisable from
and after the Effective Date and may be exercised, in full or in part, at any
time by EmCare or its Designee with respect to all or any of the PAs. EmCare
or its Designee shall exercise the Option by delivering written notice of such
exercise to Shareholder, such notice stating the date (the "Closing Date") on
which the purchase and sale of the Shares shall occur.
16.3 Resignation as Director and Officer. Shareholder
hereby agrees that if the Option is exercised with respect to any PA,
Shareholder will immediately resign as director and officer of that PA and sign
a resolution electing either Designee or a legally qualified representative
designated by EmCare to the board of directors of that PA.
16.4 Exercise Price; Payment. The exercise price of the
Option shall be equal to the Purchase Price. The exercise price shall be paid
on the Closing Date by EmCare or its Designee, as the case may be, to
Shareholder by check, electronic wire transfer, or other method reasonably
acceptable to Shareholder. Upon payment of the Purchase Price, the
Attorney-in-Fact shall deliver the Shares and all accompanying stock powers to
EmCare or its Designee.
16.6 Exercise of Shareholder's Purchase Rights. In
connection with any exercise of any Option granted hereunder, EmCare or its
Designee, as the case may be, may require Shareholder to exercise any right
Shareholder may have to acquire any stock of any corporation held by a third
party and to deliver such stock together with the Shares held by Shareholder.
In any such event, the exercise price of the Option exercised hereunder shall
include the amount required to be paid by Shareholder to acquire such third
party stock.
17. COMMUNITY PROPERTY INTERESTS. Shareholder agrees that he
shall cause his spouse to execute this Agreement or a counterpart hereto to
evidence such spouse's consent to this Agreement and such spouse's agreement
that any rights that spouse may have, as a result of a community property
interest in the Shares or otherwise, shall be subject to the provisions of this
Agreement. Shareholder and his spouse expressly agree to subject their entire
interest in the Shares to the terms of this Agreement, irrespective of any
community property interest of either spouse.
18. NEW PROFESSIONAL ASSOCIATIONS OR PROFESSIONAL CORPORATIONS.
In the event that Shareholder acquires shares of stock in a professional
association or professional corporation after the Effective Date (each a "New
PA"), Shareholder agrees to execute an amendment to this Agreement (an
"Amendment") substantially in the form of Exhibit A attached hereto.
Additionally, Shareholder shall cause New PA to execute such Amendment, which
Amendment
7
<PAGE> 8
shall (i) make New PA a party to this Agreement; (ii) include the shares of
stock in New PA to be acquired by Shareholder in the definition of "Shares"
herein; and (iii) otherwise make all the provisions of this Agreement apply to
Shareholder's interest in New PA.
19. MISCELLANEOUS PROVISIONS.
19.1 Successors and Assigns. This Agreement shall be
binding upon the parties and their respective successors, assigns, heirs,
transferees, executors and administrators, and except as otherwise expressly
provided in any particular provision of this Agreement, any subsequent holder
or holders of any of the Shares.
19.2 Notices or other Communications. Except as otherwise
specified in this Agreement, any notice or other communication required to be
given pursuant to this Agreement shall be given in writing (including
telecopier, telegraphic, telex or cable communication) or mailed (by
first-class mail, postage prepaid) to the parties at the addresses set forth
below. All such notices and communications shall, when mailed (by first-class
mail, postage prepaid), telecopied, telegraphed, telexed, cabled, or faxed be
effective when deposited in the mails, telecopied, sent by the telegraph
company, confirmed by telex answerback, delivered to the cable company, or
confirmed received in the case of a telecopy or facsimile, respectively.
Alternatively, all such notices and communications shall be deemed effective
when personally delivered to the party at its address below.
19.3 Address for Notices or Other Communications. Any
notice which this Agreement requires to be sent, shall be delivered to the
parties hereto to the following addresses (or, as to each party hereto, to such
other address as shall be designated by such party in a written notice to the
other parties):
If to EmCare:
EmCare, Inc.
1717 Main Street, Suite 5200
Dallas, Texas 75201
Attention: Robert F. Anderson
facsimile: (214) 712-2444
If to any PAs:
1717 Main Street, Suite 5200
Dallas, Texas 75201
Attention: Robert F. Anderson
facsimile: (214) 712-2444
If to Shareholder:
Steven W. Cooley, M.D.
1717 Main Street, Suite 5200
Dallas, Texas 75201
8
<PAGE> 9
19.4 Resolution of Disputes. In the event of any dispute
with respect to any matter under this Agreement, all matters in controversy
shall be submitted for binding arbitration to an alternative dispute resolution
firm agreed upon by the parties to such dispute. The arbitrator shall proceed
under rules and regulations agreed upon by the parties or, if there is no such
agreement, established by the arbitrator. EmCare, the PAs and Shareholder each
expressly covenants and agrees to be bound by the decision of the arbitrator as
a final determination of the matter in dispute. The cost of the arbitration
shall be divided equally among the parties to the dispute participating in such
arbitration proceeding. Unless the parties otherwise agree, arbitration shall
take place in Dallas, Texas.
19.5 Waiver. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure
of any party to require the performance of any term or obligation of this
Agreement, or the waiver by any party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation nor be deemed
a waiver of any subsequent breach.
19.6 Severability. If any provision of this Agreement is
held for any reason to be unenforceable by a court of competent jurisdiction,
the remainder of this Agreement shall nevertheless remain in full force and
effect.
19.7 Further Assurances. Each of the parties hereto
agrees to execute and deliver any and all additional papers, documents, and
other assurances, and shall do any and all acts and things reasonably necessary
in connection with the performance of his obligations hereunder to carry out
the intent of the parties hereto.
19.8 Modifications or Amendments. No amendment, change,
or modification of this Agreement shall be valid, unless in writing and signed
by all of the parties hereto.
19.9 Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties hereto with respect to its
subject matter and any and all prior agreements, understandings, or
representations with respect to its subject matter are hereby terminated and
canceled in their entirety and are of no further force or effect.
19.10 Headings. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
19.11 GOVERNING LAW. THIS AGREEMENT IS MADE IN, AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS.
19.12 Counterparts. This Agreement may be executed in
three (3) or more counterparts, each of which shall be deemed an original but
all of which taken together shall constitute one and the same instrument.
[SIGNATURES ON THE NEXT PAGE]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
EMCARE, INC., a Delaware corporation
By: /s/ WILLIAM F. MILLER, III
-------------------------------------
Name: William F. Miller, III
Title: President
PAs:
NETWORK FAMILY PHYSICIANS, INC., a
Texas professional association
By: /s/ STEVEN W. COOLEY, M.D.
-------------------------------------
Name: Steven W. Cooley, M.D.
Title: Senior Vice President
MESA EMCARE, S.C., an Illinois service
corporation
By: /s/ STEVEN W. COOLEY, M.D.
-------------------------------------
Name: Steven W. Cooley, M.D.
Title: Vice President
AEP-EMCARE MEDICAL GROUP, INC., a
California professional corporation
By: /s/ STEVEN W. COOLEY, M.D.
-------------------------------------
Name: Steven W. Cooley, M.D.
Title: President
SHAREHOLDER:
/s/ STEVEN W. COOLEY, M.D.
----------------------------------------
Steven W. Cooley, M.D., individually
Spouse Consent:
/s/ SUSAN COOLEY
----------------------------------------
10
<PAGE> 11
SCHEDULE A
STOCK OWNERSHIP OF SHAREHOLDER
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
NUMBER OF AUTHORIZED NUMBER OF SHARES OF
NAME OF PROFESSIONAL ASSOCIATION SHARES OF STOCK STOCK HELD OF
OR PROFESSIONAL CORPORATION ISSUED AND OUTSTANDING RECORD BY SHAREHOLDER
---------------------------- ---------------------- ---------------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Network Family Physicians, P.A. 1,000 Authorized Shares 200 Shares
600 Issued and Outstanding
- --------------------------------------------------------------------------------------------------
Mesa EmCare, S.C. 1,000 Authorized Shares 600 Shares
1,000 Issued and Outstanding
- --------------------------------------------------------------------------------------------------
AEP-EmCare Medical Group, Inc. 1,000 Authorized Shares 1,000 Shares
1,000 Issued and Outstanding
- --------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
EXHIBIT A
FORM OF
AMENDMENT TO SHAREHOLDER DESIGNATION
AND STOCK TRANSFER AGREEMENT
This _____ AMENDMENT TO SHAREHOLDER DESIGNATION AND STOCK TRANSFER
AGREEMENT (this "Amendment") is made and entered into this ___ day of ____,
19__ by and among EMCARE, INC. ("EmCare"); _____________, individually
("Shareholder"); _________, a _________ professional [corporation/association]
("PAs"); and [New PA], a ________ professional [corporation/association] ("New
PA").
R E C I T A L S:
A. EmCare, Shareholder and the PAs have entered into a Stock
Transfer and Option Agreement dated ________, 19__ (said agreement, as amended,
shall be referred to herein as the "Agreement"; capitalized terms used but not
defined herein shall have the meanings assigned to them in the Agreement), to
provide for the acquisition of the shares of the PAs in certain events and to
otherwise promote the continued and successful operation of the businesses of
the PAs.
B. Shareholder contemplates acquiring ____ shares, par value $__,
of stock of New PA (the "New PA Shares"). Pursuant to Section 18 of the
Agreement, EmCare, Shareholder, the PAs, and New PA desire to execute this
Amendment to include the New PA Shares in the definition of "Shares" in the
Agreement and to subject all of Shareholder's interest in New PA to the
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. AMENDMENT OF THE AGREEMENT. The Agreement is,
effective as of the date hereof, hereby amended by (i)
amending the definition of "Shares" to include the New PA
Shares; and (ii) amending the definition of "PA" or "PAs" to
include New PA.
2. REFERENCE TO AND EFFECT ON THE AGREEMENT.
(a) On and after the date hereof, each reference in the Agreement
to "this Agreement", "hereunder", "hereof" or words of like import referring to
the Agreement, shall mean and be a reference to the Agreement as amended
hereby.
(b) Except as specifically amended above, the Agreement is and
shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by an officer thereunto duly authorized as of
the date first above written.
12
<PAGE> 13
EMCARE, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SHAREHOLDER
----------------------------------------
---------------------------,individually
Spouse consent:
----------------------------------------
[PAs]
[New PA]
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 10.32
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
EMCARE, INC.
A DELAWARE CORPORATION
AND
EMERGENCY PHYSICIANS OF NORTHERN CALIFORNIA, INC.
A CALIFORNIA PROFESSIONAL CORPORATION
EFFECTIVE SEPTEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Manager Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Existing Billing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Existing Billing Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Gross Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Net Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Office Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Operating Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
PAGE NO.
<S> <C>
Physician . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Physician Group Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Practice Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Patient Referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Internal Management of Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 Practice of Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Support Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Quality Assurance, Risk Management, and Utilization Review . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.6 Contract Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.7 Billing and Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.8 Physician Group Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.9 Fiscal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Accounting and Financial Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 4
<TABLE>
PAGE NO.
<S> <C>
(b) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.10 Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Medical Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Other Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.11 Recruitment of Physician Group Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.12 Confidential and Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.13 Business Manager's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.14 No Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.15 Additional Obligations of Business Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV. COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP . . . . . . . . . . . . . . . . . . . 13
Section 4.1 Organization and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2 Physician Group Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Physician Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Non-physician Health Care Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.3 Professional Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5 Exclusive Authority of the Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6 Peer Review and Quality Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7 Physician Group's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.8 Confidential and Proprietary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9 Non-competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.10 Name, Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.11 Lease Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V. FINANCIAL ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 Year-End Adjustment to Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.3 Reasonable Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
iii
<PAGE> 5
<TABLE>
PAGE NO.
<S> <C>
Section 5.4 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.5 Dispute Regarding Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.7 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Initial and Renewal Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Termination By Business Manager for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Termination by Business Manager Without Cause . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Termination by Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Termination by Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Legislative, Regulatory or Administrative Change . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Effects of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.4 Repurchase Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.5 Repurchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.6 Closing of Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Physician Group Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Business Manager Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.3 Administrative Services Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.4 Status of Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.8 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Applicable Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.9 Waiver of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.10 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
iv
<PAGE> 6
<TABLE>
PAGE NO.
<S> <C>
Section 7.11 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.12 Additional Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.13 Consents, Approvals, and Exercise of Discretion . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.16 Divisions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.17 Amendments and Agreement Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
v
<PAGE> 7
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT ("Agreement") is made and entered
into effective as of September 1, 1996 (the "Effective Date"), by and between
EmCare, Inc., a Delaware corporation, ("Business Manager"), and Emergency
Physicians of Northern California, Inc., a California professional corporation
("Physician Group").
RECITALS
This Agreement is made with reference to the following facts:
A. Physician Group is a validly existing California professional
corporation, formed for and engaged in the conduct of a medical practice and
the provision of Medical Services (hereinafter defined) through individual
physicians who are licensed to practice medicine in the State of California and
who are employed or otherwise retained by Physician Group.
B. Business Manager is a duly formed and validly existing
Delaware corporation, which is in the business of managing the non-medical
aspects of physician practices.
C. Physician Group desires to focus its energies, expertise and
time on the practice of medicine and on the delivery of medical services to
patients, and to accomplish this goal it desires to delegate the increasingly
complex business functions of its medical practice to persons with business
expertise.
D. Physician Group wishes to engage Business Manager to provide
such management, administrative and business services as are necessary and
appropriate for the day-to-day administration of the non-medical aspects of
Physician Group's medical practice in the Practice Territory (as defined
below), and Business Manager desires to provide such services all upon the
terms and conditions hereinafter set forth.
E. Physician Group and Business Manager have determined a fair
market value for the services to be rendered by Business Manager, and based on
this fair market value, desire to enter into this Agreement so that each party
to this Agreement may devote its skills and expertise to the appropriate
responsibilities and functions set forth herein.
F. Business Manager is willing to commit significant resources to
Physician Group based upon the representations and warranties of Physician
Group that the current members of Physician Group will continue to practice
medicine for Physician Group in the Practice Territory for _______(__) years
from the Effective Date.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
<PAGE> 8
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings ascribed thereto, unless otherwise clearly required by the context in
which such term is used:
Adjustments shall mean any adjustments in accordance with GAAP for
uncollectible accounts, Medicare, and other payor contractual adjustments,
discounts, workers' compensation adjustments, professional courtesies, and
other reductions in collectible revenue that result from activities that do not
result in collectible charges.
Affiliate shall mean any person or entity that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with another person or entity. The term "control" shall mean
the ownership or the power to vote twenty-five percent (25%) or more of the
outstanding voting securities or interests of such other person.
Agreement shall mean this Agreement by and between Physician Group and
Business Manager and any amendments to this Agreement.
Budget shall mean an operating budget and capital expenditure budget
for each Operating Year as prepared by Business Manager and approved by
Physician Group.
Business Manager shall mean EmCare, Inc., a Delaware corporation, or
any entity that succeeds to the interests of EmCare, Inc. and to whom the
obligations of Business Manager are assigned and transferred.
Business Manager Default shall have the meaning ascribed to it in
Section 6.2(c).
Confidential Information shall mean any information of Business
Manager or Physician Group, as appropriate (whether written or oral), including
all business management or economic studies, patient lists, proprietary forms,
proprietary business or management methods, marketing data, fee schedules, or
trade secrets of the Business Manager or of Physician Group, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Agreement.
Confidential Information shall also include the terms and provisions of this
Agreement and any transaction or document executed by the parties pursuant to
this Agreement. Confidential Information does not include any information that
the receiving party can establish (i) is or becomes generally available to and
known by the public or medical community (other than as a result of an
unpermitted disclosure directly or indirectly by the receiving party or its
Affiliates, advisors, or Representatives); (ii) is or becomes available to the
receiving party on a non-confidential basis from a source other than the
furnishing party or its Affiliates or Representatives, provided that such
source is not and was not bound by a confidentiality agreement with or other
obligation of secrecy to the furnishing party of which the receiving party has
knowledge; or (iii) has already been or is hereafter independently acquired or
developed by the receiving party without violating any confidentiality
agreement with or other obligation of secrecy to the furnishing party.
Effective Date shall mean the date of this Agreement as set forth in
the introductory paragraph of this Agreement.
Existing Billing Agreement shall have the meaning ascribed to it in
Section 3.7.
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Existing Billing Company shall have the meaning ascribed to it in
Section 3.7.
GAAP mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity or other practices and procedures as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of the determination. For purposes of this
Agreement, GAAP shall be applied on an accrual basis in a manner consistent
with the historic practices of the person to which the term applies.
Governmental Authority shall mean the United States, State of
California, and any political or other subdivision of any of the foregoing, and
any agency, department, commission, board, bureau, court or instrumentality of
any of them which now or hereafter has jurisdiction over the Business Manager,
the performance of Management Services, the Physician Group or the performance
of Medical Services by the Physician Group.
Gross Revenue in any respect of any period shall mean all revenues,
receipts and income of the Physician Group during such period, as determined by
GAAP.
Legal Requirements shall mean any law, ordinance, order, rule or
regulation of any Governmental Authority.
Management Fee in respect of any period shall mean an amount equal to
Net Revenue for such period minus Physician Group Expense for such period.
Management Services shall mean the business, administrative, and
management services to be provided to Physician Group by Business Manager,
including, without limitation, the administration and performance of all
services required under the Medical Contracts (other than the performance of
Medical Services), the provision of supplies, support services, non-medical
personnel, any necessary office space, management, administration, financial
recordkeeping and reporting, and other business office services.
Medical Assets shall mean Physician Group's right, title and interest
in and to (i) any drugs, pharmaceuticals, products, substances, items or
devices whose purchase, possession, maintenance, administration, prescription
or security requires the authorization or order of a licensed health care
provider or requires a permit, registration, certification or any other
governmental authorization held by a licensed health care provider as specified
under any Legal Requirement, (ii) any records of identity, diagnosis,
evaluation or treatment of patients, (iii) any insurance policies covering or
relating to medical malpractice, (iv) any franchises, licenses, permits,
certificates, approvals and other governmental authorizations necessary or
desirable to own and operate any of the other Medical Assets, and (v) any
contract or agreement that requires performance by a licensed health care
provider under any Legal Requirement.
Medical Contracts shall mean (i) Emergency Medicine Agreement dated
June 1, 1994, by and between Hazel Hawkins Memorial Hospital at Hollister,
California, and Physician Group; (ii) Emergency Physicians Agreement dated
March 27, 1995, by and between Good Samaritan Health System dba San Jose
Medical Center and Physician Group; (iii) Agreement between the County of Santa
Clara and Physician Group relating to the provision of emergency physician
services to Santa Clara Valley Medical Center, executed and delivered by the
Physician Group on February 13, 1996, to the County of Santa Clara; (iv) Health
Care Services Agreement dated September 1, 1995, by and
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between San Jose Medical Clinic, Inc. dba San Jose Medical Group, a California
professional corporation, and Physician Group; (v) Service Agreement between
Santa Clara Valley Health and Hospital System and Community Health Services and
Physician Group relating to the provision of supplemental provider services,
executed and delivered by the Physician Group on February 13, 1996; (vi)
Agreement dated June 24, 1992, by and between Stanford University Hospital and
Physician Group; (vii) Agreement dated January 1, 1995, by and between Acorn
Personnel Agency, Inc. and Physician Group; and (viii) any and all other
contracts now or hereafter entered into by Physician Group providing for the
provision of medical services and administrative services related thereto, and
any and all amendments, restatements, extensions, substitutions and
modifications of any of the foregoing described agreements.
Medical Services shall mean medical care and services, including but
not limited to emergency department services and all related health care
services provided by Physician Group through Physician Group's Physicians and
other health care providers that are retained by or professionally affiliated
with Physician Group.
Net Revenue in respect of any period shall mean Gross Revenue for such
period minus Adjustments for such period.
Office shall mean any office space, clinic, facility, including
satellite facilities, that Business Manager shall own or lease or otherwise
procure for the use of Physician Group.
Office Expense shall mean all operating and non-operating expenses
incurred by the Business Manager in the provision of Management Services by the
Business Manager. All Office Expenses shall be determined in accordance with
GAAP. Without limitation, Office Expense shall include:
(a) the salaries, benefits, and other direct costs of all
employees of Business Manager at the Office and the salaries, benefits, and
other direct costs of the non-physician employees of Physician Group, but not
any amounts paid to, or benefits or other direct costs of the Physicians or
physician assistants or nurse practitioners employed or retained by the
Physician Group;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Office for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services, but only when such services are approved in
advance by Business Manager;
(c) reasonable recruitment costs and out-of-pocket expenses of
Business Manager or Physician Group associated with the recruitment of
additional physician employees of Physician Group;
(d) comprehensive and general liability insurance covering the
Office and employees of Business Manager at the Office;
(e) the expense of using, leasing, purchasing or otherwise
procuring the Office and related equipment, including depreciation;
(f) the cost of capital (whether as actual interest on
indebtedness incurred on behalf of Physician Group or as reasonable imputed
interest on capital advanced by Business Manager pursuant to Section 5.4 of
this Agreement or otherwise, which shall be equal to the average cost of
borrowing by Business Manager as reflected on its most recent published
financial statements);
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(g) the reasonable travel expenses associated with attending
meetings, conferences, or seminars to benefit Physician Group; and
(h) the cost of office supplies, other than office supplies owned
by Physician Group on the date of this Agreement.
