1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1999
REGISTRATION NO.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TEAM HEALTH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 8099 62-1562558
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
1900 WINSTON ROAD
KNOXVILLE, TENNESSEE 37919
(800) 342-2898
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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C/O DAVID JONES
CHIEF FINANCIAL OFFICER
1900 WINSTON ROAD, SUITE 300
KNOXVILLE, TENNESSEE 37919
(800) 342-2898
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPY TO:
JOSHUA KORFF, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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Team Health, Inc. 12% Senior Subordinated Notes $100,000,000 $1,000 $100,000,000 $27,800.00
due 2009.......................................
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Guarantees(2).................................... N/A N/A N/A N/A
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of June 9, 1999.
(2) The Guarantee by each of Alliance Corporation, Charles L. Springfield, Inc.,
Clinic Management Services, Inc., Daniel & Yeager Inc., Drs. Sheer, Ahearn
and Associates, Inc., Emergency Coverage Corporation, Emergency Management
Specialists, Inc., Emergency Physician Associates, Inc., Emergency
Physicians of Manatee, Inc., Emergency Professional Services, Inc.,
Emergicare Management, Incorporated, Fischer Mangold Partnership, Herschel
Fisher, Inc., Hospital Based Physician Services, Inc., IMBS, Inc., InPhyNet
Anesthesia of West Virginia, Inc., InPhyNet Contracting Services, Inc.,
InPhyNet Hospital Services, Inc., InPhyNet Joliet, Inc., InPhyNet Louisiana
Inc., InPhyNet Medical Management Institute, Inc., InPhyNet South Broward,
Inc., Karl G. Mangold, Inc., Med:Assure Systems, Inc., MetroAmerican
Radiology, Inc., Mt. Diablo Emergency Physicians, Neo-Med, Inc., Northwest
Emergency Physicians Incorporated, Paragon Anesthesia, Inc., Paragon
Contracting Services, Inc., Paragon Healthcare Limited Partnership, Paragon
Imaging Consultants, Inc., Quantum Plus, Inc., Reich, Seidelman & Janicki
Co., Rosendorf, Margulies, Borushok & Schoenbaum Radiology Associates of
Hollywood, Inc., Sarasota Emergency Medical Consultants, Inc., Southeastern
Emergency Physicians of Memphis, Inc., Southeastern Emergency Physicians,
Inc., Team Health Billing Services, L.P., Team Health Financial Services,
Inc., Team Health Southwest, L.P., Team Radiology, Inc., THBS, Inc., The
Emergency Associates for Medicine, Inc., and Virginia Emergency Physicians,
Inc. of the payment of principal and interest on the Notes is being
registered hereby. Pursuant to Rule 457(g), no registration fee is required
with respect to the Guarantees.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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ALLIANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WEST VIRGINIA 8099 55-0739050
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
CHARLES L. SPRINGFIELD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 94-2713012
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
CLINIC MANAGEMENT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1453392
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DANIEL & YEAGER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ALABAMA 8099 63-1009913
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DRS. SHEER, AHEARN AND ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 59-1237521
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
EMERGENCY COVERAGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1130266
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
EMERGENCY MANAGEMENT SPECIALISTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WEST VIRGINIA 8099 55-0632298
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
EMERGENCY PHYSICIAN ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEW JERSEY 8099 22-2213199
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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EMERGENCY PHYSICIANS OF MANATEE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0051890
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
EMERGENCY PROFESSIONAL SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 8099 94-2460636
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
EMERGICARE MANAGEMENT, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-0881710
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
FISCHER MANGOLD PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 94-1731121
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
HERSCHEL FISCHER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 94-3262291
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
HOSPITAL BASED PHYSICIAN SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1535401
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
IMBS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0622847
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET ANESTHESIA OF WEST VIRGINIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WEST VIRGINIA 8099 65-0746470
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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INPHYNET CONTRACTING SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0622862
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET HOSPITAL SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0622855
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET JOLIET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0086608
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET LOUISIANA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0125286
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET MEDICAL MANAGEMENT INSTITUTE
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0652251
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INPHYNET SOUTH BROWARD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0726225
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
KARL G. MANGOLD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 91-1775707
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
MED: ASSURE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1304911
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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METROAMERICAN RADIOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NORTH CAROLINA 8099 56-1657199
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
MT. DIABLO EMERGENCY PHYSICIANS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 68-0049611
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
NEO-MED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0456767
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
NORTHWEST EMERGENCY PHYSICIANS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WASHINGTON 8099 91-1753075
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PARAGON ANESTHESIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 59-2092416
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PARAGON CONTRACTING SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0622859
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PARAGON HEALTHCARE LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0426893
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PARAGON IMAGING CONSULTANTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0410357
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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QUANTUM PLUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 8099 94-3259635
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
REICH, SEIDELMAN, & JANICKI CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 8099 34-1245634
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ROSENDORF, MARGULIES, BORUSHOK & SHOENBAUM RADIOLOGY ASSOCIATES OF HOLLYWOOD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 59-1226776
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
SARASOTA EMERGENCY MEDICAL
CONSULTANTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 65-0195332
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
SOUTHEASTERN EMERGENCY PHYSICIANS OF MEMPHIS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1453389
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
SOUTHEASTERN EMERGENCY PHYSICIANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1266047
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
TEAM HEALTH BILLING SERVICES, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1727916
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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TEAM HEALTH FINANCIAL SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TENNESSEE 8099 62-1727919
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
TEAM HEALTH SOUTHWEST, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 8099 63-1201377
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
TEAM RADIOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NORTH CAROLINA 8099 56-1844186
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
THBS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 8099 62-1727916
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
THE EMERGENCY ASSOCIATES FOR MEDICINE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA 8099 59-2862461
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
VIRGINIA EMERGENCY PHYSICIANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
VIRGINIA 8099 54-1629761
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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SUBJECT TO COMPLETION -- DATED , 1999
PROSPECTUS
, 1999
TEAM HEALTH, INC.
OFFER FOR ALL OUTSTANDING 12% SERIES A SENIOR SUBORDINATED NOTES DUE 2009 IN
EXCHANGE FOR 12% SERIES B SENIOR SUBORDINATED NOTES DUE 2009.
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
[ ], 1999 UNLESS EXTENDED.
We will not receive any proceeds from the exchange of these notes.
TEAM HEALTH:
- - We are the largest national provider of outsourced physician staffing and
administrative services to hospitals and clinics in the United States.
- - Team Health, Inc.
1900 Winston Road
Knoxville, Tennessee 37919
1-800-342-2898
THE EXCHANGE OFFER:
- - Offer for $100,000,000 in principal amount of outstanding 12% Series A Senior
Subordinated notes due 2009 in exchange for $100,000,000 in principal amount
of Series B Senior Subordinated notes due 2009.
- - The terms of the exchange notes are identical in all material respects to the
terms of the outstanding old notes, except for certain transfer restrictions
and registration rights pertaining to the old notes.
- - This exchange offer will expire at 5 p.m., New York City time on
[ ], 1999, unless extended.
PROPOSED TRADING FORMAT:
- - The PORTAL market or directly with qualified buyers.
TERMS OF THE EXCHANGE NOTES:
- - MATURITY:
March 15, 2009.
- - INTEREST PAYMENTS:
- Fixed annual rate of 12%
- Paid every six months on March 15 and September 15.
- - GUARANTEES:
- If we cannot make payments on the exchange notes when due, our subsidiary
guarantors must make them instead.
- - SECURITY:
- The exchange notes and the guarantees by our subsidiary guarantors are
unsecured.
- - REDEMPTION:
- We can redeem the exchange notes at any time on or after March 15, 2004.
- Prior to March 15, 2002, we can redeem up to 33 1/3% of the exchange notes
with the net proceeds from certain sales of our equity.
- Holders of the exchange notes may also require us to redeem all or part of
such holder's exchange notes if we experience specific kinds of changes in
the control of our company or if we sell certain of our assets.
- - RANKING: these exchange notes and the subsidiary guarantees rank:
1. behind all of our and our guarantor subsidiaries' current and future senior
indebtedness (other than trade payables);
2. behind any other indebtedness that we or our subsidiary guarantors are
permitted to incur under the terms of the indenture with the United States
Trust Company of New York, as trustee, unless such indebtedness expressly
provides that it is not senior to the exchange notes;
3. equal with all of our subsidiary guarantors other senior subordinated
indebtedness and
4. ahead of our and our subsidiary guarantors other current and future
indebtedness that expressly provides that it is not senior to the exchange
notes and the subsidiary guarantees.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
9
TABLE OF CONTENTS
PAGE
Prospectus Summary............... 1
Risk Factors..................... 10
The Transactions................. 22
Use of Proceeds.................. 24
Capitalization................... 24
Selected Historical Financial
Data........................... 25
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 27
Business......................... 38
Management....................... 52
Ownership of Securities.......... 57
Relationships and Related
Transactions................... 58
Description of Capital Stock..... 61
PAGE
Description of Senior Bank
Facilities..................... 62
Description of Exchange Notes.... 65
The Exchange Offer............... 103
United States Federal Income Tax
Considerations................. 111
Plan of Distribution............. 111
Legal Matters.................... 112
Experts.......................... 112
Available Information............ 113
Index to Unaudited Pro Forma
Condensed Financial
Information.................... P-1
Index to Audited Financial
Statements..................... F-1
Index to Unaudited Financial
Statements..................... F-20
10
PROSPECTUS SUMMARY
The following summary contains basic information about this exchange offer.
It probably does not contain all the information that is important to you. For a
more complete understanding of this exchange offer, we encourage you to read
this entire document and the documents we have referred you to.
In addition, our management has estimated the market share percentages
provided in this prospectus. We believe these estimates to be reliable, but
these numbers have not been verified by an independent source.
References to the words "Team Health," "we," "our," and "us" refer only to
Team Health, Inc., its predecessors, its subsidiaries and its affiliates. As
used below, "ED" refers to a hospital emergency department or urgent care
center.
THE OLD NOTE OFFERING
Old Notes..................... We sold the old notes to Donaldson, Lufkin &
Jenrette, an investment banking firm, on March
5, 1999. DLJ subsequently resold the old notes
to qualified institutional buyers under Rule
144A of the Securities Act of 1933.
Registration Rights
Agreement..................... We and Donaldson, Lufkin & Jenrette entered
into a registration rights agreement on March
12, 1999. This agreement grants the holder of
the old notes exchange and registration rights.
The exchange offer is intended to satisfy these
exchange rights which terminate upon the
consummation of the exchange offer.
THE EXCHANGE OFFER
Securities Offered............ Up to $100,000,000 of 12% series B senior
subordinated notes due 2009. The terms of the
exchange notes and old notes are identical in
all material respects, except for certain
transfer restrictions and registration rights
relating to the old notes.
The Exchange Offer............ We are offering to exchange the old notes for
exchange notes that are equal in principal
amount. Old notes may be exchanged only in
integral principal multiples of $1000.
Expiration Date; Withdrawal
of Tender................... Our exchange offer will expire on 5:00 p.m.,
New York City time, on , 1999, or
such later date and time as we may extend. You
may withdraw your tender of old notes at any
time prior to the expiration date. Any old
notes not accepted by us for exchange for any
reason will be returned to you without expense
as promptly as possible after the expiration or
termination of our exchange offer.
Conditions to the Exchange
Offer......................... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties, we
believe that you may offer for resale, resell
or otherwise transfer the exchange notes
without complying with the registration and
prospectus delivery provisions of the
Securities Act of 1933, provided that:
- such exchange notes are acquired in the
ordinary course of your business,
- you do not intend to participate and
have no arrangement or understanding
with any person to participate in the
distribution of such exchange notes and
1
11
- you are not our "affiliate" within the
meaning of Rule 405 under the Securities
Act of 1933.
Our obligation to accept for exchange, or to
issue the exchange notes in exchange for, any
old notes is subject to:
- customary conditions relating to
compliance with any applicable law,
- any applicable interpretation by any
staff of the Securities and Exchange
Commission, or
- any order of any governmental agency or
court of law.
We currently expect that each of the conditions
will be satisfied and that no waivers will be
necessary. See "The Exchange
Offer -- Conditions."
Procedures for Tendering Old
Notes......................... Each holder of old notes wishing to accept the
exchange offer must complete, sign and date the
accompanying letter of transmittal, or a
facsimile thereof, in accordance with the
instructions. The holder must mail or otherwise
deliver the letter of transmittal, or the
facsimile, together with the old notes and any
other required documentation to the exchange
agent at the address set forth in the section
"The Exchange Offer" under the heading
"Procedures for Tendering Old Notes."
Use of Proceeds............... We will not receive any cash proceeds from the
exchange of notes pursuant to our exchange
offer.
Exchange Agent................ United States Trust Company of New York is
serving as the exchange agent in connection
with our exchange offer.
Federal Income Tax
Consequences.................. The exchange of old notes in accordance with
the terms of the exchange offer should not be a
taxable event to you for federal income tax
purposes. See "United States Federal Income Tax
Considerations."
THE EXCHANGE NOTES
The terms of the exchange notes are identical in all material respects to
the terms of the old notes, except that the old notes differed with respect to
their restrictions and their registration rights.
Issuer........................ Team Health, Inc.
Total Amount of Exchange Notes
Offered..................... Up to $100.0 million in principal amount of 12%
series B senior subordinated notes, referred to
throughout this document as the "exchange
notes."
Maturity Date................. March 15, 2009.
Interest...................... Annual Rate: 12%
Payment Frequency: every six months on March 15
and September 15.
First Payment: September 15, 1999
Optional Redemption........... After March 15, 2004, we may redeem some or all
of the exchange notes and any outstanding old
notes at any time at
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the redemption prices described in the section
"Description of Exchange Notes" under the
heading "Optional Redemption."
Before March 15, 2002, we may be able to redeem
up to 33 1/3% of the exchange notes and old
notes with the proceeds of offerings of our
equity at the price listed in the section
"Description of Exchange Notes" under the
heading "Optional Redemption." If less than
66 2/3% of the exchange notes and old notes
will remain outstanding immediately after such
redemption, we may not effect such redemption.
Change of Control
Repurchase.................... If we sell certain of our assets or experience
specific kinds of changes in control, we must
offer to repurchase the exchange notes at a
price equal to 101% of the aggregate principal
amount of any exchange notes purchased plus
accrued and unpaid interest on the exchange
notes purchased.
Subsidiary Guarantees......... The exchange notes will be fully guaranteed on
an unsecured, senior subordinated basis by each
subsidiary guarantor. Each subsidiary guarantor
is our wholly owned subsidiary and a principal
operating subsidiary. Certain of our future
domestic subsidiaries will also guarantee the
exchange notes.
If we cannot make payments on the exchange
notes when they are due, the subsidiary
guarantors must make them instead.
The subsidiary guarantors are also guarantors
of our senior bank facilities and are jointly
and severally liable with us on a senior basis
for such obligations.
To secure the obligations under our senior bank
facilities, we pledged the capital stock of
Team Health and our guarantor subsidiaries. We
and the guarantor subsidiaries also granted
security interests in, or liens on,
substantially all other tangible and intangible
assets of Team Health and our guarantor
subsidiaries.
Ranking of the Exchange
Notes......................... These exchange notes and the subsidiary
guarantees will be senior subordinated debts
(as are the old notes).
They rank:
- behind all of our and our guarantor
subsidiaries' current and future senior
indebtedness (other than trade
payables);
- behind any other indebtedness that we or
our subsidiary guarantors are permitted
to incur under the terms of the
indenture, unless such indebtedness
expressly provides that it is not senior
to the exchange notes;
- equal with all of our and our subsidiary
guarantors' other senior subordinated
indebtedness; and
- ahead of our and our subsidiary
guarantors' other current and future
indebtedness that expressly provides
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that it is not senior to the exchange
notes and the subsidiary guarantees.
Assuming we had completed this offering on
March 31, 1999 and applied the proceeds as
intended, the exchange notes and the subsidiary
guarantees would have been subordinated to
approximately $147.5 million of senior
indebtedness. No debt of ours having an equal
ranking with the exchange notes and the
subsidiary guarantees or which is subordinate
to the exchange notes and the subsidiary
guarantees would have been outstanding at such
date.
Basic Covenants of the
Indenture..................... We will issue the exchange notes under an
indenture with United States Trust Company of
New York, as trustee. The indenture will, among
other things, place certain limitations on our
ability, and the ability of some of our
subsidiaries, to:
- borrow money or make certain restricted
payments,
- pay dividends on stock or repurchase
stock,
- make investments,
- enter into transactions with
affiliates,
- use assets as security in other
transactions,
- create liens,
- sell certain assets or merge with or
into other companies,
- enter into sale and leaseback
transactions, and
- change the nature of our business.
For a more details, see the section
"Description of Exchange Notes" under the
heading "Certain Covenants and Asset Sales."
Transfer Restrictions......... The exchange notes are new securities, and
there is currently no established market for
them. We do not intend to list the exchange
notes on any securities exchange.
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF CERTAIN RISKS OF INVESTING IN THE EXCHANGE NOTES.
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TEAM HEALTH, INC.
We are the largest national provider of outsourced physician staffing and
administrative services to hospitals and clinics in the United States, with 375
hospital contracts in 25 states. Our regional operating model includes
comprehensive programs for emergency medicine, radiology, inpatient care,
pediatrics and other hospital departments. We provide a full range of physician
staffing and administrative services, including the:
- staffing, recruiting and credentialing of clinical and non-clinical
medical professionals;
- provision of administrative support services, such as payroll, insurance
coverage and continuing education services; and
- billing and collection of fees for services provided by the medical
professionals.
Since our inception in 1979, we have focused primarily on providing outsourced
services to EDs, which accounted for approximately 80% of our net revenue in
1998. We generally target larger hospitals with high volume EDs (more than
15,000 patient visits per year), where we believe we can generate attractive
margins, establish stable long-term relationships, obtain attractive payor mixes
and recruit and retain high quality physicians. When we refer to our earnings
before interest, taxes, depreciation and amortization ("EBITDA"), we are
referring to a measure of internal cash flow combining operating income before
interest and income taxes with non-cash charges for depreciation and
amortization. In 1998, we generated net revenue and pro forma EBITDA of $547.8
million and $54.3 million, respectively.
The healthcare environment is becoming increasingly complex due to changes
in regulations, reimbursement policies and the evolving nature of managed care.
As a result, hospitals are under significant pressure to improve the quality and
reduce the cost of care. In response, hospitals have increasingly outsourced the
staffing and management of multiple clinical areas to contract management
companies with specialized skills and standardized models to improve service,
increase the quality of care and reduce administrative costs. Specifically,
hospitals have become increasingly challenged to manage EDs effectively due to
increasing patient volume, complex billing and collection procedures, and the
legal requirement that EDs examine and treat all patients.
We believe we are well positioned to continue to capitalize on the current
outsourcing trends as a result of our:
- national presence;
- sophisticated information systems and standardized procedures that enable
us to efficiently manage our staffing and administrative services as well
as the complexities of the billing and collections process;
- demonstrated ability to improve productivity, patient satisfaction and
quality of care while reducing overall cost to the hospital; and
- successful record of recruiting and retaining high quality physicians.
In addition, our regional operating model allows us to deliver locally focused
services while benefitting from the operating efficiencies, infrastructure and
capital resources of a large national provider.
We believe we are well positioned to capitalize on the growth of the
overall healthcare industry as well as the growth of the ED sector. According to
the Health Care Financing Administration, national healthcare spending is
expected to increase from 13.6% of gross domestic product, or $1.0 trillion, in
1996 to 16.4% of GDP, or $2.1 trillion, by the year 2007, representing a 6.8%
compound annual growth rate. Hospital services have historically represented the
single largest component of these costs, accounting for approximately 34% of
total healthcare spending in 1997. According to industry sources, in 1997,
approximately 5,000 U.S. hospitals operated EDs and 80% of these hospitals
outsourced their EDs. In the same year, ED expenditures were approximately $20
billion, with ED physician services accounting for approximately $7 billion.
According to the American Hospital Association, EDs handle approximately 100
5
15
million patient visits annually and nearly 40% of all hospital inpatient
admissions originate in the ED. In addition, the average number of patient
visits per ED increased at a CAGR of approximately 3.0% between 1988 and 1996.
THE TRANSACTIONS
Team Health was recapitalized in a transaction providing aggregate
consideration to MedPartners, Inc. of $344.5 million, consisting of $335.2
million in cash, $6.8 million in equity retained by MedPartners, Inc.'s
wholly-owned subsidiary, Pacific Physician Services, Inc., and the assumption of
$2.5 million of existing indebtedness of MedPartners, Inc. In addition, Team
Health assumed liability for some contingent earnout payments, which we believe
will not exceed a total of $19.8 million. The recapitalization was funded by:
(1) the net proceeds from the offering of our series A 12% senior
subordinated notes referred to herein as the old notes;
(2) $150.0 million of borrowings by us under the term loan facilities of a
senior credit facility;
(3) a $99.7 million cash equity investment in Team Health by affiliates of
each of Cornerstone Equity Investors, LLC, Madison Dearborn Partners,
Inc. and Beecken Petty & Company, LLC;
(4) a cash equity investment in Team Health by our senior management of
approximately $8.5 million; and
(5) the equity of Team Health retained by Pacific Physician Services, Inc.
with a fair market value of $6.8 million.
The recapitalization and the transactions described above in clauses (1)
through (5) are collectively referred to throughout this prospectus as the
"Transactions." See "The Transactions."
THE EQUITY SPONSORS
The recapitalization was jointly sponsored by Madison Dearborn Partners,
Inc., Cornerstone Equity Investors, LLC and Beecken Petty & Company, LLC.
Affiliates of Madison Dearborn and Cornerstone each contributed 45% of the
equity capital invested by the equity sponsors in the recapitalization, and an
affiliate of Beecken Petty provided 10%. The investment by the equity sponsors
represents an indirect ownership interest in our common equity of approximately
78.7%. The equity sponsors have a history of investing together in healthcare
services companies, including investments in such companies as Health Management
Associates and Spectrum Healthcare Services, Inc.
Madison Dearborn Partners, Inc. is a private equity firm that focuses on
investments in private companies primarily in the healthcare, communications,
natural resources, consumer and industrial sectors. Madison Dearborn
professionals currently manage three funds, with aggregate committed capital of
over $3.5 billion. Prior to forming Madison Dearborn in 1993, its principals
managed the $2.4 billion management buyout and venture capital portfolio of
First Chicago Corporation. Since 1980, Madison Dearborn professionals have
invested in more than 120 management buyout and equity transactions, including
investments in such healthcare services companies as Health Management
Associates, Spectrum Healthcare Services, Inc., Cerner Corporation and Genesis
Health Ventures. In other industries, Madison Dearborn has made investments in
such companies as Nextel Communications, Inc., Buckeye Cellulose Corporation,
General Nutrition Companies, Inc., Allegiance Telecom, Inc. and Tuesday Morning
Corporation. The funds for Madison Dearborn's equity investment in Team Health
Holdings, L.L.C. came from its second private equity fund, Madison Dearborn
Capital Partners II, L.P., a fund with $925 million of committed capital.
Cornerstone Equity Investors, LLC is a private equity firm that focuses on
investments in middle-market companies, primarily in the healthcare services,
business services, consumer and technology industries. Since 1984, Cornerstone
has managed four funds with aggregate committed capital of $1.2
6
16
billion and has invested in over 80 companies through management buyouts and
expansion financings. Cornerstone has invested in a number of healthcare
services companies, such as Health Management Associates, Spectrum Healthcare
Services, Inc., VIPS Healthcare Information Solutions, Inc., Interim Healthcare,
Inc., and Guardian Care. In other industries, Cornerstone has invested in such
companies as Dell Computer, Card Establishment Services, Crossland Mortgage and
True Temper Sports, Inc. The funds for Cornerstone's equity investment in Team
Health Holdings, L.L.C. came from its fourth private equity fund, Cornerstone
Equity Investors IV, L.P., a fund with $555 million of committed capital.
Beecken Petty & Company, LLC is a private equity firm that focuses
exclusively on the healthcare services industry. Since 1995, Beecken Petty has
invested in a wide range of healthcare services companies, including Spectrum
Healthcare Services, Inc., DentalCare Partners, and Alternative Living Services.
The funds for Beecken Petty's equity investment in Team Health Holdings, L.L.C.
came from Healthcare Equity Partners, L.P. and Healthcare Equity Q.P. Partners,
L.P., which together represent $150 million of committed capital.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below are our summary historical and pro forma financial data.
(1) The historical financial data for the three months ended March 31, 1999
and 1998 have been derived from, and should be read in conjunction
with, our unaudited financial statements and related notes thereto
included elsewhere in this prospectus. Results for the interim periods
are not necessarily indicative of the results to be expected for the
full year or any other future period.
(2) The historical financial data for each of the three fiscal years ended
December 31, 1998 have been derived from, and should be read in
conjunction with, our audited financial statements and related notes
thereto included elsewhere in this prospectus.
(3) The historical financial data for the fiscal year ended December 31,
1995 has been derived from our audited financial statements and the
notes thereto not included in this prospectus.
(4) The historical financial data for the fiscal year ended December 31,
1994 is derived from our unaudited financial statements.
(5) The unaudited pro forma financial data have been derived from the
Unaudited Pro Forma Financial Information and the related notes thereto
included elsewhere in this prospectus. The pro forma data as of and for
the periods presented give effect to the Transactions as if they were
consummated at the beginning of the period indicated.
See "The Transactions," "Unaudited Pro Forma Financial Information," "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical financial statements
and the related notes thereto included elsewhere in this prospectus.
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- ------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Net revenue............ $351,857 $411,695 $463,380 $511,236 $547,785 $133,026 $137,877
Professional
expenses............. 278,585 316,526 353,593 398,738 430,362 104,886 108,388
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 73,272 95,169 109,787 112,498 117,423 28,140 29,489
General and
administrative
expenses............. 48,479 52,241 62,441 61,642 58,362 15,127 15,744
Depreciation and
amortization......... 3,673 4,808 5,628 6,455 9,740 2,038 2,351
-------- -------- -------- -------- -------- -------- --------
Operating income....... 21,120 38,120 41,718 44,401 49,321 10,975 11,394
Net income (loss)...... $ 19,272 $ 21,560 $ 18,955 $ 2,266 $ 20,526 $ 5,534 $ (7,460)
OTHER DATA:
EBITDA(1).............. $ 24,793 $ 42,928 $ 47,346 $ 50,856 $ 59,061 $ 13,013 $ 13,745
Net cash provided by
(used in):
Operating
Activities......... 23,777 7,560 12,405 43,342 43,370 13,016 8,330
Investing
Activities......... (14,440) (6,241) (11,423) (34,339) (22,864) (10,719) (1,799)
Financing
Activities......... (5,545) 17,414 (3,432) (9,122) (22,080) 5,932 10,324
Capital expenditures... 2,504 6,620 6,854 7,474 5,015 1,112 1,537
Ratio of earnings to
fixed charges(5)..... 10.0x 13.6x 10.9x 3.8x 17.2x 10.0x (4.6x)
THREE MONTHS
ENDED
MARCH 31,
1999
--------
PRO FORMA DATA:
EBITDA (2)......................................................... $ 54,268 12,506
Net cash provided by (used in):
Operating Activities............................................. 30,726 5,123
Investing Activities............................................. (22,864) (1,799)
Financing Activities............................................. (27,643) 10,324
Cash interest expense (3).......................................... 24,932 6,234
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DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 3,894 $ 20,327
Working capital........................................... 99,469 102,877
Total assets.............................................. 229,956 370,671
Total debt................................................ 2,544 247,508
Total shareholders' equity................................ 99,953 37,147
- ------------------------------
(1) EBITDA represents operating income plus depreciation and amortization. We
have included information concerning EBITDA because we believe that EBITDA
is generally accepted as providing useful information regarding a company's
ability to service and/or incur debt. EBITDA is not intended to represent
cash flows for the period, nor has it been presented as an alternative to
operating income as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles
("GAAP") in the United States and is not indicative of operating income or
cash flow from operations as determined under GAAP. We understand that while
EBITDA is frequently used by securities analysts in the evaluation of
companies, EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.
(2) Pro forma EBITDA represents EBITDA less estimated stand-alone costs plus the
effects of certain non-recurring transactions in 1998. Pro forma EBITDA has
not been reduced by a management fee payable pursuant to the Management
Services Agreement, which is contractually subordinated to all obligations
under the exchange notes and the senior bank facilities.
(3) Cash interest expense excludes amortization of deferred financing fees and
other non-cash interest expenses.
(4) Net debt represents total debt minus cash and cash equivalents.
(5) The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income taxes plus fixed
charges. For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expensed or capitalized and the portion of
rental expenses we believe is representative of the interest component of
rental expenses.
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RISK FACTORS
An investment in the exchange notes is subject to a number of risks. You
should carefully consider the following factors, as well as the more detailed
descriptions cross-referenced to the body of the prospectus and the other
matters described in this prospectus.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD HAVE A
SIGNIFICANT NEGATIVE EFFECT ON THE FINANCIAL HEALTH OF OUR COMPANY AND PREVENT
US FROM FULFILLING OUR OBLIGATIONS UNDER THESE EXCHANGE NOTES. We have a
significant amount of indebtedness. The following chart is presented assuming we
had completed the Transactions as of the dates or at the beginning of the
periods specified below and applied the proceeds as intended:
AT MARCH 31, 1999
(IN MILLIONS)
Total indebtedness.......................................... $247.5
Indebtedness senior to the exchange notes................... 147.5
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult to pay our debts as they become due during general
adverse economic and market industry conditions;
- increase our vulnerability to general adverse economic and industry
conditions;
- require a substantial portion of our cash flow from operations for debt
payments, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, acquisitions and other general
corporate purposes; and
- limit our ability to borrow additional funds.
ABILITY TO SERVICE DEBT -- WE MAY NOT HAVE SUFFICIENT CASH FROM CASH FLOW
FROM OPERATIONS, AVAILABLE CASH AND AVAILABLE BORROWINGS UNDER OUR SENIOR BANK
FACILITIES TO SERVICE OUR INDEBTEDNESS, WHICH WILL REQUIRE A SIGNIFICANT AMOUNT
OF CASH. Our ability to make payments on and to refinance our indebtedness,
including these exchange notes, and to fund planned capital expenditures will
depend on our ability to generate cash in the future as well as general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. We cannot assure you that our cash flow from operations,
available cash and available borrowings under our senior bank facilities will be
adequate to meet our future liquidity needs for at least the next few years.
In addition, we may need to refinance all or a portion of our indebtedness,
including these exchange notes on or before maturity. We might not be able to
refinance any of our indebtedness, including our senior bank facilities and
these exchange notes, on commercially reasonable terms or at all.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE EXCHANGE NOTES IS
JUNIOR TO MOST OF OUR EXISTING INDEBTEDNESS AND POSSIBLY MOST OF OUR FUTURE
BORROWINGS. FURTHER, THE GUARANTEES OF THESE EXCHANGE NOTES ARE JUNIOR TO MOST
OF OUR SUBSIDIARY GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL THEIR
FUTURE BORROWINGS. These exchange notes and the subsidiary guarantees rank
behind all of our and the subsidiary guarantors' existing indebtedness (other
than trade payables) and all of our and their future borrowings, except any
future indebtedness that expressly provides that it ranks equal with, or
subordinated in right of payment to, the exchange notes and the guarantees. As a
result, upon any distribution to our creditors or the creditors of the
subsidiary guarantors in a bankruptcy or similar proceeding relating to us or
the guarantors, the holders of senior debt of our company and the subsidiary
guarantors will be entitled to be paid in full in cash before any payment may be
made with respect to these exchange notes or the subsidiary guarantees.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to Team Health or the subsidiary guarantors, holders of the
exchange notes will participate with all other holders of our subordinated
indebtedness and the subsidiary guarantors in the assets remaining after we and
the subsidiary guarantors have paid all of the senior debt. Because our senior
debt must be paid first, you may
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20
receive proportionately less than trade creditors in any such proceeding. In any
of these cases, we and the subsidiary guarantors may not have sufficient funds
to pay all of our creditors, therefore, holders of these exchange notes may
receive ratably less than trade creditors.
RESTRICTIONS IMPOSED BY THE SENIOR BANK FACILITIES AND THE INDENTURE -- WE
ARE SUBJECT TO RESTRICTIONS CONTAINED IN OUR SENIOR BANK FACILITIES AND IN THE
INDENTURE. FAILURE TO COMPLY WITH ANY OF THE RESTRICTIONS COULD RESULT IN
ACCELERATION OF OUR DEBT. Our senior bank facilities and the indenture restrict
our ability to take various actions and enter into various types of transactions
commonly undertaken by business entities.
In addition, we must maintain minimum debt service and maximum leverage
ratios under the senior bank facilities. A failure to comply with the
restrictions contained in the senior bank facilities could lead to an event of
default which could result in an acceleration of such indebtedness and we may
not have enough available cash to immediately repay such indebtedness. Such an
acceleration would also constitute an event of default under the indenture
relating to these exchange notes.
RISKS RELATING TO EXPOSURE TO PROFESSIONAL LIABILITY; LIABILITY
INSURANCE -- WE COULD BE SUBJECT TO MEDICAL MALPRACTICE LAWSUITS, SOME OF WHICH
WE MAY NOT BE FULLY INSURED AGAINST. In recent years, physicians, hospitals and
other participants in the healthcare industry have become subject to an
increasing number of lawsuits alleging medical malpractice and related legal
theories. Many of these lawsuits involve large claims and substantial defense
costs. Although we do not principally engage in the practice of medicine or
provide medical services nor control the practice of medicine by our affiliated
physicians or the compliance with regulatory requirements applicable to the
physicians and physician groups with which we contract, there can be no
assurance that we will not become involved in such litigation in the future. In
addition, through our management of hospital departments and provision of
non-physician healthcare personnel, we could be named in actions involving care
rendered to patients by physicians employed by or contracting with medical
organizations and physician groups with which we contract. We maintain
professional and general liability insurance and other coverage deemed necessary
by us. Nevertheless, certain types of risks and liabilities are not covered by
insurance and there can be no assurance that the limits of coverage will be
adequate to cover losses in all instances.
We are liable for claims against our physicians for incidents incurred but
not reported during periods for which the related risk was covered by
claims-made insurance. Under GAAP, the cost of medical malpractice claims, which
includes costs associated with litigating or settling claims, is accrued when
the incidents that give rise to the claims occur. The accrual includes an
estimate of the losses that will result from incidents which occurred during the
claims-made period, but were not reported during such period. Such claims are
referred to as incurred-but-not-reported claims. We provide insurance to cover
such incurred-but-not-reported claims. This type of insurance is generally
referred to as "tail coverage". With respect to those physicians for whom we
provide tail coverage, we accrue professional insurance expenses based on
estimates of the cost of procuring tail coverage. There can be no assurance that
a future claim will not exceed the limits of available insurance coverage or
such accrual will be sufficient to cover any risks assumed by our company.
FUTURE LEGISLATION, REGULATION AND INTERPRETATION -- CHANGES IN THE CURRENT
REGULATORY ENVIRONMENT COULD ADVERSELY AFFECT OUR OPERATIONS. Numerous
proposals have been or may be introduced into the United States Congress and
state legislatures relating to healthcare reform in response to various
healthcare issues. There can be no assurance as to the ultimate content, timing
or effect of any healthcare reform legislation, nor is it possible at this time
to estimate the impact of potential legislation. Further, although we exercise
care in structuring our arrangements with physicians to comply in all material
respects with the above-referenced laws, there can be no assurance that
(1) government officials charged with responsibility for enforcing such
laws will not assert that we or certain transactions into which we have
entered are in violation of such laws or
(2) such laws will ultimately be interpreted by the governmental entities
or courts in a manner consistent with our interpretation. The continual
flux of healthcare rules and regulations at the federal, state and
local level, could revise the future of our relationships with the
hospitals and
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physicians with whom we contract as well as have a significant negative effect
on our financial condition.
In addition to the regulations referred to above, aspects of our operations
are also subject to state and federal statutes and regulations governing
workplace health and safety and, to a small extent, the disposal of medical
waste. Our operations may also be affected by changes in ethical guidelines and
operating standards of professional and trade associations and private
accreditation commissions such as the American Medical Association and the Joint
Commission on Accreditation of Healthcare Organizations. Accordingly, changes in
existing laws and regulations, adverse judicial or administrative
interpretations of such laws and regulations or enactment of new legislation
could have a significant negative effect on our operating results and financial
condition. Moreover, if we are required to modify our structure and organization
to comply with these laws, such modifications may not be permitted under the
terms of our financing agreements, including the indenture governing these
exchange notes and the senior bank facilities, thereby requiring us to obtain
the consent of the holders of such indebtedness or requiring the refinancing of
such indebtedness.
COLLECTION RISK -- WE MAY BE UNABLE TO COLLECT A PORTION OF OUR
REVENUE. Our revenue is derived from fees that are either billed and collected
by the hospital, which remits a negotiated amount to us monthly, or, with
respect to our fee-for-service contracts, fees that are billed and collected
separately by us directly or indirectly through our affiliated physicians. Under
fee-for-service contracts, we assume the financial risks related to changes in
patient volume, payor mix and third party reimbursement rates. Our
fee-for-service contractual arrangements also involve a credit risk related to
services provided to uninsured individuals -- a risk exacerbated in the ED
physician staffing context by federal law which requires EDs to treat all
patients regardless of the severity of illness or injury. In 1998, 76% of our
net revenue was generated from fee-for-service contracts. See Notes 2 and 3 of
Notes to Consolidated Financial Statements for information concerning historical
allowance for uncollectibles related in large part to fee-for-service business.