Operating Year shall mean each twelve (12) month period during the
Term commencing on January 1 and ending on December 31, except that the first
Operating Year shall be that period commencing on the Effective Date and ending
on the next succeeding December 31. In the event that this Agreement shall
terminate on a date other than December 31, the last Operating Year hereunder
shall end on the date of termination.
Physician shall mean each individually licensed physician who is
employed or otherwise retained by or associated with Physician Group, each of
whom shall meet at all times the qualifications described in Section 4.2 and
Section 4.3.
Physician Group shall mean Emergency Physicians of Northern
California, Inc., a California professional corporation.
Physician Group Account shall have the meaning ascribed to it in
Section 3.7 of this Agreement.
Physician Group Default shall have the meaning ascribed to it in
Section 6.2(a).
Physician Group Expense shall mean (i) the consideration, salaries,
benefits, and other direct costs of Physicians employed or retained by
Physician Group pursuant to agreements with such Physicians in the form of
Exhibit 4.1 and Section 4.2(a); (ii) the salaries and benefits of physician
assistants and nurse practitioners employed or retained by the Physician Group;
(iii) state and federal income taxes of Physician Group; (iv) malpractice
insurance expenses for Physicians, physician assistants, nurse practitioners
and other caregivers; (v) any interest expense incurred pursuant to Section 5.4
of this Agreement; and (vi) any other expense reasonably designated by Business
Manager as a Physician Group Expense. The Physician Group, and not Business
Manager is financially liable for all Physician Group Expense. In the event
Physician Group incurs consulting, accounting, or legal fees without
coordinating such engagement through Business Manager, all fees and expenses so
incurred shall be Physician Group Expenses. Physician Group, and not Business
Manager, shall be financially liable for the payment of Physician Group
Expense.
Practice Territory shall mean the geographic area within the County of
Santa Clara, California, representing the geographic boundaries of the medical
practice conducted by Physician Group.
Representatives shall mean a party's officers, directors, employees,
or other agents, representatives or advisors.
State shall mean the State of California.
Term shall mean the initial and any renewal periods of duration of
this Agreement as described in Section 6.1.
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ARTICLE II.
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 Appointment. Physician Group hereby appoints
Business Manager as its sole and exclusive agent for the management, and
administration of the business functions and business affairs of Physician
Group, and Business Manager hereby accepts such appointment, subject at all
times to the provisions of this Agreement.
Section 2.2 Authority. Consistent with the provisions of this
Agreement, Business Manager shall have the responsibility and commensurate
authority to provide Management Services to Physician Group. Subject to the
terms and conditions of this Agreement, Business Manager is hereby expressly
authorized to provide the Management Services in any reasonable manner Business
Manager deems appropriate to meet the day-to-day requirements of the business
functions of Physician Group. Moreover, Business Manager, acting alone and
without the joinder of Physician Group or any other party, shall have the sole
and exclusive authority to sell, transfer or encumber all or any part of the
assets (other than Medical Assets) of the Physician Group. Subject to the
provisions of this Agreement, Business Manager is also expressly authorized to
negotiate and execute on behalf of Physician Group contracts that do not relate
to the provision of Medical Services. The parties acknowledge and agree that
Physician Group, through its Physicians, shall be responsible for and shall
have complete authority, responsibility, supervision, and control over the
provision of all Medical Services and other professional health care services
performed for patients, and that all diagnoses, treatments, procedures, and
other professional health care services shall be provided and performed
exclusively by or under the supervision of Physicians. Business Manager shall
have and exercise absolutely no control or supervision over the provision of
Medical Services.
Section 2.3 Patient Referrals. Business Manager and Physician
Group agree that the benefits to Physician Group hereunder do not require, are
not payment for, and are not in any way contingent upon the referral,
admission, or any other arrangement for the provision of any item or service
offered by Business Manager to patients of Physician Group in any facility,
laboratory, or health care operation controlled, managed, or operated by
Business Manager.
Section 2.4 Internal Management of Physician Group. Matters
involving the internal management, control, or finances of Physician Group,
including specifically the allocation of professional income among the members
and Physician employees of Physician Group, tax planning, and investment
planning, shall remain the responsibility of Physician Group and the members of
Physician Group.
Section 2.5 Practice of Medicine. The parties acknowledge that
Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of medicine. To the
extent any act or service herein required by Business Manager should be
construed to constitute the practice of medicine by any Governmental Authority,
the requirement to perform that act or service by Business Manager shall be
deemed waived and unenforceable.
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ARTICLE III.
COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER
During the Term, Business Manager shall provide all Management
Services as are necessary and appropriate for the day-to-day administration of
the business aspects of Physician Group's operations, including without
limitation those set forth in this Article III in accordance with all Legal
Requirements.
Section 3.1 Office.
(a) To the extent deemed necessary and appropriate by Business
Manager, in its sole discretion, taking into consideration the professional
concerns of Physician Group, Business Manager shall lease, acquire, or
otherwise procure an Office in a location or locations reasonably acceptable to
Physician Group, and the expenses associated with such lease, acquisition, or
procurement shall be Office Expenses. Any Office procured by Business Manager
for the use by Physician Group shall be procured at commercially reasonable
rates.
(b) Business Manager shall provide all non-medical equipment,
fixtures, office supplies, furniture and furnishings deemed reasonably
necessary by Business Manager for the operation of the Office and reasonably
necessary for the provision of Medical Services.
(c) Business Manager shall be responsible for the repair and
maintenance of the Office, consistent with Business Manager's responsibilities
under the terms of any lease or other use arrangement, and for the repair,
maintenance, and replacement of all equipment other than such repairs,
maintenance and replacement necessitated by the negligence or willful
misconduct of Physician Group, its Physicians or other personnel employed by
Physician Group, the repair or replacement of which shall be a Physician Group
Expense and not an Office Expense.
Section 3.2 Support Services. Business Manager shall provide or
arrange for all printing, stationery, forms, postage, duplication or
photocopying services, and other support services as are reasonably necessary
and appropriate for the provision of services by Physician Group pursuant to
the Medical Contracts.
Section 3.3 Quality Assurance, Risk Management, and Utilization
Review. Business Manager shall assist Physician Group and the various
hospitals and other parties to the Medical Contracts in the implementation of
procedures to ensure the consistency, quality, appropriateness, and medical
necessity of Medical Services provided by Physician Group, and shall provide
administrative support for Physician Group's overall quality assurance, risk
management, and utilization review programs. Business Manager shall perform
these tasks in a manner to ensure the confidentiality and non-discoverability
of these program actions to the fullest extent allowable under state and
federal law.
Section 3.4 Licenses and Permits. Business Manager shall, on
behalf of and in the name of Physician Group, apply for and use reasonable
efforts to obtain and maintain all licenses and regulatory permits required by
any Legal Requirements for or in connection with the operation of Physician
Group, other than those relating to the practice of medicine or the
administration of drugs by Physicians retained by or associated with Physician
Group.
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Section 3.5 Personnel. Except as specifically provided in
Section 4.2(b) of this Agreement, Business Manager shall employ or otherwise
retain and shall be responsible for selecting, hiring, training, supervising,
and terminating, all management, administrative, clerical, secretarial,
bookkeeping, accounting, payroll, billing and collection and other
non-professional personnel as Business Manager deems reasonably necessary and
appropriate for Business Manager's performance of its duties and obligations
under this Agreement. Consistent with reasonably prudent personnel management
policies, Business Manager shall seek and consider the advice, input, and
requests of Physician Group in regard to personnel matters. Business Manager
shall have sole responsibility for determining the salaries and providing such
fringe benefits, or for withholding, as required by any Legal Requirements
including any sums for income tax, unemployment insurance, social security.
Section 3.6 Contract Negotiations. Business Manager shall advise
Physician Group with respect to and negotiate, either directly or on Physician
Group's behalf, as appropriate, all contractual arrangements with third parties
as are reasonably necessary and appropriate for Physician Group's provision of
Medical Services, including, without limitation, negotiated price agreements
with third party payors, alternative delivery systems, or other purchasers of
group health care services.
Section 3.7 Billing and Collection. On behalf of and for the
account of Physician Group, Business Manager shall establish and maintain
credit and billing and collection policies and procedures, and shall use
Business Manager's reasonable best efforts to timely bill and collect all
professional and other fees for all billable Medical Services provided by
Physician Group. Business Manager shall advise and consult with Physician
Group regarding the fees for Medical Services provided by Physician Group; it
being understood, however, that Physician Group shall establish the fees to be
charged for Medical Services and that Business Manager shall have no authority
whatsoever with respect to the establishment of such fees. In connection with
the billing and collection services to be provided hereunder, and throughout
the Term (and thereafter as provided in Section 6.3), Physician Group hereby
grants to Business Manager an exclusive special power of attorney and appoints
Business Manager as Physician Group's exclusive true and lawful agent and
attorney-in-fact, and Business Manager hereby accepts such special power of
attorney and appointment, for the following purposes:
(a) To bill Physician Group's patients, in Physician Group's name
and on Physician Group's behalf, for all billable Medical Services provided by
Physician Group to patients.
(b) To bill, in Physician Group's name and on Physician Group's
behalf, all claims for reimbursement or from Blue Shield/Blue Cross, insurance
companies, Medicare, Medicaid, and all other third party payors or fiscal
intermediaries for all covered billable Medical Services provided by Physician
Group to patients.
(c) To collect and receive, in Physician Group's name and on
Physician Group's behalf, all accounts receivable generated by such billings
and claims for reimbursement, to administer such accounts including, but not
limited to, extending the time of payment of any such accounts for cash, credit
or otherwise; discharging or releasing the obligors of any such accounts;
suing, assigning or selling at a discount such accounts to collection agencies;
or taking other measures to require the payment of any such accounts.
(d) To deposit into one or more accounts with a financial
institution selected by Manager and approved by Physician Group (the "Physician
Group Account") all revenues,
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receipts and accounts receivable collected by Business Manager on behalf of
Physician Group. Physician Group covenants to transfer and deliver to Business
Manager all funds received by Physician Group from patients or third party
payors for Medical Services. Upon receipt by Business Manager of any funds
from patients or third party payors or from Physician Group for Medical
Services, Business Manager shall immediately deposit same into the Physician
Group Account.
(e) To take possession of, endorse in the name of Physician Group,
and deposit into the Physician Group Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable for Medical Services.
(f) To sign checks, drafts, bank notes or other instruments on
behalf of Physician Group, and to make withdrawals from the Physician Group
Account for the payment of Office Expenses, Physician Group Expenses or other
cost and expenses as specified in this Agreement.
Upon request of Business Manager, Physician Group shall execute and
deliver to the financial institution wherein the Physician Group Account is
maintained, such additional instruments as may be necessary to evidence or
effect the special power of attorney granted to Business Manager by Physician
Group pursuant to this Section 3.7 and Section 3.8 of this Agreement. Business
Manager and Physician Group acknowledge that pursuant to that certain agreement
(the "Existing Billing Agreement") dated _______________, 1996, by and between
____________________________ (the "Existing Billing Company") and Physician
Group, the Existing Billing Company bills and collects for all Medical Services
provided by Physician Group. So long as the Billing Agreement is in full force
and effect, Business Manager shall administer the provision of services
thereunder and shall, on behalf of Physician Group, have the right to enforce
the terms and provisions of the Existing Billing Agreement and exercise all
rights and options granted to Physician Group thereunder, including but not
limited to the right to terminate the Existing Billing Agreement.
Section 3.8 Physician Group Account. Business Manager shall have
access to the Physician Group Account solely for the purposes stated herein and
shall use all funds on deposit therein to pay all Office Expenses and Physician
Group Expenses in accordance with the terms of this Agreement. In connection
herewith, throughout the Term (and thereafter as provided in Section 6.3),
Physician Group hereby grants to Business Manager an exclusive special power of
attorney and appoints Business Manager as Physician Group's exclusive true and
lawful agent and attorney-in- fact, and Business Manager hereby accepts such
special power of attorney and appointment, to deposit into the Physician Group
Account all funds, fees, and revenues generated from the Physician Group's
provision of Medical Services and collected by Business Manager, and to make
withdrawals from Physician Group Account for payments specified in this
Agreement and as requested from time-to-time by Physician Group. The special
power of attorney granted in Section 3.7 and in this Section may be revoked by
the Physician Group at any time, but such revocation shall constitute a breach
of this Agreement. Such special power of attorney shall expire when this
Agreement has been terminated, all accounts receivable purchased by Business
Manager have been collected, and all Management Fees and other sums due to
Business Manager under this Agreement have been paid. If Business Manager
assigns this Agreement in compliance with Section 7.7 of this Agreement,
Physician Group shall execute a special power of attorney in favor of the
assignee containing substantially the same terms and provisions as this Section
3.8. Notwithstanding any provision herein to the contrary, Physician Group
shall not draw checks or make any other withdrawals from the Physician Group
Account. The payment of Office Expenses and Physician Group
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Expenses from the Physician Group Account shall be made in such order and
priority as Business Manager shall determine in its reasonable business
judgment.
Section 3.9 Fiscal Matters.
(a) Accounting and Financial Records. Business Manager shall
establish and administer accounting policies, procedures, controls and systems
(including accounts payable and payroll) for the development, preparation, and
safekeeping of administrative or financial records and books of account
relating to the business prepared and maintained in accordance with GAAP.
Business Manager shall prepare and deliver to Physician Group, within one
hundred fifty (150) days of the end of each Operating Year, a balance sheet and
a profit and loss statement reflecting the financial status of Physician Group
in regard to the provision of Medical Services as of the end of such Operating
Year, all of which shall be prepared in accordance with GAAP consistently
applied. Business Manager shall calculate the amount of Office Expense,
Physician Group Expense, Gross Revenue, Net Revenue, and the amount of the
Management Fee for the preceding Operating Year. Such calculations, unless
objected to in writing within thirty (30) days after receipt thereof, shall be
conclusive and binding on Business Manager and Physician Group. If Business
Manager and Physician Group cannot agree on such calculations, such
calculations shall be submitted to the certified public accounting firm
described above, whose calculations and determinations of such items shall be
binding on Business Manager and Physician Group. Business Manager shall also
prepare or assist in the preparation of any other financial statements or
records as Physician Group may reasonably request.
(b) Tax Matters.
(1) In General. Business Manager shall have no
obligation to prepare or arrange for the preparation
of any tax returns or reports required of Physician
Group.
(2) Sales and Use Taxes. Business Manager and Physician
Group acknowledge and agree that to the extent that
any of the services to be provided by Business
Manager hereunder may be subject to any state sales
and use taxes, Business Manager may have a legal
obligation to collect such taxes from Physician Group
and to remit same to the appropriate tax collection
authorities. Physician Group agrees to pay in
addition to the payment of the Management Fee, the
applicable state sales and use taxes in respect of
the portion of the Management Fees attributable to
such services.
Section 3.10 Reports and Records.
(a) Medical Records. Business Manager shall establish, monitor,
and maintain procedures and policies for the timely creation, preparation,
filing and retrieval of all medical records generated by Physician Group in
connection with Physician Group's provision of Medical Services; and, subject
to applicable Legal Requirements, shall ensure that medical records are
promptly available to Physicians and any other appropriate persons. All such
medical records shall be retained and maintained in accordance with all Legal
Requirements relating to the confidentiality and retention thereof. All
medical records shall be and remain the property of Physician Group.
(b) Other Reports and Records. Business Manager shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate for
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Physician Group's provision of Medical Services, and shall be prepared to
analyze and interpret such reports and records upon the reasonable request of
Physician Group.
Section 3.11 Recruitment of Physician Group Physicians. Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential physician personnel to be retained by
Physician Group. Business Manager shall provide Physician Group with model
agreements to document Physician Group's employment, retention or other service
arrangements with such individuals. Physician Group shall have the sole and
complete responsibility to interview, select, contract with, supervise, control
and terminate all Physicians performing Medical Services or other professional
services, and Business Manager shall have no authority whatsoever with respect
to such activities.
Section 3.12 Confidential and Proprietary Information.
(a) Business Manager will not disclose any Confidential
Information of Physician Group to other persons without Physician Group's
express written authorization, such Confidential Information will not be used
in any way directly or indirectly detrimental to Physician Group, and Business
Manager will keep such Confidential Information confidential and will ensure
that its Affiliates and advisors who have access to such Confidential
Information comply with these non-disclosure obligations; provided, however,
that Business Manager may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Agreement, it being understood and agreed to by Business Manager that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Business Manager not to disclose to any other person any Confidential
Information. Business Manager agrees to be responsible for any breach of this
Section by its Affiliates or Representatives. If Business Manager is requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands, or similar processes) to
disclose or produce any Confidential Information furnished in the course of its
dealings with Physician Group or its Affiliates, or Representatives, Business
Manager will (i) provide Physician Group will prompt notice thereof and copies,
if possible, and, if not, a description, of the Confidential Information
requested or required to be produced so that Physician Group may seek an
appropriate protective order or waive compliance with the provisions of this
Section and (ii) consult with Physician Group as to the advisability of
Physician Group taking legally available action to resist or narrow such
request. Business Manager further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder Business Manager is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning Physician Group to any tribunal
legally authorized to request and entitled to receive such Confidential
Information or to stand liable for contempt or suffer other censure or penalty,
Business Manager may disclose or produce such Confidential Information to such
tribunal without liability hereunder; provided, however, that Business Manager
shall give Physician Group written notice of the Confidential Information to be
so disclosed or produced as far in advance of its disclosure or production as
is practicable and shall use reasonable efforts to obtain, to the greatest
extent practicable, an order or other reliable assurance that confidential
treatment will be accorded to such Confidential Information so required to be
disclosed or produced.
(b) Notwithstanding clause (a) above, Business Manager may share,
subject to the restrictions of this Section, with other professional
corporations, associations, medical practices, or health care delivery entities
the practice statistics of Physician Group, including data concerning
utilization review, quality assurance, cost, outcomes, or other practice. Such
information shall only be disclosed to other medical groups with whom
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Business Manager has a management relationship or to managed care providers or
other third party payors or financial analysts and underwriters. In addition,
Business Manager may disclose all practice-related information necessary or
desirable in connection with any public or private offering of any securities
of Business Manager or any of its Affiliates. No such information will
disclose or divulge patient identifying information or, to the extent possible,
physician identifying information.
Section 3.13 Business Manager's Insurance. Throughout the Term,
Business Manager shall, as an Office Expense, obtain and maintain with
commercial carriers, through self-insurance or some combination thereof,
appropriate worker's compensation coverage for personnel employed by Business
Manager pursuant to this Agreement, and professional, casualty and
comprehensive general liability insurance covering Business Manager, Business
Manager's personnel, and all of Business Manager's equipment in such amounts,
on such basis and upon such terms and conditions as Business Manager deems
appropriate. Business Manager may also carry, as an Office Expense, key person
life and disability insurance on any member or Physician employee of Physician
Group in amounts determined reasonable and sufficient by Business Manager.
Business Manager shall be the owner and beneficiary of any such insurance.
Section 3.14 No Warranty. Physician Group acknowledges that
Business Manager has not made and will not make any express or implied
warranties or representations that the services provided by Business Manager
will result in any particular amount or level of medical practice or income to
Physician Group.
Section 3.15 Additional Obligations of Business Manager. In
addition to the duties and obligations specified above, Business Manager shall
perform the following:
(a) Within a reasonable period of time after execution of this
Agreement, Business Manager shall, as an Office Expense, develop and implement
data gathering and processing capabilities designed to assist Physician Group
in managing the cost of providing Medical Services by Physician Group.
Business Manager shall use such capabilities and the information obtained
therefrom to assist Physician Group in obtaining and maintaining managed care
contracts (including, but not limited to, capitation and global pricing
arrangements).
(b) Business Manager shall, as an Office Expense, develop for
Physician Group and assist Physician Group in implementing outcomes management
and work management systems and other protocols to enable Physician Group to
achieve greater efficiencies in resource utilization.
(c) Business Manager shall commit reasonable resources to pursue,
negotiate and maintain managed care contracts on behalf of Physician Group.
Business Manager shall advise Physician Group with respect to the economic
impact of any such managed care contract.
(d) Business Manager shall assist the Physician Group in obtaining
the malpractice insurance required by Section 4.7 of this Agreement.
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ARTICLE IV.
COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP
Section 4.1 Organization and Operation. Physician Group, as a
continuing condition of Business Manager's obligations under this Agreement,
shall at all times during the Term be and remain legally organized and operated
to provide Medical Services in a manner consistent with all Legal Requirements.
Physician Group shall operate and maintain a full time practice of medicine
specializing in the provision of emergency department services, and for the
first five (5) years of the Term of this Agreement, Physician Group shall
maintain and enforce agreements in the form of Exhibit 4.1 with the equity
owners of Physician Group specified in Exhibit 4.1A. Physician Group shall not
amend the agreements or waive any rights thereunder without the prior approval
of Business Manager. Recognizing that Business Manager would not have entered
into this Agreement but for Physician Group's covenant to maintain such
agreements with its original members, on or before three (3) days after receipt
thereof, Physician Group shall pay to Business Manager, in addition to the
Management Fee, any damages, compensation, payment, or settlement received by
Physician Group from a Physician who terminates his or her agreement without
cause or whose agreement is terminated by Physician Group for cause. Such
payment shall constitute liquidated damages of Business Manager for Physician
Group's breach of the covenant contained in this Section 4.1.
Section 4.2 Physician Group Personnel.
(a) Physician Personnel. Physician Group shall retain that number
of Physicians, sufficient in the discretion of the Policy Board as are
reasonably necessary and appropriate for the provision of Medical Services
pursuant to the Medical Contracts, each of whom shall be bound by and subject
to applicable provisions of this Agreement. Each Physician retained by
Physician Group shall hold and maintain a valid and unrestricted license to
practice medicine in the State. Physician Group shall enter into and maintain
with each such retained Physician a written agreement substantially in the form
of either Exhibit 4.1 for equity owners of Physician Group as specified in
Exhibit 4.1A or Exhibit 4.2(a) for non-equity owners. Physician Group shall be
responsible for paying the compensation, and benefits as applicable, for all
Physicians and any other physician personnel or other contracted or affiliated
physicians, and for withholding, as required by any Legal Requirements.
Business Manager may, on behalf of Physician Group, establish and administer
the compensation with respect to such individuals in accordance with the
written agreement between Physician Group and each Physician. Business Manager
shall neither control nor direct any Physician in the performance of Medial
Services for patients.
(b) Non-physician Health Care Personnel. All physician assistants
and nurse practitioners who provide patient care services shall be employed by
or retained by Physician Group and shall be under Physician Group's control,
supervision and direction in the performance of or in connection with Medical
Services for patients. Physician Group shall be responsible for paying the
compensation, and benefits as applicable of all physician assistants and nurse
practitioners employed by any Physician Group, and for withholding as required
by any Legal Requirements.
Section 4.3 Professional Standards. As a continuing condition of
Business Manager's obligations hereunder, each Physician and any other
physician personnel retained by Physician Group to provide Medical Services
must (i) have and maintain a valid and unrestricted license to practice
medicine in the State and (ii) comply with, be controlled and governed by and
otherwise provide Medical Services in accordance with all
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Legal Requirements, and the ethics and standard of care of the medical
community wherein the Medical Services are performed, and (iii) obtain and
retain appropriate medical staff membership with appropriate clinical
privileges at any hospital or health care facility at which Medical Services
are to be provided. Procurement of temporary staff privileges pending the
completion of the medical staff approval process shall satisfy this provision,
provided the Physician actively pursues full appointment and actually receives
full appointment within a reasonable time.
Section 4.4 Medical Services. Physician Group shall ensure that
Physicians and non-physician health care personnel are available as necessary
to provide Medical Services to patients. In the event that Physicians employed
by Physician Group are not available to provide Medical Services coverage,
Physician Group shall engage and retain locum tenens coverage. Physicians
retained on a locum tenens basis shall meet all of the requirements of Section
4.3, and cost of providing locum tenens coverage shall be a Physician Group
Expense. With the assistance of the Business Manager, Physician Group and the
Physicians shall be responsible for scheduling Physician and non-physician
health care personnel coverage of all medical procedures. Physician Group
shall cause all Physicians to exert reasonable efforts to develop and promote
Physician Group in such a manner as to ensure that Physician Group is able to
serve the diverse needs of the community.
Section 4.5 Exclusive Authority of the Physician Group. The
Physician Group shall have exclusive authority to review and resolve issues
relating to (i) the types and levels of Medical Services to be provided by the
Physician Group; (ii) the recruitment of physicians to the Physician Group,
including the specific qualifications and specialties of recruited physicians;
(iii) the performance of Medical Services under any contract or arrangement
regarding the provision of Medical Services; and (iv) fee schedules of the
Physician Group.
Section 4.6 Peer Review and Quality Assurance. Physician Group
shall adopt a peer review and quality assurance program to monitor and evaluate
the quality and cost-effectiveness of Medical Services provided by physician
personnel of Physician Group. Pursuant to such program, Physician Group shall
designate a committee of Physicians to function as a medical peer review
committee to review credentials of potential recruits, perform quality
assurance functions, and otherwise resolve medical competence issues. The
medical peer review committee shall function pursuant to formal written
policies and procedures. Upon request of Physician Group, Business Manager
shall provide administrative assistance to Physician Group in performing its
peer review and quality assurance activities, but only if such assistance can
be provided consistent with maintaining the confidentiality and
non-discoverability of the processes and actions of the Peer Review and Quality
Assurance process of Physician Group.
Section 4.7 Physician Group's Insurance. With the advice and
assistance of Business Manager, Physician Group shall obtain and maintain with
commercial carriers reasonably acceptable to Business Manager appropriate
worker's compensation coverage for Physician Group's employed personnel and
professional and comprehensive general liability insurance covering physician
Group and each of the Physicians. The comprehensive general liability coverage
shall be in amounts customary for physician groups similarly situated and
professional liability coverage shall be in a minimum amount of $1,000,000 for
each occurrence and $3,000,000 in the aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
Business Manager from the insurer as to any alteration of coverage,
cancellation, or proposed cancellation for any reason. Physician Group shall
cause to be issued to Business Manager by such insurer or insurers a
certificate reflecting such coverage. Upon the termination of this Agreement
for any reason, Physician Group shall continue to carry professional
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liability insurance in the amounts specified herein for ten (10) years after
termination, or if Physician Group dissolves or ceases to practice medicine,
Physician Group shall obtain and maintain as a Physician Group Expense "tail"
professional liability coverage, in the amounts specified in this Section for
an extended reporting period of ten (10) years. Physician Group shall be
responsible for paying all premiums for "tail" insurance coverage. In no event
shall the professional liability insurance carrier be replaced or changed
without the written consent of Business Manager.
Section 4.8 Confidential and Proprietary Information. Physician
Group will not disclose any Confidential Information of Business Manager
without Business Manager's express written authorization, such Confidential
Information will not be used in any way directly or indirectly detrimental to
Business Manager, and Physician Group will keep such Confidential Information
confidential and will ensure that its Affiliates and Representatives who have
access to such Confidential Information comply with these non-disclosure
obligations; provided, however, that Physician Group may disclose Confidential
Information to those of its Affiliates and Representatives who need to know
Confidential Information for the purposes of this Agreement, it being
understood and agreed to by Physician Group that such Affiliates and
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by
Physician Group not to disclose to any other person any Confidential
Information. Physician Group agrees to be responsible for any breach of this
Section by its Affiliates or Representatives. If Physician Group is requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoenas, civil investigative demands, or similar processes) to
disclose or produce any Confidential Information furnished in the course of its
dealings with Business Manager or its Affiliates or Representatives, Physician
Group will (i) provide Business Manager with prompt notice thereof and copies,
if possible, and, if not, a description, of the Confidential Information
requested or required to be produced so that Business Manager may seek an
appropriate protective order or waive compliance with the provisions of this
Section and (ii) consult with Business Manager as to the advisability of
Business Manager taking legally available action to resist or narrow such
request. Physician Group further agrees that, if in the absence of a
protective order or the receipt of a waiver hereunder Physician Group is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning Business Manager to any tribunal
or to stand liable for contempt or suffer other censure or penalty, Physician
Group may disclose or produce such Confidential Information to such tribunal
legally authorized to request and entitled to receive such Confidential
Information without liability hereunder; provided, however, that Physician
Group shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced as far in advance or its disclosure
or production as is practicable and shall use reasonable efforts to obtain, to
the greatest extent practicable, an order or other reliable assurance that
confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
Section 4.9 Non-competition. Physician Group hereby recognizes
and acknowledges that Business Manager will incur substantial costs in
providing the equipment, support services, personnel, management,
administration, and other items and services that are the subject matter of
this Agreement and that in the process of providing services under this
Agreement, Physician Group will be privy to financial and Confidential
Information, to which Physician Group would not otherwise be exposed. The
parties also recognize that the services to be provided by Business Manager
will be feasible only if Physician Group operates an active practice to which
the Physicians associated with Physician Group devote their full time and
attention. Physician Group agrees and acknowledges that the non-competition
covenants described hereunder are necessary for the
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protection of Business Manager, and that Business Manager would not have
entered into this Agreement without the following covenants.
(a) During the Term, except for its obligations pursuant to this
Agreement, Physician Group shall not establish, operate, or provide Medical
Services at a medical office, clinic or other health care facility anywhere
within the Practice Territory.
(b) Physician Group covenants that, during the Term and for a
period of five (5) years from the date this Agreement is terminated, other than
if terminated by Physician Group for cause, it will not individually, or in
concert, directly or indirectly, either on its own account or for any other
person, solicit, induce, attempt to induce, interfere with, or endeavor to
cause any party to a Medical Contract to modify, amend, terminate or otherwise
alter the Medical Contract.
(c) Except as specifically agreed to by Business Manager in
writing, Physician Group covenants and agrees that during the Term and for a
period of five (5) years from the date this Agreement is terminated, other than
if terminated by Physician Group for cause, Physician Group shall not directly
or indirectly own (excluding ownership of less than one percent (1%) of the
equity of any publicly traded entity), manage, operate, control, lend funds to,
lend its name to, or maintain any interest whatsoever in any enterprise (i)
having to do with the provision, distribution, promotion, or advertising of any
type of management or administrative services or products to third parties in
competition with Business Manager, in the Practice Territory; and/or (ii)
offering any type of service(s) or product(s) to third parties substantially
similar to those offered by Business Manager to Physician Group in the Practice
Territory. Notwithstanding the above restriction, nothing herein shall
prohibit Physician Group or any of its members from providing management and
administrative services to its or their own medical practices after the
termination of this Agreement for any reason other than if terminated by
Business Manager for cause, and nothing herein shall prohibit Physician Group
or its members from contracting with a third party manager to provide
administrative or management services for its or their medical practices after
termination of this Agreement for any reason other than if terminated by
Business Manager for cause as long as such relationship complies with the
provisions of this Section 4.9(b).
(d) The written agreements described in Section 4.1 shall contain
covenants of the equity owners of Physician Group pursuant to which they shall
agree not to compete with Physician Group within the Practice Territory for one
(1) year after termination of the such agreement.
(e) Physician Group shall obtain and enforce formal written
agreements from its non-equity owner Physicians in the form of Exhibit 4.2(a),
pursuant to which they shall agree not to compete with Physician Group within
the Practice Territory for one (1) year after termination of their respective
agreements.
(f) Physician Group understands and acknowledges that the
foregoing provisions in Section 4.8 and Section 4.9 are designed to preserve
the goodwill of Business Manager and the goodwill of the individual Physicians
of Physician Group. Accordingly, if Physician Group breaches any obligation of
Section 4.8 or Section 4.9 in addition to any other remedies available under
this Agreement, at law or in equity, Business Manager shall be entitled to
enforce this Agreement by injunctive relief and by specific performance of this
Agreement, such relief to be without the necessity of posting a bond, cash or
otherwise. Additionally, nothing in this paragraph shall limit Business
Manager's right to recover any other damages to which it is entitled as result
of Physician Group's breach of Section 4.8 or Section 4.9. If any provision of
the covenants set forth in Section 4.8 or
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Section 4.9 is held by a court of competent jurisdiction to be unenforceable
due to an excessive time period, geographic area, or restricted activity, the
covenant shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable.
Section 4.10 Name, Trademark. Physician Group represents and
warrants that Physician Group conducts its professional practice under the name
of, and only under the name of "Emergency Physicians of Northern California,
Inc." and that such name is duly registered, qualified, or licensed under the
Legal Requirements of the State, and that, to Physician Group's knowledge,
Physician Group is the sole and absolute owner of the name in the State.
Physician Group covenants and promises that, without the prior written consent
of the Business Manager, Physician Group will not:
(a) take any action that is reasonably likely to result in the
loss of registration, qualification or licensure of the name;
(b) fail to take any reasonably necessary action that will
maintain the registration, qualification or licensure current;
(c) license, sell, give, or otherwise transfer the name or the
right to use the name to any medical practice, physician, professional
corporation, or any other entity; or
(d) cease conducting the professional practice of Physician Group
under the name.
Section 4.11 Lease Assignment. Upon Business Manager's request,
if Physician Group is the lessee of the Office, Physician Group shall assign
the lease to Business Manager upon receipt of consent from the lessor.
Physician Group shall use its best efforts to assist in obtaining the lessor's
consent to the assignment. Upon request, Physician Group shall execute any
instruments and shall take any acts that Business Manager may deem necessary to
accomplish the assignment of the lease. If the lessor under such lease is an
Affiliate or otherwise related to Physician Group, then Physician Group agrees
that prior to any such assignment such lease shall be modified to reflect fair
market rental and other terms and conditions reasonably satisfactory to
Business Manager.
ARTICLE V.
FINANCIAL ARRANGEMENT
Section 5.1 Management Fee. On or before the tenth (10th) day of
each calendar month during the Term, and at the expiration or sooner
termination of this Agreement, the Business Manager shall be paid an amount
equal to the Management Fee for the period from the commencement of the then
current Operating Year to the end of the immediately preceding calendar month
or the date of such expiration or sooner termination of this Agreement, as the
case may be, less the aggregate amount of monthly payments theretofore paid in
respect to the Management Fee for such Operating Year.
Section 5.2 Year-End Adjustment to Management Fee. If for any
Operating Year, the aggregate amount of the monthly payments of the Management
Fee theretofore paid by Physician Group to Business Manager shall be more or
less than the Management Fee payable for such Operating Year based upon the
final determination of such Management Fee as reflected in the annual financial
statements of the Physician Group prepared pursuant to Section 3.9 of this
Agreement, then, by way of year-end adjustment, within fifteen (15) days after
the delivery of such annual financial statement to the
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Physician Group, Business Manager shall pay into the Physician Group Account
the amount of any overpayment or withdraw from the Physician Group Account the
amount of any underpayment.
Section 5.3 Reasonable Value. Payment of the Management Fee is
not intended to be and shall not be interpreted or applied as permitting
Business Manager to share in Physician Group's fees for Medical Services or any
other services, but is acknowledged as the parties' negotiated agreement as to
the reasonable fair market value of the equipment, contract analysis and
support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to this Agreement, considering the
nature and volume of the services required and the risks assumed by Business
Manager. Physician Group and Business Manager recognize and acknowledge that:
(i) Business Manager's administrative expertise will contribute significant
value to Physician Group's performance, (ii) Business Manager will incur
substantial costs and business risks in arranging for Physician Group's use of
the Office and in providing the equipment, support services, personnel,
marketing, office space, management, administration, and other items and
services that are the subject matter of this Agreement, and (iii) certain of
such costs and expenses can vary to a considerable degree according to the
extent of Physician Group's business and services. It is the intent of the
parties that the Management Fee reasonably compensate Business Manager for the
value to Physician Group of Business Manager's administrative expertise, given
the considerable business risk to Business Manager in providing the items and
services that are the subject of this Agreement.
Section 5.4 Working Capital. To assist Physician Group in
maintaining reasonable cash flow for the payment of Physician Group Expenses,
Business Manager may lend funds to the Physician Group or purchase, with
recourse to Physician Group for the amount of the purchase, all of any part of
the accounts receivable of Physician Group arising during any previous month by
transferring the consideration for the purchase into the Physician Group
Account. The consideration for the purchase shall be an amount equal to the
Net Revenue recorded for such previous month. Business Manager shall be
entitled to offset any sums due Business Manager under this Agreement against
the amount payable for the accounts receivable. Although Business Manager may
purchase and thereby become the owner of the accounts receivable of Physician
Group, in the event such purchase shall be ineffective for any reason,
Physician Group has granted a security interest in such accounts receivable
pursuant to Section 5.6 of this Agreement All collections in respect of such
accounts receivable purchased by Business Manager shall be received by Business
Manager as the agent of Physician Group and shall be endorsed to Business
Manager and deposited in a bank account at a bank designated and owned by
Business Manager. To the extent Physician Group comes into possession of any
payments in respect of such accounts receivable, Physician Group shall direct
such payments to Business Manager for deposit in bank accounts designated and
owned by Business Manager. Any sums lent by Business Manager to Physician
Group shall be secured by the security interest granted in Section 5.6 of the
Agreement and shall bear interest as set forth in clause (f) in the definition
of Office Expense in Article I of this Agreement.
Section 5.5 Dispute Regarding Fees.
(a) Any disputes regarding performance standards of the Business
Manager shall be resolved to the extent possible by good faith negotiation. To
that end, the parties agree that if Physician Group in good faith believes that
Business Manager has failed to perform its obligations, Physician Group shall
give Business Manager notice of the perceived failure. Business Manager and
Physician Group shall then negotiate the dispute in good
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faith, and if an agreement is reached, the parties shall implement the
resolution without further action.
(b) If the parties cannot reach a resolution within a reasonable
time, Physician Group shall, at its option, submit the dispute to mediation.
Mediation shall be conducted in Dallas, Texas, in accordance with the rules of
the National Health Lawyers Association Alternative Dispute Resolution Service,
and if the amount in dispute is $25,000 or less, the mediation shall be
binding.
(c) If the amount in dispute is greater than $25,000, or if the
mediation process fails to resolve the dispute, the dispute shall be submitted
by either party to binding arbitration as provided for in Section 7.8 of this
Agreement.
Section 5.6 Security Interest. The Physician Group hereby grants
to the Business Manager a security interest in all the Physician Group's
accounts receivable which may be created during the Term, for medical or other
services rendered by the Physician Group (the "Collateral"), to secure the
payment of all monetary obligations of the Physician Group to the Business
Manager arising under this Agreement. In the event of a default by Physician
Group under any provision in this Agreement, the Business Manager may, with or
without terminating this Agreement in accordance with Article VI, exercise all
rights and remedies afforded a secured party with respect to the Collateral
under the Uniform Commercial Code as enacted and in force in the State of
Texas. The Physician Group agrees to execute all financing statements or other
documents which may be necessary to perfect Business Manager's security
interest hereunder.
Section 5.7 Default Interest. If either party hereto should fail
to pay the other party hereto any sum payable when due hereunder, then such
defaulting party shall, without notice or demand, be liable to the
non-defaulting party for the payment of all such sums due hereunder with
interest thereon at the highest lawful rate permitted by applicable Legal
Requirements. The terms and provisions of this Section shall survive the
termination of this Agreement for any reason whatsoever and shall continue
until all such amounts, together with interest thereon are paid in full.
ARTICLE VI.
TERM AND TERMINATION
Section 6.1 Initial and Renewal Term. The Term of this Agreement
will be for an initial period of forty (40) years after the Effective Date, and
shall be automatically renewed for successive five (5) year periods thereafter,
provided that neither Business Manager nor Physician Group shall have given
notice of termination of this Agreement at least one hundred twenty (120) days
before the end of the initial term or any renewal term, or unless otherwise
terminated as provided in Section 6.2 of this Agreement.
Section 6.2 Termination.
(a) Termination By Business Manager for Cause. Business Manager
may terminate this Agreement upon the occurrence of any one of the following
events ("Physician Group Default") which shall be deemed to be "for cause":
(i) Physician Group's loss or suspension for more than ninety
(90) days of its Medicare or Medicaid provider number, or
Physician Group's restriction from treating beneficiaries
of the Medicare or Medicaid programs for more than ninety
(90) days;
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(ii) The revocation, suspension, cancellation or restriction
of any Physician licensed to practice medicine within the
State if, in the reasonable discretion of the Business
Manager, Physician Group will not be financially viable
after such revocation, suspension, cancellation or
restriction;
(iii) The dissolution of Physician Group or the filing of a
petition in voluntary bankruptcy, an assignment for the
benefit of creditors, or other action taken voluntarily
or involuntarily under any state or federal statute for
the protection of debtors;
(iv) Default by Physician Group in the performance of any of
its duties or obligations hereunder, and such default
continues for sixty (60) days after notice is given by
Business Manager of such default, provided, however, that
in the event such default is of a nature that it cannot,
with due diligence, be cured within sixty (60) days, it
shall not constitute a Physician Group Default, as
hereinafter defined, so long as Physician Group begins to
cure such default within sixty (60) days and thereafter
diligently pursues such cure to completion;
(v) Business Manager and Physician Group are unable to reach
an agreement on a new service agreement or basis for
compensation after the occurrence of an event described
in Section 6.2(e).