In addition, fee-for-service contracts also have less favorable cash flow
characteristics in the start-up phase than traditional flat-rate contracts due
to longer collection periods. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
GOVERNMENT REGULATION -- REGULATORY MATTERS COULD IMPACT OUR ABILITY TO
CONDUCT OUR BUSINESS. Our operations and arrangements with healthcare providers
are subject to extensive government regulation, including numerous laws directed
at preventing fraud and abuse and laws regulating billing and collection of
reimbursement from governmental programs, such as the Medicare and Medicaid
programs. Of particular importance are:
(1) provisions of the Omnibus Budget Reconciliation Act of 1993 (commonly
known as "Stark II") that, subject to limited exceptions, prohibit the
referral of Medicare patients by a physician to an entity for the
provision of certain "designated health services" if the physician or a
member of such physician's immediate family has a direct or indirect
financial relationship (including a compensation arrangement) with the
entity;
(2) provisions of the Social Security Act, commonly referred to as the
"anti-kickback statute," that prohibit the offering or payment of any
bribe, kickback, rebate or other remuneration in return for the
referral or recommendation of patients for items and services covered
by federal health care programs, such as Medicare and Medicaid;
(3) the federal False Claims Act that imposes civil and criminal liability
on individuals or entities that submit false or fraudulent claims for
payment to the government;
(4) reassignment of payment rules that prohibit certain types of billing
and collection practices in connection with claims payable by the
Medicare and Medicaid programs; and
(5) similar state law provisions pertaining to anti-kickback, self-referral
and false claims issues.
Violations of these laws could subject us to severe fines, civil monetary
penalties and possible exclusion from participation in government sponsored
programs such as Medicare and Medicaid. Any such
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penalties, if applied to us or our affiliated physicians, could have a
significant negative effect on our operating results and financial condition.
Moreover, if we are required to modify our structure and organization to comply
with these laws, such modifications may not be permitted under the terms of our
financing agreements, including the indenture or the senior bank facilities,
thereby requiring us to obtain the consent of the holders of such indebtedness
or requiring the refinancing of such indebtedness.
DEBT COLLECTION REGULATION -- OUR INTERNAL COLLECTION AGENCY AND OUR DEBT
COLLECTION PRACTICES COULD BE AFFECTED BY LAWS REGULATING DEBT COLLECTION
PRACTICES. Certain of our operations are subject to compliance with the federal
Fair Debt Collection Practices Act and comparable statutes in many states. Under
the Fair Debt Collection Practices Act, a third-party collection company is
restricted in the methods it uses in contacting consumer debtors and eliciting
payments with respect to placed accounts. Requirements under state collection
agency statutes vary, with most requiring compliance similar to that required
under the Fair Debt Collection Practices Act. In addition, most states and
certain municipalities require collection agencies to be licensed with the
appropriate regulatory body before operating in such jurisdictions. Although we
believe that we are in substantial compliance with the Fair Debt Collection
Practices Act and comparable state and municipal statutes and we maintain
licenses in all jurisdictions in which our operations require us to be licensed,
there can be no assurance that our debt collection practices, including
operation of our internal collection agency, will not violate such statutes in
the future.
REIMBURSEMENT RISK -- OUR REVENUE COULD BE ADVERSELY AFFECTED BY LAWS
REGULATING PAYMENTS FOR MEDICAL SERVICES BY GOVERNMENT SPONSORED HEALTHCARE
PROGRAMS. In 1998, approximately 30% of the net revenue of our affiliated
physician groups was derived from payments made by government sponsored
healthcare programs (principally, Medicare and state reimbursed programs). There
are increasing public and private sector pressures to restrain healthcare costs
and to restrict reimbursement rates for medical services. Any change in
reimbursement policies, practices, interpretations, regulations or legislation
that places limitations on reimbursement amounts or practices could materially
adversely affect hospitals, and consequently affect our operations unless we are
able to renegotiate satisfactory contractual arrangements with our hospital
clients and contracted physicians. See "Business -- Regulatory Matters." In
addition, while we seek to comply substantially with applicable Medicare and
Medicaid reimbursement regulations, there can be no assurance that we would be
found to be in compliance in all respects with such regulations. A determination
that we are in violation of such regulations could have a significant negative
effect on us if we were unable to cure any such condition or if the violation
results in a determination that a substantial amount of money must be repaid by
us.
We believe that regulatory trends in cost containment will continue to
result in a reduction from historical levels in per-patient revenue for
physician services. The federal government has implemented, through the Medicare
program, a payment methodology for physician services that sets physician fees
according to a fee schedule that, except for certain geographical and other
adjustments, pays similarly situated physicians the same amount for the same
services. The fee schedule used is known as the "Resource Based Relative Value
System." The Resource Based Relative Value System is adjusted each year and is
subject to increases or decreases at the discretion of Congress. To date, the
implementation of the Resource Based Relative Value System has reduced payment
rates for certain of the procedures historically provided by ED physicians and
radiologists. Effective January 1, 1999, new Medicare regulations were adopted
to provide for reductions in the rate of growth for payments for physician
services over a four-year period ending in 2002. The new regulations provide for
the implementation of a resource-based methodology for payment of physician
practice expenses under the physician fee schedule. With respect to services
provided in EDs, there may be a cumulative reduction of between 6% and 8% over
the phase-in period. Similar reductions will apply to radiology services. There
can be no assurance that we will be able to offset reduced operating margins
through cost reductions, increased volume, the introduction of additional
procedures or otherwise. In addition, there can be no assurance that there will
not be further reductions in the Medicare physician fee schedule in the future
and such reductions could have an significant negative effect on our overall
financial condition.
Subject to some exceptions, the Medicare program prohibits the reassignment
of Medicare payments due to a physician or other healthcare provider to any
other person or entity. For example, if a hospital
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contracts with an ED physician or physician group to staff the hospital's ED,
the hospital must comply with the requirements of an applicable exception to the
reassignment prohibition in order to receive directly Medicare payments for the
services of such ED physicians. In certain states where we are not otherwise
prohibited, we utilize a "lockbox" model that we believe is in compliance with
the Medicare reassignment prohibition. However, there can be no assurance that
the lockbox model utilized by us will not be subject to challenge or scrutiny as
a result of changes in the applicable statutes and regulations or new
interpretations of existing statutes and regulations. Further, as of January 1,
1998, we implemented a program for compliance with the reassignment regulation
and Medicare carriers have been notified regarding the content of the compliance
program.
FACILITY RULES AND REGULATIONS -- OUR OPERATIONS COULD BE ADVERSELY
AFFECTED BY CHANGES IN THE FACILITY RULES AND REGULATIONS TO WHICH MANY OF OUR
CLIENTS ARE SUBJECT. Because we perform services at hospitals, outpatient
facilities and other types of healthcare facilities, we and our affiliated
physicians may be subject to certain laws which are applicable to such entities.
For example, we are subject to the provisions of the Emergency Medical Treatment
and Active Labor Act of 1986. The Emergency Medical Treatment and Active Labor
Act of 1986 addresses the issue of hospital ED "patient dumping"-- in effect
requiring the hospital and ED physicians to provide care to any patient
presenting to the ED in an emergent condition regardless of the patient's
ability to pay. Many states in which we operate, including California, also have
similar state law provisions concerning patient-dumping. In addition to the
Emergency Medical Treatment and Active Labor Act of 1986 and its state law
equivalents, our operations and performance of services are subject to any and
all state and federal statutes and regulations governing workplace health and
safety. Our operations are subject to the American Medical Association's and the
Joint Commission Accreditation of Healthcare Organizations' guidelines.
Accordingly, if any of these laws, regulations or guidelines are amended or a
new enactment occurs or standards in the community change, these changes could
have a material adverse effect on the performance of services by us and our
relationship with future and present clients; therefore, this could have an
effect on our overall financial condition. Moreover, if we are required to
modify its structure and organization to comply with any of these changes, such
modifications may not be permitted under the terms of the indenture or the
senior bank facilities, thereby requiring us to obtain the consent of the
holders of such indebtedness or requiring the refinancing of such indebtedness.
ANTITRUST -- OUR CONTRACTS WITH PHYSICIANS COULD BE ADVERSELY AFFECTED BY
CERTAIN ANTITRUST LAWS. Our contracts with physicians include contracts with
physicians organized as separate legal professional entities (e.g. professional
medical corporations) and as individuals. As such, each such physician/practice
is deemed to be separate, both from our company and from each other, under the
antitrust laws and, accordingly, subject to a wide range of laws that prohibit
anti-competitive conduct among separate legal entities or individuals. A review
or action by regulatory authorities or the courts which is negative in nature as
to the relationship between our company and the physicians/practices with which
we contract could adversely change our operations and our relationships with
clients. Moreover, if we are required to modify our structure and organization
to comply with such action or review, such modifications may not be permitted
under the terms of the indenture or the senior bank facilities, thereby
requiring us to obtain the consent of the holders of such indebtedness or
requiring the refinancing of such indebtedness.
ADVERSE TAX OR OTHER CONSEQUENCES IF INDEPENDENT CONTRACTOR PHYSICIANS ARE
RECLASSIFIED AS EMPLOYEES -- WE COULD BE FORCED TO PAY RETROACTIVE TAXES AND
PENALTIES IF TAX AUTHORITIES RECLASSIFY OUR INDEPENDENT CONTRACTOR
PHYSICIANS. We contract with many affiliated physicians as independent
contractors to fulfill our contractual obligations to clients. Because we
consider many of the physicians with whom we contract to be independent
contractors, as opposed to employees, we do not withhold federal or state income
or other employment related taxes, make federal or state unemployment tax or
Federal Insurance Contributions Act ("FICA") payments (except as described
below), or provide workers' compensation insurance with respect to such
affiliated physicians. Rather, the payment of taxes is a contractual
responsibility of such physicians. The classification of physicians as
independent contractors depends upon the facts and circumstances of the
relationship. In the event of a determination by federal or state taxing
authorities that the physicians engaged as independent contractors are
employees, we may be adversely affected and subject to retroactive taxes and
penalties. Under current federal tax law, a "safe
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harbor" from reclassification, and consequently retroactive taxes and penalties,
is available if our current treatment is consistent with a long-standing
practice of a significant segment of our industry and if we meet certain other
requirements. If challenged, we may not prevail in demonstrating the
applicability of the safe harbor to our operations. Further, proposals have been
made in the recent past, and could be made in the future, to eliminate the safe
harbor.
LOSS OF CONTRACTS -- OUR REVENUE COULD BE ADVERSELY AFFECTED BY A NET LOSS
OF CONTRACTS. The average term of our contracts with clients is approximately 3
years. These contracts are generally renewable automatically under the same
terms and conditions unless either party gives notice of an intent not to renew
and are generally terminable by either of the parties thereto upon notice of as
little as 30 days. These contracts may not be renewed or, if renewed, may
contain terms that are not as favorable to us as our current contracts. In 1998,
we experienced a net loss of contracts. Sixty-one of our contracts were either
not renewed or were terminated in that year. There can be no assurance that we
will not experience a net loss of contracts in the future and that any such net
loss would not have a material adverse effect on our operating results and
financial condition.
EXECUTION OF GROWTH STRATEGY; INTEGRATION OF NEW CONTRACTS AND
ACQUISITIONS -- WE MAY NOT BE ABLE TO FIND SUITABLE ACQUISITION CANDIDATES OR
SUCCESSFULLY INTEGRATE COMPLETED ACQUISITIONS INTO OUR CURRENT OPERATIONS IN
ORDER TO PROFITABLY OPERATE OUR CONSOLIDATED COMPANY. Obtaining new contracts
with hospitals and managed care companies, which increasingly involves a
competitive bidding process, requires that we accurately assess the costs we
will incur in providing services in order to realize adequate profit margins or
otherwise meet our objectives. The integration of new contracts, as well as the
maintenance of existing contracts, is made more difficult by increasing
pressures from healthcare payors to restrict or reduce reimbursement rates at a
time when the costs of providing medical services continue to increase.
A significant portion of our growth in net revenue has resulted from, and
is expected to continue to result from, the acquisition of healthcare
businesses. We engage in evaluations of potential acquisitions and are in
various stages of discussion regarding possible acquisitions, certain of which,
if consummated, could be significant to us. There are currently no definitive
agreements or letters of intent with respect to any material acquisition.
Acquisitions by us may result in significant transaction expenses, increased
interest and amortization expense, increased depreciation expense and decreased
operating income, any of which could have a material adverse effect on our
operating results. As we grow by acquisitions, we must be able to integrate and
manage the contracts of new groups of affiliated physicians to realize economies
of scale and control costs. In addition, acquisitions involve other risks,
including increases in pricing due to competition, diversion of management
resources and risks associated with entering new markets. We may not be able to
identify suitable acquisition candidates in the future, we may not be able to
obtain acceptable financing or we may not be able to consummate any future
acquisitions. In addition, acquisitions may require the consent of third parties
who have contracts with the entity to be acquired, such as managed care
companies or hospitals contracting with the entity. Such consents may not be
obtained in a potential acquisition. Any failure by us to integrate acquired
operations, manage the cost of providing our services or price our services
appropriately may have a material adverse effect on our operating results. In
addition, as a result of our acquisitions of other healthcare businesses, we may
be subject to the risk of unanticipated business uncertainties or legal
liabilities relating to such acquired businesses for which we may not be
indemnified by the sellers of the acquired businesses.
COMPETITION FOR MEDICAL PERSONNEL -- WE MAY NOT BE ABLE TO CONTINUE TO
SUCCESSFULLY RECRUIT AND RETAIN QUALIFIED PHYSICIANS TO SERVE AS OUR INDEPENDENT
CONTRACTORS OR EMPLOYEES. Our performance is significantly affected by our
ability to recruit and retain affiliated physicians and qualified personnel. The
demand for physicians and other healthcare professionals presently exceeds the
supply of qualified personnel. As a result, we experience competitive pressures
for the recruitment and retention of qualified physicians and other healthcare
professionals to deliver clinical services. Our future success depends on our
ability to continue to recruit and retain competent physicians to serve as our
employees or independent contractors. We may not be able to attract and retain a
sufficient number of competent physicians and other healthcare professionals to
continue to expand our operations. In addition, there can be no assurance that
our non-competition contractual arrangements with affiliated physicians and
professional corporations
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will not be successfully challenged in certain states as unenforceable. In such
event, we would be unable to prevent former affiliated physicians and
professional corporations from competing with us -- potentially resulting in the
loss of some of our hospital contracts and other business.
DEPENDENCE UPON KEY PERSONNEL -- A LOSS OF KEY PERSONNEL MAKE IT MORE
DIFFICULT FOR US TO GENERATE CASH FLOW FROM OPERATIONS AND SERVICE OUR
INDEBTEDNESS. Our success depends in large part on the services of our senior
management team. The loss of any of our key executives could materially
adversely affect our company and seriously impair our ability to implement our
strategy. Our ability to manage our anticipated growth will depend on our
ability to identify, hire and retain additional qualified management personnel.
We may be unsuccessful in attracting and retaining such personnel and such
failure could have a significant negative effect on our company.
COMPETITION -- THE HIGH LEVEL OF COMPETITION IN OUR INDUSTRY COULD
ADVERSELY AFFECT OUR CONTRACT AND REVENUE BASE. The provision of outsourced
physician staffing and administrative services to hospitals and clinics is
characterized by a high degree of competition. Such competition could adversely
affect our ability to obtain new contracts, retain existing contracts and
increase our profit margins. We compete with both national and regional
enterprises, certain of which have substantially greater financial and other
resources available to them. In addition, certain of these firms may have
greater access than us to physicians and potential clients. We also compete
against local physician groups and self-operated EDs for satisfying staffing and
scheduling needs. See "Business -- Strategy."
CONTROL BY PRINCIPAL STOCKHOLDERS -- THE INTERESTS OF OUR CONTROLLING
SHAREHOLDERS MAY BE IN CONFLICT WITH YOUR INTERESTS AS A HOLDER OF EXCHANGE
NOTES. THIS COULD RESULT IN CORPORATE DECISION MAKING THAT INVOLVES
DISPROPORTIONATE RISKS TO THE HOLDERS OF THE EXCHANGE NOTES, INCLUDING OUR
ABILITY TO SERVICE OUR INDEBTEDNESS OR PAY THE PRINCIPAL AMOUNT OF INDEBTEDNESS
WHEN DUE. The holding company through which the equity sponsors invested in our
company owns securities representing approximately 92.0% of the voting power of
our outstanding common stock immediately after giving effect to the Transactions
and indirectly controls the affairs and policies of our company. This holding
company is controlled by the equity sponsors. Consequently, the equity sponsors
indirectly control the affairs and policies of our company. Circumstances may
occur in which the interests of the equity sponsors could be in conflict with
the interests of the holders of these exchange notes. In addition, the equity
sponsors may have an interest in pursuing acquisitions, divestitures or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might involve risks to the holders of these
exchange notes.
RISKS RELATING TO TRANSITION SERVICES -- AFTER THE RECAPITALIZATION, WE MAY
BE UNABLE TO ADEQUATELY REPLACE CERTAIN SERVICES PROVIDED TO US BY
MEDPARTNERS. Prior to the recapitalization we operated within and were
controlled by MedPartners Corporate Compliance Program, which was designed to
reduce the likelihood of noncompliant activities by us. Now, we must implement
our own compliance program. MedPartners also provided us with certain corporate
services, including legal services, risk management, administration of certain
employment benefits, tax advice and preparation of tax returns, software support
services, and certain financial and other services. No long-term agreement for
the supply of certain of these services by MedPartners currently exists. The
failure to obtain replacement services in a timely manner or the failure of such
services to adequately replace existing systems could have a significant
negative effect on our operating results and financial condition.
In connection with the recapitalization, MedPartners and Physician Services
agreed to indemnify us and Team Health Holdings, subject to some limitations, in
respect of some types of losses relating to:
- breaches of representations and warranties and covenants made by each of
MedPartners and Physician Services in connection with the
Recapitalization;
- some claims or audits by governmental authorities; and
- some litigation to the extent such litigation is not covered by third
party insurance, including some medical malpractice litigation.
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A significant negative change in the financial condition of MedPartners
could prevent MedPartners from fulfilling its indemnification obligations. As
such, with respect to the indemnification rights granted to us in connection
with the recapitalization, we are subject to MedPartners' credit risk.
STATE LAWS REGARDING PROHIBITION OF CORPORATE PRACTICE OF MEDICINE AND FEE
SPLITTING ARRANGEMENTS -- OUR OPERATIONS ARE SUBJECT TO CERTAIN STATE LAWS AND
REGULATIONS, WHICH RESTRICT THE MANNER IN WHICH WE CONDUCT OUR BUSINESS AND VARY
FROM STATE TO STATE. We currently provide outsourced physician staffing and
administrative services to hospitals and clinics in 25 states. The laws and
regulations relating to our operations vary from state to state. The laws of
many states, including California (from which approximately 8% of our net
revenue was derived in 1998), prohibit general business corporations (such as
us) from practicing medicine, exercising control over physicians who practice
medicine or engaging in certain practices such as fee splitting with physicians.
The laws of other states, including Florida (from which approximately 26% of our
net revenue was derived in 1998) do not prohibit non-physician entities from
practicing medicine but generally retain a ban on certain types of fee
splitting.
Our current operating practice is to contract directly with hospitals,
physician groups and independent physicians to provide staffing of physicians
and other administrative services. In states where we employ physicians to
service our contracts with hospital-clients, payment for such services is made
directly to us or one of our regional operating units. In states such as
California that prohibit non-physician entities from practicing medicine, the
physicians providing services to our clients are either independent contractors
of our company or employees or independent contractors of physician-controlled
professional corporations with which we contract to provide certain clinical
management and administrative services. With respect to independently contracted
physicians, the payment for the physician services are paid into a "lockbox"
account under the control of the physician and subsequently directed into a
company account in exchange for our provision of management and administrative
services to or on behalf of the physician or physician group. With respect to
physicians employed by physician-controlled professional corporations, the
payment for physician services are paid to a group account under our control.
Although we believe our operations as currently conducted are in material
compliance with existing applicable laws relating to the practice of medicine
and fee splitting, there can be no assurance that our existing organization and
our contractual arrangements with physicians and professional corporations
(including non-competition agreements) will not be successfully challenged in
certain states as unenforceable or as constituting the unlicensed practice of
medicine or prohibited fee-splitting. In the event of action by any regulatory
authority limiting or prohibiting us from carrying on our business as presently
conducted or from expanding our operations to certain jurisdictions, structural
and organizational modifications of Team Health and/or its contractual
arrangements with physicians, professional corporations and hospitals may be
required. Such an action could result in significant increased operational
costs, or the loss of certain hospital contracts. The occurrence of any of the
above results could have a significant negative effect on our operating results,
financial condition and our ability to pay the principal and interest of the
exchange notes when due. Moreover, such structural and organizational
modifications may not be permitted under the terms of the indenture or the
senior bank facilities, thereby requiring us to obtain the consent of the
holders of such indebtedness or requiring the refinancing of such indebtedness.
We have not obtained an opinion of counsel with regard to our compliance with
applicable state laws and regulations, and information contained herein
regarding our compliance with applicable state laws and regulations should not
be construed as being based on an opinion of counsel.
STATE AND FEDERAL FRAUD AND ABUSE, ANTI-KICKBACK AND ANTI-REFERRAL
LAWS -- OUR CONTRACTUAL RELATIONSHIPS WITH HOSPITALS AND PHYSICIANS COULD BE
AFFECTED BY STATE AND FEDERAL LAWS REGULATING BILLING PRACTICES FOR PHYSICIAN
SERVICES AND FORBIDDING REMUNERATION FROM BEING PAID FOR PATIENT REFERRALS.
A failure by us to comply with any of the legal requirements discussed
below could have a significant negative effect on our business. Moreover, if as
a result of these legal requirements, we are required to modify our structure or
organization, such modification may not be permitted under the terms of the
indenture or the senior bank facilities. Consequently, we could be required to
obtain the consent of the holders of such indebtedness or be forced to refinance
it.
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Anti-Kickback Statutes. We are subject to the Medicare and Medicaid fraud
and abuse laws including the federal anti-kickback statute. The federal
anti-kickback statute prohibits the offering or payment of any bribe, kickback,
rebate or other remuneration in return for the referral or recommendation of
patients for items and services covered by federal healthcare programs. Federal
healthcare programs have been defined to include plans and programs that provide
health benefits funded by the United States government including Medicare,
Medicaid, and the Civilian Health and Medical Program of the Uniformed Services,
among others. Violations of the anti-kickback statute may result in civil and
criminal penalties and exclusion from participation in federal and state
healthcare programs. In addition, an increasing number of states in which we
operate have laws that prohibit certain direct or indirect payments (similar to
the anti-kickback statute) if such arrangements are designed to induce or
encourage the referral of patients to a particular provider. Possible sanctions
for violation of these restrictions include exclusion from state funded
healthcare programs, loss of licensure and civil and criminal penalties. Such
statutes vary from state to state, are often vague and have seldom been
interpreted by the courts or regulatory agencies.
The Health Insurance Portability and Accountability Act of 1996 created a
mechanism for a provider to obtain written interpretative advisory opinions
under the federal anti-kickback statute from the Department of Health and Human
Services regarding existing or contemplated transactions. Such advisory opinions
are binding as to the Department of Health and Human Services (but no other
agency is bound, e.g. the Department of Justice) but only with respect to the
requesting party or parties. The advisory opinions are not binding as to other
governmental agencies. Recently, the Department of Health and Human Services
issued an advisory opinion in which it concluded that a proposed management
services contract between a medical practice management company and a physician
practice, which provided that the management company would be reimbursed for its
costs and paid a percentage of net practice revenues, might constitute illegal
remuneration under the federal anti-kickback statute. The Department of Health
and Human Services' analysis was apparently based on a determination that the
proposed management services arrangement included financial incentives to
increase patient referrals, contained no safeguards against overutilization, and
included financial incentives that increased the risk of abusive billing
practices. We believe that our contractual relationships with hospitals and
physicians are distinguishable from the arrangement described in this advisory
opinion with regard to both the types of services provided and the risk factors
identified by the Department of Health and Human Services. Nevertheless, there
can be no assurance that the Department of Health and Human Services will not
challenge our arrangements under the federal anti-kickback statute in the
future.
In sum, although we believe that our physician staffing arrangements and
other operations are in material compliance with the federal anti-kickback
statute and state law equivalents, there can be no assurance that our existing
organization and our contractual arrangements with affiliated physicians,
professional corporations and hospitals will not be successfully challenged by
the government under such laws.
Physician Self-Referral Laws. Our contractual arrangements with physicians
and hospitals likely implicate the federal physician self-referral statute
commonly known as Stark II. In addition, a number of the states in which we
operate have similar prohibitions on physician self-referrals. In general, these
state prohibitions closely track Stark II's prohibitions and exceptions. Stark
II prohibits the referral of Medicare patients by a physician to an entity for
the provision of certain "designated health services" if the physician or a
member of such physician's immediate family has a "financial relationship" with
the entity. Stark II provides that the entity which renders the "designated
health services" may not present or cause to be presented a claim to the
Medicare program for "designated health services" furnished pursuant to a
prohibited referral. A person who engages in a scheme to circumvent Stark II's
prohibitions may be fined up to $100,000 for each such arrangement or scheme. In
addition, anyone who presents or causes to be presented a claim to the Medicare
program in violation of Stark II is subject to monetary penalties of up to
$15,000 per service, an assessment of up to twice the amount claimed, and
possibly exclusion from participation in federal healthcare programs. Generally,
these penalties are assessed against the entity that submitted the prohibited
bill to Medicare; the government has, however, indicated that such penalties
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would also apply to the referring physician because the physician "causes" the
claim to be submitted by making the referral. The term "designated health
services" includes several services commonly performed or supplied by hospitals
with which we provide physician staffing. In addition, "financial relationship"
is broadly defined to include any direct or indirect ownership or investment
interest or compensation arrangement pursuant to which a physician receives
remuneration from the provider at issue. Stark II is broadly written and at this
point, only proposed regulations have been issued to clarify its meaning and
application. Regulations for a predecessor law, Stark I, which is applicable
only to clinical laboratory services, were published in August 1995 and remain
in effect. However, neither the final Stark I regulations nor the proposed Stark
II regulations provide definitive guidance as to the application of certain key
exceptions to Stark I and Stark II as they relate to our arrangements with
physicians and hospitals. We believe that reasonable arguments can be advanced
that our staffing arrangements with physicians and hospitals meet the
requirements of an exception to Stark II. In addition, we believe that such
arrangements do not subvert the intent of Stark II as indicated by comments made
by Congress in connection with the enactment of Stark II's predecessor
legislation. Likewise, we believe that such arrangements materially comply with
similar state physician self-referral statutes. However, there can be no
assurance that our existing organizational structure and our contractual
arrangements with affiliated physicians, professional corporations and hospitals
will not be successfully challenged by the government as inconsistent with Stark
II or its state law equivalents.
Other Fraud and Abuse Laws. The federal False Claims Act imposes civil and
criminal liability on individuals and entities that submit false or fraudulent
claims for payment to the government. Violations of the False Claims Act may
result in civil monetary penalties and exclusion from the Medicare and Medicaid
programs. In addition, the Health Insurance Portability and Accountability Act
of 1996 created two new federal crimes: "Health Care Fraud" and "False
Statements Relating to Health Care Matters." The Health Care Fraud statute
prohibits knowingly and willfully executing a scheme or artifice to defraud any
healthcare benefit program (including private payors). A violation of this
statute is a felony and may result in fines, imprisonment and/or exclusion from
government sponsored programs. The False Statements statute prohibits knowingly
and willfully falsifying, concealing or covering up a material fact by any
trick, scheme or device or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits,
items or services. A violation of this statute is a felony and may result in
fines and/or imprisonment. Civil monetary penalties under the False Claims Act
and certain other similar statutes may include treble damages and penalties of
up to $10,000 per false or fraudulent claim. Recently, the federal government
has made a policy decision to significantly increase the financial resources
allocated to enforcing the general fraud and abuse laws. In addition, private
insurers and various state enforcement agencies have increased their level of
scrutiny of healthcare claims in an effort to identify and prosecute fraudulent
and abusive practices in the healthcare area. The False Claims Act also allows a
private individual with direct knowledge of fraud to bring a "whistleblower" or
qui tam suit on behalf of the government against a healthcare provider for
violations of the False Claims Act. In such event, the "whistleblower" is
responsible for initiating a lawsuit that sets in motion a chain of events that
may eventually lead to the government recovering money. After the
"whistleblower" has initiated the lawsuit, the government must decide whether to
intervene in the lawsuit and to become the primary prosecutor. In the event the
government declines to join the lawsuit, the "whistleblower" plaintiff may
choose to pursue the case alone, in which case the "whistleblower's" counsel
will have primary control over the prosecution (although the government must be
kept apprised of the progress of the lawsuit and will still receive at least 70%
of any recovered amounts). In return for bringing a "whistleblower" suit on the
government's behalf, the "whistleblower" plaintiff receives a statutory amount
(up to 30% of the recovered amount) from the government's litigation proceeds if
the litigation is successful. Recently, the number of "whistleblower" suits
brought against healthcare providers has increased dramatically. In addition, at
least five states -- California, Illinois, Florida, Tennessee, and Texas -- have
enacted laws modeled after the False Claims Act that allow these states to
recover money which was fraudulently obtained by a healthcare provider from the
state (e.g., Medicaid funds provided by the state). We, along with a number of
other industry participants, are named as defendants in a "whistleblower" suit,
which alleges that we had inappropriate financial relationships with physicians
and engaged in inappropriate
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billing practices in violation of the False Claims Act and provisions of the
Medicare Statute. It is our position that assertions made in the complaint are
unwarranted. However, no assurance can be provided as to the outcome of this
litigation. See "Business -- Legal Proceedings."
In addition to the federal statutes discussed above, we are also subject to
state statutes and regulations that prohibit, among other things, payments for
referral of patients and referrals by physicians to healthcare providers with
whom the physicians have a financial relationship. Violations of these state
laws may result in prohibition of payment for services rendered, loss of
licenses and fines and criminal penalties. State statutes and regulations
require physicians or other healthcare professionals to disclose to patients any
financial relationship the physicians or healthcare professionals have with a
healthcare provider that is recommended to the patients. These laws and
regulations vary significantly from state to state, are often vague, and, in
many cases, have not been interpreted by courts or regulatory agencies.
Exclusions and penalties, if applied to us, could result in significant loss of
reimbursement to us, thereby significantly affecting our financial condition.
YEAR 2000 ISSUE -- WE COULD BE ADVERSELY AFFECTED IF THE YEAR 2000 PROBLEMS
ARE SIGNIFICANT. The "Year 2000 Issue" refers generally to the problems that
some software may have in determining the correct century for the year. For
example, software with date-sensitive functions that is not Year 2000 compliant
may not be able to distinguish whether "00" means 1900 or 2000, which may result
in failures or the creation of erroneous results. Currently, many computer
systems and software products are coded to accept only two-digit entries in the
date code field. These date code fields will need to accept four digit entries
to distinguish between dates before and after January 1, 2000. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. If we, or third parties with
which we do business, fail to make each of our software systems Year 2000
compliant in a timely manner, our company could be negatively and significantly
impacted.
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE
THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE. Upon the occurrence of certain specific kinds of change of control
events described in the section entitled "Description of Exchange Notes --
Change of Control," we will be required to offer to repurchase all outstanding
exchange notes. However, it is possible that we will not have sufficient funds
at the time of the change of control to make the required repurchase of exchange
notes or that restrictions in our senior bank facilities will not allow such
repurchases.
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS,
UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES, SUBORDINATE CLAIMS IN RESPECT
OF THE EXCHANGE NOTES AND REQUIRE EXCHANGE NOTE HOLDERS TO RETURN PAYMENTS
RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable
provisions of state fraudulent transfer laws, the guarantees of our subsidiary
guarantors could be voided, or claims in respect of the exchange notes or the
subsidiary guarantees could be subordinated to all of our other debts or all
other debts of a subsidiary guarantor or a subsidiary guarantee could be voided
and required to be returned if, generally speaking,
(1) we or the subsidiary guarantor, at the time it incurred the
indebtedness evidenced by its guarantee, received less than fair
consideration for the issuance of such guarantee, and we or the
guarantor was insolvent or rendered insolvent by reason of such
incurrence, or we or the guarantor were engaged in a business or
transaction for which our or the guarantor's remaining assets
constituted unreasonably small capital, or
(2) we or the subsidiary guarantor intended to incur or believed that we or
it would incur, debts beyond our or its ability to pay such debts as
they mature.
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30
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a subsidiary guarantor
would be considered insolvent if:
(1) the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets,
(2) if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature, or
(3) it could not pay its debts as they become due.
We cannot assure you as to what standard a court would apply in making such
determinations or that a court would agree with our conclusions as to the
legality of the subsidiary guarantees.
NO PRIOR MARKET FOR EXCHANGE NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE
TRADING MARKET WILL DEVELOP FOR THESE EXCHANGE NOTES WHICH COULD LIMIT THE
LIQUIDITY OF YOUR EXCHANGE NOTES. Prior to this offering, there was no public
market for these exchange notes. We have been informed by the underwriter that
it intends to make a market in these exchange notes after this offering is
completed. However, the underwriter may cease its market-making at any time. In
addition, the liquidity of the trading market in these exchange notes, and the
market price quoted for these exchange notes, may be adversely affected by
changes in the overall market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally.
This prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, in particular, the statements about Team
Health's plans, strategies, and prospects under the headings "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business." Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward-looking
statements are reasonable, we cannot assure you that we will achieve the plans,
intentions or expectations. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in this prospectus
are set forth below and elsewhere in this prospectus. All forward-looking
statements attributable to Team Health or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements contained in
this "Risk Factors" section. As used in this "Risk Factors" section, unless the
context otherwise requires, the terms "Team Health," "we," "our," "ours," and
"us" refer to Team Health, Inc. and all of its subsidiaries.
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THE RECAPITALIZATION OF TEAM HEALTH, INC.
AND THE TRANSACTIONS CONSUMMATED BY TEAM HEALTH, INC.
IN CONNECTION WITH THE FUNDING OF THE RECAPITALIZATION
THE RECAPITALIZATION
Under a recapitalization agreement that was executed on January 25, 1999 by
and among us, MedPartners, Inc., Pacific Physician Services, Inc., a wholly
owned subsidiary of MedPartners, and Team Health Holdings, L.L.C., the holding
company through which Madison Dearborn Partners, Inc., Cornerstone Equity
Investors, LLC and Beecken Petty & Company, LLC., and some members of our
management invested in Team Health, Team Health was recapitalized in a
transaction which closed on March 12, 1999 in which:
(1) prior to the closing of the recapitalization, MedPartners caused some
of its subsidiaries to become our subsidiaries;
(2) Physician Services contributed to us 100 shares of our existing common
stock in exchange for 100,000 shares of our class A preferred stock and
a number of shares of our common stock;
(3) Team Health Holdings purchased from Physician Services 94,299.1 shares
of class A preferred stock and 9,267,273 shares of common stock for
consideration of $108.2 million; and
(4) Team Health used the net proceeds of the offering of the old notes and
borrowings under the senior bank facilities to redeem a portion of the
equity interests of Team Health held by Physician Services.
As a result of the recapitalization, Team Health Holdings owns securities
representing approximately 92.0% of the voting power of our outstanding capital
stock and Physician Services owns securities representing approximately 8.0% of
the voting power of our outstanding capital stock. In addition, in connection
with the recapitalization, some members of our senior management made an equity
investment of approximately $8.5 million, which, together with performance
options held by those members of management, represents an indirect fully
diluted ownership interest in our common equity of approximately 18.5%. In
connection with the recapitalization, MedPartners received aggregate
consideration of $344.5 million, consisting of $335.2 million in cash, $6.8
million in equity retained by Physician Services and the assumption of $2.5
million of existing indebtedness of MedPartners. In addition, we assumed some
contingent earnout payments. These earnout payments may be paid over the next 5
years to the sellers of various acquired groups in the event that those acquired
groups achieve designated financial targets. We believe these earnout payments
will not exceed a total of $19.8 million. The transactions that occurred under
the recapitalization agreement were funded by:
(1) the net proceeds from the offering of the old notes;
(2) $150.0 million of borrowings by us under the senior bank facilities;
(3) a $99.7 million cash equity investment by affiliates of each of
Cornerstone Equity Investors, LLC, Madison Dearborn Partners, Inc. and
Beecken Petty & Company, LLC (the "Equity Sponsor Contribution");
(4) a contribution by some of our members of management of approximately
$8.5 million (the "Management Contribution"); and
(5) equity of Team Health retained by Physician Services having a fair
market value of $6.8 million (the "Retained Equity" and, together with
the Equity Sponsor Contribution and the Management Contribution, the
"Equity Contribution").