(b) Termination by Business Manager Without Cause. Business
Manager may terminate this Agreement at any such time or from time to time
without cause upon ninety (90) days written notice from Business Manager to
Physician Group.
(c) Termination By Physician Group. Physician Group may terminate
this Agreement, which shall be deemed to be "for cause", upon at least sixty
(60) days notice in the event that Business Manager defaults in the performance
of any of its material obligations hereunder and such default continues for at
least sixty (60) days after Business Manager receives notice of such default;
provided, however, that in the event that such default is of a nature that it
cannot, with due diligence, be cured within sixty (60) days, it shall not
constitute a Business Manager Default so long as Business Manager begins to
cure such default within sixty (60) days and thereafter diligently pursues such
cure to completion. The occurrence of the foregoing is herein called "Business
Manager Default". Termination by Physician Group hereunder shall require the
affirmative vote of 100% of the outstanding equity ownership interests in
Physician Group entitled to vote.
(d) Termination by Agreement. In the event Physician Group and
Business Manager shall mutually agree in writing, this Agreement may be
terminated on the date specified in such written agreement.
(e) Legislative, Regulatory or Administrative Change. In the event
there shall be a change in the Medicare or Medicaid statutes or any other Legal
Requirements or the adoption of new federal or state legislation, or a change
in any third party reimbursement system, any of which are reasonably likely to
materially and adversely affect the manner in which either party may perform or
be compensated for its services under this Agreement or which shall make this
Agreement unlawful, the parties shall immediately use their best efforts to
enter into a new service arrangement or basis for compensation for the services
furnished pursuant to this Agreement that complies with all Legal Requirements,
or policy and that approximates as closely as possible the economic position of
the parties prior to
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the change. If the parties are unable to reach a new agreement within a
reasonable time, then either party may submit the issue to arbitration pursuant
to Section 7.8 for the purpose of reaching an alternative arrangement that is
equitable under the circumstances.
Section 6.3 Effects of Termination. Upon termination of this
Agreement, as hereinabove provided, neither party shall have any further
obligations hereunder except for (i) obligations accruing prior to the date of
termination, including, without limitation, payment of the Management Fee
relating to services provided prior to the termination of this Agreement, (ii)
obligations, promises, or covenants set forth herein that are expressly made to
extend beyond the Term, including, without limitation, indemnities and
non-competition provisions, which provisions shall survive the expiration or
termination of this Agreement; (iii) the obligation of Physician Group to pay
to Business Manager all sums advanced or lent to Physician Group by Business
Manager pursuant to Section 5.4 of this Agreement, which obligations shall be
due and payable upon termination of this Agreement; and (iv) the obligations of
Physician Group described in Section 6.4. In effectuating the provisions of
this Section 6.3, Physician Group specifically acknowledges and agrees that
Business Manager shall continue to collect and receive on behalf of Physician
Group all cash collections from accounts receivable in existence at the time
this Agreement is terminated, it being understood that Business Manager has a
security interest in such accounts as provided in Section 5.6 of this Agreement
and that such cash collections will represent, in part, compensation to
Business Manager for management services already rendered and compensation on
accounts receivable purchased by Business Manager. Upon the expiration or
termination of this Agreement for any reason or cause whatsoever, Business
Manager shall surrender to Physician Group all books and records pertaining to
Physician Group's medical practice.
Section 6.4 Repurchase Obligation. Upon termination of this
Agreement by Business Manager as a result of Physician Group Default, Physician
Group shall:
(a) Purchase from Business Manager at book value the intangible
assets, deferred charges, and all other amounts on the books of the Business
Manager relating to this Agreement and the acquisition consummated pursuant to
that certain Stock Purchase Agreement of even date herewith by and between
Business Manager and the Stockholders of AEP Management Services, Inc., and
Doctors Billing Service, Inc., including amounts, if any, for the covenants
described in Section 4.9 above, as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect amortization or depreciation of the intangible assets, deferred
charges, or covenants;
(b) Purchase from Business Manager any real estate owned by
Business Manager and used as an Office at the greater of the appraised fair
market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and Physician Group, each selecting a duly qualified
appraiser, who in turn will agree on a third appraiser. The third appraiser
shall perform the appraisal which shall be binding on both parties. In the
event either party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other party, the appraiser selected by the
other party shall make the selection of the third party appraiser;
(c) Purchase at book value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office
and that relate solely to the performance of Business Manager's obligations
under this Agreement;
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(d) Assume all debt, and all contracts, payables, and leases that
are obligations of Business Manager and that relate principally to the
performance of Business Manager's obligations under this Agreement or the
properties leased or subleased by Business Manager; and
(e) Purchase from Business Manager at book value all of the
equipment owned by the Business Manager pursuant to this Agreement, including
all replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Agreement, and all other assets,
including inventory and supplies, tangibles and intangibles, set forth on the
books of the Business Manager as adjusted through the last day of the month
most recently ended prior to the date of such termination in accordance with
GAAP to reflect operations of the Office, depreciation, amortization, and other
adjustments of assets shown on the books of the Business Manager. Physician
Group acknowledges that certain assets listed above have been or may be pledged
as collateral for loans made by Business Manager.
Section 6.5 Repurchase Option. Upon termination of this
Agreement pursuant to Section 6.2(b), or Section 6.2(c) Physician Group shall
be released from the restrictive covenants in Section 4.9 and shall have the
option but not the obligation to do all or none of the following:
(a) Purchase from Business Manager any real estate owned by
Business Manager and used as an Office at the greater of the appraised fair
market value thereof or the then book value thereof. In the event of any
repurchase of real property, the appraised value shall be determined by
Business Manager and Physician Group, each selecting a duly qualified
appraiser, who in turn will agree on a third appraiser. The third appraiser
shall perform the appraisal which shall be binding on both parties. In the
event either party fails to select an appraiser within fifteen (15) days of the
selection of an appraiser by the other party, the appraiser selected by the
other party shall make the selection of the third party appraiser;
(b) Purchase at book value all improvements, additions, or
leasehold improvements that have been made by Business Manager at any Office
and that relate solely to the performance of Business Manager's obligations
under this Agreement;
(c) Assume all debt, and all contracts, payables, and leases that
are obligations of Business Manager and that related principally to the
performance of Business Manager's obligations under this Agreement or the
properties leased or subleased by Business Manager; and
(d) Purchase from Business Manager at book value all of the
equipment owned by Business Manager pursuant to this Agreement, including all
replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Agreement, and all other tangible
assets, including inventory and supplies, set forth on the books of the
Business Manager as adjusted through the last day of the month most recently
ended prior to the date of such termination in accordance with GAAP to reflect
operations of the Office, depreciation, amortization, and other adjustments of
assets shown on the books of the Business Manager.
Physician Group shall provide notice to Business Manager of its intent to
exercise the option above described at the same time that Physician Group
provides notice to Business Manager of Physician Group's election to terminate
this Agreement for cause. Physician
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<PAGE> 29
Group acknowledges that certain assets listed above have been or may be pledged
as collateral for loans made to Business Manager.
Section 6.6 Closing of Repurchase. If Physician Group purchases
the assets pursuant to Section 6.4 or 6.5, Physician Group shall pay cash for
the repurchased assets. The amount of the purchase price shall be reduced by
the amount of debt and liabilities of Business Manager, if any, assumed by
Physician Group, which shall be offset against the purchase price. Physician
Group and any Physician associated with Physician Group shall execute such
documents as may be required to assume the liabilities set forth in Section
6.4(d) or Section 6.5(c) and to remove Business Manager from any liability with
respect to such repurchased asset and with respect to any property leased or
subleased by Business Manager. The closing date for the repurchase shall be
determined by the parties, but shall in no event occur later than one hundred
eighty (180) days from the date of the notice of termination. The termination
of this Agreement shall become effective upon the closing of the sale of the
assets if the assets are purchased, and all parties shall be released from any
restrictive covenants provided for in Section 3.15 or Section 4.9 on the
closing date. If Physician Group chooses not to purchase the assets pursuant
to Section 6.5, the termination shall be effective as of the notice date given
by Physician Group under Section 6.2(b), at which time the parties shall be
released from the restrictive covenants in Section 3.15 and Section 4.9. From
and after any termination, each party shall provide the other party with
reasonable access of the books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations that may be
required of it.
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Physician Group Indemnification. (a) The Physician
Group hereby agrees to indemnify, defend, and hold harmless the Business
Manager, and each of the Business Manager's officers, directors, shareholders,
agents and employees, from and against any and all claims, demands, losses,
liabilities, actions, lawsuits and other proceedings, judgments and awards, and
costs and expenses (including reasonable attorneys' fees), arising directly or
indirectly, in whole or in part, out of any matter related to any breach by the
Physician Group of this Agreement including but not limited to the negligence
of the Physician Group or any acts or omissions by the Physician Group in its
performance of this Agreement, excluding the professional acts or omissions of
the Physician Group to the extent that such is not paid or covered by the
proceeds of insurance. The provisions of this Section 7.1 shall survive
termination or expiration of this Agreement. The Physician Group shall
immediately notify the Business Manager of any lawsuits or actions, or any
threat thereof, that may become known to the Physician Group that might
adversely affect any interest of the Physician Group or the Business Manager
whatsoever.
(b) The indemnity set forth herein shall be deemed to include an
obligation and on the part of the indemnifying party to appear on behalf of the
indemnified party in any and all proceedings involving a claim or cause of
action covered by such indemnity and to defend the indemnified party against
such claim or cause of action, all at the indemnifying party's cost; provided,
however, at the option of any party indemnified hereunder, such party shall
have the right to appear on its behalf, employ its own legal counsel and defend
any claim or cause of action indemnified in this Section all at indemnifying
party's cost.
Section 7.2 Business Manager Indemnification. (a) The Business
Manager hereby agrees to indemnify, defend and hold harmless the Physician
Group, and each of the Physician Group's officers, managers, members, agents
and employees, from and
23
<PAGE> 30
against any and all claims, demands, losses, liabilities, actions, lawsuits and
other proceedings, judgments and awards, and costs and expenses (including
reasonable attorneys' fees), arising directly or indirectly, in whole or in
part, out of any matter related to any breach by Business Manager of this
Agreement or any acts or omissions by Business Manager in its performance of
this Agreement, including but not limited to the negligence of the Business
Manager or any acts or omissions of the Business Manager, to the extent that
such is not paid or covered by the proceeds of insurance. The provisions of
this Section 7.2 shall survive termination or expiration of this Agreement.
Notwithstanding the foregoing, the Business Manager shall not indemnify the
Physician Group for the acts, or failure to act, by personnel who perform
services under the direct supervision or control of any Physician. The
Business Manager shall immediately notify the Physician Group of any lawsuits
or actions, or any threat thereof, that may become known to the Business
Manager that might adversely affect any interest of the Business Manager or the
Physician Group whatsoever.
(b) The indemnity set forth herein shall be deemed to include an
obligation on the part of the indemnifying party to appear on behalf of the
indemnified party in any and all proceedings involving a claim or cause of
action covered by such indemnity and to defend the indemnified party against
such claim or cause of action, all at the indemnifying party's cost; provided,
however, at the option of any party indemnified hereunder, such party shall
have the right to appear on its behalf, employ its own legal counsel and defend
any claim or cause of action indemnified in this Section all at indemnifying
party's cost.
Section 7.3 Administrative Services Only. Nothing in this
Agreement is intended or shall be construed to allow Business Manager to
exercise control or direction over the manner or method by which Physician
Group or its Physicians perform Medical Services or other professional health
care services. The rendition of all Medical Services, including, but not
limited to the prescription or administration of medicine and drugs shall be
the sole responsibility of Physician Group and its Physicians, and Business
Manager shall not interfere in any manner or to any extent therewith. Nothing
contained in this Agreement shall be construed to permit Business Manager to
engage in the practice of medicine, it being the sole intention of the parties
hereto that the services to be rendered to Physician Group by Business Manager
are solely for the purpose of providing non-medical management and
administrative services to Physician Group so as to enable Physician Group to
devote its full time and energies to the professional conduct of its medical
practice and provision of Medical Services to its patients and not to
administration, or practice management.
Section 7.4 Status of Contractor. It is expressly acknowledged
that the parties hereto are "independent contractors," and nothing in this
Agreement is intended and nothing shall be construed to create an
employer/employee, partnership, or joint venture relationship, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this Agreement;
provided always that the services to be provided hereunder shall be furnished
in a manner consistent with the standards governing such services and the
provisions of this Agreement. Each party understands and agrees that (i) the
other will not be treated as an employee for federal tax purposes, (ii) neither
will withhold on behalf of the other any sums for income tax, unemployment
insurance, social security, or any other withholding pursuant to any law or
requirement of any governmental body or make available any of the benefits
afforded to its employees, (iii) all of such payments, withholdings, and
benefits, if any, are the sole responsibility of the party incurring the
liability, and (iv) each will indemnify and hold the other harmless from any
and all loss or liability arising with respect to such payments, withholdings,
and benefits, if any.
24
<PAGE> 31
Section 7.5 Notices. Any notice, demand, or communication
required, permitted, or desired to be given hereunder shall be deemed
effectively given when in writing and personally delivered or mailed by prepaid
certified or registered mail, return receipt requested, addressed as follows:
Physician Group: Emergency Physicians of Northern California, Inc.
1717 Main Street
Suite 5200
Dallas, Texas 75201
Attention: Mr. William F. Miller, III
with a copy to: Stephen C. Johnson, Esq.,
Gibson, Dunn & Crutcher LLP
1717 Main Street
Suite 5400
Dallas, Texas 75201
Business Manager: EmCare, Inc.
1717 Main Street
Suite 5200
Dallas, Texas 75201
Attention: Mr. William F. Miller, III
with a copy to: Stephen C. Johnson, Esq.,
Gibson, Dunn & Crutcher LLP
1717 Main Street
Suite 5400
Dallas, Texas 75201
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
Section 7.6 Governing Law. This Agreement shall be governed by
the laws of the State of Texas applicable to agreements to be performed wholly
within the state. Texas law was chosen by the parties after negotiation to
govern interpretation of this Agreement because the principal offices of
Business Manager are located in Dallas County, Texas.
Section 7.7 Assignment. Except as may be herein specifically
provided to the contrary, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors, and assigns; provided, however, that Physician Group may not assign
this Agreement without the prior written consent of Business Manager, which
consent may be withheld. The sale, transfer, pledge, or assignment of any of
the equity ownership interests held by any equity owner of Physician Group or
the issuance by Physician Group of voting equity interests to any other person,
or any combination of such transactions within a period of one (1) year, such
that the existing equity owners of Physician Group fail to maintain a majority
of the voting interests in Physician Group shall be deemed an attempted
assignment by Physician Group, and shall be null and void unless consented to
in writing by Business Manager prior to any such transfer or issuance. Any
breach of its provision, whether or not void or voidable, shall constitute a
material breach of this Agreement, and in the event of such breach, Business
Manager may terminate this Agreement upon twenty-four (24) hours notice to
Physician Group. The parties agree that Business Manager may transfer its
rights and
25
<PAGE> 32
obligations under this Agreement to any Affiliate of Business Manager for
performance of this Agreement. In addition, Business Manager or the transferee
shall have the right to (i) assign its rights and obligations hereunder to any
third party and (ii) collaterally assign its interest in this Agreement and its
right to collect Management Fees hereunder to any financial institution or
other third party without the consent of Physician Group.
Section 7.8 Arbitration. The parties shall use good faith
negotiation to resolve any controversy, dispute or disagreement arising out of
or relating to this Agreement or the breach of this Agreement. Any matter not
resolved by negotiation shall be submitted to binding arbitration pursuant to
this Section; provided however, that the terms and provisions of this Section
shall not preclude any party hereto from seeking, or a court of competent
jurisdiction from granting, a temporary restraining order, temporary injunction
or other equitable relief for any breach of (i) any non-competition or
confidentiality covenant in this Agreement or in any employment or other
agreement with any Physician or (ii) any duty, obligation, covenant,
representation or warranty set forth in this Agreement, the breach of which may
cause irreparable harm or damage.
(a) Arbitrators. In the event any claim or claims is brought by
Business Manager or Physician Group, or there is any other claim, controversy,
dispute or disagreement arising out of or relating to this Agreement, and the
parties are unable to resolve such claim, controversy, dispute or disagreement
within thirty (30) days after notice is first delivered pursuant to the other
party, the parties agree to each select one arbitrator to hear and decide all
such claims under this Section 7.8. The two arbitrators so chosen shall then
select a third arbitrator who is experienced in the matter or action that is
subject to such arbitration. If such matter or action involves health care
issues, then the third arbitrator shall have such qualifications as would
satisfy the requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators chosen shall be impartial
and independent of all parties to this Agreement. If either of the parties
fails to select an arbitrator within twenty days after the end of such
thirty-day period, or if the arbitrators chosen fail to select a third
arbitrator within twenty days, then any party may in writing request the judge
of the United States District Court for the Northern District of Texas senior
in term of service to appoint the arbitrator or arbitrators and, subject to
this Section 7.8, such arbitrators shall hear all arbitration matters arising
under this Section 7.8.
(b) Applicable Rules. Each arbitration hearing shall be held at a
place in Dallas, Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association to the extent such rules do not
conflict with the terms of this Section. The decision of a majority of the
arbitrators shall be reduced to writing and shall be binding on the parties.
Judgment upon the award(s) rendered by a majority of the arbitrators may be
entered and execution had in any court of competent jurisdiction or application
may be made to such court for a judicial acceptance of the award and an order
of enforcement. The charges and expenses of the arbitrators shall be shared
equally by the parties to the hearing. The arbitration shall commence within
ten (10) days after the arbitrators are selected in accordance with the
provisions of this Section 7.8. In fulfilling their duties with respect to
determining the amount of any loss or claim, the arbitrators may consider such
matters as, in the opinion of the arbitrators, are necessary or helpful to make
a proper valuation. The arbitrators may consult with and engage disinterested
third parties to advise the arbitrators. The arbitrators shall not add any
interest factor reflecting the time value of money to the amount of any loss
and shall not award any punitive damages. If any of the arbitrators selected
hereunder should die, resign or be unable to perform his or her duties
hereunder, the remaining arbitrators or such senior judge (or such judge's
successor) shall select a replacement arbitrator. The procedure set forth in
this
26
<PAGE> 33
Section 7.8 for selecting the arbitrators shall be followed from time to time
as necessary. As to any determination of the amount of any loss, or as to the
resolution of any other claim, controversy, dispute or disagreement, that under
the terms hereof is made subject to arbitration, no lawsuit based on such
claimed loss or such resolution shall be instituted by any of the parties to
this Agreement, other than to compel arbitration proceedings or enforce the
award of a majority of the arbitrators. All privileges under Texas and federal
law, including attorney-client and work-product privileges, shall be preserved
and protected to the same extent that such privileges would be protected in a
federal court proceeding applying Texas law.
Section 7.9 Waiver of Breach. The waiver by either party of a
breach or violation of any provision of this Agreement shall not operate as, or
be construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
Section 7.10 Enforcement. In the event either party resorts to
legal action to enforce or interpret any provision of this Agreement, the
prevailing party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
Section 7.11 Gender and Number. Whenever the context of this
Agreement requires, the gender of all words herein shall include the masculine,
feminine, and neuter, and the number of all words herein shall include the
singular and plural.
Section 7.12 Additional Assurances. Except as may be herein
specifically provided to the contrary, the provisions of this Agreement shall
be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall
execute such additional instruments and take such additional acts as are
reasonable and as the requesting party may deem necessary to effectuate this
Agreement.
Section 7.13 Consents, Approvals, and Exercise of Discretion.
Whenever this Agreement requires any consent or approval to be given by either
party, or either party must or may exercise discretion, and except where
specifically set forth herein to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that
such discretion shall be reasonably exercised.
Section 7.14 Force Majeure. Neither party shall be liable or
deemed to be in default for any delay or failure in performance under this
Agreement or other interruption of service deemed to result, directly or
indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's
employees, or any other similar cause beyond the reasonable control of either
party unless such delay or failure in performance is expressly addressed
elsewhere in this Agreement.