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SENIOR BANK FACILITIES
As part of the Transactions, we entered into a credit agreement (the
"senior bank facilities") with a syndicate of financial institutions for which
Fleet National Bank and NationsBanc Montgomery Securities LLC act as
co-arrangers, Donaldson, Lufkin & Jenrette Securities Corporation acts as
documentation agent, NationsBanc Montgomery Securities LLC acts as syndication
agent and Fleet National Bank acts as administrative agent. The senior bank
facilities are comprised of a five-year revolving credit facility of up to $50.0
million, including a swing line sub-facility of $5.0 million and a letter of
credit sub-facility of $5.0 million, none of which was drawn at closing, and a
term loan facility of up to $150.0 million, consisting of a $60.0 million 5-year
tranche A term loan facility and a $90.0 million 6-year tranche B term loan
facility. The senior bank facilities will provide financing for future working
capital, acquisitions, capital expenditures and other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Senior Bank Facilities."
SOURCES AND USES
The sources and uses of proceeds in connection with the recapitalization
were as follows:
AS OF DECEMBER 31, 1998
-----------------------
(DOLLARS IN MILLIONS)
SOURCES OF FUNDS:
Senior bank facilities(1):
Revolving credit facility(2).......................... $ --
Term loan facility.................................... 150.0
Series A 12% senior subordinated notes.................. 100.0
Equity Contribution(3).................................. 115.0
Assumption of existing debt............................. 2.5
------
Total sources................................. $367.5
======
USES OF FUNDS:
Recapitalization(4)..................................... $344.5
Transaction expenses(5)................................. 15.9
Excess cash............................................. 7.1
------
Total uses.................................... $367.5
======
- ---------------
(1) The senior bank facilities are comprised of a five-year revolving credit
facility of up to $50.0 million, including a swing-line facility of $5.0
million and a letter of credit facility of $5.0 million and a term loan
facility, consisting of a $60.0 million 5-year tranche A term loan facility
and a $90.0 million 6-year tranche B term loan facility.
(2) Following the Transactions, the revolving credit facility had total
availability of $50.0 million, subject to satisfaction of certain customary
conditions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and
"Description of Senior Credit Facilities."
(3) Comprised of gross proceeds from the Equity Sponsor Contribution of $99.7
million, the Management Contribution of $8.5 million and the Retained Equity
having an imputed fair market value of $6.8 million.
(4) Includes an equity valuation of $342.0 million plus $2.5 million of assumed
indebtedness.
(5) Reflects fees and expenses related to the Transactions.
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USE OF PROCEEDS
The net proceeds from the sale of the old notes, after deducting expenses
of the offering, including discounts to Donaldson, Lufkin & Jenrette were
approximately $97.0 million. The net proceeds from the offering of the old
notes, together with borrowings under the senior bank facilities and the Equity
Contribution was used to consummate the recapitalization and to pay fees and
expenses in connection therewith.
CAPITALIZATION
The following table sets forth our historical capitalization as of March
31, 1999. This table should be read in conjunction with the "Selected Historical
Financial Data," our financial statements and related notes and our Unaudited
Pro Forma Financial Information and related notes included elsewhere in this
prospectus.
AS OF MARCH 31, 1999
-----------------------
(DOLLARS IN MILLIONS)
Cash and cash equivalents................................... $ 20.3
=======
Total debt:
Senior bank facilities(1):
Revolving credit facility(2).............................. $ --
Term loan facility........................................ 145.0
Series A 12% senior subordinated notes...................... 100.0
Other debt.................................................. 2.5
-------
Total debt........................................ 247.5
Shareholders' equity........................................ 37.1
-------
Total capitalization.............................. $ 284.6
=======
- ---------------
(1) The senior bank facilities are comprised of a five-year revolving credit
facility of up to $50.0 million, including a swing-line facility of $5.0
million and a letter of credit facility of $5.0 million and a term loan
facility, consisting of a $60.0 million 5-year tranche A term loan facility
and a $90.0 million 6-year tranche B term loan facility.
(2) As of March 31, 1999, the revolving credit facility had total availability
of $50.0 million, subject to satisfaction of customary conditions to
borrowing.
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SELECTED HISTORICAL FINANCIAL DATA
Set forth below are selected historical financial data of Team Health for
the five fiscal years ended December 31, 1998 and the three months ended March
31, 1998 and 1999.
(1) The historical financial data for the three months ended March 31, 1999
and 1998 have been derived from, and should be read in conjunction
with, our unaudited financial statements and related notes thereto
included elsewhere in this prospectus. Results for the interim periods
are not necessarily indicative of the results to be expected for the
full year or any other future period.
(2) The historical financial information for each of the three fiscal years
ended December 31, 1998 have been derived from, and should be read in
conjunction with, our audited financial statements and related notes
thereto included elsewhere in this prospectus.
(3) The historical financial information for the fiscal year ended December
31, 1995 has been derived from our audited financial statements and
related notes thereto not included in this prospectus.
(4) The historical financial information for the fiscal year ended December
31, 1994 is derived from unaudited financial statements.
See "The Transactions," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements and
the related notes thereto included elsewhere in this prospectus.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Net revenue............... $ 351,857 $ 411,695 $ 463,380 $ 511,236 $ 547,785
Professional expenses..... 278,585 316,526 353,593 398,738 430,362
--------------- --------------- --------------- --------------- ---------------
Gross profit.............. 73,272 95,169 109,787 112,498 117,423
General and administrative
expenses................ 48,479 52,241 62,441 61,642 58,362
Depreciation and
amortization............ 3,673 4,808 5,628 6,455 9,740
--------------- --------------- --------------- --------------- ---------------
Operating income.......... 21,120 38,120 41,718 44,401 49,321
Novation program expense
allocation.............. -- -- -- 11,000 --
Merger expenses........... -- 519 11,525 22,927 --
MedPartners' management
fees.................... -- 594 1,055 1,660 2,941
Interest expense, net..... -- 2,256 535 886 5,301
Goodwill impairment
charge.................. -- -- -- -- 2,992
Recapitalization
expenses................ -- -- -- -- --
Other expenses (income)... 1,194 392 (204) 768 871
--------------- --------------- --------------- --------------- ---------------
Income (loss) before
income taxes............ 19,926 34,358 28,807 7,160 37,216
Income tax expense
(benefit)............... 654 12,798 9,852 4,894 15,778
--------------- --------------- --------------- --------------- ---------------
Income (loss) before
cumulative effect of a
change in accounting
principle............... 19,272 21,560 18,955 2,266 21,438
Cumulative effect of a
change in accounting
principle............... -- -- -- -- 912
--------------- --------------- --------------- --------------- ---------------
Net income (loss)......... $ 19,272 $ 21,560 $ 18,955 $ 2,266 $ 20,526
=============== =============== =============== =============== ===============
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1998 1999
--------------- ---------------
STATEMENT OF OPERATIONS
DATA:
Net revenue............... $ 133,026 $ 137,877
Professional expenses..... 104,886 108,388
--------------- ---------------
Gross profit.............. 28,140 29,489
General and administrative
expenses................ 15,127 15,744
Depreciation and
amortization............ 2,038 2,351
--------------- ---------------
Operating income.......... 10,975 11,394
Novation program expense
allocation.............. -- --
Merger expenses........... -- --
MedPartners' management
fees.................... 735 25
Interest expense, net..... 505 1,572
Goodwill impairment
charge.................. -- --
Recapitalization
expenses................ -- 21,513
Other expenses (income)... 218 105
--------------- ---------------
Income (loss) before
income taxes............ 9,517 (11,821)
Income tax expense
(benefit)............... 3,983 (4,361)
--------------- ---------------
Income (loss) before
cumulative effect of a
change in accounting
principle............... 5,534 (7,460)
Cumulative effect of a
change in accounting
principle............... -- --
--------------- ---------------
Net income (loss)......... $ 5,534 $ (7,460)
=============== ===============
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YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
OTHER DATA:
EBITDA(1)................. $ 24,793 $ 42,928 $ 47,346 $ 50,856 $ 59,061
Net cash provided by
(used in):
Operating Activities.... 23,777 7,560 12,405 43,342 43,370
Investing Activities.... (14,440) (6,241) (11,423) (34,339) (22,864)
Financing Activities.... (5,545) 17,414 (3,432) (9,122) (22,080)
Capital expenditures...... 2,504 6,620 6,854 7,474 5,015
Ratio of earnings to fixed
charges(2).............. 10.0x 13.6x 10.9x 3.8x 17.2x
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and cash
equivalents............. $ (12,238) $ 6,458 $ 5,550 $ 5,468 $ 3,894
Working capital........... 21,672 64,276 86,703 91,987 99,469
Total assets.............. 89,655 131,160 161,364 199,534 229,956
Total debt................ 15,096 12,074 2,303 7,820 2,544
Total shareholders'
equity.................. 26,747 73,288 101,378 97,893 99,953
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1998 1999
--------------- ---------------
OTHER DATA:
EBITDA(1)................. $ 13,013 $ 13,745
Net cash provided by
(used in):
Operating Activities.... 13,016 8,330
Investing Activities.... (10,719) (1,799)
Financing Activities.... 5,932 10,324
Capital expenditures...... 1,112 1,537
Ratio of earnings to fixed
charges(2).............. 10.0x (4.6x)
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and cash
equivalents............. $ 20,327
Working capital........... 102,877
Total assets.............. 370,671
Total debt................ 247,508
Total shareholders'
equity.................. 37,147
- ---------------
(1) EBITDA represents operating income plus depreciation and amortization. We
have included information concerning EBITDA because we believe that EBITDA
is generally accepted as providing useful information regarding a company's
ability to service and/or incur debt. EBITDA is not intended to represent
cash flows for the period, nor has it been presented as an alternative to
operating income as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP in the United States and is not indicative
of operating income or cash flow from operations as determined under GAAP.
We understand that while EBITDA is frequently used by securities analysts in
the evaluation of companies, EBITDA, as used herein, is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation.
(2) The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income taxes plus fixed
charges. For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expensed or capitalized and the portion of
rental expense we believe is representative of the interest component of
rental expenses.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more
detailed information in the historical financial statements and unaudited pro
forma financial information, including the related notes thereto, appearing
elsewhere in this prospectus.
INTRODUCTION
We are the largest national provider of outsourced physician staffing and
administrative services to hospitals and clinics in the United States, with 375
hospital contracts in 25 states. Our regional operating model includes
comprehensive programs for emergency medicine, radiology, inpatient care,
pediatrics and other hospital departments. We provide a full range of physician
staffing and administrative services, including the:
- staffing, recruiting and credentialing of clinical and non-clinical
medical professionals;
- provision of administrative support services, such as payroll, insurance
coverage and continuing education services; and
- billing and collection of fees for services provided by the medical
professionals.
Since our inception in 1979, we have focused primarily on providing
outsourced services to EDs, which accounted for approximately 80% of our net
revenue in 1998. We generally target larger hospitals with high volume EDs (more
than 15,000 patient visits per year), where we believe we can generate
attractive margins, establish stable long-term relationships, obtain attractive
payor mixes and recruit and retain high quality physicians. When we refer to
EBITDA, we are referring to a measure of internal cash flow combining operating
income before interest and income taxes with non-cash charges for depreciation
and amortization. In 1998, we generated net revenue and pro forma EBITDA of
$547.8 million and $54.3 million, respectively.
CONTRACTS. Our growth has historically resulted from increases in the
number of patient visits and fees for services provided under existing contracts
and the addition and acquisition of new contracts. Our 375 hospital contracts
with hospitals typically have terms of three years with evergreen renewal
clauses. Our average contract tenure exceeds 6.8 years.
Approximately 76% of our net revenue is generated from fee-for-service
contracts under which we bill and collect the professional fees for the services
provided at a particular hospital department. Conversely, under our flat-rate
contracts, hospitals pay us a fee based on the hours of physician coverage
provided, but the hospital is responsible for its own billing and collection.
Because of our billing and collection expertise, our fee-for-service contracts
typically result in higher margins. In states where physician employees service
our contracts directly because there is no prohibition against such
arrangements, Medicare payments for such services are made directly to us. In
states where the physician providing services are independent contractors of us,
Medicare payments for such services are paid into a lockbox account in the name
of the independent contractor physician and subsequently directed into a company
account.
ACQUISITIONS. Since 1996, we have successfully acquired and integrated the
contracts of 17 hospital-based physician groups. Those contracts acquired from
ED physician groups were generally with hospitals in large markets with an
average patient volume exceeding 15,000 per year.
Prior to June 1997, acquisitions were financed primarily with MedPartners'
stock. Subsequent acquisitions were financed through a combination of cash and
earnouts. Eight of our acquisitions were accounted for using the purchase method
of accounting. As such, operating results of those eight acquired businesses are
included in our consolidated and combined financial statements as of their
respective dates of acquisitions. The remaining acquisitions, however, have been
accounted for using the pooling method of accounting whereby the historical
results of the acquired company are included in our consolidated and combined
financial statements. Following each acquisition, we have converted the acquired
group's financial accounting systems to our systems infrastructure.
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37
Strategic acquisitions continue to be a core component of our growth
strategy. The market for outsourced medical services is highly fragmented and
served primarily by small, local and regional physician groups which represent
over 75% of the market and generally lack the resources and depth of services
necessary to compete with national providers. Our acquisition strategy is to
target those companies with strong clinical reputations and quality contracts
with larger hospitals.
NET REVENUES. Revenues are recorded in the period the services are
rendered as determined by the respective contract with the healthcare providers.
As is standard in the healthcare industry, revenue is reported on an accrual
basis, net of estimated third party contractual adjustments. Further adjustments
are recorded to reflect amounts estimated to be uncollectible based upon
individual contract experience. As a result, gross and net revenue differ
considerably. Our revenue recognition policy is based largely on historical
receipts of gross receivables. We update and record reserves on an ongoing basis
based on the age of receivables and our experience with payors depending on the
location and service provided. Revenue in all of our financial statements is
reported on a net basis. See Notes 2 and 3 to the Consolidated and Combined
Audited Financial Statements.
Approximately 30% of our net revenue from fee-for-service contracts is
derived from payments made by government sponsored healthcare programs
(principally, Medicare and Medicaid). These programs are subject to substantial
regulation by the federal and state governments. Funds received under Medicare
and Medicaid are subject to audit, accordingly, retroactive adjustments of these
revenues may occur. We, however, have never had any substantial retroactive
adjustment due to a Medicare or Medicaid audit. Reimbursable fee payments for
Medicare and Medicaid patients for certain services are defined and limited by
Health Care Financing Administration and some state laws and regulations.
PROFESSIONAL EXPENSES. Professional expenses primarily consist of fees
paid to physicians under contract with us, outside collection fees relating to
independent billing contracts, operating expenses of our internal billing
centers and professional liability insurance premiums for physicians under
contract. Approximately 67% of our physicians are independently contracted
physicians who are not employed by us, and the remainder are our employees. We
typically pay ED physicians a flat hourly rate for each hour of coverage
provided. We pay radiologists and primary care physicians an annual salary. The
hourly rate varies depending on whether the physician is independently
contracted or an employee. Independently contracted physicians are required to
pay a self-employment tax, social security and expenses that we pay for employed
physicians. As such, employed physicians typically receive a lower flat hourly
rate.
Medical malpractice liability expenses are recorded under professional
expenses. Under GAAP, the cost of medical malpractice claims, which includes
costs associated with litigating or settling claims, is accrued when the
incidents that give rise to the claims occur. Estimated losses from asserted and
unasserted claims are accrued either individually or on a group basis, based on
the best estimates of the ultimate costs of the claims and the relationship of
past reported incidents to eventual claim payments. The accrual includes an
estimate of the losses that will result from incidents which occurred during the
claims made period, but were not reported during such period. Such claims are
referred to as incurred-but-not-reported claims. Our historical statements of
operations include a medical malpractice liability expense that is comprised of
three components including insurance premiums, incurred-but-not-reported claims
estimates, and self-insurance costs.
MedPartners agreed as a condition of the Transactions to purchase insurance
policies covering all liabilities and obligations for any claim for medical
malpractice arising at any time in connection with our operation, our
subsidiaries and any of the affiliated physicians or other healthcare providers
prior to the closing date of the Transactions for which we or any of our
subsidiaries become liable. This has resulted in our being insured for any
malpractice liabilities originating prior to the Transactions. As a result, our
cash expense for medical malpractice in 1999 is expected to be substantially
less than our accrued expense of approximately $21.3 million. See "Relationships
and Related Transactions." Additionally, medical malpractice expense under GAAP
includes estimates of non-cash expenses relating to incurred-but-not-reported
claims and self-insured costs. To the extent that any such estimates are
included, our 1999 cash medical malpractice expense will likely be less than our
1999 GAAP medical malpractice expense.
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38
We have entered into an agreement with a major national provider of medical
malpractice insurance, for a medical malpractice expense insurance policy that
will cover us for all claims made during the term of the agreement, which is a
minimum of two years. The policy does not cover incidents that occur during such
term, but for which no claim is made during the term. In March 2001, we will
have the option to purchase a policy from the insurer that will cover the
liability for all medical malpractice claims relating to incidents that occur
during the term of the policy but for which no claim is made during such period.
To the extent that we purchase such a tail policy, our cash and GAAP medical
malpractice expense in 1999 and 2000 will be essentially equivalent. To the
extent that we do not purchase such a tail policy, our cash medical malpractice
expense will continue to be substantially less than its GAAP medical malpractice
expense until such a policy is purchased or future medical malpractice claims
estimated in our incurred-but-not-reported claims are actually payable.
NOVATION PROGRAM. Prior to closing the InPhyNet Medical Management, Inc.
("InPhyNet") merger, MedPartners and InPhyNet developed a program (the "Novation
Program") to provide a form of medical malpractice insurance for InPhyNet's
physician services, government services and hospital-based businesses. The
program was designed to protect MedPartners from InPhyNet's malpractice exposure
for all periods prior to the MedPartners merger and to allow InPhyNet to begin
with new first-year claims made insurance coverage as of the effective date of
the merger. Reserves for liabilities within the Novation Program are recorded on
MedPartners balance sheet and not on our balance sheet. A related non-cash
charge of $11.0 million, however, was allocated to us in the year ended December
31, 1997 and is included in the line item for Novation Program expense
allocation on the consolidated and combined statements of operations. These
liabilities were not be assumed by us in the recapitalization. Moreover, under
the recapitalization agreement, MedPartners agreed to purchase, at its sole cost
and expense, for the benefit of Team Health Holdings, insurance policies
covering all liabilities and obligations for any claims for medical malpractice
arising at any time in connection with our operations and those of our
subsidiaries prior to the closing date of the Transactions for which we or any
of our subsidiaries or physicians become liable.
PARENT MANAGEMENT FEE. Prior to the recapitalization, MedPartners provided
us with certain corporate services, including legal services, risk management,
administration of certain employment benefits, tax advice and preparation of tax
returns, software support services and some financial and other services. These
fees were allocated to us based on MedPartners' estimate of the approximate
costs incurred. The amounts recorded by us for these allocations on the
consolidated and combined financial statements were $1.1 million, $1.7 million
and $2.9 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The amounts allocated are not necessarily indicative of the actual
costs which may have been incurred. These expenses are expected to be
significantly higher on a stand-alone basis. Management and independent
consultants have carefully examined the costs we expect to incur as a stand-
alone entity and estimates those costs would have been approximately $5.9
million in 1998.
MERGER COSTS. We incurred non-recurring merger costs that were included in
income from operations in association with the pooling acquisitions that
occurred in 1996 and 1997. These costs included:
(1) investment banking and professional fees;
(2) severance costs and related benefits;
(3) impairment of assets;
(4) conforming accounting policies;
(5) operational restructuring; and
(6) other related charges.
OPERATIONS IMPROVEMENT PROGRAM. In 1998, we engaged an independent
consulting firm to coordinate a process improvement study, which focused largely
on our billing and collections services and on controllable costs. The process
improvement study indicated opportunities for improvement through, among other
things, a combination of insourcing all billing and collections functions and
improving productivity. In order to capitalize on these opportunities, we are
implementing a comprehensive program to maximize
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productivity and improve profitability. The three primary initiatives of the
operations improvement program include:
- integrating our twelve billing locations into a national network of four
billing centers operating on the uniform IDX billing system;
- consolidating call centers from four locations to one central location;
and
- reducing controllable costs.
In the past two years, we have experienced a 22% increase in collection
rates on delinquent accounts receivable and a 220% increase in the rate paid to
us by third party factoring agents on closed accounts receivable. We began the
operations improvement program in the second half of 1998, and we expect
substantially all of the initiatives to be fully implemented by the end of 1999.
INCOME TAXES. Prior to the recapitalization, we were included as a part of
some state and local tax returns and the consolidated federal tax return of
MedPartners. As a result, the provision for income taxes was calculated and
allocated to us from MedPartners. The amounts allocated are not necessarily
indicative of the actual costs which may have been incurred by us on a
stand-alone basis.
338(h)(10) ELECTION. In conjunction with the recapitalization, we made an
election under section 338(h)(10) of the Internal Revenue Code of 1986, as
amended. As a result, we will realize an increase in our deferred tax assets as
the recapitalization is expected to be treated as a taxable business combination
for federal and state income tax purposes, which results in a step-up in our tax
basis. This higher basis will result in an anticipated cash tax benefit of
approximately $6.7 million per year over each of the next 15 years, if fully
utilized.
RESULTS OF OPERATIONS
The following discussion provides an analysis of our results of operations
and should be read in conjunction with our consolidated and combined financial
statements and notes included elsewhere in this prospectus. The operating
results of the periods presented were not significantly affected by inflation.
The following table sets forth the components of net income and EBITDA as a
percentage of net revenues for the periods indicated:
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- --------------
1996 1997 1998 1998 1999
Net revenue................................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Professional expenses...................... 76.3 78.0 78.6 78.9 78.6
General and administrative expenses........ 13.5 12.1 10.7 11.4 11.4
Depreciation and amortization.............. 1.2 1.3 1.8 1.5 1.7
Operating income........................... 9.0 8.7 9.0 8.3 8.3
Novation program expense................... -- 2.2 -- -- --
Merger expenses............................ 2.5 4.5 -- -- --
MedPartners' management fee................ 0.2 0.3 0.5 0.6 --
Interest expense, net...................... 0.1 0.2 1.0 0.4 1.2
Goodwill impairment charge................. -- -- 0.5 -- --
Other expenses............................. -- 0.2 0.2 -- --
Income tax expense (benefit)............... 2.1 1.0 2.9 3.0 (3.2)
Net income (loss)..................... 4.1 0.4 3.7 4.2 (5.4)
EBITDA..................................... 10.2 9.9 10.8 9.8 10.0
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FIRST QUARTER ENDED MARCH 31, 1999 COMPARED TO THE FIRST QUARTER ENDED MARCH 31,
1998
NET REVENUE. Revenues for 1999 increased $4.9 million or 3.7% to $137.9
million from $133.0 million in 1998. Same contract revenue increased $7.7
million, or 7.0% to $118.4 million in 1999 from $110.7 million in 1998. Same
contract revenue consists of revenue derived from contracts under management
from the beginning of the prior period through the end of the subsequent period.
Acquisitions contributed $9.5 million of the increase in net revenue. Revenue
generated from new contracts obtained through internal sales contributed $6.8
million. The increase in revenues was partially offset by a net decrease of
$16.0 million associated with contracts terminated during the period.
Additionally, revenue growth is offset by a decline of $3.2 million attributable
to the adoption of a new accounting rule that restricts our ability to
consolidate the revenue of an affiliate operation beginning in 1999.
PROFESSIONAL EXPENSES. Professional expenses for 1999 increased 3.3% to
$108.4 million from $104.9 million in 1998. This increase was due primarily to
normal expected cost increases in professional and medical support costs. As a
percentage of net revenue, professional expenses declined slightly from 78.6% in
1999 from 78.9% in 1998.
GROSS PROFIT. Gross profit increased to $29.5 million in 1999 from $28.1
million in 1998. Gross profit as a percentage of revenues was 21.4% during 1999
and 21.2% during 1998 due to the factors described above.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for 1999 increased slightly to $15.7 million from $15.1 million in 1998. General
and administrative expenses as a percent of revenues remained flat at 11.4% in
the 1999 and the 1998 periods.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1999
increased 15.4% to $2.4 million from $2.0 million in 1998. The increase was due
primarily to additional depreciation associated with equipment purchases and
goodwill associated with acquisitions during 1998.
RECAPITALIZATION EXPENSES AND MANAGEMENT FEES. Recapitalization expenses
and management fees for 1999 were $21.5 million compared to $0.7 million in
1998. This increase was primarily due to expenses of $21.5 million incurred in
1999 to effect the recapitalization.
INTEREST EXPENSE. Interest expense in 1999 increased to $1.6 million from
$0.6 million in 1998. The increase in interest expense is due to the senior bank
facility and old notes issued during 1999.
INCOME TAX BENEFIT/EXPENSE. Income tax benefit in 1999 was $4.4 million as
compared to income tax expense in 1998 of $4.0 million. The benefit in 1999 was
due primarily to the expenses incurred in the recapitalization.
NET LOSS/INCOME. Net loss for 1999 was $7.5 million as compared to net
income of $5.5 million in 1998. This change was primarily due to the factors
described above.
EBITDA. EBITDA for 1999 increased 5.4% to $13.7 million from $13.0 million
in 1998. EBITDA margin increased to 10.0% in the 1999 period from 9.8% in the
1998 period. The increase in EBITDA and EBITDA margin were due to the factors
described above.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
NET REVENUE. Net revenue for 1998 increased 7.1% to $547.8 million from
$511.2 million for 1997. Same contract revenue increased $22.9 million, or 5.7%
to $424.8 million in 1998 from $401.9 million in 1997. Same contract revenue
consists of revenue derived from contracts under management from the beginning
of the prior period throughout the end of the subsequent period. Acquisitions
contributed $40.3 million of the increase in net revenue. Revenue generated from
new contracts obtained through incremental sales contributed $29.0 million. The
increase in revenues was partially offset by a net decrease of $55.6 million
associated with contracts terminated in 1998. We believe the net loss of
contracts during 1998 is primarily attributable to issues related to the
perceived financial condition of MedPartners,
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uncertainty regarding our potential sale, and the termination of a number of low
margin contracts associated with InPhyNet.
PROFESSIONAL EXPENSES. Professional expenses for 1998 increased 7.9% to
$430.4 million from $398.7 million in 1997. This increase was due primarily to
the net growth in contracts requiring additional medical professionals as well
as expected cost increases in professional and medical support costs. As a
percentage of net revenue, professional expenses increased to 78.6% in 1998 from
78.0% in 1997.
GROSS PROFIT. Gross profit for 1998 increased 4.4% to $117.4 million from
$112.5 million in 1997. Gross profit as a percentage of revenue decreased to
21.4% in 1998 from 22% in 1997, primarily due to the factors described above.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for 1998 decreased 5.3% to $58.4 million from $61.6 million in 1997. General and
administrative expenses as a percentage of revenues decreased to 10.7% in 1998
from 12.1% in 1997. The decrease in general and administrative expenses was due
primarily to the ability to grow revenue while eliminating duplicative corporate
overhead expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1998
increased 50.9% to $9.7 million from $6.5 million in 1997. The increase was due
primarily to additional depreciation associated with equipment purchases and
increases in goodwill amortization associated with acquisitions.
MERGER EXPENSES, NOVATION PROGRAM EXPENSE ALLOCATION, AND PARENT'S
MANAGEMENT FEES. Merger expenses, Novation program expense allocation, and
parent's management fees for 1998 decreased to $2.9 million from $35.6 million
in 1997. This decrease was primarily due to a combination of the following:
- a decrease in merger expenses of $22.9 million from 1997 to 1998
associated with acquisitions;
- an $11.0 million non-recurring charge in 1997 from MedPartners for the
Novation program associated with InPhyNet's professional liability
insurance coverage; and
- an increase of $1.3 million in parent's management fees from 1997 to
1998.
NET INCOME. Net income for 1998 increased to $20.5 million from $2.3
million in 1997. This increase was primarily due to the factors described above
with an offset from an increase of $4.4 million in interest expense from 1997 to
1998. The increase in interest expense was the result of our parent company
internally assessing interest on the balance of the intercompany account during
1998 which was not a consistent practice by our parent in 1997. Also offsetting
the increase in net income was an increase in income tax expense of $10.9
million from 1997 to 1998.
EBITDA. EBITDA for 1998 increased 16.1% to $59.1 million from $50.9
million for 1997. EBITDA margin increased to 10.8% in 1998 from 9.9% in 1997.
The increase in EBITDA and EBITDA margin were due to the factors described
above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
NET REVENUE. Net revenue for 1997 increased 10.3% to $511.2 million from
$463.4 million in 1996. Same contract revenue increased $20.4 million, or 4.9%
to $436.0 million in 1997 from $415.6 million in 1996. Same contract revenue
consists of revenue derived from contracts under management from the beginning
of the prior period through the end of the subsequent period. Acquisitions
contributed $19.6 million of the increase in net revenue. Revenue generated from
new contracts obtained through incremental sales contributed $21.2 million. The
increase in revenues was partially offset by a net decrease of $13.4 million
associated with contracts terminated in 1997.
PROFESSIONAL EXPENSES. Professional expenses for 1997 increased 12.8% to
$398.7 million from $353.6 million in 1996. This increase was due primarily to
the net growth in contracts requiring additional medical professionals as well
as normal expected cost increases in professional and medical support costs. As
a percentage of net revenue, professional expenses increased to 78.0% in 1997
from 76.3% in 1996.
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GROSS PROFIT. Gross profit for 1997 increased 2.5% to $112.5 million from
$109.8 million for 1996. Gross profit as a percentage of revenues decreased to
22.0% in 1997 from 23.7% in 1996. Gross profit increased primarily due to
additional staffing contracts. Gross profit as a percentage of revenues
decreased primarily due to the factors described above.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for 1997 decreased 1.3% to $61.6 million from $62.4 million in 1996. As a
percentage of revenue, general and administrative expenses decreased 12.1% in
1997 from 13.5% in 1996. The decrease in general and administrative expenses was
due primarily to the ability to grow revenue while eliminating duplicative
corporate overhead expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1997
increased 14.7% to $6.5 million from $5.6 million in 1996. The increase was due
primarily to additional depreciation associated with equipment purchases and
increases in goodwill amortization associated with acquisitions.
MERGER EXPENSES, NOVATION PROGRAM EXPENSE ALLOCATION, AND PARENT'S
MANAGEMENT FEES. Merger expenses, novation program expense allocation and
parent's management fees for 1997 increased to $35.6 million from $12.6 million
in 1996. This increase was due primarily to a combination of an increase in
merger expenses of $11.4 million from 1996 to 1997 associated with acquisitions
and an $11.0 million non-recurring charge in 1997 from MedPartners for the
Novation program associated with InPhyNet's professional liability insurance
coverage.
NET INCOME. Net income for 1997 decreased to $2.3 million from $19.0
million in 1996. This decrease was due primarily to the factors described above
with an offset from a decrease of $5.0 million in income tax expense from 1996
to 1997.
EBITDA. EBITDA for 1997 increased 7.4% to $50.9 million from $47.3 million
for 1996, and EBITDA margin decreased to 9.9% in 1997 from 10.2% in 1996. The
decreases in EBITDA and EBITDA margin were due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
Historically, funds generated from operations, together with funds
available from MedPartners, have been sufficient to meet our working capital
requirements and debt obligations and to finance any necessary capital
expenditures. Expansion of our business through acquisitions may require
additional funds, which to the extent not provided by internally generated
sources, cash and the senior bank facilities, will require us to seek additional
external financing.
As of March 31, 1999, we had $102.9 million in working capital, as compared
to $99.5 million as of December 31, 1998. Our principal sources of liquidity
consisted of:
(1) cash, cash equivalents, and marketable equity securities aggregating
$20.3 million as of March 31, 1999 and $3.9 million as of December 31,
1998,
(2) accounts receivable totaling $151.5 million as of March 31, 1999 and
$148.4 million as of December 31, 1998 and
(3) $50.0 million of borrowing capacity under the revolving credit facility
of the senior bank facility.
For the three months ended March 31, 1999, $8.3 million in cash was
provided by operations resulting from a net loss and negative change in
operating assets and liabilities offset by recapitalization expenses. The
negative change in operating assets and liabilities consists of an increase in
accounts receivable and income tax receivable offset by an increase in accounts
payable and other liabilities. Cash of $1.8 million was used in investing
activities for the three months ended March 31, 1999 related to purchases of
property and equipment. Cash of $10.3 million was provided by financing
activities for the three months ended March 31, 1999 as proceeds from borrowings
under the senior bank facilities and old notes exceeded
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payments made to MedPartners in connection with recapitalization and the
transaction costs thereof. Additionally, we repaid $5.0 million of the term
loans shortly after closing the recapitalization.
For the three months ended March 31, 1998, $13.0 million in cash was
provided by operations due to net income, non-cash charges such as depreciation
and amortization, and a positive change in operating assets and liabilities. The
positive change in operating assets was driven by growth in malpractice reserves
and accrued compensation offset by growth in accounts receivable resulting from
acquisitions during the quarter. Cash of $10.7 million was used in investing
activities for the three months ended March 31, 1998 related to payments for
business acquisitions and purchases of property and equipment. Cash of $5.9
million was provided by financing activities for the three months ended March
31, 1999 due to working capital transfers from MedPartners offset by the
repayment of long-term debt.
As of December 31, 1998 and 1997, we had $99.5 million and $92.0 million in
working capital, as compared to $86.7 million as of December 31, 1996. Our
principal sources of liquidity consisted of:
(1) cash and cash equivalents of $3.9 million as of December 31, 1998, $5.5
million as of December 31, 1997 and $5.6 million as of December 31,
1996,
(2) accounts receivable totaling $148.4 million as of December 31, 1998,
$130.8 million as of December 31, 1997 and $110.3 million as of
December 31, 1996 and
(3) the ability to access working capital through transfers from
MedPartners.
For the year ended December 31, 1998, $43.4 million in cash was provided by
operations due to positive net income combined with non-cash charges such as
depreciation, amortization, goodwill impairment charge, parent's management
fees, the cumulative effect of an accounting change, and a positive change in
operating assets and liabilities. During this period, we began to liquidate the
accounts receivable that were built up in prior periods due to independent
contractor physician provider application issues. Cash of $22.9 million was used
in investing activities for the year ended December 31, 1998 related to payments
for merger activities, business acquisitions, and purchases of property and
equipment. Cash of $22.1 million was used in financing activities for the year
ended December 31, 1998 as a result of working capital transfers to MedPartners
offset by a positive change in tax accounts.
For the year ended December 31, 1997, $43.3 million in cash was provided by
operations due to positive net income combined with non-cash charges such as
depreciation and amortization, merger charges, Novation program expense
allocation, and parent's management fees that more than offset the negative
change in operating assets and liabilities. The negative change in operating
assets and liabilities of $1.9 million was primarily due to an increase in
accounts receivable, resulting from the start up of several new billing
contracts during 1997, as well as a continuation of the delay in fee-for-service
reimbursement due to the Health Care Financing Administration's temporary
moratorium on issuing provider numbers for independent contractor physicians
which began in the middle of 1996. Cash of $34.3 million was used in investing
activities for the year ended December 31, 1997 related to payments for merger
charges, business acquisitions, and purchases of property and equipment. Cash of
$9.1 million was used in financing activities for the year ended December 31,
1997 due to working capital transfers to MedPartners and the repayment of
long-term debt.
For the year ended December 31, 1996, $12.4 million in cash was provided by
operations as net income and non-cash charges such as amortization and
depreciation, merger charges, and parents' management fees were greater than the
significant negative change in operating assets and liabilities. A primary
component of the negative change in operating assets and liabilities of $25.0
million related to an increase in accounts receivable resulting from the start
up of several new billing contracts during 1996, as well as a slowdown in
fee-for-service reimbursement due to the Health Care Financing Administration's
temporary moratorium on issuing provider numbers for independent contractor
physicians. Cash of $11.4 million was used in investing activities for the year
ended December 31, 1996 related to payments for merger activities and purchases
of property and equipment. Cash of $3.4 million was used in financing activities
for the year ended December 31, 1996 as the repayment of long-term debt and
negative change in tax accounts combined to exceed the working capital transfers
from MedPartners.
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FOLLOWING THE RECAPITALIZATION
We have and following the offering of the exchange notes will continue to
have significant amounts of scheduled debt payments, including interest and
principal repayments on the exchange notes and under the senior bank facilities.
In addition, we may be required to make earnout payments assumed by us in
connection with the recapitalization. We believe that the aggregate amount of
such earnout payments will not exceed $19.8 million. We intend to fund our
future working capital, capital expenditures and debt service requirements
through cash flow generated from operations and borrowings under the senior bank
facilities. For the year ended December 31, 1998, we generated cash from
operations of approximately $43.4 million and made net capital expenditures of
approximately $5.0 million.
We believe that cash flow from operations and availability under the senior
bank facilities will provide adequate funds for our foreseeable working capital
needs, planned capital expenditures, potential earnout payments and debt service
obligations. Any future acquisitions, joint ventures or similar transactions
will likely require additional capital and there can be no assurance that any
such capital will be available to us on acceptable terms or at all. Our ability
to fund our working capital needs, planned capital expenditures and debt service
obligations, to refinance indebtedness and to comply with all of the financial
covenants under our debt agreements, depends on our future operating performance
and cash flow, which in turn are subject to prevailing economic conditions and
to financial, business and other factors, some of which are beyond our control.
MANAGEMENT INFORMATION SYSTEMS AND THE IMPACT OF THE YEAR 2000
Our information technology department consists of an in-house staff of 56
professionals. This department provides support for all of the regional
operating units through a centralized, integrated network. For selected regional
operating units with more complex needs, members of our professional staff are
located on site to provide support.