Section 7.15 Severability. The parties hereto have negotiated and
prepared the terms of this Agreement in good faith with the intent that each
and every one of the terms, covenants and conditions herein be binding upon and
inure to the benefit of the respective parties. Accordingly, if any one or
more of the terms, provisions, promises, covenants or conditions of this
Agreement or the application thereof to any person or circumstance shall be
adjudged to any extent invalid, unenforceable, void or voidable for any reason
whatsoever by a court of competent jurisdiction or an arbitration tribunal,
such provision shall be as narrowly construed as possible, and each and all of
the remaining terms, provisions, promises, covenants and conditions of this
Agreement or their application to other persons or circumstances shall not be
affected thereby and shall be valid and
27
<PAGE> 34
enforceable to the fullest extent permitted by law. To the extent this
Agreement is in violation of applicable Legal Requirements, then the parties
agree to negotiate in good faith to amend the Agreement, to the extent possible
consistent with its purposes, to conform to all Legal Requirements.
Section 7.16 Divisions and Headings. The divisions of this
Agreement into articles, sections, and subsections and the use of captions and
headings in connection therewith is solely for convenience and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 7.17 Amendments and Agreement Execution. This Agreement
and amendments hereto shall be in writing and may be executed in multiple
copies. Each multiple copy shall be deemed an original, but all multiple
copies together shall constitute one and the same instrument.
Section 7.18 Entire Agreement. With respect to the subject matter
of this Agreement, this Agreement supersedes all previous contracts and
constitutes the entire agreement between the parties. Neither party shall be
entitled to benefits other than those specified herein. No prior oral
statements or contemporaneous negotiations or understandings or prior written
material not specifically incorporated herein shall be of any force and effect,
and no changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to
become effective on the date stipulated in such amendment(s). The parties
specifically acknowledge that, in entering into and executing this Agreement,
the parties rely solely upon the representations and agreements contained in
this Agreement and no others.
[SIGNATURES INTENTIONALLY APPEAR ON NEXT PAGE]
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<PAGE> 35
IN WITNESS WHEREOF, Physician Group and Business Manager have caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
PHYSICIAN GROUP: EMERGENCY PHYSICIANS OF NORTHERN
CALIFORNIA, INC., a professional medical
corporation
By: /s/ ROBERT V. VIOLANTE, M.D.
-------------------------------------
Name: Robert V. Violante, M.D.
-----------------------------------
Title: President
----------------------------------
BUSINESS MANAGER: EMCARE, INC., a Delaware corporation
By: /s/ WILLIAM F. MILLER, III
-------------------------------------
Name: William F. Miller, III
-----------------------------------
Title: President
----------------------------------
29
<PAGE> 1
EXHIBIT 10.33
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
EMCARE, INC.
A DELAWARE CORPORATION
AND
GOULD PHYSICIANS, P.A.
A TEXAS PROFESSIONAL ASSOCIATION
EFFECTIVE NOVEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS ...................................................... 2
1.1. Adjustments .................................................. 2
1.2. Affiliate .................................................... 2
1.3. Agreement .................................................... 2
1.4. Business Manager ............................................. 2
1.5. Business Manager Default ..................................... 2
1.6. Confidential Information ..................................... 2
1.7. Covenant Not To Compete. ..................................... 2
1.8. Effective Date ............................................... 3
1.9. Emergency Department Services. ............................... 3
1.10. GAAP ......................................................... 3
1.11. Governmental Authority ....................................... 3
1.12. Gross Revenue ............................................... 3
1.13. Legal Requirements .......................................... 3
1.14. Management Fee .............................................. 3
1.15. Management Services ......................................... 3
1.16. Medical Assets .............................................. 4
1.17. Medical Contracts ............................................ 4
1.18. Medical Contract Client . .................................... 4
1.19. Net Revenue ................................................. 4
1.20. Non-Compete Period . ......................................... 4
1.21. [Office ..................................................... 4
1.22. Office Expense . ............................................. 4
1.23. Operating Year .............................................. 4
1.24. Physician ................................................... 4
1.25. Physician Group ............................................. 5
1.26. Physician Group Account ..................................... 5
1.27. Physician Group Default ..................................... 5
1.28. Practice Territory .......................................... 5
1.29. Representatives ............................................. 5
1.30. State ....................................................... 5
1.31. Term ........................................................ 5
ARTICLE 2. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER .................... 5
2.1. Appointment. ................................................. 5
2.2. Authority. ................................................... 5
2.3. Patient Referrals. ........................................... 6
2.4. Practice of Medicine. ........................................ 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 3. COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER 6
3.1. [Office. ..................................................... 6
3.1.1. Procurement of Office. ............................... 6
3.1.2. Equipment for Office. ................................ 6
3.1.3. Repair and Maintenance of Office. .................... 6
3.2. Support Services. ............................................ 6
3.3. Quality Assurance, Risk Management, and Utilization Review. .. 7
3.4. Licenses and Permits. ........................................ 7
3.5. Business Manager Personnel. .................................. 7
3.6. Contract Negotiations. ....................................... 7
3.7. Billing and Collection. ...................................... 7
3.8. Physician Group Account. ..................................... 8
3.9. Fiscal Matters. .............................................. 9
3.9.1. Accounting and Financial Records. .................... 9
3.9.2. Sales and Use Taxes. ................................. 9
3.10. Reports and Records . ........................................ 9
3.10.1. Medical Records. .................................... 10
3.10.2. Other Reports and Records. .......................... 10
3.11. Recruitment & Review of Physician Group Physicians . ......... 10
3.12. Confidential and Proprietary Information . ................... 10
3.12.1. Practice Statistics. ................................ 11
3.13. Business Manager's Insurance . ............................... 11
3.14. Physician Group Insurance . .................................. 11
3.15. No Warranty . ................................................ 12
3.16. Additional Obligations of Business Manager . ................. 12
ARTICLE 4. COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP 12
4.1. Organization and Operation. .................................. 12
4.2. Physician Group Personnel. ................................... 12
4.2.1. Physician Personnel. ................................. 12
4.2.2. Non-Physician Health Care Personnel. ................. 13
4.3. Professional Standards. ...................................... 13
4.4. Emergency Department Services. ............................... 13
4.5. Exclusive Authority of the Physician Group. .................. 13
4.6. Peer Review and Quality Assurance. ........................... 14
4.7. Physician Group's Insurance. ................................. 14
4.8. Confidential and Proprietary Information. .................... 14
4.9. Non-competition. ............................................. 15
4.9.1. Covenant Not to Compete. ............................. 15
4.9.2. Passive Investments. ................................. 16
4.9.3. Reformation. ......................................... 16
4.9.4. Ancillary Agreement. ................................. 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
4.9.5. Extension of Non-Compete Period. ..................... 17
ARTICLE 5. FINANCIAL ARRANGEMENT ............................................ 17
5.1. Management Fee. .............................................. 17
5.2. Year-End Adjustment to Management Fee. ....................... 17
5.3. Reasonable Value. ............................................ 17
5.4. Working Capital. ............................................. 18
5.5. Dispute Regarding Fees. ...................................... 18
5.5.1. Good Faith Negotiations. ............................. 18
5.5.2. Mediation. ........................................... 18
5.5.3. Arbitration. ......................................... 18
5.6. Security Interest. ........................................... 18
5.7. Default Interest. ............................................ 19
ARTICLE 6. TERM AND TERMINATION ............................................. 19
6.1. Initial and Renewal Term. .................................... 19
6.2. Termination. ................................................. 19
6.2.1. Termination By Business Manager for Cause. ........... 19
6.2.2. Termination by Business Manager Without Cause. ....... 20
6.2.3. Termination By Physician Group. ...................... 20
6.2.4. Termination by Agreement. ............................ 20
6.2.5. Legislative, Regulatory or Administrative Change. .... 20
6.3. Effects of Termination. ...................................... 21
6.4. Repurchase Obligation. ....................................... 21
6.4.1. Intangible Assets, Deferred Charges, Etc. ............ 21
6.4.2. Real Estate. ......................................... 21
6.4.3. Office Improvements. ................................. 22
6.4.4. Assumption of Debts. ................................. 22
6.4.5. Equipment. ........................................... 22
6.5. Physician Group Rights. ...................................... 22
6.6. Closing of Repurchase. ....................................... 22
ARTICLE 7. MISCELLANEOUS .................................................... 23
7.1. Physician Group Indemnification. ............................. 23
7.1.1. Procedure for Indemnification. ....................... 23
7.2. Business Manager Indemnification. ............................ 23
7.2.1. Procedure for Indemnification. ....................... 24
7.3. Administrative Services Only. ................................ 24
7.4. Status of Contractor. ........................................ 24
7.5. Notices. ..................................................... 24
7.6. Governing Law. ............................................... 25
7.7. Assignment. .................................................. 25
7.8. Arbitration. ................................................. 25
7.8.1. Arbitrators. ......................................... 26
7.8.2. Applicable Rules. .................................... 26
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
7.9. Waiver of Breach. ............................................ 27
7.10. Enforcement . ................................................ 27
7.11. Gender and Number . .......................................... 27
7.12. Additional Assurances . ...................................... 27
7.13. Consents, Approvals, and Exercise of Discretion . ............ 27
7.14. Force Majeure . .............................................. 27
7.15. Severability . ............................................... 27
7.16. Divisions and Headings . ..................................... 28
7.17. Amendments and Agreement Execution . ......................... 28
7.18. Entire Agreement . ........................................... 28
</TABLE>
iv
<PAGE> 6
INDEX OF SCHEDULES
SCHEDULE 4.1 ORGANIZATION AND OPERATION
i
<PAGE> 7
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT ("Agreement") is made and entered into
effective as of November 1, 1996 (the "Effective Date"), by and between EmCare,
Inc., a Delaware corporation, ("Business Manager"), and Gould Physicians, P.A.,
a Texas professional association ("Physician Group").
AGREEMENT RECITALS
This Agreement is made with reference to the following facts:
A. Physician Group is a validly existing Texas professional association,
formed for and engaged in the conduct of a medical practice and the provision
of Emergency Department Services through individual physicians who are licensed
to practice medicine in the State of Texas and who are employed or otherwise
retained by Physician Group.
B. Business Manager is a duly formed and validly existing Delaware
corporation, which is in the business of managing the non-medical aspects of
physician practices.
C. Physician Group desires to focus its energies, expertise and time on
the practice of medicine and on the delivery of Emergency Department Services
to patients, and to accomplish this goal it desires to delegate the
increasingly complex business functions of its medical practice to persons with
business expertise.
D. Physician Group wishes to engage Business Manager to provide such
management, administrative and business services as are necessary and
appropriate for the day-to-day administration of the non-medical aspects of
Physician Group's medical practice in the Practice Territory, and Business
Manager desires to provide such services all upon the terms and conditions
hereinafter set forth.
E. Physician Group and Business Manager have determined a fair market
value for the services to be rendered by Business Manager, and based on this
fair market value, desire to enter into this Agreement so that each party to
this Agreement may devote its skills and expertise to the appropriate
responsibilities and functions set forth herein.
F. Business Manager is willing to commit significant resources to
Physician Group based upon execution and delivery of this Agreement by
Physician Group.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
<PAGE> 8
ARTICLE 1.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings ascribed thereto, unless otherwise clearly required by the context in
which such term is used:
1.1. AFFILIATE shall mean any person or entity that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with another person or entity. The term "control" shall mean
the ownership or the power to vote twenty-five percent (25%) or more of the
outstanding voting securities or interests of such other person.
1.2. AGREEMENT shall mean this Agreement by and between Physician Group and
Business Manager and any amendments to this Agreement.
1.3. BUSINESS MANAGER shall mean EmCare, Inc., a Delaware corporation, or
any entity that succeeds to the interests of EmCare, Inc. and to whom the
obligations of Business Manager are assigned and transferred
1.4. BUSINESS MANAGER DEFAULT shall have the meaning ascribed to it in
SECTION 6.2.4.
.
1.5. CONFIDENTIAL INFORMATION shall mean any information of Business
Manager or Physician Group, as appropriate (whether written or oral), including
all business management or economic studies, patient lists, proprietary forms,
proprietary business or management methods, marketing data, fee schedules, or
trade secrets of the Business Manager or of Physician Group, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Agreement.
Confidential Information shall also include the terms and provisions of this
Agreement and any transaction or document executed by the parties pursuant to
this Agreement. Confidential Information does not include any information that
the receiving party can establish (i) is or becomes generally available to and
known by the public or medical community (other than as a result of an
unpermitted disclosure directly or indirectly by the receiving party or its
Affiliates, advisors, or Representatives); (ii) is or becomes available to the
receiving party on a non-confidential basis from a source other than the
furnishing party or its Affiliates or Representatives, provided that such
source is not and was not bound by a confidentiality agreement with or other
obligation of secrecy to the furnishing party of which the receiving party has
knowledge; or (iii) has already been or is hereafter independently acquired or
developed by the receiving party without violating any confidentiality
agreement with or other obligation of secrecy to the furnishing party.
1.6. COVENANT NOT TO COMPETE shall mean, with respect to the Physician
Group, the covenants contained in SECTION 4.9 of the Agreement.
1.7. EFFECTIVE DATE shall mean the date of this Agreement as set forth in
the introductory paragraph of this Agreement.
1.8. EMERGENCY DEPARTMENT SERVICES shall mean all services required in
connection with the operation of an emergency department of a health care
facility, including but not limited
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to the staffing and scheduling of continuous 24-hour emergency physician
coverage, the establishment of a schedule of usual and customary fees and the
administration of such schedule, the maintenance of medical records that
adequately reflect the quality of care rendered and instructions given to
patients, and maintaining within such emergency department the standards of
professional practice as set forth in the medical staff by-laws, rules, and
regulations of the health care facility and in accordance with the ethical and
professional standards of the Joint Commission on Accreditation of Healthcare
Organizations.
1.9. GAAP shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination. For
purposes of this Agreement, GAAP shall be applied on an accrual basis in a
manner consistent with the historic practices of the person to which the term
applies.
1.10. GOVERNMENTAL AUTHORITY shall mean the United States, the State, and
any political or other subdivision of any of the foregoing, and any agency,
department, commission, board, bureau, court or instrumentality of any of them
which now or hereafter has jurisdiction over the Business Manager, the
performance of Emergency Department Management Services, the Physician Group or
the performance of Emergency Department Services by the Physician Group.
1.11. GROSS REVENUE in any respect of any period shall mean all revenues,
receipts and income of the Physician Group during such period, as determined by
GAAP.
1.12. LEGAL REQUIREMENTS shall mean any law, ordinance, order, rule or
regulation of any Governmental Authority.
1.13. MANAGEMENT FEE in respect of any period shall mean a certain
percentage of Gross Revenue as determined annually by Business Manager.
1.14. MANAGEMENT SERVICES shall mean the business, administrative, and
management services to be provided to Physician Group by Business Manager,
including, without limitation, the administration and performance of all
services required under the Medical Contracts (other than the performance of
Emergency Department Services), the provision of supplies, support services,
non-medical personnel, any necessary office space, management, administration,
financial recordkeeping and reporting, and other business office services.
1.15. MEDICAL ASSETS shall mean Physician Group's right, title and
interest in and to (i) any drugs, pharmaceuticals, products, substances, items
or devices whose purchase, possession, maintenance, administration,
prescription or security requires the authorization or order of a licensed
health care provider or requires a permit, registration, certification or any
other governmental authorization held by a licensed health care provider as
specified under any Legal Requirement, (ii) any records of identity, diagnosis,
evaluation or treatment of patients, (iii) any
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insurance policies covering or relating to medical malpractice, (iv) any
franchises, licenses, permits, certificates, approvals and other governmental
authorizations necessary or desirable to own and operate any of the other
Medical Assets, and (v) any contract or agreement that requires performance by
a licensed health care provider under any Legal Requirement.
1.16. MEDICAL CONTRACTS shall mean (I) __________________
___________________________ and (ii) any and all other contracts now or
hereafter entered into by Physician Group providing for the provision of
Emergency Department Services and administrative services related thereto, and
any and all amendments, restatements, extensions, substitutions and
modifications of any of the foregoing described agreements.
1.17. MEDICAL CONTRACT CLIENT shall mean any hospital, clinic, or other
location where Physician Group provides Emergency Department Services pursuant
to a Medical Contract.
1.18. NON-COMPETE PERIOD. shall mean the Term of the Agreement and a
period of five (5) years from the date the Agreement is terminated, other than
if terminated by Physician Group for cause.
1.20. [OFFICE shall mean any office space, clinic, facility, including
satellite facilities, that Business Manager shall own or lease or otherwise
procure for the use of Physician Group.]
1.20. OFFICE EXPENSE shall mean any and all expenses paid by Business
Manager pursuant to this Agreement (including the Management Fee) in order to
perform the services of Business Manager required under this Agreement, all of
which shall be paid from funds held in the Physician Group Account.
1.21. OPERATING YEAR shall mean each twelve (12) month period during the
Term commencing on January 1 and ending on December 31, except that the first
Operating Year shall be that period commencing on the Effective Date and ending
on the next succeeding December 31. In the event that this Agreement shall
terminate on a date other than December 31, the last Operating Year hereunder
shall end on the date of termination.
1.22. PHYSICIAN shall mean each individually licensed physician who is
employed or otherwise retained by or associated with Physician Group, each of
whom shall meet at all times the qualifications described in SECTION 4.2. and
SECTION 4.3..
1.23. PHYSICIAN GROUP shall mean Gould Physicians, P.A., a Texas
professional association.
1.24. PHYSICIAN GROUP ACCOUNT shall have the meaning ascribed to it in
SECTION 3.7. of this Agreement.
1.25. PHYSICIAN GROUP DEFAULT shall have the meaning ascribed to it in
SECTION 6.2.4..
1.26. REPRESENTATIVES shall mean a party's officers, directors, employees,
or other agents, representatives or advisors.
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1.27. STATE shall mean the State of Texas.
1.28. TERM shall mean the initial and any renewal periods of duration of
this Agreement as described in SECTION 6.1..
ARTICLE 2.
APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
2.1. APPOINTMENT. Physician Group hereby appoints Business Manager as its
sole and exclusive agent for the management, and administration of the business
functions and business affairs of Physician Group, and Business Manager hereby
accepts such appointment, subject at all times to the provisions of this
Agreement.
2.2. AUTHORITY. Consistent with the provisions of this Agreement,
Business Manager shall have the responsibility and commensurate authority to
provide Management Services to Physician Group. Subject to the terms and
conditions of this Agreement, Business Manager is hereby expressly authorized
to provide the Management Services in any reasonable manner Business Manager
deems appropriate to meet the day-to-day requirements of the business functions
of Physician Group. Moreover, Business Manager, acting alone and without the
joinder of Physician Group or any other party, shall have the sole and
exclusive authority to sell, transfer or encumber all or any part of the assets
(other than Medical Assets) of the Physician Group. Subject to the provisions
of this Agreement, Business Manager is also expressly authorized to negotiate
and execute on behalf of Physician Group contracts that do not relate to the
provision of Emergency Department Emergency Department Services. The parties
acknowledge and agree that Physician Group, through its Physicians, shall be
responsible for and shall have complete authority, responsibility, supervision,
and control over the provision of all Emergency Department Services and other
professional health care services performed for patients, and that all
diagnoses, treatments, procedures, and other professional health care services
shall be provided and performed exclusively by or under the supervision of
Physicians. Business Manager shall have and exercise absolutely no control or
supervision over the provision of Emergency Department Services.
2.3. PATIENT REFERRALS. Business Manager and Physician Group agree that
the benefits to Physician Group hereunder do not require, are not payment for,
and are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business
Manager to patients of Physician Group in any facility, laboratory, or health
care operation controlled, managed, or operated by Business Manager.
2.4. PRACTICE OF MEDICINE. The parties acknowledge that Business Manager
is not authorized or qualified to engage in any activity that may be construed
or deemed to constitute the practice of medicine. To the extent any act or
service herein required by Business Manager should be construed to constitute
the practice of medicine by any Governmental Authority, the requirement to
perform that act or service by Business Manager shall be deemed waived and
unenforceable.
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ARTICLE 3
COVENANTS AND RESPONSIBILITIES CONCERNING BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services as
are necessary and appropriate for the day-to-day administration of the business
aspects of Physician Group's operations, including without limitation those set
forth in this ARTICLE 3. in accordance with all Legal Requirements.
3.3. [OFFICE.
3.1.1. PROCUREMENT OF OFFICE. To the extent deemed necessary and
appropriate by Business Manager, in its sole discretion, taking into
consideration the professional concerns of Physician Group, Business
Manager shall lease, acquire, or otherwise procure an Office in a
location or locations reasonably acceptable to Physician Group.
3.1.2. EQUIPMENT FOR OFFICE. Business Manager shall provide all
non-medical equipment, fixtures, office supplies, furniture and
furnishings deemed reasonably necessary by Business Manager for the
operation of the Office and reasonably necessary for the provision of
Emergency Department Services.
3.1.3. REPAIR AND MAINTENANCE OF OFFICE. Business Manager shall be
responsible for the repair and maintenance of the Office, consistent with
Business Manager's responsibilities under the terms of any lease or other
use arrangement, and for the repair, maintenance, and replacement of all
equipment other than such repairs, maintenance and replacement
necessitated by the negligence or willful misconduct of Physician Group,
its Physicians or other personnel employed by Physician Group.]