We support our business operations through a wide area network. Based on
the commonality of functions across the business units, the wide area network
enhances the support of the business applications, facilitates communication
across the enterprise and allows flexibility in addressing changing business
needs and technology advancements. In addition, we are in the process of
upgrading our core applications to enhance the integration of the business
units.
We are in the process of formulating and implementing a plan designed to
ensure that all application software and hardware used in connection with our
management information systems, including internally developed systems and
software purchased from outside vendors, will manage and manipulate data
involving the transition of dates from 1999 to 2000 without functional or data
abnormality and without inaccurate results related to such dates. Due to the
fact that existing software often defines each year with two digits rather than
four digits, our computers that have date-sensitive software may recognize a
date using "00" as occurring in the year 1900 rather than the year 2000. This
phenomenon could result in abnormalities and inaccuracies and cause a disruption
of our operations, including a temporary inability to process customer orders,
send invoices or engage in other normal business activities.
We are making satisfactory progress with our year 2000 compliance plan,
which consists of the following stages:
(1) Production of an inventory of our hardware and software systems.
(2) Identification of where problems exist.
(3) Diagnosis of solutions to problems.
(4) Implementation of solutions.
(5) Confirmation from major suppliers and customers that they will be year
2000 compliant by the end of 1999.
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We have completed the production of an inventory of our hardware and
software systems and identified several areas in which either our software or
hardware is not year 2000 compliant. In most instances, we will replace
noncompliant systems with compliant ones. We have established project timetables
for our remediation efforts and hold weekly progress meetings to review progress
made on such remediation efforts. Our project timetables project completion of
our remediation efforts in October 1999. Our remediation efforts are on schedule
with the project timetables.
Pursuant to the recapitalization agreement, MedPartners agreed to provide
us with some transition services. Some of these transition services will involve
our use of MedPartners' hardware and software systems. Thus, we will be subject
to the risk that these MedPartners systems are not Year 2000 compliant. In
February 1999, we mailed a letter to MedPartners requesting such compliance.
In addition to identifying and remedying our own noncompliant systems, we
have requested that each of our customers and suppliers take steps to ensure
that their own systems are year 2000 compliant. In February 1999, letters
requesting such compliance were mailed to each of our customers and suppliers.
The total cost of achieving year 2000 compliance is forecast to be $1.9
million. As of March 31, 1999, we have spent approximately $827,000 in
connection with our year 2000 compliance plan.
Implementation of our remediation efforts is reviewed on a weekly basis. If
it becomes apparent that automated processes cannot be made year 2000 compliant,
we will resort to manual processes, utilizing temporary staffing in order to
perform the additional workload resulting from year 2000 related malfunctions.
Risks from Year 2000 Issues
We believe that we have an effective plan to address and remediate the year
2000 issues for systems of our company. Although we believe that we will
complete our action plan by September, 1999, as noted above, we have not yet
completed all the necessary phases of our year 2000 systems program.
In the event we do not successfully complete our internal year 2000
program, we may experience disruptions in our ability to provide services to our
clients and support for our independent contractors and employee physicians. If
these disruptions are significant, they could cause a material adverse effect to
the results of our operations. However, based upon our current assessment of our
year 2000 program, Team Health does not expect to experience any significant
disruptions to its ability to conduct normal business activities that would have
a material long term affect on the results of its business operations.
In addition to our own internal risk factors, we, like most companies, are
subject to a wide variety of external risk factors associated with the year 2000
issue. In the opinion of management, these risk factors are so numerous and
nebulous that management cannot provide a meaningful and quantifiable estimate
of how these external risk factors may impact our company. Although we have no
reason to believe that this will occur, in a "worst case scenario," a wide scale
downturn in the domestic and/or international economies could occur if year 2000
problems caused significant disruptions to banking services, and power and
communication utilities, or shipping and transit systems. Should this occur, it
would probably have a significant negative effect on our business operations.
Although we do not subscribe to this "worst case scenario," we could
experience some degree of adverse impact to our business operations if key
clients or service providers suffer year 2000 problems. Team Health has 375
contracts with clients, and in 1998 our largest contract accounted for less than
1.5% of our net revenue. With such a diverse contract base, the risk for an
adverse impact on our business operations resulting from the year 2000 problems
of a single customer is reduced, but not eliminated. In addition, there can be
no guarantee that several of our key customers will not have year 2000 problems
despite their own internal remediation efforts.
In summary, we may or may not incur a material adverse impact to our
business operations depending on the magnitude and duration of any disruptions
to our internal systems and/or the systems of
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our trading partners. We believe that the diversity of our contract base reduces
the overall exposure and expects that the consequences of any unsuccessful
remediation will not be significant. However, there can be no assurance that our
efforts or those of other entities will be successful, or that any potential
failure would not have a significant negative effect on our operating results or
financial condition.
Contingency Plans
We are in the process of developing contingency plans and actions for year
2000 issues related to both internal and external systems. As part of this
planning, we are evaluating the incremental cost of the contingency alternatives
as compared to the perceived level of risk for year 2000 problems. In some cases
we have determined that the perceived level of risk does not justify the cost of
the contingency alternative. Contingency plans involve consideration of a number
of possible actions, including, to the extent necessary or justified, the
selection of alternative service providers and adjustments to staffing
strategies. We plan to continue developing and modifying our contingency plans
throughout 1999 as we monitor and evaluate the progress of our internal and
external year 2000 compliance program.
SEASONALITY
Historically, our sales and operating results have reflected minimal
seasonal variations due to our geographic diversification.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. SFAS No. 131 will
have no effect on our results of operations, financial position or cash flows.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures About Pensions and Other Post-retirement Benefits."
SFAS No. 132 revises employers' disclosures about pension and other
post-retirement benefits, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that no longer are
useful. SFAS No. 132 is effective for financial statements for fiscal years
beginning after December 15, 1997. SFAS No. 132 has no impact on our results of
operations, financial position, or cash flows.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires all derivatives to be measured at fair value and recognized as either
assets or liabilities on the balance sheet. Changes in such fair value are
required to be recognized immediately in net income (loss) to the extent the
derivatives are not effective as hedges. SFAS No. 133 is effective for fiscal
years beginning after June 15, 2000 and is effective for interim periods in the
initial year of adoption. At the present time, we do not feel the adoption of
SFAS No. 133 will have a significant effect on our results of operations,
financial position, or cash flows.
In March 1998, the EITF concluded its discussion on Issue No. 97-2 related
to the Application of APB Opinion No. 16, Business Combinations, and FASB
Statement No. 94, Consolidation of All Majority-Owned Subsidiaries, to Physician
Practice Management Entities. The Task Force established the criteria for
determining when a Physician Practice Management Entity could consolidate or
combine with a physician's practice. We have considered all implications, and
does not feel this issue will have a significant effect on our results of
operations, financial position, or cash flows.
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BUSINESS
The market and industry data we present in this prospectus are based upon
third party data or have been derived from sources of industry data. While we
believe that such estimates are reasonable and reliable, in some cases, these
estimates cannot be verified by information available from independent sources.
Accordingly, we cannot assure you that the market share data are accurate in all
significant respects.
VBS(TM), WaitLoss(TM) and TeamWorks(TM) are our trademarks. Team Health(R),
InPhyNet Medical Management(R), InPhyNet(R), MetroAmerican Radiology(R), M and
Design(R), Park Med(R), SEP(R), Southeastern Emergency Physicians(R), Emergency
Coverage Corporation(R) and ECC(R) are our service marks. TeamWorks(TM) and
VBS(TM) are our proprietary software systems. Tradenames and trademarks of other
companies appearing in this prospectus are the property of their respective
holders.
INTRODUCTION
We are the largest national provider of outsourced physician staffing and
administrative services to hospitals and clinics in the United States, with 375
hospital contracts in 25 states. Our regional operating model includes
comprehensive programs for emergency medicine, radiology, inpatient care,
pediatrics and other hospital departments. We provide a full range of physician
staffing and administrative services, including the:
- staffing, recruiting and credentialing of clinical and non-clinical
medical professionals;
- provision of administrative support services, such as payroll, insurance
coverage and continuing education services; and
- billing and collection of fees for services provided by the medical
professionals.
Since our inception in 1979, we have focused primarily on providing
outsourced services to EDs, which accounted for approximately 80% of our net
revenue in 1998. We generally target larger hospitals with high volume EDs (more
than 15,000 patient visits per year), where we believe we can generate
attractive margins, establish stable long-term relationships, obtain attractive
payor mixes and recruit and retain high quality physicians. In 1998, we
generated net revenue and pro forma EBITDA of $547.8 million and $54.3 million,
respectively.
The healthcare environment is becoming increasingly complex due to changes
in regulations, reimbursement policies and the evolving nature of managed care.
As a result, hospitals are under significant pressure to improve the quality and
reduce the cost of care. In response, hospitals have increasingly outsourced the
staffing and management of multiple clinical areas to contract management
companies with specialized skills and standardized models to improve service,
increase the quality of care and reduce administrative costs. Specifically,
hospitals have become increasingly challenged to manage EDs effectively due to:
- increasing patient volume;
- complex billing and collection procedures; and
- the legal requirement that EDs examine and treat all patients.
We believe we are well positioned to continue to capitalize on the current
outsourcing trends as a result of our:
- national presence;
- sophisticated information systems and standardized procedures that enable
us to efficiently manage our staffing and administrative services as well
as the complexities of the billing and collections process;
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- demonstrated ability to improve productivity, patient satisfaction and
quality of care while reducing overall cost to the hospital; and
- successful record of recruiting and retaining high quality physicians.
In addition, our regional operating model allows us to deliver locally focused
services while benefitting from the operating efficiencies, infrastructure and
capital resources of a large national provider.
We believe we are well positioned to capitalize on the growth of the
overall healthcare industry as well as the growth of the ED sector. According to
the Health Care Financing Administration, national healthcare spending is
expected to increase from 13.6% of gross domestic product, or $1.0 trillion, in
1996 to 16.4% of gross domestic product, or $2.1 trillion, by the year 2007,
representing a 6.8% compound annual growth rate. Hospital services have
historically represented the single largest component of these costs, accounting
for approximately 34% of total healthcare spending in 1997. According to
industry sources, in 1997, approximately 5,000 U.S. hospitals operated EDs and
80% of these hospitals outsourced their EDs. In the same year, ED expenditures
were approximately $20 billion, with ED physician services accounting for
approximately $7 billion. According to the American Hospital Association, EDs
handle approximately 100 million patient visits annually and nearly 40% of all
hospital inpatient admissions originate in the ED. In addition, the average
number of patient visits per ED increased at a compound annual growth rate of
approximately 3.0% between 1988 and 1996.
COMPETITIVE STRENGTHS
We believe we are able to compete effectively due to the following
strengths:
LEADING MARKET POSITION. We are the largest national provider of
outsourced emergency physician staffing and administrative services in the
United States. In addition, we are the second largest provider of outsourced
radiology staffing and administrative services and have a growing presence in
other hospital departments. We believe our ability to spread the relatively
fixed costs of our corporate infrastructure over a broad national contract and
revenue base generates significant cost efficiencies that are generally not
available to smaller competitors. As a full-service provider with a
comprehensive understanding of changing healthcare regulations and policies and
the management information systems that provide support to manage these changes,
we believe we are well positioned to gain market share from less sophisticated
local and regional service providers. Furthermore, we have a geographically
diverse base of 375 hospital contracts, with an average contract tenure of
approximately 6.8 years. In 1998, no single contract accounted for more than
1.5% of our net revenue, and as a result, the loss of any contract would not
significantly impact our financial performance.
REGIONAL OPERATING MODEL SUPPORTED BY A NATIONAL INFRASTRUCTURE. We
service our client hospitals from 13 regional operating units, which allows us
to deliver locally focused services with the resources and sophistication of a
national provider. Our local presence creates closer relationships with
hospitals, resulting in responsive service and high physician retention rates.
Our strong relationships in local markets enable us to effectively market our
services to local hospital administrators, who generally make decisions
regarding contract awards and renewals. Our regional operating units are
supported by our national infrastructure, which includes integrated information
systems and standardized procedures that enable us to efficiently manage the
operations and billing and collections processes. We also provide each of our
regional operating units with centralized staffing support, purchasing economies
of scale, payroll administration, coordinated marketing efforts and risk
management. We believe our regional operating model supported by our national
infrastructure improves productivity and quality of care while reducing the cost
of care.
SIGNIFICANT INVESTMENT IN INFORMATION SYSTEMS AND PROCEDURES. Our
proprietary information systems link our billing, collection, recruiting,
scheduling, credentialing and payroll functions among our regional operating
units, allowing our best practices and procedures to be delivered and
implemented nationally while retaining the familiarity and flexibility of a
locally-based service provider. Over the last five years, we have spent over $10
million to develop and maintain integrated, advanced systems to facilitate the
exchange of information among our regional operating units and clients. These
systems include our IDX
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Billing System, our VBS(TM) patient information system, our WaitLoss(TM) process
improvement program, our TeamWorks(TM) physician database and software package
and the company-wide application of best practices. As a result of this
investment, we believe our average cost per patient billed and average cost per
physician recruited are among the lowest in the industry. The strength of our
information systems has enhanced our ability to collect patient payments and
reimbursements in an orderly and timely fashion and has increased our billing
and collections productivity. In the past two years, we have experienced a 22%
increase in collection rates on delinquent accounts and a 220% increase in the
rates paid to us by third party factoring agents on closed accounts receivable.
ABILITY TO RECRUIT AND RETAIN HIGH QUALITY PHYSICIANS. A key to our
success has been our ability to recruit and retain high quality physicians to
service our contracts. While our local presence gives us the knowledge to
properly match physicians and hospitals, our national presence and
infrastructure enable us to provide physicians with a variety of attractive
hospital locations, advanced information and reimbursement systems and
standardized procedures. Furthermore, we offer physicians substantial
flexibility in terms of geographic location, type of facility, scheduling of
work hours, benefits packages and opportunities for relocation and career
development. This flexibility, combined with fewer administrative burdens,
improves physician retention rates and stabilizes our contract base. We believe
we have among the highest physician retention rates in the industry.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY OWNERSHIP. Our senior
management team has extensive experience in the outsourced physician staffing
and administrative services industry. Our Chief Executive Officer, Lynn
Massingale, M.D., has been with us since our inception in 1979. Our top 23
executives have an average of over 20 years experience in the outsourced
physician staffing and medical services industry. Twenty members of our
management team contributed an aggregate of $8.5 million in connection with the
recapitalization, which, together with performance based options, represents an
indirect fully diluted ownership interest of approximately 18.5%. As a result of
its substantial equity interest, we believe our management team will have
significant incentive to continue to increase our sales and profitability.
GROWTH STRATEGY
The key elements of our growth strategy are as follows:
INCREASE REVENUE FROM EXISTING CUSTOMERS. We have a strong record of
increasing revenue from existing customers. In 1997 and 1998, net revenue from
continuing contracts grew by approximately 5% and 6%, respectively. We plan to
continue to increase revenue from existing customers by
- improving documentation of care delivered, capturing full reimbursement
for services provided;
- implementing fee schedule increases, where appropriate;
- capitalizing on increasing patient volumes;
- increasing the scope of services offered within contracted departments;
and
- cross-selling services to other hospital departments.
CAPITALIZE ON INDUSTRY TRENDS TO WIN NEW CONTRACTS. We seek to obtain new
contracts by
- replacing contract management companies at hospitals that currently
outsource their services and
- winning new contracts from hospitals that do not currently outsource.
We believe the number of high volume EDs will grow as patient visits increase
and hospital consolidation continues.
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Furthermore, we believe that our market share of larger volume EDs is
likely to increase as a result of our
- national presence;
- sophisticated information systems and standardized procedures that enable
us to efficiently manage our core staffing and administrative services as
well as the complexities of the billing and collections process;
- demonstrated ability to improve productivity, patient satisfaction and
quality of care while reducing overall cost to the hospital; and
- successful record of recruiting and retaining high quality physicians.
Since 1996, we have won 89 new outsourced contracts.
GROW THROUGH ACQUISITIONS. We intend to continue to pursue strategic
acquisitions of contracts currently held by local and regional physician groups.
Many of these physician groups are faced with increasing pressure to provide the
systems and services of a larger organization. The market for outsourced ED
physician staffing services is highly fragmented. Approximately 75% of the
market is served primarily by small, local and regional physician groups who
generally lack the resources and depth of services necessary to compete with
national providers. We have developed and implemented a disciplined acquisition
methodology utilized by our dedicated in-house mergers and acquisitions team.
Since 1996, we have completed 17 acquisitions. We expect to continue to fund
acquisitions with a combination of cash and earnout payments based on future
operating performance.
IMPLEMENT OPERATIONS IMPROVEMENT PROGRAM. We have recently initiated a
comprehensive program to maximize productivity and improve profitability in our
administrative areas. The three primary initiatives of the operations
improvement program include:
- integrating our twelve billing locations into a national network of four
billing centers operating on the uniform IDX billing system;
- consolidating call centers from four locations to one central location;
and
- reducing controllable costs.
We have already experienced increased profitability where our operations
improvement program has been implemented. In the past two years, we have
experienced a 22% increase in collection rates on delinquent accounts receivable
and a 220% increase in the rate paid to us by third party factoring agents on
closed accounts receivable. We began the operations improvement program in the
second half of 1998. We expect substantially all of the initiatives to be fully
implemented by the end of 1999.
INDUSTRY
According to Health Care Financing Administration, national healthcare
spending is expected to increase from 13.6% of gross domestic product, or $1.1
trillion, in 1997 to 15.9% of gross domestic product, or $1.8 trillion, by the
year 2005, representing a 6.4% compound annual growth rate. Hospital services
have historically represented the single largest component of these costs,
accounting for more than 40% of total healthcare spending. In the increasingly
complex healthcare regulatory, managed care and reimbursement environment,
hospitals are under significant pressure from the government and private payors
both to improve the quality and reduce the cost of care. In response, hospitals
have increasingly outsourced the staffing and management of multiple clinical
areas to contract management companies with specialized skills and a
standardized model to improve service, increase the overall quality of care and
reduce administrative costs.
In addition, the healthcare industry is experiencing an increasing trend
towards outpatient therapy rather than the traditional inpatient treatment.
Healthcare reform, such as the Health Care Financing Administration
reimbursement code reforms and the advent of managed care, places an increasing
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emphasis on reducing the time patients spend in hospitals. As a result, the
severity of illnesses and injuries treated in the ED is likely to increase when
these patients require emergency medical attention.
EDS. According to industry sources, in 1997 approximately 5,000 U.S.
hospitals operated EDs and 80% of these hospitals had outsourced their ED
departments. According to the American Hospital Association, EDs handle nearly
100 million patient visits annually, and nearly 40% of all hospital inpatient
admissions originate in the ED. According to the American Hospital Association,
the average number of patient visits per ED increased at a compound annual
growth rate of 3.0% between 1988 and 1996. The market for outsourced ED medical
services is highly fragmented. Approximately 80% of the market is served by a
large number of small, local and regional physician groups. These local
providers generally lack the depth of services and administrative and systems
infrastructure necessary to compete with national providers in the increasingly
complex healthcare business and regulatory environment.
RADIOLOGY. According to the 1998-1999 Medical and Healthcare Marketplace
Guide, total spending on radiology services in the U.S. in 1998 was estimated at
$69 billion or approximately 5% of annual healthcare expenditures, with 70% of
this spending in hospital settings. According to the American College of
Radiology, there were approximately 3,200 radiology groups in the U.S. in 1996,
representing approximately 27,000 radiologists who performed approximately 350
million radiological procedures in 1995. As with outsourced ED medical services,
the market for outsourced radiology services is highly fragmented and served by
a large number of small local and regional radiology groups. Competition for
outsourced radiology services contracts is intense and based on the ability of
the radiology group to provide a high level of medical and non-medical services.
Smaller radiology groups are often at a competitive disadvantage since they
often lack the capital, range of medical equipment and information systems
required to meet the increasingly complex needs of hospitals.
INPATIENT SERVICES. Hospitalists, physicians whose practice is solely
hospital based, care for admitted patients who lack a private physician or whose
private physician practices solely in the outpatient setting. According to
industry sources, less than 10% of inpatient care services are outsourced by
hospitals, and there are only 3,000 hospitalists practicing today. Hospitalists,
however, have demonstrated an ability to reduce inpatient costs while
maintaining high quality care and patient satisfaction, and industry sources
have projected a potential need for 34,000 hospitalists by the year.
CONTRACTUAL ARRANGEMENTS
HOSPITALS. We provide outsourced physician staffing and administrative
services to hospitals under fee-for-service contracts and flat-rate contracts.
Hospitals entering into fee-for-service contracts agree, in exchange for
granting our affiliated physicians medical staff privileges and exclusivity for
services, to authorize us to bill and collect the professional component of the
charges for medical services rendered by our contracted and employed physicians.
Under the fee-for-service arrangements, we receive direct or indirect
disbursements from patients and payors of the amounts collected. Depending on
the magnitude of services provided to the hospital and payor mix, we may also
receive supplemental revenue from the hospital. In a fee-for service
arrangement, we accept responsibility for billing and collection.
Under flat-rate contracts, the hospital performs the billing and collection
services of the professional component and assumes the risk of uncollectibility.
In return for providing the physician staffing and administrative services, the
hospital pays a contractually negotiated fee for physician coverage.
In 1998, approximately 76% of our net revenue was generated from
fee-for-service contracts. Our contracts with hospitals do not require any
material financial outlay, investment obligation or equipment purchase by us
other than the professional expenses associated with staffing the contracts.
Contracts with hospitals generally have terms of three years and are
generally automatically renewable under the same terms and conditions unless
either party gives notice of an intent not to renew. While most contracts are
terminable by either of the parties upon notice of as little as 30 days, the
average tenure of our contracts is approximately 6.8 years.
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PHYSICIANS. We contract with physicians as independent contractors or
employees to provide services to fulfill our contractual obligations to our
hospital clients. We typically pay the physicians a flat hourly rate for each
hour of coverage provided at rates comparable to the market in which they work,
with the exception of those radiologists and primary care physicians employed by
us, who are paid a base salary. The hourly rate varies if the physician is
independently contracted or an employee. Independently contracted physicians are
required to pay a self-employment tax, social security, and workers'
compensation insurance premiums. In contrast, we pay these taxes and expenses
for employed physicians. As such, employed physicians typically receive a lower
flat hourly rate.
Our contracts with physicians are generally perpetual and can be terminated
at any time under certain circumstances by either party without cause, typically
upon 180 days notice. In addition, we generally require the physician to sign a
two-year non-compete and non-solicitation agreement. Under these agreements, the
physician is restricted from divulging confidential information, soliciting or
hiring our physicians, inducing termination and competing for or soliciting our
clients. As of March 31, 1999, we had working relationships with over 2,160
physicians, of which over 1,450 were independently contracted, and over 230
other healthcare professionals.
SERVICE LINES
We provide a full range of outsourced physician staffing and administrative
services for EDs, radiology, inpatient services, pediatrics, and other
departments of the hospital. As hospitals experience growing pressure from
managed care companies and other payors to reduce costs while maintaining or
improving the quality of service, we believe hospitals will increasingly turn to
single-source providers of outsourced physician staffing and administrative
services with an established track record of success. As the outsourcing trend
grows, we believe our delivery platform of regional operating units supported by
a national infrastructure will result in higher customer satisfaction and a more
stable contract base than many of our competitors.
EMERGENCY DEPARTMENT. We are one of the largest providers of outsourced
physician staffing and administrative services for the ED in the United States.
Approximately 80% of our net revenue in 1998 came from ED contracts. As of March
31, 1999, we independently contracted with or employed approximately 1,940 ED
physicians. We contract with the hospital to provide qualified emergency
physicians and other healthcare providers for the ED. In addition to the core
services of contract management, recruiting, credentialing, staffing and
scheduling, we provide our client hospitals with enhanced services designed to
improve the efficiency and effectiveness of the ED. Specific programs like
WaitLoss(TM) apply proven process improvement methodologies to departmental
operations. Publications such as the Emergency Physician Legal Bulletin(TM) and
Case Studies of Customer Service in the Emergency Department(TM) are delivered
to all client hospitals and physicians on a quarterly basis. Information systems
such as the VBS(TM) documentation and billing information system are installed
in certain client EDs to improve physician documentation and to track
utilization of clinical resources. Physician documentation templates ensure
compliance with federal documentation guidelines and allow for more accurate
patient billing. By providing these enhanced services, we believe we increase
the value of services we provide to our clients and improve client relations.
Additionally, we believe these enhanced services also differentiate us in sales
situations and improve the chances of being selected in a contract bidding
process.
Since 1996, Team Health has merged with or acquired the contracts of 13 ED
physician groups. The acquired ED contracts were generally with hospitals in
large markets with an average patient volume exceeding 15,000 per year. Since
1996, we have also successfully negotiated 71 new outsourced ED physician
staffing and administrative services contracts. These contracts have been
obtained either through direct selling or through a competitive bidding process
initiated by hospitals.
Partially offsetting the growth in the number of ED contracts attributed to
acquisitions and direct sales are contract terminations. Since 1996, 85 ED
contracts in total were terminated. Our cancellations can be attributed
primarily to the elimination of low margin contracts obtained in connection with
acquisitions. Hospital cancellations can be attributed to consolidation among
hospitals, medical staff
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politics and pricing. In 1998, we had a net loss of approximately 25 ED
contracts. We believe the net loss of contracts during 1998 is primarily
attributable to issues related to the perceived financial condition of
MedPartners, uncertainty regarding the potential sale of Team Health, and the
termination of a number of low margin contracts associated with InPhyNet.
RADIOLOGY. We believe we are the second largest provider of outsourced
radiology physician staffing and administrative services in the United States.
We contract directly or through the regional operating units with selected
radiologists to provide radiology physician staffing and administrative
services. A typical radiology management team consists of clinical
professionals, board certified radiologists that are trained in all modalities,
and non-clinical professionals and support staff that are responsible for the
scheduling, purchasing, billing and collections functions. As of March 31, 1999,
we employed over 105 radiologists. We have traditionally focused on the
hospital-based radiology market, although we also maintain contracts with
outpatient diagnostic imaging centers. We believe the advantages of contracting
with us include our ability to provide 24-hour radiology coverage through a
combination of on-site services and/or teleradiology coverage (a means of
electronically transmitting patient images and consultative text from one
location to another).
INPATIENT SERVICES. We are one of the largest providers of outsourced
physician staffing and administrative services for inpatient services which
include hospitalist services and house coverage services. Our inpatient services
contracts with hospitals are generally on a cost plus or flat-rate basis. As of
March 31, 1999, we independently contracted with or employed over 63 inpatient
physicians. Since 1996, we experienced net revenue and contract growth in our
inpatient services business primarily due to new contract sales, acquisitions,
and to a lesser extent, rate increases on existing contracts.
PEDIATRICS. We are one of the largest providers of outsourced pediatrics
physician staffing and administrative services for general and pediatrics
hospitals. We provide these services on a cost plus or flat-rate basis. These
services include pediatrics emergency medicine and radiology, neonatal intensive
care, pediatric intensive care, urgent care centers, primary care centers,
observation units and inpatient services. As of March 31, 1999, we independently
contracted with or employed over 51 pediatrics physicians. Since 1996, we have
experienced net revenue and contract growth in our outsourced pediatrics
physician staffing and administrative services business due primarily to new
contract sales and acquisitions, and to a lesser extent, rate increases on
existing contracts.
PRIMARY CARE CLINICS AND OCCUPATIONAL MEDICINE. We provide primary care
staffing and administrative services in stand-alone primary clinics and in
clinics located within the work-site of industrial clients. While such clinics
are not a major focus of our business, they are complementary to our hospital
client's interests. The primary care clinics are typically a joint venture with
a local hospital and serve as an extension of the hospitals' primary care
services. We generally contract with the hospital to provide cost-effective,
high quality primary care physician staffing and administrative services. We
generally contract with an industrial employer to provide physician staffing and
administrative services for the occupational medicine clinic.
SERVICES
We provide a full range of outsourced physician staffing and administrative
services for EDs, radiology, inpatient services, pediatrics, and other areas of
the hospital.
Our outsourced physician staffing and administrative services include:
- - Contract Management
- - Staffing
- - Recruiting
- - Credentialing
- - Scheduling
- - Payroll Administration and
Benefits
- - Information Systems
- - Consulting Services
- - Billing and Collection
- - Risk Management
- - Continuing Education Services
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CONTRACT MANAGEMENT. Our delivery of outsourced physician staffing and
administrative services for a clinical area of the hospital is led by an
experienced contract management team of clinical and other healthcare
professionals. The team includes a Regional Medical Director, an on-site Medical
Director and a Client Services Manager. The Medical Director is a physician with
the primary responsibility of managing the physician component of a clinical
area of the hospital. The Medical Director works with the team, in conjunction
with the nursing staff and private medical staff, to improve clinical quality
and operational effectiveness. Additionally, the Medical Director works closely
with the regional operating unit operations staff to meet the clinical area's
ongoing recruiting and staffing needs.
STAFFING. We provide a full range of staffing services to meet the unique
needs of each hospital and clinic. Our dedicated clinical teams include
qualified, career-oriented physicians and other healthcare professionals
responsible for the delivery of high quality, cost-effective care. These teams
also rely on managerial personnel, many of whom have clinical experience, who
oversee the administration and operations of the clinical area. As a result of
our staffing services, hospitals can focus their efforts on improving their core
business of providing healthcare services for their communities as opposed to
recruiting and managing physicians. We also provide temporary staffing services
of physicians and other healthcare professionals to hospitals and clinics in 25
states.
RECRUITING. Many hospitals lack the resources necessary to identify and
attract specialized, career-oriented physicians. We have a staff of over 25
professionals dedicated to the recruitment of qualified physicians. These
professionals are regionally located and are focused on matching qualified,
career-oriented physicians with hospitals. Common recruiting methods include the
use of our proprietary national physician database, attending trade shows,
placing website and professional journal advertisements and telemarketing.
We have committed significant resources to the development of a proprietary
national physician database to be shared among our regional operating units.
This database is currently in operation at all but one of the operating units,
with final rollout scheduled to be completed over the next six months. The
database uses the American Medical Association Masterfile of over 700,000
physicians as the raw data source on potential candidates. Recruiters contact
potential prospects through telemarketing, direct mail, conventions, journal
advertising and our internet site to confirm and update the information.
Prospects expressing interest in one of our practice opportunities provide more
extensive information on their training, experience, and references, all of
which is added to our database. Our goal is to ensure that the practitioner is a
good match with both the facility and the community before proceeding with an
interview.
CREDENTIALING. We conduct a comprehensive review of a candidate's
background, academic records and previous medical experience. Once a candidate's
application is complete, it is loaded into our proprietary credentials software
program. While the hospital has the ultimate responsibility for verifying
credentials prior to granting medical staff privileges, we conduct this
extensive review prior to presenting the candidate, ensuring that only qualified
candidates are presented to the client.
SCHEDULING. Our scheduling department assists the Medical Directors in
scheduling physicians and other healthcare professionals within the clinical
area on a monthly basis.
PAYROLL ADMINISTRATION AND BENEFITS. We provide payroll administration
services for the physicians and other healthcare professionals with whom we
contract to provide physician staffing and administrative services. Our clinical
employees benefit significantly by our ability to aggregate physicians and other
healthcare professionals to negotiate more favorable employee benefit packages
and professional liability coverage than many hospitals or physicians could
negotiate on a stand-alone basis. Additionally, hospitals benefit from the
elimination of the overhead costs associated with the administration of the
payroll and, where applicable, employee benefits.
INFORMATION SYSTEMS. We have invested in advanced information systems and
proprietary software packages designed to assist hospitals in lowering
administrative costs while improving the efficiency and productivity of a
clinical area. These systems include VBS, a system that facilitates the
documentation, utilization review, coding and billing of the professional
services of the emergency physicians to ensure
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appropriate reimbursement and TeamWorks(TM), a national physician database and
software package that facilitates the recruitment and retention of physicians
and supports our contract requisition, credentialing, automated application
generation, scheduling, and payroll operations.
CONSULTING SERVICES. We have a long history of providing outsourced
physician staffing and administrative services to hospitals and, as a result,
have developed extensive knowledge in the operations of certain areas of the
hospital. As such, we provide consulting services to hospitals to improve the
productivity, quality and cost of care delivered by the hospital.
Process Improvement. We have developed a number of utilization review
programs designed to track patient flow and identify operating inefficiencies.
To rectify such inefficiencies, we have developed a Fast Track system to
expedite patient care in the ED by separating patients who can be treated in a
short period of time from patients who have more serious or time-consuming
problems. Fast Track patients, once identified through appropriate triage
categorization, are examined and treated in a separate area of the ED,
controlled by its own staff and operational system. We have substantial
experience in all phases of development and management of Fast Track programs,
including planning, equipping, policy and procedure development, and staffing.
In addition, we employ WaitLoss(TM), a proprietary process improvement system
designed to assist the hospital in improving the efficiency and productivity of
a department.
Quality Improvement. We provide a quality improvement program designed
to assist the hospital in maintaining a consistent level of high quality care.
It periodically measures the performance of the hospital, based on a variety of
benchmarks, including patient volume, quality indicators and patient
satisfaction. This program is typically integrated into our process improvement
program to ensure seamless delivery of high quality, cost-effective care.
Managed Care Contracting. We have developed extensive knowledge of the
treatment protocols, and related documentation requirements, of a variety of
managed care payors. As a result, we often participate in the negotiation of
managed care contracts to make those managed care relationships effective for
the patients, the payors, the physicians and the hospitals. We provide managed
care consulting services in the areas of contracting, negotiating, reimbursement
analysis/projections, payor/hospital relations, communications and marketing. We
have existing managed care agreements with health maintenance organizations,
preferred provider organizations and integrated delivery systems for commercial,
Medicaid and Medicare products. While the majority of our agreements with payors
continue to be traditional fee-for-service contracts, we are experienced in
providing managed, prepaid healthcare to enrollees of managed care plans.
Nursing Services. We maintain highly regarded, experienced nurse
consultants on our client support staff. These nurse consultants provide
assistance to nurse managers and Medical Directors of the client hospital on
issues regarding risk management and total quality management. In addition, the
nurse consultants are available to make site visits to client hospitals on
request to assess overall operations, utilization of personnel and patient flow.
BILLING AND COLLECTION. Our billing and collection services are a critical
component of our business. We are in the process of consolidating all billing
and collections operations into four core billing facilities, each of which has
already been converted into our uniform billing system -- the IDX software
system. Two sites have been on the IDX system for several years, a third site
was converted in June 1998, and the last site was converted in February 1999.
The IDX system has proven to be a powerful billing and accounts receivable
software package, with strong reporting capabilities and a proven record of
improving collections while reducing billing expenses. We have interfaced a
number of other software systems with the IDX system to further improve
productivity and efficiency. Foremost among these is the electronic registration
interface that gathers registration information directly from the hospitals'
management information systems. Additionally, we have invested in electronic
submission of claims, as well as electronic remittance posting. These programs
have markedly diminished labor and postage expenses. At the present time,
approximately 3.7 of 5.0 million billed annual patient encounters are being
processed by the four billing facilities. The remaining 1.3 million billed
annual patient encounters, which are being processed by third-party billing
companies will be transitioned to one of the four billing facilities, with the
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transition expected to be completed by the end of the fourth quarter of 1999.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Operations Improvement Program."
We use a patient information system known as VBS(TM), which is presently
installed in 46 EDs that we staff and manage. Using purchased software which has
the capability to recognize the spoken voice, we have installed personal
computers in these EDs and have modified the software to enable the physician to
generate the clinical note. This note is interfaced with demographic information
from the hospital information system. Each day, the combined clinical
note/demographic information is transmitted to our Plantation, Florida operation
center, where the information is scanned and electronically loaded into the
billing system and into a data warehouse for production of sophisticated
utilization and practice management reports.
We also operate an internal collection agency, called IMBS, to handle our
outstanding receivables deemed uncollectible. This agency utilizes an advanced
collection agency software package linked to a predictive dialer. Presently,
approximately 75% of all collection placements generated from our billing
facilities are sent to the IMBS agency. Over the next six months, this is
expected to increase to 100%. Comparative analysis has shown that the internal
collection agency has markedly decreased expenses previously paid to outside
agencies and improved the collectibilty of existing placements. By combining the
VBS(TM) system, the regional Team Health billing operation centers (on a common
platform) and the IMBS collection agency, we have built an integrated system
combining the generation of clinical information with the electronic capture of
billing information which passes unpaid accounts into an internal collection
agency. This advanced comprehensive billing and collection system allows us to
have full control of accounts receivable at each step of the process.
RISK MANAGEMENT. Our risk management function is designed to prevent or
minimize medical professional liability claims and includes:
- incident reporting systems,
- tracking/trending the cause of accidents and claims,
- physician education and service programs (including peer review and
pre-deposition review),
- loss prevention information (audio tapes and risk alert bulletins) and
- early intervention of malpractice claims.
Through our risk management staff, the quality assurance staff and the
Medical Director, we conduct an aggressive claims management program for loss
prevention and early intervention. We have a proactive role in promoting early
reporting, evaluation and resolution of serious incidents that may evolve into
claims or suits.
CONTINUING EDUCATION SERVICES. Our internal continuing education services
are fully accredited by the Accreditation Council for Continuing Medical
Education. This allows us to grant our physicians and nurses continuing
education credits for internally developed educational programs at a lower cost
than if such credits were earned through external programs. We have designed a
series of customer relations seminars entitled Successful Customer Relations for
physicians, nurses and other personnel to learn specific techniques for becoming
effective communicators and delivering top-quality customer service. These
seminars help the clinical team sharpen its customer service skills, further
develop communication skills and provide techniques to help deal with people in
many critical situations.
SALES AND MARKETING
Contracts with hospitals for outsourced physician staffing and
administrative services are generally obtained either through direct selling
efforts or requests for proposals. We have a team of five sales professionals
located throughout the country. Each sales professional is responsible for
developing sales and acquisition opportunities for the operating unit in their
territory. In addition to direct selling, the sales
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professionals are responsible for working in concert with the regional operating
unit president and corporate development personnel to respond to a request for
proposal.
Although practices vary from hospital to hospital, hospitals generally
issue a request for proposal with demographic information of the hospital
department, a list of services to be performed, the length of the contract, the
minimum qualifications of bidders, the selection criteria and the format to be
followed in the bid. Supporting the sales professionals is a fully integrated
marketing campaign comprised of a telemarketing program, internet website,
journal advertising, and a direct mail and lead referral program.
OPERATIONS
We currently operate through 13 regional operating units which are listed
in the table below. The operating units are managed semi-autonomously by senior
physician leaders and are operated as profit centers with the responsibility for
pricing new contracts, recruiting and scheduling physicians and other healthcare
professionals, marketing locally and conducting day to day operations. The
management of such corporate functions as accounting, payroll, billing and
collection, capital spending, information systems and legal are centralized.
NAME LOCATION PRINCIPAL SERVICES
- ---- ---------------------- ------------------
The Emergency Associates for Medicine............ Tampa, FL ED
Emergency Coverage Corporation................... Knoxville, TN ED
Emergency Physician Associates................... Woodbury, NJ ED
Emergency Professional Services.................. Middleburg Heights, OH ED
InPhyNet Medical Management...................... Ft. Lauderdale, FL ED
Northwest Emergency Physicians................... Seattle, WA ED
Radiology Associates of Hollywood................ Hollywood, FL Radiology
Reich, Seidelmann, and Janicki................... Solon, OH Radiology
Sheer, Ahearn & Associates....................... Tampa, FL Radiology
Southeastern Emergency Physicians................ Knoxville, TN ED
Team Health Southwest............................ Houston, TX ED
Team Radiology................................... Knoxville, TN Radiology
Team Health West................................. Pleasanton, CA ED
COMPETITION
The healthcare services industry is highly competitive and, especially in
recent years, has been subject to continuing changes in how services are
provided and how providers are selected and paid. Competition for outsourced
physician staffing and administrative service contracts is based primarily on
- the ability to improve department productivity and patient satisfaction
while reducing overall costs;
- the breadth of staffing and management services offered;
- the ability to recruit and retain qualified physicians; and
- billing and reimbursement expertise.
Our national competitors in the provision of staffing and administrative
services to EDs include EmCare, Inc. and Spectrum Emergency Care, Inc., both of
which are subsidiaries of Laidlaw, Inc., Sheridan Healthcare, Inc., Coastal
Physician Group, Inc., National Emergency Services and Sterling Healthcare
Group, a subsidiary of FPA Medical Management. American Physician Partners, Inc.
is our principal national competitor in the provision of radiology staffing and
administrative services. There are also many local and regional companies which
provide physician staffing and administrative services. We also compete against
the traditional structure of hospital management for its physician staffing and
scheduling needs.
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We believe that evolution of the healthcare industry will tend to blur
traditional distinctions among industry segments. We expect that other companies
in other healthcare industry segments, such as managers of other hospital-based
specialties and large physician group practices, some of which have financial
and other resources greater than ours, may become competitors in the delivery of
physician staffing and administrative services.
PROPERTIES
We lease 38,141 square feet at 1900 Winston Road, Knoxville, Tennessee for
our corporate headquarters. We also lease or sublease facilities for the
operations of the clinics, billing centers, and certain regional operations. We
believe our present facilities are adequate to meet our current and projected
needs. The leases and subleases have various terms ranging from one to seven
years and monthly rents ranging from $510 to $60,000. We expect to be able to
renew each of our leases or to lease comparable facilities on terms commercially
acceptable to us.
INSURANCE
We require the physicians with whom we contract to obtain professional
liability insurance coverage. For both our independently contracted and employed
physicians, we currently arrange the provision of claims-made coverage of
$1,000,000 per incident and $3,000,000 annual aggregate per physician and
$1,000,000 per incident and $25,000,000 annual aggregate with respect to Team
Health and our operating units and other healthcare practitioners. These limits
are deemed appropriate by management based upon historical claims, the nature
and risks of the business and standard industry practice.
We are usually obligated to arrange for the provision of "tail" coverage
for claims against our physicians for incidents which are incurred but not
reported during periods for which the related risk was covered by claims-made
insurance. With respect to those physicians for whom we are obligated to provide
tail coverage, we accrue professional insurance expenses based on estimates of
the cost of procuring tail coverage. See "Risk Factors -- Risks Relating to
Exposure to Professional Liability; Liability Insurance."
We also maintain general liability, vicarious liability, automobile
liability, property and other customary coverages in amounts deemed appropriate
by management based upon historical claims and the nature and risks of the
business.
EMPLOYEES
As of March 31, 1998, we had over 2,400 employees, of which 1,340 worked in
billings and collections, operations and support and over 110 of which worked in
clinics providing clinical support functions. Our employees are not covered by
any labor agreements nor affiliated with any unions.
LEGAL PROCEEDINGS
We are party to various pending legal actions arising in the ordinary
operation of our business such as contractual disputes, employment disputes and
general business actions as well as malpractice actions. We believe that any
payment of damages resulting from these types of lawsuits would be covered by
insurance, exclusive of deductibles, would not be in excess of the reserves and
such liabilities, if incurred, should not have a significant negative effect on
the operating results and financial condition of our company. Moreover, in
connection with the recapitalization, subject to certain limitations,
MedPartners and Physician Services have jointly and severally agreed to
indemnify us against some losses relating to litigation arising out of incidents
occurring prior to the recapitalization to the extent those losses are not
covered by third party insurance. With respect to some litigation matters, we
are only indemnified if our losses from all indemnification claims exceed a
total of $3.7 million and do not exceed a total of $50 million. With respect to
other litigation matters, we are indemnified for all losses. Finally, also in
connection with the recapitalization, MedPartners agreed to purchase, at its
sole cost and expense, for the benefit of Team Health Holdings, insurance
policies covering all liabilities and obligations for any claim for medical
malpractice arising at any time in connection with the operation of Team Health
and its
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subsidiaries prior to the closing date of the Transactions for which Team Health
or any of its subsidiaries or physicians becomes liable.
In July 1998, a lawsuit was filed against EmCare, Inc. and InPhyNet Medical
Management, Inc. and several other unrelated defendants in the United States
District Court for the District of Kansas. The case is captioned United States
ex rel. George R. Schwartz v. EmCare, Inc. and InPhyNet Management, Inc. et al.
The plaintiff in that case, George R. Schwartz, alleges that, based on
Management Services contracts, InPhyNet and others had inappropriate financial
relationships with ED physicians and engaged in inappropriate billing practices
in violation of the False Claims Act and the Medicare Anti-kickback Law as well
as various other statutes. If the plaintiff's challenge to our contractual
arrangements is successful, we may be forced to modify the current structure of
our relationships with physicians and clients. This modification could have a
significant negative impact on our operations and financial condition. See "Risk
Factors -- State and Federal Fraud and Abuse, Anti-Kickback and Anti-referral
Laws." In connection with the recapitalization, subject to some limitations,
MedPartners and Physician Services have jointly and severally agreed to
indemnify us against any and all losses relating to this lawsuit.
REGULATORY MATTERS
General. As a participant in the healthcare industry, our operations and
relationships with healthcare providers such as hospitals are subject to
extensive and increasing regulations by numerous federal and state governmental
entities as well as local governmental entities. The management services
provided by us under contracts with hospitals and other clients include
(collectively, "Management Services"):
- the identification and recruitment of physicians and other healthcare
professionals for the performance of emergency, medicine, radiology and
other services at hospitals, out-patient imaging facilities and other
facilities;
- utilization and review of services and administrative overhead;
- scheduling of staff physicians and other healthcare professionals who
provide clinical coverage in designated areas of hospitals; and
- administrative services such as billing and collection of fees for
professional services.
All of the above services are subject to scrutiny and review by federal,
state and local governmental entities and are subject to the rules and
regulations promulgated by such governmental entities. Specifically, but without
limitation, the following laws and regulations related to these laws may affect
the operations and contractual relationships of Team Health:
State Laws Regarding Prohibition of Corporate Practice of Medicine and Fee
Splitting Arrangements. Team Health is a general business corporation which
derives a significant portion of its revenues from business transacted in
California. The laws of many states, including California, prohibit general
business corporations from practicing medicine, exercising control over
physicians who practice medicine or engaging in certain practices such as
fee-splitting with physicians. These laws and their interpretations vary from
state to state and are enforced by the courts and by regulatory authorities with
broad discretion. For the reasons discussed above, we believe our operations as
currently conducted are in substantial compliance with these laws. See "Risk
Factors -- State Laws Regarding Prohibition of Corporate Practice of Medicine
and Fee-Splitting Arrangements."
Debt Collection Regulation. Some of our operations are subject to
compliance with the Fair Debt Collection Practices Act and comparable statutes
in many states. Under the Fair Debt Collection Practices Act, a third-party
collection company is restricted in the methods it uses in contacting consumer
debtors and eliciting payments with respect to placed accounts. Requirements
under state collection agency statutes vary, with most requiring compliance
similar to that required under the Fair Debt Collection Practices Act. In
addition, most states and some municipalities require collection agencies to be
licensed with the appropriate regulatory body before operating in those
jurisdictions. We believe that we are in substantial compliance with the Fair
Debt Collection Practices Act and comparable state statutes and that we maintain
licenses in all jurisdictions in which our operations require us to be licensed.
Anti-Kickback Statutes. We are subject to the Medicare and Medicaid fraud
and abuse laws including the federal anti-kickback statute. In addition, an
increasing number of states in which we operate
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have laws that prohibit some direct or indirect payments (similar to the
anti-kickback statute) if those arrangements are designed to induce or encourage
a particular provider. These statutes vary from state to state, are often vague
and have seldom been interpreted by the courts or regulatory agencies. For the
reasons discussed above, we believe our operations as currently conducted are in
substantial compliance with these laws. See "Risk Factors -- State and Federal
Fraud and Abuse, Anti-Kickback and Anti-Referral Laws."
Physician Self-Referral Laws. Our contractual arrangements with physicians
and hospitals may be subject to provisions of the Omnibus Budget Reconciliation
Act of 1993 that, subject to limited exceptions, prohibit the referral of
Medicare patients by a physician to an entity for the provision of certain
"designated health services" if the physician or a member of the physician's
family has a direct or indirect financial relationship with the entity. In
addition, a number of the states in which we operate have similar prohibitions
on physician self-referrals. In general, these states prohibitions closely track
the prohibitions and exceptions of the provisions of the Omnibus Budget
Reconciliation Act of 1993 noted above. We believe that our staffing
arrangements with physicians and hospitals meet the requirements of an exception
to the provisions of the Omnibus Budget Reconciliation Act of 1993. In addition,
we believe that our arrangements do not subvert the intent of the provisions of
the Omnibus Budget Reconciliation Act of 1993, as indicated by comments made by
the Congress in connection with the enactment of predecessor legislation to the
provisions of the Omnibus Budget Reconciliation Act of 1993. Likewise, we
believe that our arrangements substantially comply with similar state physician
self-referral statutes. See "Risk Factors -- State and Federal Fraud and Abuse,
Anti-Kickback and Anti-Referral Laws."
Other Fraud and Abuse Laws. We are also subject to a number of other fraud
and abuse laws. Of particular importance is the federal False Claims Act which
imposes civil and criminal liability on individuals or entities that submit
false or fraudulent claims for payment to the government. In addition, we are
subject to the Health Insurance Portability and Accountability Act of 1996
provisions concerning to "Health Care Fraud" and "False Statements Relating to
Health Care Matters." The Health Care Fraud statute prohibits knowingly and
willfully executing a scheme or artifice to defraud any healthcare benefit
program, including private payors. The False Statements statute prohibits
knowingly and willfully falsifying, concealing or covering up a material fact by
any trick, scheme or device or making any false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits,
items or services. For the reasons discussed above, we believe our operations as
currently conducted are in substantial compliance with these laws. See "Risk
Factors -- State and Federal Fraud and Abuse, Anti-Kickback and Anti-Referral
Laws."
Facility Rules and Regulations. Because we perform services at hospitals,
outpatient facilities and other types of healthcare facilities, we and our
affiliated physicians may be subject to certain laws which are applicable to
such entities. For example, we are subject to the Emergency Medical Treatment
and Active Labor Act of 1986 which prohibits "patient dumping" by requiring
hospitals and ED physicians to provide care to any patient presenting to the
hospital's ED in an emergent condition regardless of the patient's ability to
pay. Many states in which we operate, including California, have similar state
law provisions concerning patient-dumping. In addition to the Emergency Medical
Treatment and Active Labor Act of 1986 and its state law equivalents,
significant aspects of our operations are subject to state and federal statutes
and regulations governing workplace health and safety, dispensing of controlled
substances and the disposal of medical waste. Our operations may also be
affected by changes in ethical guidelines and operating standards of
professional and trade associations and private accreditation commissions such
as the American Medical Association and the Joint Commission on Accreditation of
Health Care Organizations. For the reasons discussed above, we believe our
operations as currently conducted are in substantial compliance with these laws
and guidelines. See "Risk Factors -- Facility Rules and Regulations."
We currently operate under MedPartners' compliance program that is designed
to assure that every effort is made to comply with federal, state and other laws
which regulate the healthcare industry, including debt collection. Following the
recapitalization, we will implement our own compliance program which will be
structured so as to reduce the likelihood of any noncompliant activities. See
"Risk Factors -- Risks Related to Transition Services."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
NAME AGE POSITION
- ---- --- --------
Lynn Massingale, M.D................. 46 President, Chief Executive Officer and Director
Michael Hatcher...................... 48 Chief Operating Officer
Jeffrey Bettinger, M.D............... 49 Executive Vice President, Billing and Reimbursement
Stephen Sherlin...................... 53 Executive Vice President, Finance and Administration
David Jones.......................... 31 Chief Financial Officer
Nicholas W. Alexos................... 35 Director
Dana J. O'Brien...................... 43 Director
Kenneth W. O'Keefe................... 32 Director
Timothy P. Sullivan.................. 40 Director
Tyler J. Wolfram..................... 32 Director
LYNN MASSINGALE, M.D. has been President, Chief Executive Officer and
Director of Team Health since its founding in 1994. Prior to that, Dr.
Massingale served as President and Chief Executive Officer of Southeastern
Emergency Physicians, a major provider of emergency physician services to
hospitals in the Southeast and the predecessor of Team Health which Dr.
Massingale co-founded in 1979. Dr. Massingale served as the director of
Emergency Services for the state of Tennessee from 1989 to 1993. Dr. Massingale
is a graduate of the University of Tennessee Medical Center for Health Services.
MICHAEL HATCHER joined Team Health in 1990 and currently serves as Chief
Operating Officer. Mr. Hatcher has served as Chief Financial Officer and
President of Nutritional Support Services, Ltd. in Knoxville; and as Chief
Financial Officer for Cherokee Textile Mills, Inc. in Sevierville, Tennessee and
Spindale Mills, Inc. in Spindale, N.C. Mr. Hatcher is a member of the American
Institute of Certified Public Accountants and has served as a Board Member for
the Center for Services Marketing at the Owen School of Business at Vanderbilt
University. Mr. Hatcher is responsible for the Company's operations, including
development activities. Mr. Hatcher is a graduate of the University of Tennessee
and Vanderbilt University.
JEFFREY BETTINGER, M.D. has been Executive Vice President, Billing and
Reimbursement for Team Health since MedPartners' acquisition of InPhyNet in June
1997. For InPhyNet, Dr. Bettinger directed the Healthcare Financial Services
Division since 1992. Dr. Bettinger is a board certified emergency physician and
is a fellow of the American College of Emergency Physicians. Dr. Bettinger
received an M.D. from Hahnemann Medical College.
STEPHEN SHERLIN joined Team Health in January 1997 as Senior Vice
President, Finance and Administration, and was promoted to Executive Vice
President, Finance and Administration in July 1998. Prior to joining Team
Health, Mr. Sherlin served as Vice President and Chief Financial Officer of the
Tennessee Division of Columbia/HCA. Mr. Sherlin has also served as Chief
Financial Officer for the Athens Community Hospital in Athens, Tennessee; Park
West Medical Center in Knoxville, Tennessee; and Doctors Hospital in Little
Rock, Arkansas. Mr. Sherlin has operations responsibility for accounting,
finance, human resources, information technology and risk management. Mr.
Sherlin is a graduate of Indiana University.
DAVID JONES has been our Chief Financial Officer since May 1996. From 1994
to 1996, Mr. Jones was our Controller. Prior to that, Mr. Jones worked at
Pershing, Yoakley and Associates, a regional healthcare audit and consulting
firm, as a Supervisor. Before joining Pershing, Yoakley and Associates, Mr.
Jones worked at KPMG Peat Marwick as an Audit Senior. Mr. Jones is a certified
public accountant and is a member of the American Institute of Certified Public
Accountants. Mr. Jones received a B.S. in Business Administration from The
University of Tennessee in Knoxville.
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NICHOLAS W. ALEXOS became a director in connection with the
recapitalization. Prior to co-founding Madison Dearborn Partners, Inc., Mr.
Alexos was with First Chicago Venture Capital for four years. Previously, he was
with The First National Bank of Chicago. Mr. Alexos concentrates on investments
in the healthcare and food manufacturing industries and currently serves on the
Boards of Directors of Milnot Holding Company and Spectrum Healthcare Services,
Inc. Mr. Alexos received a B.B.A. from Loyola University and an M.B.A. from the
University of Chicago Graduate School of Business.
DANA J. O'BRIEN became a director in connection with the recapitalization.
Mr. O'Brien co-founded Prudential Equity Investors, Inc. in 1984. He and the
other principals of Prudential Equity Investors, Inc. co-founded Cornerstone
Equity Investors, LLC in 1996. He currently serves on the Boards of Directors of
Guardian Care, Inc., International Language Engineering Corp., Interim
Healthcare, Inc., Regent Assisted Living, Inc., Specialty Hospital of America,
Inc., Spectrum Healthcare Services and VIPS Healthcare Information Solutions.
Mr. O'Brien received a B.A. from Hobart College and an M.B.A. from the Wharton
School of the University of Pennsylvania.
KENNETH W. O'KEEFE became a director in connection with the
recapitalization. Prior to co-founding Beecken Petty & Company, LLC, Mr. O'Keefe
was with ABN AMRO Incorporated and an affiliated entity, the Chicago Dearborn
Company, for four years. Previously, he was with the First National Bank of
Chicago. Mr. O'Keefe currently serves on the Boards of Directors of Spectrum
Healthcare Services, Inc., Same Day Surgery, LLC, Component Software
International, Inc. and UroTherapies, Inc. Mr. O'Keefe received a B.A. from
Northwestern University and an M.B.A. from the University of Chicago Graduate
School of Business.
TIMOTHY P. SULLIVAN became a director in connection with the
recapitalization. Prior to co-founding Madison Dearborn Partners, Inc. Mr.
Sullivan was with First Chicago Venture Capital for three years after having
served in the U.S. Navy. Mr. Sullivan concentrates on investments in the
healthcare industry and currently serves on the Boards of Directors of Milnot
Holding Corporation, Path Lab Holdings, Inc. and Spectrum Healthcare Services,
Inc. Mr. Sullivan received a B.S. from the United States Naval Academy, an M.S.
from the University of Southern California and an M.B.A. from Stanford
University Graduate School of Business.
TYLER J. WOLFRAM became a director in connection with the recapitalization.
Mr. Wolfram has served as a Managing Director of Cornerstone Equity Investors,
LLC since March 1998. From 1993 to March 1998, Mr. Wolfram held various
positions in the High Yield Group of Donaldson, Lufkin & Jenrette Securities
Corporation. Mr. Wolfram currently serves on the Board of Directors of True
Temper Sports, Inc. Mr. Wolfram received an A.B. from Brown University and an
M.B.A. from the Wharton School of the University of Pennsylvania.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to us for 1998 of those
persons who served as
(1) the chief executive officer during 1998 and
(2) our other four most highly compensated executive officers for 1998
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER TOTAL
-------------------------- UNDERLYING COMPEN- COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) SATION SATION
- --------------------------- ---- -------- -------- ------------ --------- ------------
Lynn Massingale, M.D............ 1998 $400,000 $150,000 60,000 $107,237(2) $657,237
President and Chief Executive
Officer
Jeffrey Bettinger, M.D.......... 1998 219,985 25,000 7,500 3,331(3) 248,316
Executive Vice President,
Billing and Reimbursement
Michael Hatcher................. 1998 239,154 80,000 32,400 20,865(4) 340,020
Chief Operating Officer
Stephen Sherlin................. 1998 143,608 30,000 3,000 5,595(5) 179,203
Executive Vice President,
Finance and Administration
David Jones..................... 1998 137,231 55,919 13,500 16,032(6) 209,182
Chief Financial Officer
- ---------------
(1) Represents options to acquire shares of MedPartners' common stock
("MedPartners Shares") granted during 1998.
(2) Amounts shown reflect premiums paid for life insurance coverage ($52,428),
medical insurance ($1,885), dental insurance ($224) and long term disability
insurance ($1,400) and matching contributions under our 401(k) plan
($4,800), automobile allowance ($9,000) and deferred compensation ($37,500).
(3) Amounts shown reflect premiums paid for life insurance coverage ($384),
medical insurance ($2,023) and dental insurance ($224) and long term
disability insurance ($700).
(4) Amounts shown reflect premiums paid for life insurance coverage ($480),
medical insurance ($2,827), dental insurance ($309) and long-term disability
insurance ($4,149) and automobile allowance ($6,000), matching contributions
under our 401(k) plan ($4,800) and estate and financial planning benefits
($2,300).
(5) Amounts shown reflect premiums paid for life insurance coverage ($336),
medical insurance ($1,885), dental insurance ($224) and long term disability
insurance ($612) and automobile allowance ($2,538).
(6) Amounts shown reflect premiums paid for life insurance coverage ($269),
health insurance ($5,655), dental insurance ($618) and long term disability
insurance ($490) and automobile allowance ($4,200) and matching
contributions under our 401(k) plan ($4,800).
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The following table sets forth options granted to the Named Executive
Officers for 1998:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- ---------------------------------- ---------- ------------- -------- ---------- --------- ---------
Lynn Massingale, M.D. ............ 60,000 --(2) $3.000 9/21/08 $113,201 $286,873
Jeffrey Bettinger, M.D. .......... 7,500 --(2) 3.000 9/21/08 14,150 35,859
Michael Hatcher................... 32,400 --(2) 3.000 9/21/08 61,129 154,912
Stephen Sherlin................... 3,000 --(2) 3.000 9/21/08 5,660 14,344
David Jones....................... 13,500 --(2) 3.000 9/21/08 25,470 64,547
- ---------------
(1) Represents options to acquire MedPartners Shares.
(2) Percent of options granted represents less than 1% of options granted by
MedPartners to its and its subsidiaries' employees.
(3) Realizable Value is the product of the number of MedPartners Shares into
which options are exercisable and the difference between
(A) an assumed price per MedPartners Share determined by applying annual
rates of appreciation to the price per MedPartners Share as of the date
of option grant and
(B) the exercise price. The price per MedPartners Share as of the date of
grant of each option listed above was $3.00. At assumed annual rates of
appreciation of 5% and 10%, the price per MedPartners Share at
expiration will be $4.87 and $7.78, respectively, resulting in a
realizable value per MedPartners Share of $1.87 and $4.78, respectively.
No stock options were exercised by any of the Named Executive Officers
during 1998. The following table sets forth the number of securities underlying
unexercised options held by each of the Named Executive Officers and the value
of such options at the end of 1998:
FISCAL YEAR END OPTION VALUES
NUMBERS OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR-END YEAR-END($)(1)EXERCISABLE/
NAME (#)EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- ---------------------------- ----------------------------
Lynn Massingale, M.D. ....................... 32,400/47,600 45,900/89,100
Jeffrey Bettinger, M.D. ..................... 3,550/6,450 5,738/11,138
Michael Hatcher.............................. 17,496/25,704 24,786/48,114
Stephen Sherlin.............................. 1,420/2,580 2,295/4,455
David Jones.................................. 7,290/10,710 10,328/20,048
- ---------------
(1) Value of unexercised options at fiscal year-end represents the difference
between the exercise price of any outstanding-in-the-money options and
$5.25, the fair market value of MedPartners Shares on December 31, 1998. At
the closing of the Recapitalization, all options will become fully vested
and immediately exercisable.
PENSION PLANS
Substantially all of the salaried employees, including our executive
officers, participate in a 401(k) savings plan established by us. Prior to the
Transactions, such employees participated in a 401(k) plan sponsored by Pacific
Physician Services. As part of the Transactions, Pacific Physician Services
permitted these employees to participate under the Pacific Physician Services'
401(k) plan for a transitional period
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of time, not to exceed six months, until we established our own 401(k) plan.
Employees are permitted to defer a portion of their income under our 401(k) plan
and we will match such contribution. The matching contribution is consistent
with that under the Pacific Physician Services' 401(k) plan which provided a
matching contribution equal to 50% of the first 6% of the employee's
contribution.
EMPLOYMENT AGREEMENTS
In connection with the Transactions, we entered into employment agreements
with some members of our senior management. The terms of such agreements are
customary for the positions held by such executive officers.
STOCK OPTION PLAN
The Board of Directors has adopted a stock option plan (the "Stock Plan"),
which provides for the grant to some of our key employees and/or directors of
stock options that are non-qualified options for federal income tax purposes.
The Stock Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has broad powers under the Stock Plan,
including exclusive authority (except as otherwise provided in the Stock Plan)
to determine:
(1) who will receive awards;
(2) the type, size and terms of awards;
(3) the time when awards will be granted; and
(4) vesting criteria, if any, of the awards.
COMPENSATION OF DIRECTORS
We will reimburse directors for any out-of-pocket expenses incurred by them
in connection with services provided in such capacity. In addition, we may
compensate directors who are not our employees for services provided in such
capacity.
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OWNERSHIP OF SECURITIES
Team Health Holdings owns 92.7% of our outstanding common stock and voting
interests and 94.3% of our outstanding preferred stock. Physician Services owns
the remaining 7.3% of our outstanding common stock and voting interests and the
remaining 5.7% of our outstanding preferred stock. The following table sets
forth certain information regarding the actual beneficial ownership of Team
Health Holdings' ownership units by:
(1) each person (other than the directors and executive officers of Team
Health Holdings) known to Team Health Holdings to own more than 5% of
the outstanding membership units of Team Health Holdings and
(2) certain executive officers and members of the Board of Team Health
Holdings.
Except as otherwise indicated below, each of the following individuals can be
reached care of Team Health at 1900 Winston Road, Suite 300, Knoxville,
Tennessee 37919.
PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING COMMON PERCENTAGE OF
BENEFICIAL OWNER PREFERRED UNITS UNITS VOTING UNITS
- ---------------- --------------- ------------------ -------------
Cornerstone Equity Investors IV, L.P................ 42.0% 38.1% 38.1%
c/o Cornerstone Equity Investors, LLC
717 Fifth Avenue, Suite 1100
New York, New York 10022
Attention: Dana J. O'Brien
Madison Dearborn Capital Partners II, L.P........... 42.0 38.1 38.1
c/o Madison Dearborn Partners
Three First National Plaza, Suite 3800
Chicago, Illinois 60602
Attention: Timothy P. Sullivan
Healthcare Equity Partners, L.P..................... 2.3 2.1 2.1
c/o Beecken Petty & Company, L.L.C
901 Warranville Road, Suite 205
Lisle, Illinois 60532
Attention: Kenneth W. O'Keefe
Healthcare Equity Q.P. Partners, L.P................ 7.0 6.4 6.4
c/o Beecken Petty & Company, L.L.C
901 Warranville Road, Suite 205
Lisle, Illinois 60532
Attention: Kenneth W. O'Keefe
Certain members of management....................... 6.8 15.2 15.2
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RELATIONSHIPS AND RELATED TRANSACTIONS
RECAPITALIZATION AGREEMENT
The Recapitalization Agreement contains customary provisions for such
agreements, including representations and warranties with respect to the
condition and operations of the business, covenants with respect to the conduct
of the business prior to the closing date of the recapitalization and various
closing conditions, including the execution of a registration rights agreement
and stockholders agreement, the obtaining of financing, and the continued
accuracy of the representations and warranties.
Pursuant to the recapitalization agreement, each of MedPartners and
Physician Services have indemnified, jointly and severally, subject to certain
limitations, Team Health Holdings and Team Health against losses resulting from:
(1) any misrepresentation or breach of any warranty or covenant of
MedPartners or Physician Services contained in the recapitalization
agreement, a claim for which is made in most cases within the 18 months
following the closing of the recapitalization;
(2) some claims or audits by governmental authorities; and
(3) some litigation matters, including some medical malpractice claims to
the extent not covered by third-party insurance.
With respect to some matters, we are only indemnified if our losses from
all indemnification claims exceed $3.7 million and do not exceed a total of $50
million. There is no basket or limit on the total payments with respect to some
other specified misrepresentations or breaches of warranties and some litigation
matters.
In addition, each of MedPartners and Physician Services have agreed for a
period of five years after March 12, 1999 not to compete with us in any business
that provides outsourced staffing and related billing services. Each of
MedPartners and Physician Services have also agreed for a period of five years
after March 12, 1999 not to solicit employment of our employees.
Under the recapitalization agreement, MedPartners has agreed to purchase,
at its sole cost and expense, for the benefit of Team Health Holdings, insurance
policies covering all liabilities and obligations for any claim for medical
malpractice arising at any time in connection with the operation of Team Health
and its subsidiaries prior to the closing date of the Transactions for which
Team Health or any of its subsidiaries or physicians becomes liable. Such
insurance policies are for amounts and contain terms and conditions mutually
acceptable to MedPartners and Team Health Holdings.
Pursuant to the recapitalization agreement, MedPartners agreed to provide
us certain transition services. These services include
(1) use of certain existing phone systems;
(2) access to MedPartners' wide area network via MCI frame-relay circuits;
and
(3) some accounting, finance and related support services.
These services will, in most cases, be provided for six months following the
recapitalization at a cost to us consistent with the cost of such services
charged to us immediately prior to the recapitalization.
SECURITYHOLDERS AGREEMENTS
In connection with the recapitalization, both Team Health and our
stockholders, Team Health Holdings and Physician Services, and Team Health
Holdings and all of its unitholders, entered into two separate securityholders
agreements. The securityholders agreements:
(1) restrict the transfer of the equity interests of Team Health and Team
Health Holdings, respectively; and
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(2) grant tag-along rights on certain transfers of equity interests of Team
Health and Team Health Holdings, respectively.
Some of the foregoing provisions of the securityholders agreements will
terminate upon the consummation of an initial public offering.
REGISTRATION RIGHTS AGREEMENT
In connection with the recapitalization, both Team Health and our
stockholders, Team Health Holdings and Physician Services, and Team Health
Holdings and all of its unitholders, entered into two separate registration
rights agreements. Under the registration rights agreements, some of the holders
of capital stock owned by Team Health Holdings (with respect to our shares) and
Cornerstone, Madison Dearborn and Beecken Petty (with respect to units of Team
Health Holdings), respectively, have the right, subject to various conditions,
to require us or Team Health Holdings, as the case may be, to register any or
all of their common equity interests under the Securities Act of 1933 at our or
Team Health Holdings' expense. In addition, all holders of registrable
securities are entitled to request the inclusion of any common equity interests
of Team Health or Team Health Holdings covered by the registration rights
agreements in any registration statement at our or Team Health Holdings'
expense, whenever we or the Team Health Holdings propose to register any of our
common equity interests under the Securities Act of 1933. In connection with all
such registrations, we or the Team Health Holdings have agreed to indemnify all
holders of registrable securities against some liabilities, including
liabilities under the Securities Act of 1933.
CORPORATE PASS-THROUGH CHARGES
MedPartners provided certain common services for us and other MedPartners
affiliates, including group insurance programs. Many of these services represent
services provided by third parties whereby MedPartners incurred the cost of the
service on behalf of us. MedPartners charged us for the estimated cost of these
services. The costs for these services and/or expenses have been allocated to us
by MedPartners based upon certain allocation methodologies determined by
MedPartners. Accordingly, there is no assurance that the amounts allocated for
such items provided by MedPartners would be indicative of the actual amounts
that we would have incurred on a stand-alone basis.
MANAGEMENT SERVICES AGREEMENT
In connection with the recapitalization, we entered into a management
services agreement with Cornerstone, Madison Dearborn and Beecken Petty under
which each of Cornerstone, Madison Dearborn and Beecken Petty will agree to
provide us with:
(1) general management services;
(2) assistance with the identification, negotiation and analysis of
acquisitions and dispositions;
(3) assistance with the negotiation and analysis of financial alternatives;
and
(4) other services agreed upon by us and each of Cornerstone, Madison
Dearborn and Beecken Petty.
In exchange for such services, Cornerstone, Madison Dearborn and Beecken
Petty will collectively receive an annual advisory fee of $500,000, plus
reasonable out-of-pocket expenses (payable quarterly). Additionally,
Cornerstone, Madison Dearborn and Beecken Petty also received a one time
transaction fee and reasonable out of pocket expenses in connection with the
closing of the recapitalization. The management services agreement has an
initial term of 3 years, subject to automatic one-year extensions unless we or
Cornerstone, Madison Dearborn or Beecken Petty provides written notice of
termination. The management services agreement will automatically terminate upon
the consummation of an initial public offering.
NET TRANSFERS TO/FROM PARENTS TO PARENTS' SUBSIDIARIES
MedPartners and Physician Services have paid some of our third party
liabilities. MedPartners and Physician Services have made advances to us to fund
operating and investing activities, including
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acquisitions, net of amounts advanced to MedPartners and Physician Services from
operating cash flows generated by us. Such net transfers are included as part of
MedPartners' and Physician Services' equity because we were not required to
settle these amounts as part of the recapitalization.
CORPORATE EXPENSE ALLOCATION
Prior to the recapitalization, MedPartners and Physician Services provided
some corporate services to us, including legal services, risk management, some
employment benefit administration, tax advice and preparation of tax returns,
software support services and some financial and other services. These fees were
allocated by MedPartners and Physician Services to us and approximate costs
incurred. The amounts recorded by us for these allocations in the consolidated
and combined financial statements were approximately $1.0 million, $1.7 million
and $2.9 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The amounts allocated by MedPartners and Physician Services were
not necessarily allocated on a basis which approximated our estimated usage of
such services, and consequently, were not necessarily indicative of the actual
costs which may have been incurred had we operated as an entity unaffiliated
with MedPartners or Physician Services. However, our management believes that
the allocation is reasonable and in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 55.
TEAM HEALTH HOLDINGS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
Cornerstone, Madison Dearborn, Beecken Petty and some of the members of our
management (collectively, the "Members") entered into an Amended and Restated
Limited Liability Company Agreement. The Limited Liability Company Agreement
governs the relative rights and duties of the Members.
Membership Interests. The ownership interests of the members in Team
Health Holdings consist of preferred units and common units. The common units
represent the common equity of Team Health Holdings and the preferred units
represent the preferred equity of Team Health Holdings. Holders of the preferred
units are entitled to return of capital contributions prior to any distributions
made to holders of the common units.
Distributions. Subject to any restrictions contained in any financing
agreements to which Team Health Holdings or any of its affiliates is a party,
the board of managers of Team Health Holdings may make distributions, whether in
cash, property or securities of Team Health Holdings at any time or from time to
time in the following order of priority:
First, to the holders of preferred units, the aggregate unpaid amount
accrued on such preferred units on a daily basis, at a rate of 10% per annum.
Second, to the holders of preferred units, an amount determined by the
aggregate Unreturned Capital (as defined and described in the Limited Liability
Company Agreement).
Third, to the holders of common units, an amount equal to the amount of
such distribution that has not been distributed pursuant to clauses First
through Second above.
Team Health Holdings may distribute to each holder of units within 75 days
after the close of each fiscal year such amounts as determined by the board of
managers of Team Health Holdings to be appropriate to enable each holder of
units to pay estimated income tax liabilities.
OTHER RELATED PARTY TRANSACTIONS.
We lease office space for our corporate headquarters from Winston Road
Properties, an entity which is owned 50% by Park Med Properties. Two of our
executive officers, Dr. Massingale and Mr. Hatcher, each own 20% of Park Med
Properties. We paid $432,000 to Winston Properties in connection with the lease
agreement. In addition, Park Med Properties owns a building which houses a
medical clinic that is operated by Park Med Ambulatory Care, PC, a joint venture
of the Company. In 1998, Park Med Ambulatory Care, PC paid $72,000 to Park Med
Properties in connection with the lease agreement.
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DESCRIPTION OF CAPITAL STOCK
The issued and outstanding capital stock of the Company consists of common
stock and class A preferred stock.