3.2. SUPPORT SERVICES. Business Manager shall provide or arrange for all
printing, stationery, forms, postage, duplication or photocopying services, and
other support services as are reasonably necessary and appropriate for the
provision of services by Physician Group pursuant to the Medical Contracts.
3.3. QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW. Business
Manager shall assist Physician Group and the various hospitals and other
parties to the Medical Contracts in the implementation of procedures to ensure
the consistency, quality, appropriateness, and medical necessity of Emergency
Department Services provided by Physician Group, and shall provide
administrative support for Physician Group's overall quality assurance, risk
management, and utilization review programs. Business Manager shall perform
these tasks in a manner to ensure the confidentiality and non-discoverability
of these program actions to the fullest extent allowable under state and
federal law.
3.4.LICENSES AND PERMITS. Business Manager shall, on behalf of and in the
name of Physician Group, apply for and use reasonable efforts to obtain and
maintain all licenses and regulatory permits required by any Legal Requirements
for or in connection with the operation of
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Physician Group, other than those relating to the practice of medicine or the
administration of drugs by Physicians retained by or associated with Physician
Group.
3.5. BUSINESS MANAGER PERSONNEL. Business Manager shall employ or
otherwise retain any and all personnel that Business Manager deems reasonably
necessary and appropriate for Business Manager's performance of its duties and
obligations under this Agreement.
3.6. CONTRACT NEGOTIATIONS. Business Manager shall negotiate, either
directly or on Physician Group's behalf, as appropriate, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
Physician Group's provision of Emergency Department Services, including, but
not limited to, Medical Contracts. Business Manager shall commit reasonable
resources to pursue, negotiate and maintain managed care contracts on behalf of
Physician Group. Business Manager shall advise Physician Group with respect to
the economic impact of any such third party contracts, including providing
marketing advice and consultation services and providing cashflow analysis and
profitability projections, upon request by the Physician Group.
3.7. BILLING AND COLLECTION. On behalf of and for the account of Physician
Group, Business Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall use Business Manager's reasonable
best efforts to timely bill and collect all professional and other fees for all
billable Emergency Department Services provided by Physician Group. Business
Manager shall advise and consult with Physician Group regarding the fees for
Emergency Department Services provided by Physician Group; it being understood,
however, that Physician Group shall establish the fees to be charged for
Emergency Department Services and that Business Manager shall have no authority
whatsoever with respect to the establishment of such fees. In connection with
the billing and collection services to be provided hereunder, and throughout
the Term (and thereafter as provided in SECTION 6.3.), Physician Group hereby
grants to Business Manager an exclusive special power of attorney and appoints
Business Manager as Physician Group's exclusive true and lawful agent and
attorney-in-fact, and Business Manager hereby accepts such special power of
attorney and appointment, for the following purposes:
(a) To bill Physician Group's patients, in Physician Group's name
and on Physician Group's behalf, for all billable Emergency Department
Services provided by Physician Group to patients.
(b) To bill, in Physician Group's name and on Physician Group's
behalf, all claims for reimbursement or from Blue Shield/Blue Cross,
insurance companies, Medicare, Medicaid, and all other third party payors
or fiscal intermediaries for all covered billable Emergency Department
Services provided by Physician Group to patients.
(c) To collect and receive, in Physician Group's name and on
Physician Group's behalf, all accounts receivable generated by such
billings and claims for reimbursement, to administer such accounts
including, but not limited to, extending the time of payment of any such
accounts for cash, credit or otherwise; discharging or releasing the
obligors of any such accounts; suing, assigning or selling at a discount
such
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accounts to collection agencies; or taking other measures to require
the payment of any such accounts.
(d) To deposit into one or more accounts with a financial
institution selected by Business Manager (the "Physician Group Account")
all revenues, receipts and accounts receivable collected by Business
Manager on behalf of Physician Group. Physician Group covenants to
transfer and deliver to Business Manager all funds received by Physician
Group from patients or third party payors for Emergency Department
Services. Upon receipt by Business Manager of any funds from patients or
third party payors or from Physician Group for Emergency Department
Services, Business Manager shall immediately deposit same into the
Physician Group Account.
(e) To take possession of, endorse in the name of Physician Group,
and deposit into the Physician Group Account any notes, checks, money
orders, insurance payments, and any other instruments received in payment
of accounts receivable for Emergency Department Services.
(f) To sign checks, drafts, bank notes or other instruments on
behalf of Physician Group, and to make withdrawals from the Physician
Group Account for the payment of Office Expenses or other costs and
expenses as specified in this Agreement.
Upon request of Business Manager, Physician Group shall execute and
deliver to the financial institution wherein the Physician Group Account is
maintained, such additional instruments as may be necessary to evidence or
effect the special power of attorney granted to Business Manager by Physician
Group pursuant to this SECTION 3.7. and SECTION 3.8. of this Agreement.
3.8. PHYSICIAN GROUP ACCOUNT. Business Manager shall have access to the
Physician Group Account solely for the purposes stated herein and shall use all
funds on deposit therein to pay all Office Expenses and the Management Fee in
accordance with the terms of this Agreement. In connection herewith, throughout
the Term (and thereafter as provided in SECTION 6.3.), Physician Group hereby
grants to Business Manager an exclusive special power of attorney and appoints
Business Manager as Physician Group's exclusive true and lawful agent and
attorney-in-fact, and Business Manager hereby accepts such special power of
attorney and appointment, to deposit into the Physician Group Account all
funds, fees, and revenues generated from the Physician Group's provision of
Emergency Department Services and collected by Business Manager, and to make
withdrawals from Physician Group Account for payments specified in this
Agreement. The special power of attorney granted in SECTION 3.7. and in this
Section may be revoked by the Physician Group at any time, but such revocation
shall constitute a breach of this Agreement. Such special power of attorney
shall expire when this Agreement has been terminated, all accounts receivable
purchased by Business Manager have been collected, and all Management Fees and
other sums due to Business Manager under this Agreement have been paid. If
Business Manager assigns this Agreement in compliance with SECTION 7.7. of this
Agreement, Physician Group shall execute a special power of attorney in favor
of the assignee containing substantially the same terms and provisions as this
SECTION 3.8.. Notwithstanding any provision
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herein to the contrary, Physician Group shall not draw checks or make any other
withdrawals from the Physician Group Account. The payment of Office Expenses
and the Management Fee from the Physician Group Account shall be made in such
order and priority as Business Manager shall determine in its reasonable
business judgment.
3.9. FISCAL MATTERS.
3.9.1. ACCOUNTING AND FINANCIAL RECORDS. Business Manager shall
establish and administer accounting policies, procedures, controls and
systems (including accounts payable and payroll) for the development,
preparation, and safekeeping of administrative or financial records and
books of account relating to the business prepared and maintained in
accordance with GAAP. Business Manager shall prepare and deliver to
Physician Group, within one hundred fifty (150) days of the end of each
Operating Year, a balance sheet and a profit and loss statement reflecting
the financial status of Physician Group in regard to the provision of
Emergency Department Services as of the end of such Operating Year, all of
which shall be prepared in accordance with GAAP consistently applied.
Business Manager shall calculate the amount of Office Expense, Gross
Revenue, and the percentage of Gross Revenue amount of the Management Fee
for the preceding Operating Year. Such calculations, shall be conclusive
and binding on Business Manager and Physician Group.
3.9.2. SALES AND USE TAXES. To the extent that any of the services
to be provided by Business Manager hereunder may be subject to any state
sales and use taxes, Business Manager may have a legal obligation to
collect such taxes from Physician Group and to remit same to the
appropriate tax collection authorities. The applicable state sales and use
taxes in respect of the portion of the Management Fees attributable to
such services, shall be Office Expenses.
3.10. REPORTS AND RECORDS.
3.10.1. MEDICAL RECORDS. Business Manager shall establish, monitor,
and maintain procedures and policies for the timely creation, preparation,
filing and retrieval of all medical records generated by Physician Group
in connection with Physician Group's provision of Emergency Department
Services; and, subject to applicable Legal Requirements, shall ensure that
medical records are promptly available to Physicians and any other
appropriate persons. All such medical records shall be retained and
maintained in accordance with all Legal Requirements relating to the
confidentiality and retention thereof. All medical records shall be and
remain the property of Physician Group.
3.10.2. OTHER REPORTS AND RECORDS. Business Manager shall timely
create, prepare, and file such additional reports and records as are
reasonably necessary and appropriate for Physician Group's provision of
Emergency Department Services, and shall be prepared to analyze and
interpret such reports and records upon the reasonable request of
Physician Group.
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3.11. RECRUITMENT & REVIEW OF PHYSICIAN GROUP PHYSICIANS. Business Manager
shall perform all administrative services reasonably necessary and appropriate
to recruit potential physician personnel to be retained by Physician Group.
Business Manager shall provide Physician Group with model agreements to
document Physician Group's employment, retention or other service arrangements
with such individuals. Business Manager shall also assist the Physician Group
in identifying potential physician personnel by (i) performing initial
interviews; (ii) reviewing credentials; (iii) reviewing academic and
professional histories; (iv) contacting academic and professional references;
and (v) providing to the Physician Group a summary of the qualifications and
other useful information to assist Physician Group in reaching a decision on
whether Physician Group will retain a prospect as an independent contractor
physician. Physician Group shall retain the sole and complete responsibility to
conduct final interviews, select, contract with, supervise, control and
terminate all Physicians performing Emergency Department Services or other
professional services, and Business Manager shall have no authority whatsoever
with respect to such activities. Business Manager shall also provide all
clerical and administrative assistance needed by Physician Group in order to
assist Physician Group in preparing Physician Group physician reviews.
3.12. CONFIDENTIAL AND PROPRIETARY INFORMATION. Business Manager will not
disclose any Confidential Information of Physician Group to other persons
without Physician Group's express written authorization, such Confidential
Information will not be used in any way directly or indirectly detrimental to
Physician Group, and Business Manager will keep such Confidential Information
confidential and will ensure that its Affiliates and advisors who have access
to such Confidential Information comply with these non-disclosure obligations;
provided, however, that Business Manager may disclose Confidential Information
to those of its Representatives who need to know Confidential Information for
the purposes of this Agreement, it being understood and agreed to by Business
Manager that such Representatives will be informed of the confidential nature
of the Confidential Information, will agree to be bound by this Section, and
will be directed by Business Manager not to disclose to any other person any
Confidential Information. If Business Manager is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands, or similar processes) to disclose or
produce any Confidential Information furnished in the course of its dealings
with Physician Group or its Affiliates, or Representatives, Business Manager
will (i) provide Physician Group will prompt notice thereof and copies, if
possible, and, if not, a description, of the Confidential Information requested
or required to be produced so that Physician Group may seek an appropriate
protective order or waive compliance with the provisions of this Section and
(ii) consult with Physician Group as to the advisability of Physician Group
taking legally available action to resist or narrow such request. Business
Manager further agrees that, if in the absence of a protective order or the
receipt of a waiver hereunder Business Manager is nonetheless, in the written
opinion of its legal counsel, compelled to disclose or produce Confidential
Information concerning Physician Group to any tribunal legally authorized to
request and entitled to receive such Confidential Information or to stand
liable for contempt or suffer other censure or penalty, Business Manager may
disclose or produce such Confidential Information to such tribunal without
liability hereunder; provided, however, that Business Manager shall give
Physician Group written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use reasonable efforts to obtain, to the
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greatest extent practicable, an order or other reliable assurance that
confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
3.12.1.PRACTICE STATISTICS. Notwithstanding this SECTION 3.12.,
Business Manager may share, subject to the restrictions of this SECTION
3.12.1., with other professional corporations, associations, medical
practices, or health care delivery entities the practice statistics of
Physician Group, including data concerning utilization review, quality
assurance, cost, outcomes, or other practice. Such information shall only
be disclosed to other medical groups with whom Business Manager has a
management relationship or to managed care providers or other third party
payors or financial analysts and underwriters. In addition, Business
Manager may disclose all practice-related information necessary or
desirable in connection with any public or private offering of any
securities of Business Manager or any of its Affiliates. No such
information will disclose or divulge patient identifying information or,
to the extent possible, physician identifying information.
3.13. BUSINESS MANAGER'S INSURANCE. Throughout the Term, Business Manager
shall obtain and maintain with commercial carriers, through self-insurance or
some combination thereof, appropriate worker's compensation coverage for
personnel employed by Business Manager pursuant to this Agreement, and
professional, casualty and comprehensive general liability insurance covering
Business Manager, Business Manager's personnel, and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Business Manager may also carry key person
life and disability insurance on any member or Physician employee of Physician
Group in amounts determined reasonable and sufficient by Business Manager.
Business Manager shall be the owner and beneficiary of any such insurance.
3.14. PHYSICIAN GROUP INSURANCE. Throughout the Term, Business Manager
shall negotiate, obtain, and maintain with commercial carriers, through
self-insurance or some combination thereof, appropriate professional liability
and malpractice insurance coverage for Physician Group Physicians holding
independent contractor agreements with Physician Group as required by SECTION
4.7. of this Agreement, in such amounts, on such basis, and upon such terms
and conditions as Business Manager deems appropriate.
3.15. NO WARRANTY. Physician Group acknowledges that Business Manager has
not made and will not make any express or implied warranties or representations
that the services provided by Business Manager will result in any particular
amount or level of medical practice or income to Physician Group.
3.16. ADDITIONAL OBLIGATIONS OF BUSINESS MANAGER. In addition to the
duties and obligations specified above, throughout the Term, Business Manager
shall provide other nonmedical professional support through accountants,
attorneys and other advisors as may be necessary to carry out the obligations
of the Business Manager to the Physician Group.
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ARTICLE 4.
COVENANTS AND RESPONSIBILITIES CONCERNING PHYSICIAN GROUP
4.1. ORGANIZATION AND OPERATION. Physician Group, as a continuing
condition of Business Manager's obligations under this Agreement, shall at all
times during the Term be and remain legally organized and operated to provide
Emergency Department Services in a manner consistent with all Legal
Requirements. Physician Group shall operate and maintain a full time practice
of medicine specializing in the provision of Emergency Department Services, and
for the Term of this Agreement, Physician Group shall maintain and enforce
agreements in the form of SCHEDULE 4.1. with the Physicians. Physician Group
shall not amend the agreements or waive any rights thereunder without the prior
approval of Business Manager. Recognizing that Business Manager would not have
entered into this Agreement but for Physician Group's covenant to maintain such
agreements with its current Physicians, on or before three (3) days after
receipt thereof, Physician Group shall pay to Business Manager, in addition to
the Management Fee, any damages, compensation, payment, or settlement received
by Physician Group from a Physician who terminates his or her agreement without
cause or whose agreement is terminated by Physician Group for cause. Such
payment shall constitute liquidated damages of Business Manager for Physician
Group's breach of the covenant contained in this SECTION 4.1..
4.2. PHYSICIAN GROUP PERSONNEL.
4.2.1. PHYSICIAN PERSONNEL. Physician Group shall retain that number
of Physicians, as are reasonably necessary and appropriate for the
provision of Emergency Department Services pursuant to the Medical
Contracts, each of whom shall be bound by and subject to applicable
provisions of this Agreement. Each Physician retained by Physician Group
shall hold and maintain a valid and unrestricted license to practice
medicine in the State. Physician Group shall enter into and maintain with
each such retained Physician a written agreement substantially in the form
of SCHEDULE 4.1.. Physician Group shall be responsible for paying the
compensation, and benefits as applicable, for all Physicians and any other
physician personnel or other contracted or affiliated physicians, and for
withholding, as required by any Legal Requirements. Business Manager
shall, on behalf of Physician Group, establish and administer the
compensation with respect to such individuals in accordance with the
written agreement between Physician Group and each Physician. Business
Manager shall neither control nor direct any Physician in the performance
of Medial Services for patients.
4.2. NON-PHYSICIAN HEALTH CARE PERSONNEL. All physician assistants
and nurse practitioners who provide patient care services shall be
employed by or retained by Physician Group and shall be under Physician
Group's control, supervision and direction in the performance of or in
connection with Emergency Department Services for patients. Physician
Group shall be responsible for paying the compensation, and benefits as
applicable of all physician assistants and nurse practitioners employed by
any Physician Group, and for withholding as required by any Legal
Requirements. Business Manager shall, on behalf of Physician Group,
establish and administer the compensation with
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respect to such individuals in accordance with the written agreement
between Physician Group and each physician assistant and nurse
practitioner.
4.3. PROFESSIONAL STANDARDS. As a continuing condition of Business
Manager's obligations hereunder, each Physician and any other physician
personnel retained by Physician Group to provide Emergency Department Services
must (i) have and maintain a valid and unrestricted license to practice
medicine in the State and (ii) comply with, be controlled and governed by and
otherwise provide Emergency Department Services in accordance with all Legal
Requirements, and the ethics and standard of care of the medical community
wherein the Emergency Department Services are performed, and (iii) obtain and
retain appropriate medical staff membership with appropriate clinical
privileges at any hospital or health care facility at which Emergency
Department Services are to be provided. Procurement of temporary staff
privileges pending the completion of the medical staff approval process shall
satisfy this provision, provided the Physician actively pursues full
appointment and actually receives full appointment within a reasonable time.
4.4. EMERGENCY DEPARTMENT SERVICES. Physician Group shall ensure that
Physicians and non-physician health care personnel are available as necessary
to provide Emergency Department Services to patients under the Medical
Contracts. In the event that Physicians employed by Physician Group are not
available to provide Emergency Department Services coverage under the Medical
Contracts, Physician Group shall engage and retain locum tenens coverage.
Physicians retained on a locum tenens basis shall meet all of the requirements
of SECTION 4.3.. With the assistance of the Business Manager, Physician Group
and the Physicians shall be responsible for scheduling Physician and
non-physician health care personnel coverage of all medical procedures.
Physician Group shall cause all Physicians to exert reasonable efforts to
develop and promote Physician Group in such a manner as to ensure that
Physician Group is able to serve the diverse needs of the community.
4.5. EXCLUSIVE AUTHORITY OF THE PHYSICIAN GROUP. The Physician Group shall
have exclusive authority to review and resolve issues relating to (i) the types
and levels of Emergency Department Services to be provided by the Physician
Group; (ii) the recruitment of physicians to the Physician Group, including the
specific qualifications and specialties of recruited physicians; (iii) the
performance of Emergency Department Services under the Medical Contracts or any
other contract or arrangement regarding the provision of Emergency Department
Services; and (iv) fee schedules of the Physician Group.
4.6. PEER REVIEW AND QUALITY ASSURANCE. Physician Group shall adopt a peer
review and quality assurance program to monitor and evaluate the quality and
cost-effectiveness of Emergency Department Services provided by physician
personnel of Physician Group. Pursuant to such program, Physician Group shall
designate a committee of Physicians to function as a medical peer review
committee to review credentials of potential recruits, perform quality
assurance functions, and otherwise resolve medical competence issues. The
medical peer review committee shall function pursuant to formal written
policies and procedures. Upon request of Physician Group, Business Manager
shall provide administrative assistance to Physician Group in performing its
peer review and quality assurance activities, but only if such assistance can
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be provided consistent with maintaining the confidentiality and
non-discoverability of the processes and actions of the Peer Review and Quality
Assurance process of Physician Group.
4.7. PHYSICIAN GROUP'S INSURANCE. With the advice and assistance of
Business Manager, Physician Group shall obtain and maintain with commercial
carriers reasonably acceptable to Business Manager appropriate worker's
compensation coverage for Physician Group's employed personnel and professional
and comprehensive general liability insurance covering physician Group and each
of the Physicians. The comprehensive general liability coverage shall be in
amounts customary for physician groups similarly situated and professional
liability coverage shall be in a minimum amount of $1,000,000 for each
occurrence and $3,000,000 in the aggregate. The insurance policy or policies
shall provide for at least thirty (30) days advance written notice to Business
Manager from the insurer as to any alteration of coverage, cancellation, or
proposed cancellation for any reason. Physician Group shall cause to be issued
to Business Manager by such insurer or insurers a certificate reflecting such
coverage. Upon the termination of this Agreement for any reason, Physician
Group shall continue to carry professional liability insurance in the amounts
specified herein for ten (10) years after termination, or if Physician Group
dissolves or ceases to practice medicine, Physician Group shall obtain and
maintain a "tail" professional liability coverage, in the amounts specified in
this Section for an extended reporting period of ten (10) years. Physician
Group shall be responsible for paying all premiums for "tail" insurance
coverage. In no event shall the professional liability insurance carrier be
replaced or changed without the written consent of Business Manager.