Holders of class A preferred stock have no voting rights, except as
required by Delaware law. The holders of common stock are entitled to one vote
per share on all matters to be voted upon by the stockholders of Team Health,
including the election of directors.
As, if and when declared by our board of directors, holders of class A
preferred stock are entitled to receive from us cumulative preferential
dividends from the date of issuance of such shares accruing at 10% per annum per
share of class A preferred stock. The class A preferred stock contains terms
requiring us to pay to the holders thereof the liquidation preference per share
of class A preferred stock plus all accrued and unpaid dividends thereon if the
class A preferred stock is redeemed, whether voluntarily or involuntarily.
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Team Health, holders of class A preferred stock are entitled to be paid, out of
the assets of Team Health available for distribution to shareholders of Team
Health, the liquidation preference per share of class A preferred stock, plus,
an amount in cash equal to all accrued, whether or not declared, and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up
before any distribution is made on any stock junior to the preferred stock,
including, without limitation, our common stock.
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DESCRIPTION OF SENIOR BANK FACILITIES
As part of the Transactions, we entered into the senior bank facilities
with a syndicate of financial institutions for which Fleet National Bank and
NationsBanc Montgomery Securities LLC act as Co-Arrangers, Donaldson, Lufkin &
Jenrette Securities Corporation acts as Documentation Agent, NationsBanc
Montgomery Securities LLC acts as the Syndication Agent and Fleet National Bank
acts as Administrative Agent. The following is a summary of the material terms
and conditions of the senior bank facilities and is subject to the detailed
provisions of the senior bank facilities and the various related documents to be
entered into in connection therewith.
Loans; Interest Rates. The senior bank facilities consist of up to a $50.0
million five-year revolving credit facility including a swing line sub-facility
of $5.0 million and a letter of credit sub-facility of $5.0 million, and a term
loan facility consisting of a 5 year $60.0 million tranche A term loan facility
and a 6 year $90.0 million tranche B term loan facility. The borrowings under
the senior bank facilities, together with the aggregate gross proceeds from the
offering of the old notes, the Equity Sponsor Contribution, the Management
Contribution and the Retained Equity, were used to consummate the
recapitalization and pay fees and expenses related to the Transactions. In
addition, the senior bank facilities will provide financing for future working
capital, capital expenditures and other general corporate purposes.
The revolving credit facility is available on a revolving basis during the
period from March 12, 1999 until March 12, 2004. At our option, loans made under
the revolving bank facility and the tranche A term loan facility bear interest
at either
(1) the Alternate Base Rate, defined as the higher of
(A) the NationsBank prime rate and
(B) the Federal Funds rate plus 0.5% plus a margin of 2.25% or
(2) the reserve-adjusted LIBO rate plus a margin of 3.25%.
At our option, the tranche B term loan facility bears interest at either
(1) the reserve-adjusted LIBO rate plus a margin of 3.75% or
(2) the Alternate Base Rate plus a margin of 2.75%.
Repayment. Revolving loans may be borrowed, repaid and reborrowed from
time to time until March 12, 2004. The tranche A term loan facility is repayable
in equal quarterly installments at the end of March, June, September and
December of each year, commencing September 30, 1999, with the aggregate amount
payable in each year as set forth in the table below. The tranche B term loan
facility is repayable
(1) during the first five years of the tranche B term loan facility, in
annual installments payable at the end of December of each year,
commencing December 31, 1999 with the aggregate amount payable in each
year as set forth in the table below, and
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(2) in the sixth year of the tranche B term loan facility in equal
quarterly installments payable at the end of March, June, September and
December of such year with the aggregate amount payable in such year as
set forth in the table below.
AGGREGATE AMOUNT
PAYABLE UNDER
----------------------
TRANCHE A TRANCHE B
TERM TERM
YEAR LOAN LOAN
- ---- --------- ---------
(DOLLARS IN MILLIONS)
1999................................................. $ 4.8 $ 0.9
2000................................................. $ 9.6 $ 0.9
2001................................................. $11.4 $ 0.9
2002................................................. $14.7 $ 0.9
2003................................................. $15.6 $ 0.9
2004................................................. $ 3.9 $85.5
----- -----
$60.0 $90.0
===== =====
Security. The revolving credit facility and the term loan facility are
secured by a first-priority lien on
(1) 100% of our issued and outstanding capital stock held by Team Health
Holdings and Physician Services;
(2) 100% of the issued and outstanding capital stock of our direct and
indirect domestic subsidiaries;
(3) 65% of the issued and outstanding voting capital stock (or such greater
percentage which would not result in material adverse tax consequences)
and 100% of the issued and outstanding non-voting capital stock of each
direct foreign subsidiary of the Team Health and
(4) all other present and future assets and properties of the Team Health
and its domestic subsidiaries.
Guarantors. The senior bank facilities are guaranteed by Team Health
Holdings and all existing and later acquired direct and indirect subsidiaries of
Team Health Holdings, other than Team Health. All guarantees are guarantees of
payment and not of collection. The guaranty by Team Health Holdings is limited
to the value of our capital stock held by the Team Health Holdings.
Prepayments. In addition, the senior bank facilities provide for mandatory
repayments, subject to certain exceptions, of the term loan facility, and
reductions in the revolving credit facility, based on certain net asset sales
outside of the ordinary course of business, the net proceeds of certain debt and
equity issuances, and excess cash flow. Outstanding loans under the senior bank
facilities are voluntarily pre-payable without penalty; provided, however, that
LIBO rate breakage costs, if any, shall be borne by us.
Conditions and Covenants. The obligations of the lenders under the senior
bank facilities are subject to the satisfaction of certain conditions precedent,
customary for similar credit facilities or otherwise appropriate under the
circumstances. We and each of our subsidiaries are subject to certain negative
covenants contained in the senior bank facilities, including without limitation
covenants that restrict:
- the incurrence of additional indebtedness and other obligations and the
granting of additional liens;
- mergers, consolidations, amalgamations, liquidations, dissolutions and
dispositions of assets;
- investments, loans and advances;
- dividends, stock repurchases and redemptions;
- prepayment or repurchase of subordinated indebtedness and amendments to
some agreements governing indebtedness, including the indenture and the
exchange notes; and
- engaging in transactions with our affiliates.
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The senior bank facilities also contain customary affirmative covenants,
including compliance with environmental laws, year 2000 compliance, maintenance
of corporate existence and rights, maintenance of insurance, property and
interest rate protection, financial reporting, inspection of property, books and
records, and the pledge of additional collateral and guarantees from new
subsidiaries. In addition, the senior bank facilities require us to maintain
(each as defined in the senior bank facilities):
- a minimum fixed charge coverage ratio;
- a maximum leverage ratio;
- a minimum EBITDA and
- a minimum interest coverage ratio.
Also, in the event we have less than $150 million in fixed rate
indebtedness, we must enter into interest rate protection agreements. Certain of
these financial, negative and affirmative covenants are more restrictive than
those set forth in the indenture.
Events of Default. The senior bank facilities also include events of
default that are typical for senior credit facilities and appropriate in the
context of the Transactions, including, without limitation, nonpayment of
principal, interest, fees or reimbursement obligations with respect to letters
of credit, violation of covenants, inaccuracy of representations and warranties
in any material respect, actual or asserted invalidity of any loan documents,
cross default to certain other indebtedness and agreements, bankruptcy and
insolvency events, material judgments and liabilities, defaults or judgements
under ERISA and change of control. The occurrence of any of such events of
default could result in acceleration of our obligations under the senior bank
facilities and foreclosure on the collateral securing such obligations, which
could have significant negative results to holders of the exchange notes.
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DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of some of the terms used in this description
under the subheading "Definitions." In this description, the words "we," "us,"
and "our" refer only to Team Health, Inc. and not to any of our subsidiaries.
We will issue the exchange notes under an indenture dated March 12, 1999
among Team Health, Inc., our subsidiary guarantors and United States Trust
Company of New York, as trustee. See "Notice to Investors." The terms of the
exchange notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939, as amended.
The following description is a summary of the material provisions of the
indenture. It does not restate that agreement in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these exchange notes. Copies of the indenture are available as set
forth below under the subheading "Additional Information."
BRIEF DESCRIPTION OF THE EXCHANGE NOTES AND THE SUBSIDIARY GUARANTEES
THE EXCHANGE NOTES
These exchange notes:
- are our general unsecured obligations;
- are subordinated in right of payment to all of our senior debt;
- are ahead of or equal in right of payment to all of our existing and
future subordinated indebtedness; and
- are unconditionally guaranteed by our subsidiary guarantors.
THE SUBSIDIARY GUARANTEES
These exchange notes are guaranteed by each of our Domestic Restricted
Subsidiaries.
The subsidiary guarantees of these exchange notes:
- are general unsecured obligations of each subsidiary guarantor;
- are subordinated in right of payment to all senior debt of each
subsidiary guarantor; and
- are ahead of or equal in right of payment to all existing and future
subordinated indebtedness of each subsidiary guarantor.
As of March 31, 1999, we and our subsidiary guarantors had total senior
debt of approximately $147.5 million. As indicated above and as discussed in
detail below under the subheading "Subordination," payments on the exchange
notes and under the subsidiary guarantees will be subordinated to the payment of
senior debt. The indenture will permit us and our subsidiary guarantors to incur
additional senior debt.
As of March 31, 1999, all of our subsidiaries were "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants in the indenture. Unrestricted Subsidiaries
will not guarantee the exchange notes.
PRINCIPAL, MATURITY AND INTEREST
We will issue the exchange notes with a maximum aggregate principal amount
of $225.0 million, of which $100.0 million will be issued on the date of
original issuance. We will issue the exchange notes in denominations of $1,000
and integral multiples of $1,000. The exchange notes will mature on March 15,
2009.
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Interest on these exchange notes will accrue at the rate of 12% per annum
and will be payable semi-annually in arrears on March 15 and September 15,
commencing on September 15, 1999. We will make each interest payment to the
holders of record of these exchange notes on the immediately preceding March 1
and September 1.
Interest on these exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Additional exchange notes may be issued from time to time after
the offering, subject to the provisions of the indenture described below under
the caption "Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock." The exchange notes offered hereby and any additional exchange notes
subsequently issued under the indenture would be treated as a single class for
all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
METHODS OF RECEIVING PAYMENTS ON THE EXCHANGE NOTES
If a holder has given wire transfer instructions to us, we will make all
principal, premium and interest payments on those exchange notes in accordance
with those instructions. All other payments on these exchange notes will be made
at the office or agency of the paying agent and registrar within the City and
State of New York unless we elect to make interest payments by check mailed to
the holders at their address set forth in the register of holders.
PAYING AGENTS AND REGISTRAR FOR THE EXCHANGE NOTES
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of the
exchange notes, and we or any of our subsidiaries may act as paying agent or
registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange exchange notes in accordance with the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and we may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. We are not required to transfer or exchange any exchange note
selected for redemption. Also, we are not required to transfer or exchange any
exchange note for a period of 15 days before a selection of exchange notes to be
redeemed.
The registered holder of an exchange note will be treated as the owner of
it for all purposes.
SUBSIDIARY GUARANTEES
Our subsidiary guarantors will jointly and severally guarantee, on a senior
subordinated basis, our obligations under these exchange notes. Each subsidiary
guarantee will be subordinated to the prior payment in full of all senior debt
of that subsidiary guarantor. The obligations of each subsidiary guarantor under
its subsidiary guarantee will be limited as necessary to prevent that subsidiary
guarantee from constituting a fraudulent conveyance under applicable law. See
"Risk Factors -- Fraudulent Conveyance Matters."
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A subsidiary guarantor may not sell or otherwise dispose of all or
substantially all of its assets, or consolidate with or merge with or into
(whether or not such subsidiary guarantor is the surviving person), another
person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the person acquiring the property in any such sale or disposition or
the person formed by or surviving any such consolidation or merger
assumes all the obligations of that subsidiary guarantor pursuant to
a supplemental indenture satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the indenture.
The subsidiary guarantee of a subsidiary guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that subsidiary guarantor (including
by way of merger or consolidation), if we apply the Net Proceeds of
that sale or other disposition, in accordance with the applicable
provisions of the indenture; or
(2) in connection with the sale of all of the capital stock of a subsidiary
guarantor, if we apply the Net Proceeds of that sale, in accordance
with the applicable provisions of the indenture; or
(3) if we designate any Restricted Subsidiary that is a subsidiary
guarantor as an Unrestricted Subsidiary.
See "Repurchase at Option of Holders -- Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, and interest on these
exchange notes will be subordinated to the prior payment in full of all of our
senior debt.
The holders of senior debt will be entitled to receive payment in full in
cash of all amounts due or to become due in respect of senior debt before the
holders of exchange notes will be entitled to receive any payment with respect
to the exchange notes (except that holders of exchange notes may receive
Reorganization Securities), in the event of any distribution to our creditors in
any Insolvency or Liquidation Proceeding with respect to us. Upon any such
Insolvency or Liquidation Proceeding, any payment or distribution of our assets
of any kind or character, whether in cash, property or securities (other than
Reorganization Securities), to which the holders of the exchange notes or the
trustee would be entitled will be paid by us or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the exchange notes or by the trustee if
received by them, directly to the holders of senior debt (pro rata to such
holders on the basis of the amounts of senior debt held by such holders) or
their Representative or Representatives, as their interests may appear, for
application to the payment of the senior debt remaining unpaid until all such
senior debt has been paid in full in cash, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of senior
debt.
We also may not make any payment in respect of the exchange notes (except
in Reorganization Securities) if:
(1) a payment default on Designated Senior Debt occurs and is continuing;
or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the trustee receives a notice of such default (a "Payment
Blockage Notice") from the Credit Agent or the holders or the
Representative of any Designated Senior Debt.
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\Payments on the exchange notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in case of a nonpayment default, the earlier of
(A) the date on which such nonpayment default is cured or waived,
(B) 179 days after the date on which the applicable Payment Blockage
Notice is received or
(C) the date on which the trustee receives written notice from the
Credit Agent or the Representative for such Designated Senior Debt,
as the case may be, rescinding the applicable Payment Blockage
Notice, unless the maturity of any Designated Senior Debt has been
accelerated.
No new Payment Blockage Notice may be delivered unless and until 181 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No event of default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 90 days.
As a result of the subordination provisions described above, in the event
of our bankruptcy, liquidation or reorganization, holders of these exchange
notes may recover less ratably than our creditors who are holders of senior
debt. See "Risk Factors -- Subordination," which describes how the right of
holders of exchange notes to receive payments on the exchange notes is junior to
all of our existing and future senior indebtedness. We and our restricted
subsidiaries will be subject to certain financial tests limiting the amount of
additional indebtedness, including senior debt, that we and our restricted
subsidiaries can incur. See "-- Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock" for a more detailed description of the types of
Indebtedness that we may and may not incur.
OPTIONAL REDEMPTION
At any time prior to March 15, 2002, we may on one or more occasions redeem
up to 33 1/3% of the aggregate principal amount of exchange notes originally
issued under the indenture at a redemption price of 112.0% of the principal
amount thereof, plus accrued and unpaid interest to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided that:
(1) at least 66 2/3% of the aggregate principal amount of exchange notes
remains outstanding immediately after the occurrence of such redemption
(excluding notes held by us and our subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of
such Equity Offering.
Except pursuant to the preceding paragraphs, we will not have the option of
redeeming the exchange notes prior to March 15, 2004.
After March 15, 2004, we may redeem all or a part of these exchange notes,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon, to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2004............................................ 108.000%
2005............................................ 106.000%
2006............................................ 104.000%
2007............................................ 102.000%
2008 and thereafter............................. 100.000%
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SELECTION AND NOTICE
If less than all of the exchange notes are to be redeemed at any time, the
trustee will select exchange notes for redemption as follows:
(1) if the exchange notes are listed, in compliance with the requirements
of the principal national securities exchange on which the exchange
notes are listed; or
(2) if the exchange notes are not so listed, on a pro rata basis, by lot or
by such method as the trustee shall deem fair and appropriate.
No exchange notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of exchange notes to be redeemed
at its registered address. Notices of redemption may not be conditional.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. A new exchange note in principal amount
equal to the unredeemed portion of the original exchange note will be issued in
the name of the holder thereof upon cancellation of the original exchange note.
Exchange notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
exchange notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," we
are not required to make mandatory redemption or sinking fund payments with
respect to the exchange notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of exchange notes will have the
right to require us to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's exchange notes pursuant to the
Change of Control Offer. In the Change of Control Offer, we will offer a Change
of Control Payment in cash equal to 101% of the aggregate principal amount of
exchange notes repurchased plus accrued and unpaid interest thereon, if any, to
the date of purchase. Within 60 days following any Change of Control, we will
mail a notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase exchange notes on
the Change of Control Payment Date, pursuant to the procedures required by the
indenture and described in such notice. We will comply with the requirements of
Rule 14e-1 under the Securities Exchange Act of 1934 and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the exchange notes as a result
of a Change of Control. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of the indenture relating to such
Change of Control Offer, we will comply with the applicable securities laws and
regulations and shall not be deemed to have breached our obligations described
in the indenture by virtue thereof.
On the Change of Control Payment Date, we will, to the extent lawful:
(1) accept for payment all exchange notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all exchange notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the trustee the exchange notes so
accepted together with an officers' certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased
by us.
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The paying agent will promptly mail to each holder of exchange notes so
tendered the Change of Control Payment for such exchange notes, and the trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each holder a new exchange note equal in principal amount to any unpurchased
portion of the exchange notes surrendered, if any; provided that each such new
exchange note will be in a principal amount of $1,000 or an integral multiple
thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, we will
either repay all outstanding senior debt or obtain the requisite consents, if
any, under all agreements governing outstanding senior debt to permit the
repurchase of exchange notes required by this covenant. We will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require us to make a Change of Control
Offer following a Change of Control will be applicable regardless of whether or
not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the holders of the exchange notes to require that we
repurchase or redeem the exchange notes in the event of a takeover,
recapitalization or similar transaction.
Our outstanding senior debt currently prohibits us from purchasing any
exchange notes, and also provides that certain change of control events with
respect to us would constitute a default under the agreements governing the
senior debt. Any future credit agreements or other agreements relating to senior
debt to which we become a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when we are prohibited from
purchasing exchange notes, we could seek the consent of our senior lenders to
the purchase of exchange notes or could attempt to refinance the borrowings that
contain such prohibition. If we do not obtain such a consent or repay such
borrowings, we will remain prohibited from purchasing exchange notes. In such
case, our failure to purchase tendered exchange notes would constitute an event
of default under the indenture which would, in turn, constitute a default under
such senior debt. In such circumstances, the subordination provisions in the
indenture would likely restrict payments to the holders of exchange notes.
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
exchange notes validly tendered and not withdrawn under such Change of Control
Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Team Health and our subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of exchange notes to require us to
repurchase such exchange notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of us and those
of our Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) we (or the Restricted Subsidiary, as the case may be) receive
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by our board of directors and
evidenced by a resolution of the board of directors set forth in an
officers' certificate delivered to the trustee provided that the board
of directors' determination must be based on an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $25 million; and
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(3) at least 80% of the consideration therefor received by us or such
Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be
cash:
(a) any liabilities (as shown on our or such Restricted Subsidiary's
most recent balance sheet), of us or any Restricted Subsidiary
(other than contingent liabilities and liabilities that are by their
terms subordinated to the exchange notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases us or such
Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by us or any
such Restricted Subsidiary from such transferee that are converted
by us or such Restricted Subsidiary into cash or Cash Equivalents
within 180 days (to the extent of the cash received in that
conversion).
The 80% limitation referred to in clause (3) above will not apply to any
Asset Sale in which the cash or Cash Equivalents portion of the consideration
received therefrom, determined in accordance with the preceding proviso, is
equal to or greater than what the after-tax proceeds would have been had such
Asset Sale complied with the aforementioned 80% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
we or any such Restricted Subsidiary may apply such Net Proceeds, at our or its
option:
(1) to repay or repurchase senior debt of us or any Restricted Subsidiary;
(2) to acquire a controlling interest in another Permitted Business;
(3) to make a capital expenditure in a Permitted Business; or
(4) to acquire other assets in a Permitted Business.
Pending the final application of any such Net Proceeds, we may temporarily
reduce the revolving indebtedness under the senior bank facilities or otherwise
invest such Net Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $15.0 million, we will be required
to make an offer to all holders of exchange notes (an "Asset Sale Offer") to
purchase the maximum principal amount of exchange notes that may be purchased
out of the Excess Proceeds. The offer price in any Asset Sale Offer will be
equal to 100% of principal amount plus accrued and unpaid interest, if any, to
the date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, we may use such Excess Proceeds for
general corporate purposes. If the aggregate principal amount of exchange notes
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee shall select the exchange notes to be purchased on a pro rata basis.
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
COVENANTS
RESTRICTED PAYMENTS
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of our or any of our Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment on such Equity
Interests in connection with any merger or consolidation involving us)
or to the direct or indrect holders of our or any of our Restricted
Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than our
Disqualified Stock);
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving Team Health) any of our Equity Interests or those of any
direct or indirect parent of Team Health (other than any such Equity
Interests owned by us or any of our Restricted Subsidiaries);
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(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any indebtedness that is
subordinated to the exchange notes or the Subsidiary Guarantees, except
scheduled payments of interest or principal at Stated Maturity thereof;
or
(4) make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(2) we would, after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth
in the first paragraph of the covenant described below under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock;"
and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by us and our Restricted Subsidiaries
after the date of the indenture (excluding Restricted Payments
permitted by clauses (1), (2), (3), (4), (8) (other than those
permitted by clause (6) of the definition of "Permitted Investments")
(11) and (12) of the next succeeding paragraph), is less than the sum,
without duplication, of:
(a) 50% of our Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the first full fiscal
quarter commencing after the date of the indenture to the end of our
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus
(b) 100% of the aggregate net proceeds (including the fair-market value
of property other than cash, provided, that fair market value of
property other than cash shall be determined in good faith by the
board of directors whose resolution with respect thereto shall be
delivered to the trustee and such determination must be based upon
an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market
value exceeds $15.0 million) received by us as a contribution to our
capital or received by us from the issue or sale since the date of
the indenture of our Equity Interests (other than Disqualified
Stock) or of our Disqualified Stock or debt securities that have
been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to our
Restricted Subsidiary and other than Disqualified Stock or
convertible debt securities that have been converted into
Disqualified Stock), plus
(c) to the extent that any Restricted Investment that was made after the
date of the indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of
(1) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and
(2) the initial amount of such Restricted Investment, plus
(d) if any Unrestricted Subsidiary
(1) is redesignated as a Restricted Subsidiary, the fair market
value of such redesignated Subsidiary (as determined in good
faith by our board of directors) as of the date of its
redesignation or
(2) pays any cash dividends or cash distributions to us or any of
our Restricted Subsidiaries, 100% of any such cash dividends or
cash distributions made after the date of the indenture.
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The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
of any of our subordinated indebtedness or Equity Interests or those of
any Restricted Subsidiary in exchange for, or out of the net cash
proceeds of the substantially concurrent sale or issuance (other than
to one of our Restricted Subsidiaries) of, other Equity Interests of
Team Health (other than Disqualified Stock); provided that the amount
of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of our
subordinated indebtedness or that of any Restricted Subsidiary with the
net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary to the holders
of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any of our Equity Interests held by any member or former
member of our (or any of our Restricted Subsidiaries') management or
affiliated physician pursuant to any management equity subscription
agreement, stockholders agreement or stock option agreement or other
similar agreements in effect as of the date of the indenture;
provided, however, the aggregate price paid shall not exceed
(a) $2.5 million in any calendar year (with unused amounts in any
calendar year being carried over to succeeding calendar years
subject to a maximum (without giving effect to clause (b)) of $5.0
million in any calendar year, plus
(b) the aggregate cash proceeds received by us from any issuance or
reissuance of Equity Interests to members of our management or our
affiliated physicians and those of our Restricted Subsidiaries and
the proceeds to us of any "key man" life insurance policies;
provided that the cancellation of indebtedness owing to us from
members of management or our affiliated physicians or those of any
of our Restricted Subsidiaries in connection with such repurchase
of Equity Interests will not be deemed to be a Restricted Payment;
(6) Investments in any Person (other than us or a Restricted Subsidiary)
engaged in a Permitted Business in an amount not to exceed $7.5
million;
(7) other Investments in unrestricted subsidiaries having an aggregate
fair market value, taken together with all other Investments made
pursuant to this clause (7) that are at that time outstanding, not to
exceed $6.0 million;
(8) Permitted Investments;
(9) so long as no Default or Event of Default has occurred and is
continuing, the declaration and payment of dividends on Disqualified
Stock, the incurrence of which satisfied the covenant set forth in
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" below;
(10) repurchases of Equity Interests deemed to occur upon the exercise of
stock options if such Equity Interests represent a portion of the
exercise price thereof; and
(11) distributions to fund the Transactions. See "The Transactions."
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or such subsidiary, as the case may
be, pursuant to the Restricted Payment. The fair market value of any non-cash
Restricted Payment shall be determined in good faith by the board of directors
whose resolution with respect thereto shall be delivered to the trustee. The
board of directors' determination must be based upon
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an opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if such fair market value exceeds $15.0 million. Not
later than the date of making any Restricted Payment, we shall deliver to the
trustee an officers' certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
We will not, and will not permit any of our subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any indebtedness (including Acquired Debt) and we will not issue any
Disqualified Stock and will not permit any of our Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that we may incur
indebtedness (including Acquired Debt) or issue Disqualified Stock or preferred
stock and our Restricted Subsidiaries may incur Indebtedness (including Acquired
Debt) and issue Disqualified Stock or preferred stock if the Fixed Charge
Coverage Ratio for our most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, if such incurrence or issuance is on
or prior to the second anniversary of the Issue Date, or 2.25 to 1 if such
incurrence or issuance is after the second anniversary of the Issue Date but on
or prior to the fourth anniversary of the Issue Date, or 2.5 to 1 if such
incurrence or issuance is after the fourth anniversary of the Issue Date, in
each case, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by us or any of our Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the senior bank
facilities; provided that the aggregate amount of all indebtedness then
classified as having been incurred in reliance upon this clause (1)
that remains outstanding under the senior bank facilities after giving
effect to such incurrence does not exceed an amount equal to $190
million.
(2) the incurrence by us or our Restricted Subsidiaries of Existing
Indebtedness;
(3) the incurrence by us and the subsidiary guarantors of indebtedness
represented by the exchange notes and the subsidiary guarantees;
(4) the incurrence by us or any of our Restricted Subsidiaries of
indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in our
business or that of such Restricted Subsidiary (whether through the
direct purchase of assets or the Capital Stock of any Person owning
such Assets), in an aggregate principal amount or accreted value, as
applicable, not to exceed $15.0 million;
(5) the incurrence by us or any of our Restricted Subsidiaries of
indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary; provided that such indebtedness was incurred by
the prior owner of such assets or such Restricted Subsidiary prior to
such acquisition by us or one of our subsidiaries and was not incurred
in connection with, or in contemplation of, such acquisition by our or
one of our subsidiaries; provided further that the principal amount (or
accreted value, as applicable) of such indebtedness, together with any
other outstanding indebtedness incurred pursuant to this clause (5),
does not exceed $20.0 million;
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(6) the incurrence by us or any of our Restricted Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness that was
permitted by the indenture to be incurred;
(7) the incurrence by us or any of our Restricted Subsidiaries of
intercompany Indebtedness between or among us and any of our Restricted
Subsidiaries; provided, however, that:
(a) if we or any subsidiary guarantor is the obligor on such
indebtedness, such indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect to
the exchange notes, in the case of us, or the subsidiary guarantee
of such subsidiary guarantor, in the case of a subsidiary guarantor;
and
(b) (1) any subsequent issuance or transfer of Equity Interests that
results in any such indebtedness being held by a Person other
than us or a Restricted Subsidiary and
(2) any sale or other transfer of any such Indebtedness to a Person
that is not either us or a Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such
indebtedness by us or such Restricted Subsidiary, as the case
may be;
(8) the incurrence by us or any of our Restricted Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging:
(a) interest rate risk with respect to any floating rate indebtedness
that is permitted by the terms of this indenture to be outstanding;
(b) exchange rate risk with respect to any agreement or indebtedness of
such Person payable in a currency other than U.S. dollars; or
(c) commodities risk relating to commodities agreements, entered into in
the ordinary course of business, for the purchase of raw material
used by us and our Restricted Subsidiaries;
(9) the Guarantee by us or any of our Restricted Subsidiaries of our
indebtedness or that of one of our Restricted Subsidiaries that was
permitted to be incurred by another provision of this covenant;
(10) the incurrence by our Unrestricted Subsidiaries of Non-Recourse Debt;
provided, however, that if any such indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of indebtedness by our Restricted
Subsidiary;
(11) indebtedness incurred by us or one of our Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including without
limitation to letters of credit in respect to workers' compensation
claims or self-insurance, or other indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims;
provided, however, that upon the drawing of such letters of credit or
the incurrence of such indebtedness, such obligations are reimbursed
within 30 days following such drawing or incurrence;
(12) indebtedness arising from agreements of us or one of our Restricted
Subsidiaries providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, asset or subsidiary,
other than guarantees of indebtedness incurred by any person acquiring
all or any portion of such business, assets or subsidiary for the
purpose of financing such acquisition; provided that
(a) such indebtedness is not reflected on our balance sheet or that
of any Restricted Subsidiary (contingent obligations referred to
in a footnote or footnotes to financial statements and not
otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this clause (a))
and
(b) the maximum assumable liability in respect of such Indebtedness
shall at no time exceed the gross proceeds including non-cash
proceeds (the fair market value of such non-cash proceeds being
measured at the time received and without giving effect to any
such
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subsequent changes in value) actually received by us and/or such
Restricted Subsidiary in connection with such disposition;
(13) indebtedness incurred by us or any of our Restricted Subsidiaries
which is subordinated to the exchange notes and the subsidiary
guarantees; provided that such indebtedness matures after the date on
which the exchange notes mature and that no cash interest is payable
with respect to such indebtedness until after the date on which the
exchange notes mature;
(14) obligations in respect of performance and surety bonds and completion
guarantees provided by us or any of our Restricted Subsidiaries in the
ordinary course of business;
(15) guarantees incurred in the ordinary course of business in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
and
(16) the incurrence by us or any of our Restricted Subsidiaries of
additional indebtedness, including Attributable Debt incurred after
the date of the indenture, in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other indebtedness incurred pursuant to this clause (16),
not to exceed $25.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, we
will be permitted to classify such item of indebtedness in any manner that
complies with this covenant. In addition, we may, at any time, change the
classification of an item of indebtedness (or any portion thereof) to any other
clause or to the first paragraph hereof provided that we would be permitted to
incur such item of indebtedness (or portion thereof) pursuant to such other
clause or the first paragraph hereof, as the case may be, at such time of
reclassification. Accrual of interest, accretion or amortization of original
issue discount and the accretion of accreted value will not be deemed to be an
incurrence of indebtedness for purposes of this covenant.
LIENS
We will not, and will not permit any of our Restricted Subsidiaries to,
create, incur, assume or otherwise cause or suffer to exist or become effective
any Lien of any kind securing trade payables or indebtedness that does not
constitute senior debt (other than Permitted Liens) upon any of our or our
Restricted Subsidiaries' property or assets, now owned or hereafter acquired
unless:
(1) in the case of Liens securing indebtedness that is expressly
subordinated or junior in right of payment to the exchange notes, the
exchange notes are secured on a senior basis to the obligations so
secured until such time as such obligations are no longer secured by a
Lien; and
(2) in all other cases, the exchange notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to us or any of our
Restricted Subsidiaries
(1) on our Capital Stock or
(2) with respect to any other interest or participation in, or
measured by, our profits; or
(b) pay any indebtedness owed to us or any of our Restricted
Subsidiaries;
(2) make loans or advances to us or any of our Restricted Subsidiaries; or
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(3) transfer any of its properties or assets to us or any of our Restricted
Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture;
(2) the senior bank facilities as in effect as of the date of the
indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole (as determined
in the good faith judgment of our board of directors), with respect to
such dividend and other payment restrictions than those contained in
the senior bank facilities as in effect on the date of the indenture;
(3) the indenture and the exchange notes;
(4) any applicable law, rule, regulation or order;
(5) any instrument of a Person acquired by us or any of our Restricted
Subsidiaries as in effect at the time of such acquisition (except to
the extent incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that, in the case of indebtedness, such indebtedness was permitted by
the terms of the indenture to be incurred;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding
paragraph;
(8) Permitted Refinancing Indebtedness, provided that the material
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, in the good faith
judgment of our board of directors, taken as a whole, to the holders
of exchange notes than those contained in the agreements governing the
indebtedness being refinanced;
(9) contracts for the sale of assets, including without limitation
customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such
subsidiary;
(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(11) other indebtedness or Disqualified Stock of Restricted Subsidiaries
permitted to be incurred subsequent to the Issue Date pursuant to the
provisions of the covenant described under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock."
MERGER, CONSOLIDATION, OR SALE OF ASSETS
We may not:
(A) consolidate or merge with or into another person (whether or not we are
the surviving corporation); or
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(B) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of our properties or assets, in one or more related
transactions, to another person unless:
(1) either:
(a) we are the surviving corporation; or
(b) the Person formed by or surviving any such consolidation or merger
(if other than us) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation or
merger (if other than us) or the entity or Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made assumes all of our obligations under the exchange notes and the
indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) we or the entity or Person formed by or surviving any such
consolidation or merger (if other than us), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been
made:
(a) will, after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; or
(b) would (together with our Restricted Subsidiaries) have a higher
Fixed Charge Coverage Ratio immediately after such transaction
(after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period)
than our Fixed Charge Coverage Ratio and that of our subsidiaries
immediately prior to the transaction.
The preceding clause (4) will not prohibit:
(a) a merger between us and one of our Wholly Owned Subsidiaries; or
(b) a merger between us and one of our Affiliates incorporated solely for
the purpose of reincorporating us in another state of the United
States;
so long as, in each case, the amount of our indebtedness and that of our
Restricted Subsidiaries is not increased thereby.
In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets, in one or more related transactions, to any
other person. This "Merger, Consolidation, or Sale of Assets" covenant will not
be applicable to a sale, assignment, transfer, conveyance or other disposition
of assets between or among us and any of our Wholly Owned Restricted
Subsidiaries.
TRANSACTIONS WITH AFFILIATES
We will not, and will not permit any of our Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to us
or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or such Restricted
Subsidiary with an unrelated Person; and
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(2) we deliver to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $3.0 million, a resolution of the board of directors set forth in
an officers' certificate certifying that such Affiliate Transaction
complies with clause (1) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the
board of directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $15.0 million, an opinion as to the fairness to the holders of
such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) customary directors' fees, indemnification or similar arrangements or
any employment agreement or other compensation plan or arrangement
entered into by us or any of our Restricted Subsidiaries in the
ordinary course of business and consistent with our past practice or
the past practice of such Restricted Subsidiary;
(2) transactions between or among us and/or our Restricted Subsidiaries;
(3) Permitted Investments and Restricted Payments that are permitted by the
provisions of the indenture described above under the caption
"Restricted Payments";
(4) customary loans, advances, fees and compensation paid to, and indemnity
provided on behalf of, our or any of our Restricted Subsidiaries'
officers, directors, employees or consultants;
(5) transactions pursuant to any contract or agreement in effect on the
date of the indenture as the same may be amended, modified or replaced
from time to time so long as any such amendment, modification or
replacement is no less favorable to us and our Restricted Subsidiaries
than the contract or agreement as in effect on the Issue Date;
(6) transactions pursuant to management contracts with affiliated
physicians entered into in the ordinary course of business consistent
with past practice (or as such practice may be modified to comply with
regulations governing our operations); and
(7) payments in connection with the Transactions (including the payment of
fees and expenses with respect thereto).
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The board of directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by us and our Restricted Subsidiaries (except to
the extent repaid in cash) in the subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation (to the extent not
designated a Permitted Investment) and will reduce the amount available for
Restricted Payments under the first paragraph of the covenant described above
under the caption "Restricted Payments." All such outstanding Investments will
be valued at their fair market value at the time of such designation, as
determined in good faith by the board of directors. That designation will only
be permitted if such Restricted Payment would be permitted at that time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
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ANTI-LAYERING
We will not incur, create, issue, assume, guarantee or otherwise become
liable for any indebtedness that is both:
(1) subordinate or junior in right of payment to any senior debt; and
(2) senior in any respect in right of payment to the exchange notes.
No subsidiary guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any indebtedness that is both:
(1) subordinate or junior in right of payment to any senior debt of such
subsidiary guarantor; and
(2) senior in any respect in right of payment to the subsidiary guarantees.
SALE AND LEASEBACK TRANSACTIONS
We will not, and will not permit any of our Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that we or any of our
Restricted Subsidiaries may enter into a sale and leaseback transaction if:
(1) we or such Restricted Subsidiary could have
(a) incurred indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the
covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" and
(b) incurred a Lien to secure such indebtedness pursuant to the covenant
described above under the caption "Liens";
(2) the gross cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the board of directors and set forth in an officers' certificate
delivered to the trustee, of the property that is the subject of such
sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and we apply the proceeds of such transaction in
compliance with, the covenant described above under the caption "Asset
Sales."