4.8. CONFIDENTIAL AND PROPRIETARY INFORMATION. Physician Group will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
Physician Group will keep such Confidential Information confidential and will
ensure that its Affiliates and Representatives who have access to such
Confidential Information comply with these non- disclosure obligations;
provided, however, that Physician Group may disclose Confidential Information
to those of its Affiliates and Representatives who need to know Confidential
Information for the purposes of this Agreement, it being understood and agreed
to by Physician Group that such Affiliates and Representatives will be informed
of the confidential nature of the Confidential Information, will agree to be
bound by this Section, and will be directed by Physician Group not to disclose
to any other person any Confidential Information. Physician Group agrees to be
responsible for any breach of this Section by its Affiliates or
Representatives. If Physician Group is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoenas,
civil investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its Affiliates or Representatives, Physician Group will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this Section and (ii) consult with
Business Manager as to the advisability of Business Manager taking legally
available action to resist or narrow such request. Physician Group further
agrees that, if in the absence of a protective order or the receipt of a waiver
hereunder Physician Group is nonetheless, in the written opinion of its legal
counsel, compelled to disclose or produce
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Confidential Information concerning Business Manager to any tribunal
or to stand liable for contempt or suffer other censure or penalty, Physician
Group may disclose or produce such Confidential Information to such tribunal
legally authorized to request and entitled to receive such Confidential
Information without liability hereunder; provided, however, that Physician
Group shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced as far in advance or its disclosure
or production as is practicable and shall use reasonable efforts to obtain, to
the greatest extent practicable, an order or other reliable assurance that
confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
4.9. NON-COMPETITION. Physician Group hereby recognizes and acknowledges
that Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Agreement and that in the process
of providing services under this Agreement, Physician Group will be privy to
financial and Confidential Information, to which Physician Group would not
otherwise be exposed. The parties also recognize that the services to be
provided by Business Manager will be feasible only if Physician Group operates
an active practice to which the Physicians associated with Physician Group
devote their full time and attention. Physician Group agrees and acknowledges
that the Covenant Not to Compete described hereunder is necessary for the
protection of Business Manager, and that Business Manager would not have
entered into this Agreement without the following Covenant Not to Compete.
4.9.1. COVENANT NOT TO COMPETE. The Physician Group agrees that
during the Non-Compete Period it will not individually, or in concert, directly
or indirectly:
(i) either on its own account or for any other Person,
solicit, induce, attempt to induce, interfere with, or endeavor to
cause any: (a) Medical Contract Client to modify, amend, terminate,
or otherwise alter a Medical Contract; (b) Physician to modify,
amend, terminate, or otherwise alter its or their agreements
described in SECTION 4.1. of the Agreement; or (c) Physician engaged
by the Physician Group or any Affiliate thereof to terminate its or
their arrangement with the Physician Group or the Affiliate,
respectively.
(ii) own, manage, operate, maintain, engage in, serve as an
advisor or consultant for, control, or otherwise participate in or
be involved as a partner, guarantor, or other holder of a financial
interest in, or have any other interest in, any Person providing
Emergency Department Services in: (a) any Medical Contract Client;
or (b) any county where a Medical Contract Client or an Affiliate
thereof is located.
(iii) make any statement or perform any act intended to
advance an interest of any existing or prospective competitor or
encourage any other person to make any such statement or to perform
any such act.
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(iv) make any statement or perform any act intended to cause
any existing or potential client of the Business Manager or any
Affiliate thereof to use the services or purchase the products of
any competitor.
4.9.2. PASSIVE INVESTMENTS. The ownership restriction contained in
SECTION 4.9.1. hereof shall not apply to ownership as a passive investor of
less than a one percent (1%) interest in the outstanding equity securities
of any publicly held corporation listed on a national securities exchange
or association.
4.9.3. REFORMATION. Should any portion of this SECTION 4.9. be deemed
unenforceable by any court of competent jurisdiction because of the scope,
duration or territory encompassed by the undertakings hereunder, and only
in such event, then the Business Manager and the Physician Group consent
and agree to such limitation on scope duration or territory as may be
finally adjudicated as enforceable by a court of competent jurisdiction
after the exhaustion of all appeals.
4.9.4. ANCILLARY AGREEMENT. This Covenant Not to Compete shall be
construed as an agreement ancillary to the other provisions of this
Agreement and the existence of any claim or cause of action of Physician
Group against Business Manager or any of its Affiliates, whether
predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by Business Manager of this Covenant Not to Compete.
Any breach or violation of the Covenant Not to Compete shall entitle
Purchaser to an injunction restraining any further or continued breach or
violation. Such right to an injunction shall be in addition to and
cumulative of (and not in lieu of) any other remedies to which Purchaser
is entitled because of such breach or violation. If a court of competent
jurisdiction determines that the Covenant Not to Compete is partially or
wholly inoperative, invalid or unenforceable in a particular case because
of its duration, geographical scope, restricted activity or any other
parameter such court may reform such duration, geographical scope,
restricted activity or other parameter with respect to such case to permit
enforcement of such reformed Covenant Not to Compete to the greatest
extent allowable.
4.9.5. EXTENSION OF NON-COMPETE PERIOD. In the event that Physician
Group violates its Covenant Not to Compete, then notwithstanding any
provision herein to the contrary the Non-Compete Period shall be extended
day for day for the time period that party is in violation of any such
Covenant Not to Compete.
ARTICLE 5.
FINANCIAL ARRANGEMENT
5.1. MANAGEMENT FEE. On or before the tenth (10th) day of each calendar
month during the Term, and at the expiration or sooner termination of this
Agreement, the Business Manager shall be paid an amount equal to the estimated
Management Fee for the period from the commencement of the then current
Operating Year to the end of the immediately preceding
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calendar month or the date of such expiration or sooner termination of this
Agreement, as the case may be, less the aggregate amount of monthly payments
theretofore paid in respect to the estimated Management Fee for such Operating
Year.
5.2. YEAR-END ADJUSTMENT TO MANAGEMENT FEE. If for any Operating Year, the
aggregate amount of the monthly payments of the estimated Management Fee
theretofore paid by Physician Group to Business Manager shall be more or less
than the Management Fee payable for such Operating Year based upon the final
determination of such Management Fee as reflected in the annual financial
statements of the Physician Group prepared pursuant to SECTION 3.9. of this
Agreement, then, by way of year-end adjustment, within fifteen (15) days after
the delivery of such annual financial statement to the Physician Group,
Business Manager shall pay into the Physician Group Account the amount of any
overpayment or withdraw from the Physician Group Account the amount of any
underpayment.
5.3. REASONABLE VALUE. Payment of the Management Fee is not intended to be
and shall not be interpreted or applied as permitting Business Manager to share
in Physician Group's fees for Emergency Department Services or any other
services, but is acknowledged as the parties' negotiated agreement as to the
reasonable fair market value of the equipment, contract analysis and support,
other support services, purchasing, personnel, office space, management,
administration, strategic management and other items and services furnished by
Business Manager pursuant to this Agreement, considering the nature and volume
of the services required and the risks assumed by Business Manager. Physician
Group and Business Manager recognize and acknowledge that: (i) Business
Manager's administrative expertise will contribute significant value to
Physician Group's performance, (ii) Business Manager will incur substantial
costs and business risks [in arranging for Physician Group's use of the Office
and] in providing the equipment, support services, personnel, marketing, office
space, management, administration, and other items and services that are the
subject matter of this Agreement, and (iii) certain of such costs and expenses
can vary to a considerable degree according to the extent of Physician Group's
business and services. It is the intent of the parties that the Management Fee
reasonably compensate Business Manager for the value to Physician Group of
Business Manager's administrative expertise, given the considerable business
risk to Business Manager in providing the items and services that are the
subject of this Agreement.
5.4. WORKING CAPITAL. To assist Physician Group in maintaining reasonable
cash flow, Business Manager may lend funds to the Physician Group or purchase,
with recourse to Physician Group for the amount of the purchase, all of any
part of the accounts receivable of Physician Group arising during any previous
month by transferring the consideration for the purchase into the Physician
Group Account. The consideration for the purchase shall be an amount equal to
the Net Revenue recorded for such previous month. Business Manager shall be
entitled to offset any sums due Business Manager under this Agreement against
the amount payable for the accounts receivable. Although Business Manager may
purchase and thereby become the owner of the accounts receivable of Physician
Group, in the event such purchase shall be ineffective for any reason,
Physician Group has granted a security interest in such accounts receivable
pursuant to SECTION 5.6. of this Agreement. All collections in respect of such
accounts receivable purchased by Business Manager shall be received by Business
Manager as the agent of Physician Group and
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shall be endorsed to Business Manager and deposited in a bank account at a bank
designated and owned by Business Manager. To the extent Physician Group comes
into possession of any payments in respect of such accounts receivable,
Physician Group shall direct such payments to Business Manager for deposit in
bank accounts designated and owned by Business Manager. Any sums lent by
Business Manager to Physician Group shall be secured by the security interest
granted in SECTION 5.6. of the Agreement and shall bear interest as set forth in
clause (f) in the definition of Office Expense in Article I of this Agreement.
5.5. DISPUTE REGARDING FEES.
5.5.1. GOOD FAITH NEGOTIATIONS. Any disputes regarding performance
standards of the Business Manager shall be resolved to the extent possible
by good faith negotiation. To that end, the parties agree that if
Physician Group in good faith believes that Business Manager has failed to
perform its obligations, Physician Group shall give Business Manager
notice of the perceived failure. Business Manager and Physician Group
shall then negotiate the dispute in good faith, and if an agreement is
reached, the parties shall implement the resolution without further
action.
5.5.2. MEDIATION. If the parties cannot reach a resolution within a
reasonable time, Physician Group shall, at its option, submit the dispute
to mediation. Mediation shall be conducted in Dallas, Texas, in accordance
with the rules of the National Health Lawyers Association Alternative
Dispute Resolution Service, and if the amount in dispute is $25,000 or
less, the mediation shall be binding.
5.5.3. ARBITRATION. If the amount in dispute is greater than $25,000,
or if the mediation process fails to resolve the dispute, the dispute
shall be submitted by either party to binding arbitration as provided for
in SECTION 7.8. of this Agreement.
5.6. SECURITY INTEREST. Any sums advanced by Business Manager to pay any
Office Expense shall be payable to Business Manager and Physician Group within
ten (10) days after demand and be secured by the security interest granted in
this SECTION 5.6. The Physician Group hereby grants to the Business Manager a
security interest in all the Physician Group's accounts receivable which may be
created during the Term, for medical or other services rendered by the
Physician Group (the "Collateral"), to secure the payment of all monetary
obligations of the Physician Group to the Business Manager arising under this
Agreement. In the event of a default by Physician Group under any provision in
this Agreement, the Business Manager may, with or without terminating this
Agreement in accordance with Article VI, exercise all rights and remedies
afforded a secured party with respect to the Collateral under the Uniform
Commercial Code as enacted and in force in the State of Texas. The Physician
Group agrees to execute all financing statements or other documents which may
be necessary to perfect Business Manager's security interest hereunder.
5.7. DEFAULT INTEREST. If either party hereto should fail to pay the other
party hereto any sum payable when due hereunder, then such defaulting party
shall, without notice or demand, be liable to the non-defaulting party for the
payment of all such sums due hereunder with interest
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thereon at the highest lawful rate permitted by applicable Legal Requirements.
The terms and provisions of this Section shall survive the termination of this
Agreement for any reason whatsoever and shall continue until all such amounts,
together with interest thereon are paid in full.
ARTICLE 6.
TERM AND TERMINATION
6.1. INITIAL AND RENEWAL TERM. The Term of this Agreement will be for an
initial period of forty (40) years after the Effective Date, and shall be
automatically renewed for successive five (5) year periods thereafter, provided
that neither Business Manager nor Physician Group shall have given notice of
termination of this Agreement at least one hundred twenty (120) days before the
end of the initial term or any renewal term, or unless otherwise terminated as
provided in SECTION 6.2. of this Agreement.
6.2. TERMINATION.
6.2.1. TERMINATION BY BUSINESS MANAGER FOR CAUSE. Business Manager
may terminate this Agreement upon the occurrence of any one of the
following events ("Physician Group Default") which shall be deemed to be
"for cause":
(i) Physician Group's loss or suspension for more than ninety
(90) days of its Medicare or Medicaid provider number, or Physician
Group's restriction from treating beneficiaries of the Medicare or
Medicaid programs for more than ninety (90) days;
(ii) The revocation, suspension, cancellation or restriction
of any Physician licensed to practice medicine within the State if,
in the reasonable discretion of the Business Manager, Physician
Group will not be financially viable after such revocation,
suspension, cancellation or restriction;
(iii) The dissolution of Physician Group or the filing of a
petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily or involuntarily under
any state or federal statute for the protection of debtors;
(iv) Default by Physician Group in the performance of any of
its duties or obligations hereunder, and such default continues for
sixty (60) days after notice is given by Business Manager of such
default, provided, however, that in the event such default is of a
nature that it cannot, with due diligence, be cured within sixty
(60) days, it shall not constitute a Physician Group Default, as
hereinafter defined, so long as Physician Group begins to cure such
default within sixty (60) days and thereafter diligently pursues
such cure to completion;
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(v) Business Manager and Physician Group are unable to reach
an agreement on a new service agreement or basis for compensation
after the occurrence of an event described in SECTION 6.2.5..
6.2.2. TERMINATION BY BUSINESS MANAGER WITHOUT CAUSE. Business
Manager may terminate this Agreement at any such time or from time to time
without cause upon ninety (90) days written notice from Business Manager
to Physician Group.
6.2.3. TERMINATION BY PHYSICIAN GROUP. Physician Group may terminate
this Agreement, which shall be deemed to be "for cause", upon at least
sixty (60) days notice in the event that Business Manager defaults in the
performance of any of its material obligations hereunder and such default
continues for at least sixty (60) days after Business Manager receives
notice of such default; provided, however, that in the event that such
default is of a nature that it cannot, with due diligence, be cured within
sixty (60) days, it shall not constitute a Business Manager Default so
long as Business Manager begins to cure such default within sixty (60)
days and thereafter diligently pursues such cure to completion. The
occurrence of the foregoing is herein called "Business Manager Default".
Termination by Physician Group hereunder shall require the
affirmative vote of 100% of the outstanding equity ownership interests in
Physician Group entitled to vote.
6.2.4. TERMINATION BY AGREEMENT. In the event Physician Group and
Business Manager shall mutually agree in writing, this Agreement may be
terminated on the date specified in such written agreement.
6.2.5. LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the event
there shall be a change in the Medicare or Medicaid statutes or any other
Legal Requirements or the adoption of new federal or state legislation, or
a change in any third party reimbursement system, any of which are
reasonably likely to materially and adversely affect the manner in which
either party may perform or be compensated for its services under this
Agreement or which shall make this Agreement unlawful, the parties shall
immediately use their best efforts to enter into a new service arrangement
or basis for compensation for the services furnished pursuant to this
Agreement that complies with all Legal Requirements, or policy and that
approximates as closely as possible the economic position of the parties
prior to the change. If the parties are unable to reach a new agreement
within a reasonable time, then either party may submit the issue to
arbitration pursuant to SECTION 7.8. for the purpose of reaching an
alternative arrangement that is equitable under the circumstances.
6.3. EFFECTS OF TERMINATION. Upon termination of this Agreement, as
hereinabove provided, neither party shall have any further obligations
hereunder except for (i) obligations accruing prior to the date of termination,
including, without limitation, payment of the Management Fee relating to
services provided prior to the termination of this Agreement, (ii) obligations,
promises, or covenants set forth herein that are expressly made to extend
beyond the Term, including, without limitation, indemnities and non-competition
provisions, which provisions
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shall survive the expiration or termination of this Agreement; (iii) the
obligation of Physician Group to pay to Business Manager all sums advanced or
lent to Physician Group by Business Manager pursuant to SECTION 5.4. of this
Agreement, which obligations shall be due and payable upon termination of this
Agreement; and (iv) the obligations of Physician Group described in SECTION
6.4.. In effectuating the provisions of this SECTION 6.3., Physician Group
specifically acknowledges and agrees that Business Manager shall continue to
collect and receive on behalf of Physician Group all cash collections from
accounts receivable in existence at the time this Agreement is terminated, it
being understood that Business Manager has a security interest in such accounts
as provided in SECTION 5.6. of this Agreement and that such cash collections
will represent, in part, compensation to Business Manager for management
services already rendered and compensation on accounts receivable purchased by
Business Manager. Upon the expiration or termination of this Agreement for any
reason or cause whatsoever, Business Manager shall surrender to Physician Group
all books and records pertaining to Physician Group's medical practice.
6.4. REPURCHASE OBLIGATION. Upon termination of this Agreement by Business
Manager as a result of Physician Group Default, Physician Group shall:
6.4.1. INTANGIBLE ASSETS, DEFERRED CHARGES, ETC. Purchase from
Business Manager at book value the intangible assets, deferred charges,
and all other amounts on the books of the Business Manager relating to
this Agreement, including amounts, if any, paid for the covenants
described in SECTION 4.9. above, as adjusted through the last day of the
month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the
intangible assets, deferred charges, or covenants;
6.4.2. REAL ESTATE. Purchase from Business Manager any real estate
owned by Business Manager and used as an Office at the greater of the
appraised fair market value thereof or the then book value thereof. In the
event of any repurchase of real property, the appraised value shall be
determined by Business Manager and Physician Group, each selecting a duly
qualified appraiser, who in turn will agree on a third appraiser. The
third appraiser shall perform the appraisal which shall be binding on both
parties. In the event either party fails to select an appraiser within
fifteen (15) days of the selection of an appraiser by the other party, the
appraiser selected by the other party shall make the selection of the
third party appraiser;
6.4.3. OFFICE IMPROVEMENTS. Purchase at book value all improvements,
additions, or leasehold improvements that have been made by Business
Manager at any Office and that relate solely to the performance of
Business Manager's obligations under this Agreement;
6.4.4. ASSUMPTION OF DEBTS. Assume all debt, and all contracts,
payables, and leases that are obligations of Business Manager and that
relate principally to the performance of Business Manager's obligations
under this Agreement or the properties leased or subleased by Business
Manager; and
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6.4.5. EQUIPMENT. Purchase from Business Manager at book value all of
the equipment owned by the Business Manager pursuant to this Agreement,
including all replacements and additions thereto made by Business Manager
pursuant to the performance of its obligations under this Agreement, and
all other assets, including inventory and supplies, tangibles and
intangibles, set forth on the books of the Business Manager as adjusted
through the last day of the month most recently ended prior to the date of
such termination in accordance with GAAP to reflect operations of the
Office, depreciation, amortization, and other adjustments of assets shown
on the books of the Business Manager.
Physician Group acknowledges that certain assets listed above have been or
may be pledged as collateral for loans made by Business Manager.
6.5. PHYSICIAN GROUP RIGHTS. Upon termination of this Agreement pursuant
to SECTION 6.2.4. , or SECTION 6.2.4. , Physician Group shall be released from
the restrictive covenants in SECTION 4.8. and SECTION 4.9.
6.6. CLOSING OF REPURCHASE. If Physician Group purchases the assets
pursuant to SECTION 6.4., Physician Group shall pay cash for the repurchased
assets. The amount of the purchase price shall be reduced by the amount of debt
and liabilities of Business Manager, if any, assumed by Physician Group, which
shall be offset against the purchase price. Physician Group and any Physicians
associated with Physician Group shall execute such documents as may be required
to assume the liabilities set forth in SECTION 6.4.4. or SECTION 6.4.5. and to
remove Business Manager from any liability with respect to such repurchased
asset and with respect to any property leased or subleased by Business Manager.
The closing date for the repurchase shall be determined by the parties, but
shall in no event occur later than one hundred eighty (180) days from the date
of the notice of termination. The termination of this Agreement shall become
effective upon the closing of the sale of the assets if the assets are
purchased, and all parties shall be released from any restrictive covenants
provided for in SECTION 4.8. or SECTION 4.9. on the closing date. From and
after any termination, each party shall provide the other party with reasonable
access of the books and records then owned by it to permit such requesting
party to satisfy reporting and contractual obligations that may be required of
it.
ARTICLE 7.
MISCELLANEOUS
7.1. PHYSICIAN GROUP INDEMNIFICATION. The Physician Group hereby agrees to
indemnify, defend, and hold harmless the Business Manager, and each of the
Business Manager's officers, directors, shareholders, agents and employees,
from and against any and all claims, demands, losses, liabilities, actions,
lawsuits and other proceedings, judgments and awards, and costs and expenses
(including reasonable attorneys' fees), arising directly or indirectly, in
whole or in part, out of any matter related to any breach by the Physician
Group of this Agreement including but not limited to the negligence of the
Physician Group or any acts or omissions by the Physician Group in its
performance of this Agreement, excluding the professional acts or
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omissions of the Physician Group to the extent that such is not paid or covered
by the proceeds of insurance. The provisions of this SECTION 7.1. shall survive
termination or expiration of this Agreement. The Physician Group shall
immediately notify the Business Manager of any lawsuits or actions, or any
threat thereof, that may become known to the Physician Group that might
adversely affect any interest of the Physician Group or the Business Manager
whatsoever.