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
We will not permit any Domestic Restricted Subsidiary, directly or
indirectly, to incur indebtedness or guarantee or pledge any assets to secure
the payment of any other of our indebtedness or that of any Restricted
Subsidiary unless either such Restricted Subsidiary
(1) is a subsidiary guarantor or
(2) simultaneously executes and delivers a supplemental indenture to the
indenture and becomes a subsidiary guarantor, which guarantee shall
(a) with respect to any guarantee of senior debt, be subordinated in
right of payment on the same terms as the exchange notes are
subordinated to such senior debt and
(b) with respect to any guarantee of any other indebtedness, be senior
to or pari passu with such Restricted Subsidiary's other
indebtedness or guarantee of or pledge to secure such other
indebtedness.
Notwithstanding the preceding paragraph, any such guarantee by a Restricted
Subsidiary of the exchange notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not our Affiliate, of all of our stock in,
or all
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or substantially all the assets of, such Restricted Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of the
indenture.
ADDITIONAL GUARANTEES
If we acquire or create a Domestic Restricted Subsidiary after the date of
the indenture, or if any of our subsidiaries become a Domestic Restricted
Subsidiary, then such newly acquired or created Domestic Restricted Subsidiary
shall become a subsidiary guarantor and execute a Supplemental Indenture and
deliver an opinion of counsel, in accordance with terms of the indenture.
BUSINESS ACTIVITIES
We will not, and will not permit any Restricted Subsidiary to, engage in
any business other than a Permitted Business, except to such extent as would not
be material to us and our Restricted Subsidiaries taken as a whole.
REPORTS
Whether or not required by the Securities and Exchange Commission, so long
as any exchange notes are outstanding, we will furnish to the holders of
exchange notes, within the time periods specified in the Securities and Exchange
Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Securities and Exchange Commission
on Forms 10-Q and 10-K if we were required to file such forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report on the annual financial statements by our
certified independent accountants; and
(2) all current reports that would be required to be filed with the
Securities and Exchange Commission on Form 8-K if we were required to
file such reports.
In addition, following the consummation of this exchange offer, whether or
not required by the Securities and Exchange Commission, we will file a copy of
all the information and reports referred to in clauses (1) and (2) above with
the Securities and Exchange Commission for public availability within the time
periods specified in the Securities and Exchange Commission's rules and
regulations (unless the Securities and Exchange Commission will not accept such
a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, we have agreed that, for so
long as any exchange notes remain outstanding, we will furnish to the holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act of 1933.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the exchange
notes whether or not prohibited by the subordination provisions of the
indenture;
(2) default in payment when due of the principal of or premium, if any, on
the exchange notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) our failure to comply with the provisions described under the caption
"-- Change of Control;"
(4) our failure for 30 days after notice from the trustee or holders of at
least 25% in principal amount of the exchange notes then outstanding to
comply with the provisions described under the captions "-- Asset
Sales," "-- Restricted Payments" or "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;"
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(5) our failure for 60 days after notice from the trustee or holders of at
least 25% in principal amount of the exchange notes then outstanding
voting as a single class to comply with any of its other agreements in
the indenture or the exchange notes;
(6) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by us or any of our Restricted
Subsidiaries (or the payment of which is guaranteed by us or any of our
Restricted Subsidiaries) whether such indebtedness or guarantee now
exists, or is created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of or premium, if any, on
such indebtedness prior to the expiration of the grace period
provided in such indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such indebtedness,
together with the principal amount of any other such indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more;
(7) failure by us or any of our subsidiaries to pay final judgments
aggregating in excess of $10.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days;
(8) except as permitted by the indenture, any subsidiary guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any subsidiary
guarantor, or any Person acting on behalf of any subsidiary guarantor,
shall deny or disaffirm its obligations under its subsidiary guarantee;
and
(9) certain events of bankruptcy or insolvency with respect to us or any of
our Restricted Subsidiaries that are Significant Subsidiaries.
In the event of a declaration of acceleration of the exchange notes because
an Event of Default has occurred and is continuing as a result of the
acceleration of any indebtedness described in clause (6) of the preceding
paragraph, the declaration of acceleration of the exchange notes shall be
automatically annulled if the holders of any indebtedness described in clause
(6) of the preceding paragraph have rescinded the declaration of acceleration in
respect of such indebtedness within 30 days of the date of such declaration and
if:
(1) the annulment of the acceleration of exchange notes would not conflict
with any judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or
interest on the exchange notes that became due solely because of the
acceleration of the exchange notes, have been cured or waived.
If any Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding exchange
notes may declare all the exchange notes to be due and payable immediately;
provided, that so long as any indebtedness permitted to be incurred pursuant to
the senior bank facilities shall be outstanding, such acceleration shall not be
effective until the earlier of:
(1) an acceleration of any such indebtedness under the senior bank
facilities, or
(2) five business days after receipt by us of written notice of such
acceleration.
Notwithstanding the preceding paragraph, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to us or
any of our Subsidiaries, all outstanding exchange notes will become due and
payable without further action or notice.
Holders of the exchange notes may not enforce the indenture or the exchange
notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the
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then outstanding exchange notes may direct the trustee in its exercise of any
trust or power. The trustee may withhold from holders of the exchange notes
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of us with the intention
of avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the exchange notes pursuant to the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the exchange notes. If an Event of Default occurs prior to March 15, 2004 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of us with the intention of avoiding the prohibition on redemption of the
exchange notes prior to March 15, 2004, then the premium specified in the
indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the exchange notes.
The holders of a majority in aggregate principal amount of the exchange
notes then outstanding by notice to the trustee may on behalf of the holders of
all of the exchange notes waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the exchange notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
None of our directors, officers, employees, incorporators or stockholders,
or those of any subsidiary guarantor, as such, shall have any liability for any
of our obligations or those of the subsidiary guarantors under the exchange
notes, the indenture, the subsidiary guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
exchange notes by accepting a exchange note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the exchange notes. The waiver may not be effective to waive liabilities under
the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding exchange notes and all obligations of
the subsidiary guarantors discharged with respect to their subsidiary guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding exchange notes to receive payments
in respect of the principal of, premium, if any, and interest on such
exchange notes when such payments are due from the trust referred to
below;
(2) our obligations with respect to the exchange notes concerning issuing
temporary exchange notes, registration of exchange notes, mutilated,
destroyed, lost or stolen exchange notes and the maintenance of an
office or agency for payment and money for security payments held in
trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
our obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations and the obligations of the subsidiary guarantors released with
respect to certain covenants that are described in the indenture ("Covenant
Defeasance") and thereafter any omission to comply with those covenants shall
not constitute a Default or Event of Default with respect to the exchange notes.
In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency
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events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the exchange notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the benefit
of the holders of the exchange notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the outstanding exchange notes on
the stated maturity or on the applicable redemption date, as the case
may be, and we must specify whether the exchange notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, we shall have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that
(a) we have received from, or there has been published by, the Internal
Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that,
subject to customary assumptions and exclusions, the holders of the
outstanding exchange notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we shall have delivered to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that, subject to customary
assumptions and exclusions, the holders of the outstanding exchange
notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had
not occurred;
(4) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which we or any
of our subsidiaries are a party or by which we or any of our
subsidiaries are bound;
(6) we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the
holders of exchange notes over our other creditors with the intent of
defeating, hindering, delaying or defrauding our creditors or others;
and
(7) we must deliver to the trustee an officers' certificate and an opinion
of counsel, which opinion may be subject to customary assumptions and
exclusions, each stating that all conditions precedent relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
With the consent of the holders of not less than a majority in principal
amount of the exchange notes at the time outstanding, we and the trustee are
permitted to amend or supplement the indenture or any supplemental indenture or
modify the rights of the holders; provided that without the consent of each
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holder affected, no amendment, supplement, modification or waiver may (with
respect to any exchange notes held by a non-consenting holder):
(1) reduce the principal amount of exchange notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any exchange
note or alter the provisions with respect to the redemption of the
exchange notes (other than provisions relating to the covenants
described above under the caption "Repurchase at the Option of
Holders");
(3) reduce the rate of or change the time for payment of interest on any
exchange note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the exchange notes (except a rescission
of acceleration of the exchange notes by the holders of at least a
majority in aggregate principal amount of the exchange notes and a
waiver of the payment default that resulted from such acceleration);
(5) make any exchange note payable in money other than that stated in the
exchange notes;
(6) make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of holders of exchange notes to receive
payments of principal of or premium, if any, or interest on the
exchange notes;
(7) waive a redemption payment with respect to any exchange note (other
than a payment required by one of the covenants described above under
the caption "Repurchase at the Option of Holders");
(8) make any change in the preceding amendment and waiver provisions; or
(9) release any guarantor from any of its obligations under its guarantee
of the exchange notes or the indenture, except in accordance with the
terms of the indenture.
In addition, any amendment to, or waiver of the provisions of Article 10 of
the indenture relating to subordination that adversely affects the rights of the
holders of the exchange notes will require the consent of the holders of at
least 75% in aggregate principal amount of the exchange notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of
exchange notes, we and the trustee may amend or supplement the indenture or the
exchange notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated exchange notes in addition to or in place
of certificated exchange notes;
(3) to provide for the assumption of our obligations to holders of exchange
notes in the case of a merger or consolidation or the sale of all or
substantially all of our assets;
(4) to make any change that would provide any additional rights or benefits
to the holders of exchange notes or that does not adversely affect the
legal rights under the indenture of any such holder; or
(5) to comply with requirements of the Securities and Exchange Commission
in order to effect or maintain the qualification of the indenture under
the Trust Indenture Act of 1939, to provide for the issuance of
Additional Notes in accordance with the limitations set forth in the
indenture or to allow any subsidiary to guarantee the exchange notes.
CONCERNING THE TRUSTEE
If the trustee becomes our creditor or that of any subsidiary guarantor,
the indenture limits the trustee's right to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee will be permitted to engage in other
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transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Securities and Exchange Commission
for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
exchange notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture provides that in case an Event of
Default shall occur and be continuing, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any holder of exchange notes, unless such holder shall have offered
to the trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture
without charge by writing to Team Health, Inc., P.O. Box 30698, Knoxville,
Tennessee 37919; Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes sold to Qualified Institutional Buyers initially will be
in the form of one or more registered global notes without interest coupons
(collectively, the "Global Notes"). Upon issuance, the Global Notes will be
deposited with the trustee, as custodian for The Depository Trust Company, in
New York, New York, and registered in the name of The Depository Trust Company
or its nominee for credit to the accounts of The Depository Trust Company's
Direct or Indirect Participants (as defined below).
Beneficial interests in all Global Notes, if any, will be subject to
certain restrictions on transfer and will bear a restrictive legend as described
under "Notice to Investors."
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of The Depository Trust Company
and its Direct or Indirect Participants (including, if applicable, those of
Euroclear and CEDEL), which may change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of The Depository Trust Company or to a successor of The
Depository Trust Company or its nominee in certain limited circumstances.
Beneficial interests in the Global Notes may be exchanged for exchange notes in
certificated form in certain limited circumstances. See "-- Transfer of
Interests in Global Notes for Certificated Notes."
The exchange notes may be presented for registration of transfer and
exchange at the offices of the registrar.
DEPOSITORY PROCEDURES
The Depository Trust Company has advised us that The Depository Trust
Company is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Direct Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Direct Participants through electronic book-entry changes in accounts of
Direct Participants. The Direct Participants include securities brokers and
dealers (including the underwriters), banks, trust companies, clearing
corporations and certain other organizations. Access to The Depository Trust
Company's system is also available to other entities that clear through or
maintain a direct or indirect custodial relationship with a Direct Participant
(collectively, the "Indirect Participants"). Persons who are not Direct
Participants may beneficially own securities held by or on behalf of The
Depository Trust Company only through the Direct Participants or Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of The Depository Trust
Company are recorded on the records of the Direct Participants and Indirect
Participants.
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The Depository Trust Company has also advised us that pursuant to
procedures established by it, ownership of interests in the Global Notes will be
shown on, and the transfer ownership thereof will be effected only through,
records maintained by The Depository Trust Company (with respect to Direct
Participants) or by Direct Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through The Depository Trust Company or indirectly through organizations such as
Euroclear and CEDEL. All interests in a Global Note, including those held
through Euroclear or CEDEL, may be subject to the procedures and requirements of
The Depository Trust Company. Those interests held by Euroclear or CEDEL may
also be subject to the procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities they own. This may limit or
curtail the ability to transfer beneficial interest in a Global Note to such
persons. Because The Depository Trust Company can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not Direct Participants in The
Depository Trust Company, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificate evidencing such
interests. For certain other restrictions on the transferability of the exchange
notes, see "-- Book-Entry, Delivery and Form -- Transfer of Interests in Global
Notes for Certificated Notes" and "-- Book-Entry, Delivery and Form -- Exchanges
of Global Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFER OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the indenture, we and the trustee will treat the persons
in whose names the exchange notes are registered (including exchange notes
represented by Global Notes) as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Payments in respect
of the principal and premium, if any, and interest on Global Notes registered in
the name of The Depository Trust Company or its nominee will be payable by the
trustee to The Depository Trust Company or its nominee as the registered holder
under the indenture. Consequently, neither we, nor the trustee nor any agent of
us or the trustee has or will have any responsibility or liability for:
(1) any aspect of The Depository Trust Company's records or any Direct
Participant's or Indirect Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any of The Depository
Trust Company's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in
any Global Note, or
(2) any other matter relating to the actions and practices of The
Depository Trust Company or any of its Direct Participants or Indirect
Participants.
The Depository Trust Company has advised us that its current practice, upon
receipt of any payment in respect of securities such as the exchange notes is to
credit the accounts of the relevant Direct Participants with the payment on the
payment date, in amounts proportionate to such Direct Participant's respective
ownership interests in the Global Notes as shown on The Depository Trust
Company's records. Payments by Direct Participants and Indirect Participants to
the beneficial owners of exchange notes will be governed by standing
instructions and customary practices between them and will not be the
responsibility of The Depository Trust Company, the trustee or us. Neither we
nor the trustee will be liable for any delay by The Depository Trust Company or
its Direct Participants in identifying the beneficial owners of the exchange
notes, and we and the trustee may conclusively rely on and will be protected in
relying on instructions from The Depository Trust Company or its nominee as the
registered owner of the exchange notes for all purposes.
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The Global Notes will trade in The Depository Trust Company's Same-Day
Funds Settlement System and therefore, transfers between Direct Participants in
The Depository Trust Company will be effected in accordance with The Depository
Trust Company's procedures, and will be settled in immediately available funds.
Transfers between Indirect Participants who hold interests in the exchange notes
through Euroclear and CEDEL will be effected in the ordinary way in accordance
with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
exchange notes described herein, cross-market transfers between Direct
Participants in The Depository Trust Company, on the one hand, and Indirect
Participants, who hold interests in the exchange notes through Euroclear and
CEDEL, on the other hand, will be effected by Euroclear's or CEDEL's respective
nominee through The Depository Trust Company in accordance with The Depository
Trust Company's rules on behalf of Euroclear or CEDEL; however, delivery of
instructions relating to cross-market transactions must be made directly to
Euroclear or CEDEL, as the case may be, by the counterparty in accordance with
the rules and procedures of Euroclear or CEDEL and within their established
deadlines (Brussels time for Euroclear and UK time for CEDEL). Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in The Depository Trust Company, and making or
receiving payment in accordance with normal procedures for same-day fund
settlement applicable to The Depository Trust Company. Euroclear Participants
and CEDEL Participants may not deliver instructions directly to the depositaries
for Euroclear or CEDEL.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds interests in the exchange notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in The
Depository Trust Company will be credited, and any such crediting will be
reported to Euroclear or CEDEL during the European business day immediately
following the settlement date of The Depository Trust Company in New York.
Although recorded in The Depository Trust Company's accounting records as of The
Depository Trust Company's settlement date in New York, Euroclear and CEDEL
customers will not have access to the cash amount credited to their accounts as
a result of a sale of an interest in a Global Note to a The Depository Trust
Company Participant until the European business day for Euroclear or CEDEL
immediately following The Depository Trust Company's settlement date.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of exchange notes only at the direction of one
or more Direct Participants to whose account The Depository Trust Company
interests in the Global Notes are credited and only in respect of such portion
of the aggregate principal amount of the exchange notes to which such Direct
Participant or Direct Participants have given direction. However, if there is an
Event of Default under the exchange notes, The Depository Trust Company reserves
the right to exchange Global Notes for legended notes in certificated form, and
to distribute such exchange notes to its Direct Participants.
The information in this section concerning The Depository Trust Company,
Euroclear and CEDEL and their book-entry systems has been obtained from sources
that we believe to be reliable, but we take no responsibility for the accuracy
thereof.
Although The Depository Trust Company, Euroclear and CEDEL have agreed to
the foregoing procedures to facilitate transfers of interests in the Global
Notes among Direct Participants, including Euroclear and CEDEL, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of us, the initial purchasers
or the trustee will have any responsibility for the performance by The
Depository Trust Company, Euroclear or CEDEL or their respective Direct
Participants and Indirect Participants of their respective obligations under the
rules and procedures governing any of their operations.
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TRANSFER OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive exchange notes in registered
certificated form if:
(1) The Depository Trust Company
(x) notifies us that it is unwilling or unable to continue as depositary
for the Global Note and we thereupon fail to appoint a successor
depositary or
(y) has ceased to be a clearing agency registered under the Securities
Exchange Act of 1934,
(2) we, at our option, notify the trustee in writing that we elect to cause
the issuance of Certificated Notes, or
(3) there shall have occurred and be continuing to occur a Default or an
Event of Default with respect to the exchange notes.
In addition, beneficial interests in a Global Note may be exchanged for
certificated exchange notes upon request but only upon at least 20 days' prior
written notice given to the trustee by or on behalf of The Depository Trust
Company in accordance with customary procedures. In all cases, certificated
exchange notes delivered in exchange for any Global Note or beneficial interest
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear, in the case of the Global Notes, the
restrictive legend referred to in "Notice to Investors" unless we determine
otherwise, in compliance with applicable law.
EXCHANGES OF GLOBAL NOTES
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note, and accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in a Global Note
for a beneficial interest in another Global Note will be effected by The
Depository Trust Company by means of an instruction originated by the trustee
through The Depository Trust Company/Deposit Withdraw at Custodian system.
Accordingly, in connection with such transfer, appropriate adjustments will be
made to reflect a decrease in the principal amount of the one Global Note and a
corresponding increase in the principal amount of the other Global Note, as
applicable.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the trustee, exchange such beneficial
interest for exchange notes in the form of Certificated Notes. Upon any such
issuance, the trustee is required to register such Certificated Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). All such certificated exchange notes would be subject
to the legend requirements described herein under "Notice to Investors." In
addition, if:
(1) we notify the trustee in writing that the Depositary is no longer
willing or able to act as a depositary and we are unable to locate a
qualified successor within 90 days, or
(2) we, at our option, notify the trustee in writing that we elect to cause
the issuance of exchange notes in the form of Certificated Notes under
the indenture,
then, upon surrender by the Global Note Holder of its Global Note, exchange
notes in such form will be issued to each person that the Global Note Holder and
the Depositary identify as being the beneficial owner of the related exchange
notes.
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Neither we nor the trustee will be liable for any delay by the Global Note
Holder or the Depositary in identifying the beneficial owners of exchange notes
and we and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or the Depositary for all
purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the exchange notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available next day funds to
the accounts specified by the Global Note Holder. With respect to Certificated
Notes, we will make all payments of principal, premium, if any, and interest, by
wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing a check to each
such holder's registered address. We expect that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
DEFINITIONS
Set forth below are defined terms used in the indenture. Reference is made
to the indenture for a full disclosure of all such terms, as well as any other
terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) indebtedness of any other Person existing at the time such other Person
is merged with or into or became a subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
subsidiary of such specified Person, and
(2) indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition (a "Disposition") of
any assets or rights (including, without limitation, by way of a sale
and leaseback) (provided that the sale, lease, conveyance or other
disposition of all or substantially all of our assets and those of our
Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the caption "Change
of Control" and/or the provisions described above under the caption
"Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant); and
(2) the issue or sale by us or any of our Restricted Subsidiaries of Equity
Interests of any of our Restricted Subsidiaries, in the case of either
clause (1) or (2), whether in a single transaction or a series of
related transactions:
(a) that have a fair market value in excess of $1.0 million, or
(b) for net proceeds in excess of $1.0 million.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) a disposition of assets by us to a Restricted Subsidiary or by a
Restricted Subsidiary to us or to another Restricted Subsidiary;
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(2) an issuance of Equity Interests by a Restricted Subsidiary to us or to
another Restricted Subsidiary;
(3) a Restricted Payment that is permitted by the covenant described above
under the caption "Restricted Payments";
(4) a disposition in the ordinary course of business;
(5) the sale and leaseback of any assets within 90 days of the acquisition
thereof;
(6) foreclosures on assets;
(7) any exchange of property pursuant to Section 1031 on the Internal
Revenue Code of 1986, as amended, for use in a Permitted Business; and
(8) the licensing of intellectual property.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) Government Securities having maturities of not more than six months
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits,
in each case with any lender party to the senior bank facilities or
with any domestic commercial bank having capital and surplus in excess
of $500 million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having the rating of "P-2" (or higher) from Moody's
Investors Service, Inc. or "A-3" (or higher) from Standard & Poor's
Corporation and in each case maturing within six months after the date
of acquisition; and
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(6) any fund investing exclusively in investments of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of our assets and those of
our subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934) other than
the Principals or a Related Party of any of the Principals;
(2) the adoption of a plan relating to our liquidation or dissolution;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 50% of our Voting Stock (measured by voting
power rather than number of shares); or
(4) the first day on which a majority of the members of our board of
directors are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, plus:
(1) an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, to the extent such losses were deducted
in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
subsidiaries for such period, to the extent that such provision for
taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash charges (excluding
any such non-cash charge to the extent that it represents an accrual of
or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such person
and its subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; plus
(5) our expenses and charges related to the Transactions which are paid,
taken or otherwise accounted for within 90 days of the consummation of
the Transactions, plus
(6) any non-capitalized transaction costs incurred in connection with
actual or proposed financings, acquisitions or divestitures (including,
but not limited to, financing and refinancing fees and costs incurred
in connection with the Transactions), plus
(7) any extraordinary and non-recurring charges for such period to the
extent that such charges were deducted in computing such Consolidated
Net Income, plus
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(8) amounts paid pursuant to the Management Services Agreement to the
extent such amounts were deducted in computing such Consolidated Net
Income.
Notwithstanding the preceding, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that Net Income of such Subsidiary was included in calculating Consolidated Net
Income of such person.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication:
(1) the interest expense of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with
GAAP (including amortization of original issue discount, non-cash
interest payments, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations;
provided that in no event shall any amortization of deferred financing
costs be included in Consolidated Interest Expense); plus
(2) the consolidated capitalized interest of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued.
Notwithstanding the preceding, the Consolidated Interest Expense with
respect to any Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary shall be included only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to us or one of our Restricted Subsidiaries
for purposes of the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock" and shall be included for
purposes of the covenant described under the caption "Restricted
Payments" only to the extent of the amount of dividends or
distributions paid in cash to us or one of our Restricted Subsidiaries.
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"Continuing Directors" means, as of any date of determination, any member
of our board of directors who:
(1) was a member of such board of directors on the date of the indenture;
(2) was nominated for election or elected to such board of directors with
the approval of a majority of the Continuing Directors who were members
of such board at the time of such nomination or election; or
(3) was nominated by the Principals pursuant to the Stockholders Agreement.
"Credit Agent" means Fleet National Bank, in its capacity as Administrative
Agent for the lenders party to the senior bank facilities, or any successor
thereto or any person otherwise appointed.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the senior bank facilities; and
(2) any other senior debt permitted under the indenture the principal
amount of which is $25.0 million or more and that has been designated
by us as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the exchange notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would not qualify
as Disqualified Stock but for change of control or asset sale provisions shall
not constitute Disqualified Stock if the provisions are not more favorable to
the holders of such Capital Stock than the provisions described under "-- Change
of Control" and "-- Asset Sales."
"Domestic Restricted Subsidiary" means, with respect to us, any of our
Wholly Owned Subsidiaries that was formed under the laws of the United States of
America.
"Earn-out Obligation" means any contingent consideration based on future
operating performance of the acquired entity or assets payable following the
consummation of an acquisition based on criteria set forth in the documentation
governing or relating to such acquisition.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of our Equity Interests (other than
Disqualified Stock) that results in net proceeds to us of at least $25,000,000.
"Existing Indebtedness" means our Indebtedness and that of our subsidiaries
(other than indebtedness under the senior bank facilities) in existence on the
date of the indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the Consolidated Interest Expense of such Person for such period; plus
(2) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such guarantee or Lien is called upon;
plus
(3) the product of
(a) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests
payable solely in our Equity Interests, times
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(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any person for any
period, the ratio of the Consolidated Cash Flow of such person for such period
to the Fixed Charges of such Person for such period. In the event that we or any
of our Restricted Subsidiaries incur, assume, guarantee or redeem any
indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee or redemption of indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by us or any of our Restricted
Subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be calculated to include the Consolidated Cash
Flow of the acquired entities on a pro forma basis (to be calculated in
accordance with Article 11-02 of Regulation S-X, as in effect on the
Issue Date) after giving effect to cost savings resulting from employee
terminations, facilities consolidations and closings, standardization
of employee benefits and compensation policies, consolidation of
property, casualty and other insurance coverage and policies,
standardization of sales and distribution methods, reductions in taxes
other than income taxes and other cost savings reasonably expected to
be realized from such acquisition, shall be deemed to have occurred on
the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving
effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified person or any of its
Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means any subsidiary of us that is not organized under
the laws of a state or territory of the United States or the District of
Columbia.
"GAAP" means 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 as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of the indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, issued in accordance with
certain sections of the indenture.
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"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
indebtedness.
"Hedging Obligations" means, with respect to any person, the obligations of
such person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency exchange rates.
"indebtedness" means, with respect to any specified person, any
indebtedness of such person, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) bankers' acceptances;
(4) representing Capital Lease Obligations; or
(5) the balance deferred and unpaid of the purchase price of any property
or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable,
if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person; provided that
Indebtedness shall not include
(1) our pledge of the Capital Stock of one of our Unrestricted Subsidiaries
to secure Non-Recourse Debt of such Unrestricted Subsidiary or
(2) any Earn-out Obligation.
The amount of any indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any indebtedness that does
not require current payments of interest; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other indebtedness.
"Insolvency or Liquidation Proceedings" means:
(1) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding,
relative to us or to our creditors, as such, or to our assets;
(2) any liquidation, dissolution, reorganization or winding up of us,
whether voluntary or involuntary, and involving insolvency or
bankruptcy; or
(3) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of us.
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"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If we or any of our Restricted Subsidiaries sell or otherwise dispose of any
Equity Interests of any of our direct or indirect Restricted Subsidiaries such
that, after giving effect to any such sale or disposition, such Person is no
longer our Restricted Subsidiary, we shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "Restricted Payments."
"Issue Date" means the date on which the initial $100.0 million in
aggregate principal amount of the notes was originally issued under the
indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Management Services Agreement" means the Management Services Agreement
dated on the date of the indenture, between us and each of the Principals.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with:
(a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary or nonrecurring gain (but not loss), together with
any related provision for taxes on such extraordinary or nonrecurring
gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by us or any of
our Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), the amounts required to be applied to the payment of indebtedness
(other than indebtedness incurred pursuant to the senior bank facilities)
secured by a Lien on the asset or assets that were the subject of the Asset
Sale, and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means indebtedness:
(1) as to which neither we nor any of our Restricted Subsidiaries:
(a) provide credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness),
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(b) are directly or indirectly liable as a guarantor or otherwise, or
(c) constitute the lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder
of any of our other indebtedness (other than the exchange notes) of or
that of any of our Restricted Subsidiaries to declare a default on such
other indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock (other than stock of an Unrestricted
Subsidiary pledged by us to secure debt of such Unrestricted
Subsidiary) or assets of us or those of any of our Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any indebtedness.
"Permitted Business" means any business in which we and our Restricted
Subsidiaries are engaged on the date of the indenture or any business reasonably
related, incidental or ancillary thereto.
"Permitted Investments" means:
(1) any Investment in us or in one of our Restricted Subsidiaries;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any of our Restricted Subsidiaries in a person,
if as a result of such Investment:
(a) such Person becomes our Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, us or one of our Restricted Subsidiaries;
(4) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of our
Equity Interests (other than Disqualified Stock); and
(6) other Investments made after the date of the indenture in any Person
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to
this clause (6) since the date of the indenture, not to exceed $12.5
million.
"Permitted Liens" means:
(1) Liens securing senior debt (including, without limitation,
indebtedness under the senior bank facilities) permitted by the terms
of the indenture to be incurred or other indebtedness allowed to be
incurred under clause (1) of the second paragraph of the covenant
described above under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock";
(2) Liens in favor of us or any Restricted Subsidiary;
(3) Liens on property of a person existing at the time such person is
merged into or consolidated with us or any of our Restricted
Subsidiaries, provided that such Liens were not incurred in
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
us or any of our Restricted Subsidiaries;
(4) Liens on property existing at the time of acquisition thereof by us or
any of our Restricted Subsidiaries, provided such Liens were not
incurred in contemplation of such acquisition;
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(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens existing on the date of the indenture;
(7) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(8) Liens to secure indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock;"
(9) Liens securing Permitted Refinancing Indebtedness where the Liens
securing the indebtedness being refinanced were permitted under the
indenture;
(10) Liens incurred in the ordinary course of business of us or any of our
Restricted Subsidiaries with respect to obligations that do not exceed
$7.5 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the
ordinary course of business) and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by us or such Restricted Subsidiary;
(11) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse
Debt of Unrestricted Subsidiaries;
(12) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred or imposed, as
applicable, in the ordinary course of business and consistent with
industry practices;
(13) any interest or title of a lessor under any Capital Lease Obligation;
(14) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating
to such letters of credit and products and proceeds thereof;
(15) Liens encumbering deposits made to secure obligations arising from our
statutory, regulatory, contractual or warranty requirements or those
of any of our Restricted Subsidiaries, including rights of offset and
set-off;
(16) Liens securing Hedging Obligations which Hedging Obligations relate to
indebtedness that is otherwise permitted under the indenture;
(17) leases or subleases granted to others that do not materially interfere
with our ordinary course of business and that of any of our Restricted
Subsidiaries;
(18) Liens arising from filing Uniform Commercial Code financing statements
regarding leases.
"Permitted Refinancing Indebtedness" means any of our indebtedness or that
of any of our Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund our other indebtedness or that of any of our Restricted Subsidiaries;
provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith) except, in
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the case of the senior bank facilities, the principal amount of such
Permitted Refinancing Indebtedness does not exceed the greater of
(a) the principal amount of indebtedness permitted (whether or not
borrowed) under clause (1) of the covenant described above under
the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock" or
(b) the amount actually borrowed under the senior bank facilities.
(2) such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(3) if the indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the holders of
notes as those contained in the documentation governing the
indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principals" means Cornerstone Equity Investors, LLC, Madison Dearborn
Partners, Inc. and Beecken Petty & Company LLC and their respective affiliates.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder or partner, 80% (or more) owned subsidiary,
or spouse or immediate family member (in the case of an individual) of
such Principal; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a 51% or
more controlling interest of which consist of such Principal and/or
such other Persons referred to in the immediately preceding clause (1).
"Reorganization Securities" means securities distributed to holders of the
notes in an Insolvency or Liquidation Proceeding pursuant to a plan of
reorganization consented to by each class of the senior debt, but only if all of
the terms and conditions of such securities including, without limitation, term,
tenor, interest, amortization, subordination, standstills, covenants and
defaults are at least as favorable (and provide the same relative benefits) to
the holders of senior debt and to the holders of any security distributed in
such Insolvency or Liquidation Proceeding on account of any such senior debt as
the terms and conditions of the notes and the indenture are, and provide to the
holders of senior debt.
"Representative" means the trustee, agent or representative for any senior
debt.
"Restricted Investment" means an investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act of 1933.
"Senior Bank Facilities" means the senior bank facilities dated on the date
of the indenture between us and Fleet National Bank and NationsBanc Montgomery
Securities LLC, as co-arrangers, NationsBanc Montgomery Securities LLC, as
syndication agent and Fleet National Bank, as administrative agent, providing
for revolving credit borrowings and term loans, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time including increases in principal
amount.
"Senior Debt" means:
(1) all indebtedness outstanding under the senior bank facilities,
including any guarantees thereof and all Hedging Obligations with
respect thereto;
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(2) any other indebtedness permitted to be incurred by us under the terms
of the indenture, unless the instrument under which such indebtedness
in incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes; and
(3) all Obligations with respect to the preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing by
us;
(2) any of our indebtedness to any of our subsidiaries or other Affiliates;
(3) any trade payables;
(4) any Earn-out Obligations; or
(5) any indebtedness that is incurred in violation of the indenture.
"Significant Subsidiary" means any subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act of 1933, as such Regulation is in effect on the
date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other subsidiaries of that person (or a combination
thereof); and
(2) any partnership or limited liability company
(a) the sole general partner or the managing general partner or managing
member of which is such person or a subsidiary of such person or
(b) the only general partners of which are such person or of one or more
subsidiaries of such person (or any combination thereof).
"subsidiary guarantors" means each subsidiary of us that executes a
subsidiary guarantee in accordance with the provisions of the indenture, and
their respective successors and assigns.
"Unrestricted Subsidiary" means any subsidiary that is designated by the
board of directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with us or any of our Restricted Subsidiaries unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to us or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not our Affiliates;
(3) is a person with respect to which neither we nor any of our Restricted
Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or
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(b) to maintain or preserve such person's financial condition or to
cause such person to achieve any specified levels of operating
results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any indebtedness of us or any of our Restricted
Subsidiaries.
Any designation of our subsidiaries as an Unrestricted Subsidiary shall be
evidenced to the trustee by filing with the trustee a certified copy of the
Board Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the preceding conditions and was
permitted by the covenant described above under the caption
"Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the preceding requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
indenture and any indebtedness of such subsidiary shall be deemed to be incurred
by our Restricted Subsidiary as of such date and, if such indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock," we shall
be in default of such covenant. Our board of directors may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by one of our
Restricted Subsidiaries of any outstanding indebtedness of such Unrestricted
Subsidiary and such designation shall be permitted only if:
(1) such indebtedness is permitted under the covenant described under the
caption "Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," and
(2) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the board of
directors of such person.
"Weighted Average Life to Maturity" means, when applied to any indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying:
(a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including payment
at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(2) the then outstanding principal amount of such indebtedness.
"Wholly Owned Subsidiary" of any Person means a subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person and/or by one or more Wholly Owned Subsidiaries of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We originally sold the old notes on March 5, 1999 to Donaldson, Lufkin &
Jenrette. Donaldson, Lufkin & Jenrette subsequently resold the old notes to
qualified institutional buyers in reliance on Rule 144A under the Securities Act
of 1933 and to a limited number of institutional accredited investors that
agreed to comply with transfer restrictions and other conditions. As a condition
to the purchase agreement, we entered into a registration rights agreement with
Donaldson, Lufkin & Jenrette pursuant to which we have agreed to:
(1) file a registration statement within 90 days after the date on which
the old notes were issued with respect to registered offers to exchange
the old notes for the exchange notes; and
(2) use our best efforts to cause the exchange offer registration statement
to be declared effective under the Securities Act of 1933 within 180
days after the date on which the old notes were originally issued.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. We will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding old notes accepted in
the exchange offer. Holders may tender some or all of their old notes pursuant
to the exchange offer. However, old notes may be tendered only in integral
multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the old notes except that:
(1) the exchange notes have been registered under the Securities Act of
1933 and hence will not bear legends restricting their transfer
thereof; and
(2) the holders of the exchange notes will not be entitled to rights under
the registration rights agreement. These rights include the provisions
for an increase in the interest rate on the old notes in some
circumstances relating to the timing of the exchange offer. All of
these rights will terminate when the exchange offer is terminated. The
exchange notes will evidence the same debt as the old notes. Holders of
exchange notes will be entitled to the benefits of the indenture.
As of the date of this prospectus, $100.0 million aggregate principal
amount of old notes was outstanding. We have fixed the close of business on
, 1999 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
We intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
We shall be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purpose of receiving
the exchange notes from the issuers.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of other events set forth in this prospectus or
otherwise, we will return the certificates for any unaccepted old notes, at our
expense, to the tendering holder as promptly as practicable after the expiration
date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the
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exchange of notes. We will pay all charges and expenses, other than transfer
taxes in some circumstances, in connection with the exchange offer as described
under the subheading "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless we extend the exchange offer. In that case, the term
"expiration date" shall mean the latest date and time to which the exchange
offer is extended. Notwithstanding the foregoing, we will not extend the
expiration date beyond , 1999.
In order to extend the exchange offer, prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration date,
we will:
(1) notify the exchange agent of any extension by oral or written notice
and
(2) mail to the registered holders an announcement of any extension.
We reserve the right, in our sole discretion,
(1) if any of the conditions set forth below under the heading "Conditions"
shall not have been satisfied,
(A) to delay accepting any old notes,
(B) to extend the exchange offer or
(C) to terminate the exchange offer, or
(2) to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice of delay to the registered
holders. We will give oral or written notice of any delay, extension or
termination to the exchange agent.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance. Holders
of old notes that are accepted for exchange will receive, in cash, accrued
interest on the exchange notes to, but not including, the date of issuance of
the exchange notes. We will make the first interest payment on the exchange
notes on September 15, 1999. Interest on the old notes accepted for exchange
will cease to accrue upon issuance of the exchange notes.