7.1.1. PROCEDURE FOR INDEMNIFICATION. The indemnity set forth herein
shall be deemed to include an obligation and on the part of the
indemnifying party to appear on behalf of the indemnified party in any and
all proceedings involving a claim or cause of action covered by such
indemnity and to defend the indemnified party against such claim or cause
of action, all at the indemnifying party's cost; provided, however, at the
option of any party indemnified hereunder, such party shall have the right
to appear on its behalf, employ its own legal counsel and defend any claim
or cause of action indemnified in this Section all at indemnifying party's
cost.
7.2. BUSINESS MANAGER INDEMNIFICATION. The Business Manager hereby agrees
to indemnify, defend and hold harmless the Physician Group, and each of the
Physician Group's officers, managers, members, agents and employees, from and
against any and all claims, demands, losses, liabilities, actions, lawsuits and
other proceedings, judgments and awards, and costs and expenses (including
reasonable attorneys' fees), arising directly or indirectly, in whole or in
part, out of any matter related to any breach by Business Manager of this
Agreement or any acts or omissions by Business Manager in its performance of
this Agreement, including but not limited to the negligence of the Business
Manager or any acts or omissions of the Business Manager, to the extent that
such is not paid or covered by the proceeds of insurance. The provisions of
this SECTION 7.2. shall survive termination or expiration of this Agreement.
Notwithstanding the foregoing, the Business Manager shall not indemnify the
Physician Group for the acts, or failure to act, by personnel who perform
services under the direct supervision or control of any Physician. The
Business Manager shall immediately notify the Physician Group of any lawsuits
or actions, or any threat thereof, that may become known to the Business
Manager that might adversely affect any interest of the Business Manager or the
Physician Group whatsoever.
7.2.1. PROCEDURE FOR INDEMNIFICATION. The indemnity set forth herein
shall be deemed to include an obligation on the part of the indemnifying
party to appear on behalf of the indemnified party in any and all
proceedings involving a claim or cause of action covered by such indemnity
and to defend the indemnified party against such claim or cause of action,
all at the indemnifying party's cost; provided, however, at the option of
any party indemnified hereunder, such party shall have the right to appear
on its behalf, employ its own legal counsel and defend any claim or cause
of action indemnified in this Section all at indemnifying party's cost.
7.3. ADMINISTRATIVE SERVICES ONLY. Nothing in this Agreement is intended
or shall be construed to allow Business Manager to exercise control or
direction over the manner or method by which Physician Group or its Physicians
perform Emergency Department Services or other professional health care
services. The rendition of all Emergency Department Services, including,
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but not limited to the prescription or administration of medicine and drugs
shall be the sole responsibility of Physician Group and its Physicians, and
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained in this Agreement shall be construed to permit Business
Manager to engage in the practice of medicine, it being the sole intention of
the parties hereto that the services to be rendered to Physician Group by
Business Manager are solely for the purpose of providing non-medical management
and administrative services to Physician Group so as to enable Physician Group
to devote its full time and energies to the professional conduct of its medical
practice and provision of Emergency Department Services to its patients and not
to administration, or practice management.
7.4. STATUS OF CONTRACTOR. It is expressly acknowledged that the parties
hereto are "independent contractors," and nothing in this Agreement is intended
and nothing shall be construed to create an employer/employee, partnership, or
joint venture relationship, or to allow either to exercise control or direction
over the manner or method by which the other performs the services that are the
subject matter of this Agreement; provided always that the services to be
provided hereunder shall be furnished in a manner consistent with the standards
governing such services and the provisions of this Agreement. Each party
understands and agrees that (i) the other will not be treated as an employee
for federal tax purposes, (ii) neither will withhold on behalf of the other
any sums for income tax, unemployment insurance, social security, or any other
withholding pursuant to any law or requirement of any governmental body or make
available any of the benefits afforded to its employees, (iii) all of such
payments, withholdings, and benefits, if any, are the sole responsibility of
the party incurring the liability, and (iv) each will indemnify and hold the
other harmless from any and all loss or liability arising with respect to such
payments, withholdings, and benefits, if any.
7.5. NOTICES. Any notice, demand, or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when in writing
and personally delivered or mailed by prepaid certified or registered mail,
return receipt requested, addressed as follows:
Physician Group: Gould Physicians, P.A.
1717 Main Street
Suite 5200
Dallas, Texas 75201
Attention: Dr. Leonard M. Riggs, Jr., M.D.
Business Manager: EmCare, Inc.
1717 Main Street
Suite 5200
Dallas, Texas 75201
Attention: Mr. William F. Miller, III
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
24
<PAGE> 31
7.6. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas applicable to agreements to be performed wholly within the
state. Texas law was chosen by the parties after negotiation to govern
interpretation of this Agreement because the principal offices of Business
Manager are located in Dallas County, Texas.
7.7. ASSIGNMENT. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors, and
assigns; provided, however, that Physician Group may not assign this Agreement
without the prior written consent of Business Manager, which consent may be
withheld. The sale, transfer, pledge, or assignment of any of the equity
ownership interests held by any equity owner of Physician Group or the issuance
by Physician Group of voting equity interests to any other person, or any
combination of such transactions, such that the existing equity owners of
Physician Group fail to maintain a majority of the voting interests in
Physician Group shall be deemed an attempted assignment by Physician Group, and
shall be null and void unless consented to in writing by Business Manager prior
to any such transfer or issuance. Any breach of its provision, whether or not
void or voidable, shall constitute a material breach of this Agreement, and in
the event of such breach, Business Manager may terminate this Agreement upon
twenty-four (24) hours notice to Physician Group. The parties agree that
Business Manager may transfer its rights and obligations under this Agreement
to any Affiliate of Business Manager for performance of this Agreement. In
addition, Business Manager or the transferee shall have the right to (i) assign
its rights and obligations hereunder to any third party and (ii) collaterally
assign its interest in this Agreement and its right to collect Management Fees
hereunder to any financial institution or other third party without the consent
of Physician Group.
7.8. ARBITRATION. The parties shall use good faith negotiation to resolve
any controversy, dispute or disagreement arising out of or relating to this
Agreement or the breach of this Agreement. Any matter not resolved by
negotiation shall be submitted to binding arbitration pursuant to this Section;
provided however, that the terms and provisions of this Section shall not
preclude any party hereto from seeking, or a court of competent jurisdiction
from granting, a temporary restraining order, temporary injunction or other
equitable relief for any breach of (i) any non-competition or confidentiality
covenant in this Agreement or in any employment or other agreement with any
Physician or (ii) any duty, obligation, covenant, representation or warranty
set forth in this Agreement, the breach of which may cause irreparable harm or
damage.
7.8.1. ARBITRATORS. In the event any claim or claims is brought by
Business Manager or Physician Group, or there is any other claim,
controversy, dispute or disagreement arising out of or relating to this
Agreement, and the parties are unable to resolve such claim, controversy,
dispute or disagreement within thirty (30) days after notice is first
delivered pursuant to the other party, the parties agree to each select
one arbitrator to hear and decide all such claims under this SECTION 7.8.
The two arbitrators so chosen shall then select a third arbitrator who is
experienced in the matter or action that is subject to such arbitration.
If such matter or action involves health care issues, then the third
arbitrator shall have such qualifications as would satisfy the
requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators chosen shall be
impartial and independent of all parties to this Agreement. If
25
<PAGE> 32
either of the parties fails to select an arbitrator within twenty days
after the end of such thirty-day period, or if the arbitrators chosen fail
to select a third arbitrator within twenty days, then any party may in
writing request the judge of the United States District Court for the
Northern District of Texas senior in term of service to appoint the
arbitrator or arbitrators and, subject to this SECTION 7.8., such
arbitrators shall hear all arbitration matters arising under this SECTION
7.8..
7.8.2. APPLICABLE RULES. Each arbitration hearing shall be held at a
place in Dallas, Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association to the extent
such rules do not conflict with the terms of this Section. The decision of
a majority of the arbitrators shall be reduced to writing and shall be
binding on the parties. Judgment upon the award(s) rendered by a majority
of the arbitrators may be entered and execution had in any court of
competent jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement. The charges
and expenses of the arbitrators shall be shared equally by the parties to
the hearing. The arbitration shall commence within ten (10) days after the
arbitrators are selected in accordance with the provisions of this SECTION
7.8.2. In fulfilling their duties with respect to determining the amount
of any loss or claim, the arbitrators may consider such matters as, in the
opinion of the arbitrators, are necessary or helpful to make a proper
valuation. The arbitrators may consult with and engage disinterested third
parties to advise the arbitrators. The arbitrators shall not add any
interest factor reflecting the time value of money to the amount of any
loss and shall not award any punitive damages. If any of the arbitrators
selected hereunder should die, resign or be unable to perform his or her
duties hereunder, the remaining arbitrators or such senior judge (or such
judge's successor) shall select a replacement arbitrator. The procedure
set forth in this SECTION 7.8. for selecting the arbitrators shall be
followed from time to time as necessary. As to any determination of the
amount of any loss, or as to the resolution of any other claim,
controversy, dispute or disagreement, that under the terms hereof is made
subject to arbitration, no lawsuit based on such claimed loss or such
resolution shall be instituted by any of the parties to this Agreement,
other than to compel arbitration proceedings or enforce the award of a
majority of the arbitrators. All privileges under Texas and federal law,
including attorney-client and work-product privileges, shall be preserved
and protected to the same extent that such privileges would be protected
in a federal court proceeding applying Texas law.
7.9. WAIVER OF BREACH. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, or be construed to
constitute, a waiver of any subsequent breach of the same or another provision
hereof.
7.10. ENFORCEMENT. In the event either party resorts to legal action to
enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover the costs and expenses of such action so incurred,
including, without limitation, reasonable attorneys' fees.
26
<PAGE> 33
7.11. GENDER AND NUMBER. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine, and
neuter, and the number of all words herein shall include the singular and
plural.
7.12. ADDITIONAL ASSURANCES. Except as may be herein specifically provided
to the contrary, the provisions of this Agreement shall be self-operative and
shall not require further agreement by the parties; provided, however, at the
request of either party, the other party shall execute such additional
instruments and take such additional acts as are reasonable and as the
requesting party may deem necessary to effectuate this Agreement.
7.13. CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever this
Agreement requires any consent or approval to be given by either party, or
either party must or may exercise discretion, and except where specifically set
forth herein to the contrary, the parties agree that such consent or approval
shall not be unreasonably withheld or delayed, and that such discretion shall
be reasonably exercised.
7.14. FORCE MAJEURE. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party unless such delay or failure in
performance is expressly addressed elsewhere in this Agreement.
7.15. SEVERABILITY. The parties hereto have negotiated and prepared the
terms of this Agreement in good faith with the intent that each and every one
of the terms, covenants and conditions herein be binding upon and inure to the
benefit of the respective parties. Accordingly, if any one or more of the
terms, provisions, promises, covenants or conditions of this Agreement or the
application thereof to any person or circumstance shall be adjudged to any
extent invalid, unenforceable, void or voidable for any reason whatsoever by a
court of competent jurisdiction or an arbitration tribunal, such provision
shall be as narrowly construed as possible, and each and all of the remaining
terms, provisions, promises, covenants and conditions of this Agreement or
their application to other persons or circumstances shall not be affected
thereby and shall be valid and enforceable to the fullest extent permitted by
law. To the extent this Agreement is in violation of applicable Legal
Requirements, then the parties agree to negotiate in good faith to amend the
Agreement, to the extent possible consistent with its purposes, to conform to
all Legal Requirements.
7.16. DIVISIONS AND HEADINGS. The divisions of this Agreement into
articles, sections, and subsections and the use of captions and headings in
connection therewith is solely for convenience and shall not affect in any way
the meaning or interpretation of this Agreement.
7.17. AMENDMENTS AND AGREEMENT EXECUTION. This Agreement and amendments
hereto shall be in writing and may be executed in multiple copies. Each
multiple copy shall be deemed an original, but all multiple copies together
shall constitute one and the same instrument.
27
<PAGE> 34
7.18. ENTIRE AGREEMENT. With respect to the subject matter of this
Agreement, this Agreement supersedes all previous contracts and constitutes the
entire agreement between the parties. Neither party shall be entitled to
benefits other than those specified herein. No prior oral statements or
contemporaneous negotiations or understandings or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Agreement shall be recognized unless
incorporated herein by amendment as provided herein, such amendment(s) to
become effective on the date stipulated in such amendment(s). The parties
specifically acknowledge that, in entering into and executing this Agreement,
the parties rely solely upon the representations and agreements contained in
this Agreement and no others.
[SIGNATURES INTENTIONALLY APPEAR ON NEXT PAGE]
28
<PAGE> 35
IN WITNESS WHEREOF, Physician Group and Business Manager have caused this
Agreement to be executed by their duly authorized representatives, all as of
the day and year first above written.
PHYSICIAN GROUP: GOULD PHYSICIANS, P.A.
By: /s/ LEONARD M. RIGGS, JR., M.D.
--------------------------------
Name: Leonard M. Riggs, Jr., M.D.
Title: President
BUSINESS MANAGER: EMCARE, INC.
By: /s/ WILLIAM F. MILLER, III
-----------------------------
William F. Miller, III
President
29
<PAGE> 36
SCHEDULE 4.1.
FORM OF PHYSICIAN INDEPENDENT
CONTRACTOR AGREEMENT
<PAGE> 1
EXHIBIT 11.1
EMCARE HOLDINGS INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Primary and Fully Diluted:
Weighted average number of common shares outstanding during ............... 8,142 7,830 4,965
Weighted average shares issuable upon exercise of outstanding stock options
using the "treasury stock" method (1) .................................. 389 421 173
------ ------ ------
Weighted average shares outstanding (2) ................................... 8,531 8,251 5,138
====== ====== ======
Income (loss) before extraordinary charge ................................. $5,425 $8,693 $4,569
====== ====== ======
Net income (loss) ......................................................... $5,425 $8,693 $3,372
====== ====== ======
Income (loss) per share before extraordinary charge .................. $ 0.64 $ 1.05 $ 0.89
====== ====== ======
Net income (loss) per share .......................................... $ 0.64 $ 1.05 $ 0.73
====== ====== ======
</TABLE>
- ---------------
(1) Exercise of the options is not assumed until the market price of the stock
is above the exercise price for substantially all of three consecutive months.
(2) All shares in these tables are weighted on the basis of the number of days
the shares were outstanding or assumed to be outstanding during each period.
<PAGE> 1
EXHIBIT 21.1
EMCARE HOLDINGS INC.
SUBSIDIARIES AND AFFILIATED
PROFESSIONAL ASSOCIATIONS
<TABLE>
<CAPTION> JURISDICTION OF
COMPANY ORGANIZATION ASSUMED NAMES
- ------- ------------ -------------
<S> <C> <C>
Adams Emergency Physicians, P.A. Texas None
AEP -- EmCare Medical Group, Inc. California None
Associated Emergency Physicians, Inc., California None
Medical Group of Northern California
Capital Billing Services, Inc. Maryland None
Capital EmCare, P.A. Texas None
Capital Emergency Associates, LLC Maryland None
Copenhaver, Bell & Associates, M.D.'s, Florida None
Inc.
Doctors Billing Service, Inc. California None
EmCare, Inc. Delaware EmCare Management (Massachusetts)
EmCare Physician Staffing Services (Texas)
Emergency Physicians of Orlando; PES/EmCare (Florida)
EmCare Medical Services of New York, P.C. New York None
EmCare Medical Services of Pennsylvania, Pennsylvania None
P.C.
EmCare OP, L.P. Texas None
EmCare Physicians Network, Inc. Delaware None
EmCare Receivables Corporation Nevada None
Emergency Health Services Associates Texas Beaumont Regional Express Clinic (Texas)
EmCare Radiology Services (Texas)
EmCare Physicians Staffing Services (Texas)
EPSS (Texas)
Emergency Health Services Associates of New New Mexico None
Mexico, P.C.
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION> JURISDICTION OF
COMPANY ORGANIZATION ASSUMED NAMES
- ------- ------------ -------------
<S> <C> <C>
Emergency Specialists of Arkansas, Inc. II Texas None
EmTac Business Trust Pennsylvania None
EmTac, Inc. Delaware None
The Gould Group, Inc. Texas None
Gould Physicians, P.A. Texas None
Houston Emergency Physicians, Inc. Georgia None
Jasper Emergency Physicians, Inc. Missouri None
Jones Emergency Physicians, P.A. Texas None
Medical Emergency Services Associates Illinois None
(MESA), Inc.
MESA EmCare, S.C. Illinois None
National Primary Care Network, P.A. Texas National Primary Care Medical Network
In-Patient Care Associates (Texas)
Texas Primary Care (Texas)
Network Family Physicians, P.A. Texas None
Reimbursement Technologies, Inc. Pennsylvania None
SEMS, Inc. Georgia None
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
JURISDICTION OF
BILLING PARTNERSHIPS ORGANIZATION
-------------------- ------------
<S> <C>
Arrowhead Emergency Physicians Texas
Belfort House Physicians Texas
Cedar House Physicians Texas
Central Florida Emergency Physicians Texas
Clarkson House Physicians Texas
Contee Emergency Physicians Texas
Copperfall Emergency Physicians Texas
Crane Emergency Physicians Texas
Doctex Emergency Physicians Texas
Hansen Emergency Physicians Texas
Jupiter Emergency Physicians Pennsylvania
Liberty House Physicians Texas
Linden House Physicians Texas
Longwood Emergency Physicians Texas
Oakwood House Physicians Texas
Palestine Emergency Physicians Texas
Randall Emergency Physicians Texas
Sentre Emergency Physicians Pennsylvania
Silver Emergency Physicians Texas
South Charles Emergency Physicians Texas
EM-MED Texas
EmCare-DEN Emergency Physicians Texas
EmCare-DFW Emergency Physicians Texas
EmCare-DTX Emergency Physicians Texas
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
JURISDICTION OF
BILLING PARTNERSHIPS ORGANIZATION
-------------------- ------------
<S> <C>
EmCare-FOR Emergency Physicians Texas
EmCare-GLT Emergency Physicians Texas
EmCare-HAR Emergency Physicians Texas
EmCare-HHS Emergency Physicians Texas
EmCare-HTN Emergency Physicians Texas
EmCare-IAH Emergency Physicians Texas
EmCare-MSQ Emergency Physicians Texas
EmCare-NLR Emergency Physicians Texas
EmCare-PAZ Emergency Physicians Texas
EmCare-PNX Emergency Physicians Texas
EmCare-PWV Emergency Physicians Texas
EmCare-RSN Emergency Physicians Texas
EmCare-TEX Emergency Physicians Texas
EmCare-VIC Emergency Physicians Texas
</TABLE>
4
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-12965 and Form S-8 33-94684) pertaining to the Amended and
Restated Stock Option and Restricted Stock Purchase Plan of EmCare Holdings Inc.
of our report dated February 18, 1997, except for Note 5, as to which the date
is March 7, 1997, with respect to the consolidated financial statements and
schedule of EmCare Holdings Inc. included in the Annual Report (Form 10-K) for
the year ended December 31, 1996.
Dallas, Texas
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,329
<SECURITIES> 0
<RECEIVABLES> 119,024
<ALLOWANCES> 72,611
<INVENTORY> 0
<CURRENT-ASSETS> 55,758
<PP&E> 7,847
<DEPRECIATION> 3,429
<TOTAL-ASSETS> 138,063
<CURRENT-LIABILITIES> 35,840
<BONDS> 0
0
0
<COMMON> 82
<OTHER-SE> 61,063
<TOTAL-LIABILITY-AND-EQUITY> 138,063
<SALES> 196,257
<TOTAL-REVENUES> 196,257
<CGS> 156,412
<TOTAL-COSTS> 156,412
<OTHER-EXPENSES> 30,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,143
<INCOME-PRETAX> 8,263
<INCOME-TAX> 2,838
<INCOME-CONTINUING> 5,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,425
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
<PAGE> 1
EXHIBIT 99.1
SCHEDULE X
EMCARE HOLDINGS INC.
ALLOWANCE FOR CONTRACTUAL ADJUSTMENTS AND
CHARITY AND OTHER ADJUSTMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS REDUCTIONS, BALANCE AT
BEGINNING OF CHARGED TO NET OF END OF
PERIOD INCOME RECOVERIES PERIOD
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
1996 ......................... $42,798 $118,571 ($88,758 $ 72,611
1995 ......................... 26,619 102,985 -86,806 42,798
1994 ......................... 19,856 76,613 -69,850 26,619
</TABLE>