Interest on the exchange notes is payable semi-annually on each March 15
and September 15, commencing on September 15, 1999.
PROCEDURES FOR TENDERING OLD NOTES
Only a holder of old notes may tender old notes in the exchange offer. To
tender in the exchange offer, a holder must
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal,
- have the signatures guaranteed if required by the letter of transmittal,
and
- mail or otherwise deliver the letter of transmittal or such facsimile,
together with the old notes and any other required documents, to the
exchange agent prior to 5:00 p.m., New York City time, on the expiration
date.
To tender old notes effectively, the holder must complete the letter of
transmittal and other required documents and the exchange agent must receive all
the documents prior to 5:00 p.m., New York City time, on the expiration date.
Delivery of the old notes may be made by book-entry transfer in accordance with
the procedures described below. The exchange agent must receive confirmation of
book-entry transfer prior to the expiration date.
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The tender by a holder and the acceptance of the tender by us will
constitute agreement between the holder and us under the terms and subject to
the conditions set forth in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO US. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should promptly instruct the registered holder to tender on the
beneficial owner's behalf. See "Instruction to Registered Holder and/or Book-
Entry Transfer Facility Participant from Owner" included with the letter of
transmittal.
An institution that is a member firm of the Medallion system must guarantee
signatures on a letter of transmittal or a notice of withdrawal unless the old
notes are tendered:
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
(2) for the account of member firm of the Medallion system.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed in that letter of transmittal, the old
notes must be endorsed or accompanied by a properly completed bond power, signed
by the registered holder as the registered holder's name appears on the old
notes. An institution that is a member firm of the Medallion System must
guarantee the signature.
Trustees, executors, administrators, guardians, attorneys-in-fact, offices
of corporations or others acting in a fiduciary or representative capacity
should indicate their capacities when signing the letter of transmittal or any
old notes or bond powers. Evidence satisfactory to us of their authority to so
act must be submitted with the letter of transmittal.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the exchange
notes at the book-entry transfer facility, The Depository Trust Company, for the
purpose of facilitating the exchange offer. Subject to the establishment of the
accounts, any financial institution that is a participant in The Depository
Trust Company's system may make book-entry delivery of old notes. To do so, the
financial institution should cause the book-entry transfer facility to transfer
the old notes into the exchange agent's account with respect to the old notes
following the book-entry transfer facility's procedures for transfer. Delivery
of the old notes may be effected through book-entry transfer into the exchange
agent's account at the book-entry transfer facility. However, the holder must
transmit and the exchange agent must receive or confirm an appropriate letter of
transmittal properly completed and duly executed with any required signature
guarantee and all other required documents on or prior to the expiration date,
or, if the guaranteed delivery procedures described below are complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
The Depositary and The Depository Trust Company have confirmed that the
exchange offer is eligible for The Depository Trust Company Automated Tender
Offer Program. Accordingly, The Depository Trust Company participants may
electronically transmit their acceptance of the exchange offer by causing The
Depository Trust Company to transfer old notes to the depositary in accordance
with The Depository Trust Company's Automated Tender Offer Program procedures
for transfer. The Depository Trust Company will then send an "agent's message"
to the Depositary.
The term "agent's message" means a message transmitted by The Depository
Trust Company, received by the Depositary and forming part of the confirmation
of a book-entry transfer, which states that
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(1) The Depository Trust Company has received an express acknowledgment
from the participant in The Depository Trust Company tendering old
notes subject of the book-entry confirmation,
(2) the participant has received and agrees to be bound by the terms of the
letter of transmittal and
(3) we may enforce such agreement against such participant.
In the case of an agent's message relating to guaranteed delivery, the term
means a message transmitted by The Depository Trust Company and received by the
Depositary, which states that The Depository Trust Company has received an
express acknowledgment from the participant in The Depository Trust Company
tendering old notes that such participant has received and agrees to be bound by
the notice of guaranteed delivery.
Notwithstanding the foregoing, in order to validly tender in the exchange
offer with respect to securities transferred through the Automated Tender Offer
Program, a The Depository Trust Company participant using Automated Tender Offer
Program must also properly complete and duly execute the applicable letter of
transmittal and deliver it to the Depositary.
By the authority granted by The Depository Trust Company, any The
Depository Trust Company participant which has old notes credited to its The
Depository Trust Company account at any time (and held of record by The
Depository Trust Company's nominee) may directly provide a tender as though it
were the registered holder by completing, executing and delivering the
applicable letter of transmittal to the Depositary. DELIVERY OF DOCUMENTS TO THE
DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
All questions as to the
- validity,
- form,
- eligibility (including time of receipt),
- acceptance of tendered old notes and
- withdrawal of tendered old notes
will be determined by us in our sole discretion. Our determination will be final
and binding. We reserve the absolute right to reject any and all old notes not
properly tendered. We reserve the absolute right to reject any old notes which
would be unlawful if accepted, in the opinion of our counsel. We also reserve
the right in our sole discretion to waive any defects, irregularities or
conditions of tender as to particular old notes. Our interpretation of the terms
and conditions of the exchange offer, including the instructions in the letter
of transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within such time as we shall determine. We intend to notify holders of defects
or irregularities with respect to tenders of old notes. However, neither we, the
exchange agent nor any other person shall incur any liability for failure to
give such notification. Tenders of old notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any old
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their old notes and:
(1) whose old notes are not immediately available;
(2) who cannot deliver their old notes, the letter of transmittal or any
other required documents to the exchange agent; or
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(3) who cannot complete the procedures for book-entry transfer, prior to
the expiration date
may effect a tender if:
(1) they tender through an institution that is a member firm of the
Medallion system;
(2) prior to the expiration date, the exchange agent receives from an
institution that is a member firm of the Medallion system a properly
completed and duly executed notice of guaranteed delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address
of the holder, the certificate number(s) of such old notes and the
principal amount of old notes tendered, stating that the tender is
being made and guaranteeing that, within five New York Stock Exchange
trading days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the certificate(s) representing the
old notes (or a confirmation of book-entry transfer of such old notes
into the exchange agent's account at the book-entry transfer facility),
and any other documents required by the letter of transmittal will be
deposited by the firm with the exchange agent; and
(3) the exchange agent receives
(A) such properly completed and executed letter of transmittal (of
facsimile thereof),
(B) the certificate(s) representing all tendered old notes in proper
form for transfer (or a confirmation of book-entry transfer of such
old notes into the exchange agent's account at the book-entry
transfer facility), and
(C) all other documents required by the letter of transmittal
upon five New York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, we will send a notice of guaranteed
delivery to holders who wish to tender their old notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders may withdraw
tenders of old notes at any time prior to 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of old notes in the exchange offer, the
exchange agent must receive a telegram, telex, letter or facsimile transmission
notice of withdrawal at its address set forth in this prospectus prior to 5:00
p.m., New York City time, on the expiration date. Any such notice of withdrawal
must:
(1) specify the name of the person having deposited the old notes to be
withdrawn;
(2) identify the old notes to be withdrawn (including the certificate
number(s) and principal amount of such old notes, or, in the case of
old notes transferred by book-entry transfer, the name and number of
the account at the book-entry transfer facility to be credited);
(3) be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee with respect to
the old notes register the transfer of old notes into the name of the
person withdrawing the tender; and
(4) specify the name in which any old notes are to be registered, if
different from that of the person who deposited the old notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices. Our determination shall be final and
binding on all parties. We will not deem old notes so withdrawn to have been
validly tendered for purposes of the exchange offer. We will not issue exchange
notes for withdrawn old notes unless you validly retender the withdrawn old
notes. We will return any old notes which have been tendered but which are not
accepted for exchange to the holder of the old notes at our cost as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer.
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You may retender properly withdrawn old notes by following one of the procedures
described above under the heading "Procedures for Tendering Old Notes" at any
time prior to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange exchange notes for, any old notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the old notes, if:
(1) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or any development has occurred in any
existing action or proceeding which may be harmful to us or any of our
subsidiaries; or
(2) any law, statute, rule, regulation or interpretation by the staff of
the Securities and Exchange Commission is proposed, adopted or enacted,
which, in our sole judgment, might impair our ability to proceed with
the exchange offer or impair the contemplated benefits of the exchange
offer to us; or
(3) any governmental approval has not been obtained, which we believe, in
our sole discretion, is necessary for the consummation of the exchange
offer as outlined in this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may:
(1) refuse to accept any old notes and return all tendered old notes to the
tendering holders;
(2) extend the exchange offer and retain all old notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights
of holders to withdraw their old notes; or
(3) waive such unsatisfied conditions of the exchange offer and accept all
properly tendered old notes which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the exchange
agent for the exchange offer. You should direct all
- executed letters of transmittal,
- questions,
- requests for assistance,
- requests for additional copies of this prospectus or of the letter of
transmittal and
- requests for Notices of Guaranteed Delivery
to the exchange agent addressed as follows:
By Overnight Courier and By Hand: By Registered or
by Hand after 4:30 pm United States Trust Certified Mail:
on the Expiration Date: Company of New York United States Trust
United States Trust 111 Broadway, Lower Level Company of New York
Company of New York New York, New York 10006 P.O. Box 844
770 Broadway, 13th Floor Attn: Corporate Trust Services Cooper Station
New York, New York 10003 Via Facsimile: New York, New York 10276-0844
Attn: Corporate (212) 780-0592 Attn: Corporate
Trust Services Attn: Corporate Trust Services Trust Services
Confirm by Telephone:
(800) 548-6565
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
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FEES AND EXPENSES
We will bear the expenses of soliciting tenders. We are mailing the
principal solicitation. However, our officers and regular employees and those of
our affiliates may make additional solicitation by telegraph, telecopy,
telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer. We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services. We will reimburse the exchange
agent for its reasonable out-of-pocket expenses.
We will pay the cash expenses incurred in connection with the exchange
offer. These expenses include fees and expenses of the exchange agent and
trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the old
notes. The carrying value is face value, as reflected in our accounting records
on the date of exchange. Accordingly, we will recognize no gain or loss for
accounting purposes. The expenses of the exchange offer will be expensed over
the term of the exchange notes.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. However, holders who
instruct us to register exchange notes in the name of, or request that old notes
not tendered or not accepted in the exchange offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax on that transfer.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
The old notes that are not exchanged for exchange notes under the exchange
offer will remain restricted securities. Accordingly, those old notes may be
resold only:
(1) to us (upon redemption of the old notes or otherwise);
(2) so long as the old notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States who is a qualified institutional
buyer according to Rule 144A under the Securities Act of 1933 or
pursuant to another exemption from the registration requirements of the
Securities Act of 1933, based upon an opinion of counsel reasonably
acceptable to us;
(3) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act of 1933; or
(4) under an effective registration statement under the Securities Act of
1933
in each case in accordance with any applicable securities laws of any state of
the United States.
SHELF REGISTRATION STATEMENT
If either of the following occur:
(1) the exchange offer is not permitted by applicable law or policy of the
Securities and Exchange Commission; or
(2) a holder of old notes notifies us that:
(A) the holder was prohibited by law or Securities Exchange Commission
policy from participating in the exchange offer,
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(B) the holder cannot resell the exchange notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained herein is not appropriate or available for such
resales by the holder, or
(C) the holder is a broker-dealer and holds old notes acquired directly
from us or any of our affiliates
then, we will take the following actions:
(1) we will file a shelf registration statement under Rule 415 of the
Securities Act of 1933, relating to the notes, and
(2) use our best efforts to cause such shelf registration statement to
become effective on or prior to the date that is 360 days after March
12, 1999.
RESALES OF THE EXCHANGE NOTES
Based on interpretations by the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties, we believe
that a holder or other person who receives exchange notes will be allowed to
resell the exchange notes to the public without further registration under the
Securities Act of 1933 and without delivering a prospectus that satisfies the
requirements of Section 10 of the Securities Act of 1933. The holder (other than
a person that is our "affiliate" within the meaning of Rule 405 under the
Securities Act of 1933) who receives exchange notes in exchange for old notes in
the ordinary course of business and who is not participating, need not intend to
participate or have an arrangement or understanding with any person to
participate in the distribution of the exchange notes. However, if any holder
acquires exchange notes in the exchange offer for the purpose of distributing or
participating in a distribution of the exchange notes, the holder cannot rely on
the position of the staff of the Securities and Exchange Commission enunciated
in the no-action letters or any similar interpretive letters. A holder who
acquires exchange notes in order to distribute them must comply with the
registration and prospectus delivery requirements of the Securities Act of 1933
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each broker-dealer that receives exchange notes
for its own account in exchange for notes as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, including the opinion of counsel described below,
is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. The Internal Revenue Service may take a contrary view, and
no ruling from the Internal Revenue Service has been or will be sought.
Legislative judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the following statements and conditions.
Any changes or interpretations may or may not be retroactive and could affect
the tax consequences to holders. Some holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. We recommend that each
holder consult his own tax advisor as to the particular tax consequences of
exchanging such holder's old notes for exchange notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, counsel to Team Health, has advised us that in its
opinion, the exchange of the old notes for exchange notes pursuant to the
exchange offer will not be treated as an "exchange" for federal income tax
purposes because the exchange notes will not be considered to differ materially
in kind or extent from the old notes. Rather, the exchange notes received by a
holder will be treated as a continuation of the old notes in the hands of such
holder. As a result, there will be no federal income tax consequences to holders
exchanging old notes for exchange notes pursuant to the exchange offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act of 1933 in connection
with any resale of exchange notes.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for old notes if the old notes were acquired as a result of
market-making activities or other trading activities. We and our subsidiary
guarantors have agreed to make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1999, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus.
Neither we nor our subsidiary guarantors will receive any proceeds from any
sales of the exchange notes by broker-dealers. Exchange notes received by
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions
- in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the exchange notes or a combination of
such methods of resale,
- at market prices prevailing at the time of resale,
- at prices related to such prevailing market prices or
- at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers. Brokers or dealers may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such exchange notes. Any broker-dealer that resells the exchange notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such exchange notes may
be deemed to be an "underwriter" within the meaning of the Securities Act of
1933 and any profit on any such resale of exchange notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act of 1933. The letter of transmittal states
that by acknowledging that it will deliver
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and by delivering a prospectus meeting the requirements of the Securities Act of
1933, a broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act of 1933.
Based on interpretations by the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties, we believe
that a holder or other person who receives exchange notes will be allowed to
resell the exchange notes to the public without further registration under the
Securities Act of 1933 and without delivering to the purchasers of the exchange
notes a prospectus that satisfies the requirements of Section 10 of the
Securities Act of 1933. The holder (other than a person that is an "affiliate"
of Team Health within the meaning of Rule 405 under the Securities Act of 1933)
who receives exchange notes in exchange for old notes in the ordinary course of
business and who is not participating, need not intend to participate or have an
arrangement or understanding with person to participate in the distribution of
the exchange notes.
However, if any holder acquires exchange notes in the exchange offer for
the purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in such no-action letters or any similar
interpretive letters. The holder must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933 in connection
with any resale transaction. A secondary resale transaction should be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K under
the Securities Act of 1933, unless an exemption from registration is otherwise
available.
Further, each broker-dealer that receives exchange notes for its own
account in exchange for old notes, where the old notes were acquired by such
participating broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of any exchange notes. We and each of our subsidiary
guarantors have agreed, for a period of not less than one year from the
consummation of the exchange offer, to make this prospectus available to any
broker-dealer for use in connection with any such resale.
For a period of not less than one year after the expiration date we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We and each of our guarantor subsidiaries have
jointly and severally agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the old notes, other
than commissions or concessions of any brokers or dealers. We will indemnify the
holders of the old notes against liabilities under the Securities Act of 1933,
including any broker-dealers.
LEGAL MATTERS
Kirkland & Ellis, New York, New York will issue an opinion for us and the
guarantor subsidiaries with respect to the issuance of the exchange notes
offered hereby, including
(1) our existence and good standing under our state of incorporation,
(2) our authorization of the sale and issuance of the exchange notes and
(3) the enforceability of the exchange notes.
EXPERTS
The consolidated and combined financial statements of Team Health, Inc. at
December 31, 1997 and 1998, and for each of the three years in the period ended
December 31, 1998, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
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AVAILABLE INFORMATION
We and our subsidiary guarantors have filed with the Securities and
Exchange Commission a Registration Statement on Form S-4, the "Exchange Offer
Registration Statement," which term shall encompass all amendments, exhibits,
annexes and schedules thereto, pursuant to the Securities Act of 1933, and the
rules and regulations promulgated thereunder, covering the exchange notes being
offered. This prospectus does not contain all the information set forth in the
exchange offer registration statement. For further information with respect to
Team Health, the subsidiary guarantors and the exchange offer, reference is made
to the exchange offer registration statement. Statements made in this prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the exchange offer registration statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The exchange offer registration statement, including the exhibits thereto,
can be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Securities and
Exchange Commission at Seven World Trade Center, Suite 1300, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Securities and Exchange
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the filing of the exchange offer registration statement, we
will become subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance therewith will be required to file periodic
reports and other information with the Securities and Exchange Commission. Our
obligation to file periodic reports and other information with the Securities
and Exchange Commission will be suspended if the exchange notes are held of
record by fewer than 300 holders as of the beginning of our fiscal year other
than the fiscal year in which the exchange offer registration statement is
declared effective.
We will nevertheless be required to continue to file reports with the
Securities and Exchange Commission if the exchange notes are listed on a
national securities exchange. In the event we cease to be subject to the
informational requirements of the Securities Exchange Act of 1934, we will be
required under the indenture to continue to file with the Securities and
Exchange Commission the annual and quarterly reports, information, documents or
other reports, including, without limitation, reports on Forms 10-K, 10-Q and
8-K, which would be required pursuant to the informational requirements of the
Securities Exchange Act of 1934.
Under the indenture, we will furnish the holders of exchange notes with
annual, quarterly and other reports after we files such reports with the
Securities and Exchange Commission. Annual reports delivered to the trustee and
the holders of exchange notes will contain financial information that has been
examined and reported upon, with an opinion expressed by an independent public
accountant. We will also furnish such other reports as may be required by law.
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TEAM HEALTH, INC.
INDEX TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Statement of Income for the
Year Ended December 31, 1998.............................. P-3
Unaudited Pro Forma Condensed Statement of Income for the
Three Months Ended March 31, 1999......................... P-4
Notes to Unaudited Pro Forma Condensed Statements of
Income.................................................... P-5
P-1
125
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of the Company has
been prepared to give effect to the following transactions (together, the
"Transactions"):
(1) the Recapitalization;
(2) the Offering,
(3) the contribution of the capital stock of certain subsidiaries to the
Company by MedPartners;
(4) $150.0 million of borrowings by the Company under the Term Loan portion
of a Senior Credit Facilities;
(5) a $99.7 million cash equity investment in the Company by the Equity
Sponsors;
(6) a Management Contribution of $8.5 million;
(7) equity of Physician Services held by MedPartners having a fair market
value of $6.8 million;
(8) $2.5 million in the assumption of existing debt and
(9) the assumption of certain contingent earnout payments which the Company
believes have a maximum value of $19.8 million.
For purposes of the Unaudited Pro Forma Financial Information, the Equity
Investment is necessary to determine the total imputed value of the Company for
purposes of the calculation of deferred tax assets. The unaudited pro forma
adjustments presented are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma condensed statements of income of the Company for
the year ended December 31, 1998 and the three months ended March 31, 1999 give
effect to the Transactions as if they had occurred at the beginning of the
respective periods.
The Recapitalization has been accounted for as a leveraged
recapitalization, which will have no impact on the historical basis of the
Company's assets and liabilities. The unaudited pro forma financial information
should be read in conjunction with "Use of Proceeds," "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Financial Statements of the Company and
notes thereto all included elsewhere in this Offering Memorandum. The Unaudited
Pro Forma Financial Information and related notes are provided for informational
purposes only and do not purport to be indicative of the Company's financial
condition or results of operations that would have actually been obtained had
the Transactions been consummated as of the assumed date and for the periods
presented, nor are they indicative of the Company's financial condition or
results of operations of any future period.
The unaudited pro forma adjustments to operations exclude approximately
$7.5 million of estimated transaction fees and expenses incurred in connection
with the Transactions. These fees and expenses are nonrecurring and were
recorded in the Company's statement of income during the period in which the
Transactions are consummated. There were $8.4 million of estimated financing
expenses capitalized by the Company in connection with the Transactions.
P-2
126
TEAM HEALTH, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net revenue................................................. $547,785 $ -- $547,785
Professional expenses....................................... 430,362 -- 430,362
-------- -------- --------
Gross profit................................................ 117,423 -- 117,423
General and administrative.................................. 58,362 5,948(a) 64,810
500(b)
Depreciation and amortization............................... 9,740 -- 9,740
-------- -------- --------
Operating income............................................ 49,321 6,448 42,873
MedPartners' management fees................................ 2,941 (2,941)(c) --
Interest expense, net....................................... 5,301 20,473(d) 25,774
Goodwill impairment charge.................................. 2,992 -- 2,992
Other expenses.............................................. 871 (871)(e) --
Cumulative effect of change in accounting principle, net.... 912 -- 912
-------- -------- --------
Income before income taxes.................................. 36,304 (23,109) 13,195
Income tax expense.......................................... 15,778 (8,781)(f) 6,997
-------- -------- --------
Net income.................................................. $ 20,526 $(14,328) $ 6,198
======== ======== ========
OTHER FINANCIAL DATA
EBITDA(g)............................................................................. $ 54,268
Net cash provided by (used in):
Operating activities................................................................ 30,726
Investing activities................................................................ (22,864)
Financing activities................................................................ (27,643)
Cash interest expense................................................................. 24,932
P-3
127
TEAM HEALTH, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- ----------- --------
Net Revenue............................................... $137,877 $ -- $137,877
Professional expenses..................................... 108,388 -- 108,388
-------- -------- --------
Gross profit.............................................. 29,489 -- 29,489
General and administrative................................ 15,744 1,239(a) 16,983
Depreciation and amortization............................. 2,351 -- 2,351
-------- -------- --------
Operating Income.......................................... 11,394 -- 10,155
MedPartners' management Fee............................... 25 (25)(c) --
Interest Income........................................... (59) -- (59)
Interest Expense.......................................... 1,631 4,814(d) 6,445
Recapitalization Expense.................................. 21,513 -- 21,513
Other expenses............................................ 105 -- 105
-------- -------- --------
(Loss) before income taxes................................ (11,821) (6,028) (17,849)
Income tax (benefit)...................................... (4,361) (2,291)(f) (6,652)
-------- -------- --------
Net (loss)................................................ $ (7,460) $ (3,737) $(11,197)
======== ======== ========
OTHER FINANCIAL DATA
EBITDA(g)............................................................................ $ 12,506
Net cash provided by (used in):
Operating Activities............................................................... 5,123
Investing Activities............................................................... (1,799)
Financing Activities............................................................... 10,324
Cash Interest Expense................................................................ 6,234
P-4
128
TEAM HEALTH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS)
(a) To record management's estimate of incremental stand-alone costs to replace
services formerly provided by MedPartners:
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
------------ ---------------
Accounting and finance........................ $ 1,550 $ 323
Additional insurance costs.................... 1,234 257
Risk management............................... 900 187
Information technology........................ 802 167
Intercompany charges.......................... 764 159
Legal......................................... 300 62
Lobbying...................................... 200 42
Human resources............................... 77 16
Other......................................... 121 26
------- ------
Pro forma adjustment..................... $ 5,948 $1,239
======= ======
(b) To record the management fee payable by the Company, in the amount of $500
per annum.
(c) To remove management fee for services formerly provided by MedPartners. The
incremental stand-alone costs to replace these services are described in
note (a) above.
(d) To record the increase in interest expense as a result of the
Recapitalization as follows:
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
------------ ---------------
Senior Subordinated Notes(1).................. $12,000 $ 3,000
Term Loans:
Term A Loan ($60,000 at 8.25% per
annum)(2)................................ 4,950 1,238
Term B Loan ($90,000 at 8.75% per
annum)(2)................................ 7,875 1,969
Amortization of deferred financing costs...... 842 211
Interest on debt assumed...................... 107 27
------- -------
Total pro forma interest expense.............. 25,774 6,445
Less historical interest expense.............. (5,301) (1,631)
------- -------
Pro forma adjustment..................... $20,473 $ 4,814
======= =======
- ---------------
(1) Interest expense was calculated at an interest rate of 12.00%.
(2) Represents 3 month LIBOR @ 5.00% plus 3.25% and 3.75% for Term A and Term B
Loans, respectively.
P-5
129
TEAM HEALTH, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF INCOME -- (CONTINUED)
(IN THOUSANDS)
(e) To remove other expenses of $871 for MedPartners' internal expense
allocations.
(f) To record the difference between the historical tax expense and unaudited
pro forma expense at the statutory rate of 38% as follows:
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
------------ ---------------
Pro forma pretax income (loss).................... $ 13,195 $(17,849)
Adjustments to pretax income...................... 5,218 344
-------- --------
Taxable income (loss)............................. 18,413 (17,505)
Statutory rate.................................... 38% 38%
-------- --------
Pro forma tax expense (benefit)................... 6,997 (6,652)
Historical tax (expense) benefit.................. (15,778) 4,361
-------- --------
Pro forma adjustment.............................. $ (8,781) $ (2,291)
======== ========
(g) EBITDA represents operating income plus depreciation and amortization. Pro
Forma EBITDA represents EBITDA less estimated stand-alone costs plus the
effects of certain non-recurring transactions in 1998. Pro forma EBITDA has
not been reduced by a management fee payable pursuant to the Management
Services Agreement, which is contractually subordinated to all obligations
under the Notes and the Senior Credit Facilities.
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1998 1999
------------ ---------------
EBITDA............................................ $59,061 $13,745
Estimated stand-alone costs....................... (5,948) (1,239)
Non-recurring transactions........................ 1,155 --
------- -------
Pro forma EBITDA............................. $54,268 $12,506
======= =======
P-6
130
TEAM HEALTH, INC.
INDEX TO AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F-2
Consolidated and Combined Balance Sheets.................... F-3
Consolidated and Combined Statements of Income.............. F-4
Consolidated and Combined Statements of Net Invested
Capital................................................... F-5
Consolidated and Combined Statements of Cash Flows.......... F-6
Notes to Consolidated and Combined Financial Statements..... F-7
F-1
131
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MedPartners, Inc.
3000 Galleria Tower
Birmingham, Alabama 35244
We have audited the accompanying consolidated and combined balance sheets
of Team Health, Inc. (an operating unit of MedPartners, Inc.) as of December 31,
1997 and 1998, and the related consolidated and combined statements of income,
net invested capital and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements 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 financial statements referred to above present fairly,
in all material respects, the consolidated and combined financial position of
Team Health, Inc. at December 31, 1998 and 1997, and the consolidated and
combined results of operations and cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
As discussed in Note 17, the Company changed its method of accounting for
the costs of start-up activities.
Birmingham, Alabama Ernst & Young LLP
January 29, 1999
F-2
132
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
--------------------
1997 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,468 $ 3,894
Marketable securities..................................... 242 --
Accounts receivable, net.................................. 130,777 148,447
Prepaid expenses.......................................... 4,580 904
Other receivables......................................... 9,219 4,106
Other current assets...................................... 557 269
-------- --------
Total current assets........................................ 150,843 157,620
Property and equipment, net................................. 14,863 14,886
Intangibles, net............................................ 31,698 56,457
Other....................................................... 2,130 993
-------- --------
Total assets................................................ $199,534 $229,956
======== ========
LIABILITIES AND NET INVESTED CAPITAL
Current liabilities:
Accounts payable.......................................... $ 7,889 $ 6,495
Accrued compensation and physician payable................ 36,234 42,043
Other accrued liabilities................................. 9,568 9,449
Current portion of long-term debt......................... 5,165 164
-------- --------
Total current liabilities................................... 58,856 58,151
Long-term debt, less current portion........................ 2,655 2,380
Professional liability insurance reserves................... 38,280 49,697
Deferred payment obligations................................ 1,850 19,775
Net invested capital........................................ 97,893 99,953
-------- --------
Total liabilities and net invested capital.................. $199,534 $229,956
======== ========
See accompanying notes.
F-3
133
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
Net revenue.............................................. $463,380 $511,236 $547,785
Professional expenses.................................... 353,593 398,738 430,362
-------- -------- --------
Gross profit............................................. 109,787 112,498 117,423
General and administrative............................... 62,441 61,642 58,362
Depreciation and amortization............................ 5,628 6,455 9,740
-------- -------- --------
Operating income......................................... 41,718 44,401 49,321
Novation program expense allocation...................... -- 11,000 --
Merger expenses.......................................... 11,525 22,927 --
MedPartners' management fee.............................. 1,055 1,660 2,941
Interest expense, net.................................... 535 886 5,301
Goodwill impairment charge............................... -- -- 2,992
Other expenses (income).................................. (204) 768 871
-------- -------- --------
Income before income taxes............................... 28,807 7,160 37,216
Income tax expense....................................... 9,852 4,894 15,778
-------- -------- --------
Income before cumulative effect of a change in accounting
principle.............................................. 18,955 2,266 21,438
Cumulative effect of a change in accounting principle,
net of taxes of $559................................... -- -- 912
-------- -------- --------
Net income............................................... $ 18,955 $ 2,266 $ 20,526
======== ======== ========
See accompanying notes.
F-4
134
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF NET INVESTED CAPITAL
(IN THOUSANDS)
BALANCE AT DECEMBER 31, 1995................................ $ 73,288
Net income.................................................. 18,955
Parents' management fees.................................... 1,055
Net income of Team Health, Inc. for two months ended
December 31, 1995......................................... 203
Unrealized loss on marketable securities.................... (152)
Beginning balance of immaterial poolings of interests
entities.................................................. 1,195
Changes in tax accounts, included in net invested capital... (6,604)
Net transfers from parents and parents' subsidiaries........ 13,438
--------
BALANCE AT DECEMBER 31, 1996................................ 101,378
Net income.................................................. 2,266
Parents' management fees.................................... 1,660
Beginning balance of immaterial poolings of interests
entities.................................................. 377
Unrealized gain on marketable securities.................... 91
Changes in tax accounts, included in net invested capital... 259
Net transfers to parents and parents' subsidiaries.......... (8,138)
--------
BALANCE AT DECEMBER 31, 1997................................ 97,893
Net income.................................................. 20,526
Parents' management fees.................................... 2,941
Change in unrealized gain in marketable securities.......... (93)
Changes in tax accounts, included in net invested capital... 18,987
Net transfers to parents and parents' subsidiaries.......... (40,301)
--------
BALANCE AT DECEMBER 31, 1998................................ $ 99,953
========
See accompanying notes.
F-5
135
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
OPERATING ACTIVITIES
Net income.................................................. $ 18,955 $ 2,266 $ 20,526
Net income of Team Health, Inc. for two months ended
December 31, 1995......................................... 203 -- --
Adjustments to reconcile net income:
Depreciation and amortization............................. 5,628 6,455 9,740
Goodwill impairment charge................................ -- -- 2,992
Novation program expense allocation....................... -- 11,000 --
(Gain) loss on sale of equipment.......................... 20 947 (463)
Merger expenses........................................... 11,525 22,927 --
Parents' management fees.................................. 1,055 1,660 2,941
Cumulative effect of change in accounting principle....... -- -- 1,471
Changes in operating assets and liabilities, net of
effects of acquisitions................................ (24,981) (1,913) 6,163
-------- -------- --------
Net cash provided by operating activities................... 12,405 43,342 43,370
INVESTING ACTIVITIES
Cash paid for merger expense................................ (5,681) (12,711) (1,071)
Purchases of equipment, net of disposals and transfers to
other divisions........................................... (5,937) (3,837) (3,931)
Net cash paid for acquisitions.............................. (180) (15,726) (16,658)
Additions to intangibles.................................... (466) (2,065) (605)
Other investing activities.................................. 841 -- (599)
-------- -------- --------
Net cash used in investing activities....................... (11,423) (34,339) (22,864)
FINANCING ACTIVITIES
Payments on notes payable................................... (10,266) (1,396) (766)
Additions to notes payable.................................. -- 153 --
Net transfers (to) from parents' and parents subsidiaries... 13,438 (8,138) (40,301)
Change in tax accounts, included in net invested capital.... (6,604) 259 18,987
-------- -------- --------
Net cash used in financing activities....................... (3,432) (9,122) (22,080)
-------- -------- --------
Decrease in cash and cash equivalents....................... (2,450) (119) (1,574)
Cash and cash equivalents, beginning of year................ 6,495 5,550 5,468
Cash and cash equivalents, beginning of year for immaterial
poolings of interests entities............................ 1,505 37 --
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 5,550 $ 5,468 $ 3,894
======== ======== ========
See accompanying notes.
F-6
136
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Team Health is the largest national provider of outsourced physician
staffing and administrative services to hospitals and clinics in the United
States. The Company's regional operating model includes comprehensive programs
for emergency medicine, radiology, inpatient care, pediatrics and other hospital
departments. Team Health provides a full range of physician staffing and
administrative services, including the: (i) staffing, recruiting and
credentialing of clinical and non-clinical medical professionals; (ii) provision
of administrative support services, such as payroll, insurance coverage and
continuing education services; and (iii) billing and collection of fees for
services provided by the medical professionals.
Team Health, Inc. was incorporated in March 1994 in order to provide
outsourced physician staffing and administrative services to hospitals and
clinics. On June 30, 1995, Team Health, Inc. merged with Pacific Physician
Services.
In February 1996 and June 1997, MedPartners, Inc. ("MedPartners") combined
with Pacific Physician Services, Inc. ("Physician Services") and InPhyNet
Medical Management, Inc. ("InPhyNet"), respectively. These business combinations
were accounted for as poolings-of-interests by MedPartners. During the second
half of 1997, MedPartners combined the operations of the Hospital Services
Division ("Hospital Services") of InPhyNet with Team Health, Inc. a wholly-owned
subsidiary of Physician Services.
The accompanying consolidated and combined financial statements are
presented on a carve-out basis and include the historical operations of Team
Health, Inc., and Hospital Services. These operations are collectively referred
to herein as the "Company" or "Team Health."
MedPartners and its subsidiaries' net investment in Team Health ("net
invested capital") is shown in lieu of stockholder's equity in the accompanying
consolidated and combined financial statements. The consolidated and combined
financial statements have been prepared from both Team Health's and MedPartners'
historical accounting records.
The consolidated and combined financial statements include the accounts of
the Company and its subsidiaries. Consolidation is necessary to present fairly
the financial position and results of operations of the Company. All significant
intercompany and inter-affiliate accounts and transactions have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE
Revenue is recorded in the period services are rendered as determined by
the respective contract with the health care providers. Revenue is reported on
an accrual basis, net of estimated third-party contractual adjustments. Further
adjustments are recorded to reflect amounts estimated to be uncollectible based
upon individual contract experience.
The Company's revenue is derived from the provision of outsourced physician
staffing and administrative services to hospitals under fee-for-service
contracts and flat-rate contracts. Hospitals entering into fee-for-service
contracts agree, in exchange for granting the Company's affiliated physicians
medical staff privileges and exclusivity for services, to authorize the Company
to bill and collect the professional component of the charges for medical
services rendered by the Company's contracted and employed physicians. Under the
fee-for-service arrangements, the Company receives direct or indirect
disbursements from patients and payors of the amounts collected and, depending
on the magnitude of services provided to the hospital and payor mix, may also
receive supplemental revenue from the hospital.
F-7
137
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to such arrangement, the Company accepts responsibility for billing and
collection. Under flat-rate contracts, the hospital performs the billing and
collection services of the professional component and assumes the risk of
uncollectibility. In return for providing the physician staffing and
administrative services, the hospital pays a contractually negotiated fee for
physician coverage. In 1998, approximately 76% of net revenue was generated from
fee-for-service contracts.
PROFESSIONAL EXPENSES
Professional expenses primarily consist of fees paid to physicians and
other clinicians under contract with the Company, collection fees relating to
fee-for-service contracts billed by vendors, operating expenses for the
Company's billing subsidiaries and professional liability insurance expense.
The Company contracts with physicians as independent contractors of our
Company or employees or independent contractors of physician-controlled
professional corporations to provide services to fulfill their contractual
obligations to its hospital clients. The Company typically pays the physicians a
flat hourly rate for each hour of coverage provided at rates comparable to the
market in which they work, with the exception of those radiologists and primary
care physicians employed by the Company, who are paid a base salary. The hourly
rate varies if the physician is independently contracted or an employee.
Independently contracted physicians are required to pay a self-employment tax,
social security, and workers' compensation insurance premiums. In contrast, the
Company will pay these taxes and expenses for employed physicians. As such,
employed physicians typically receive a lower flat hourly rate. In select
markets physicians receive supplemental incentive-based compensation based on
the patient volume of the hospital, the intensity of the cases, improvements in
documentation and patient satisfaction.
The Company's contracts with physicians are generally perpetual and can be
terminated at any time under certain circumstances by either party without
cause, typically upon 180 days notice. In addition, the Company generally
requires the physician to sign a two-year non-compete and non-solicitation
agreement. Under these agreements, the physician is restricted from divulging
confidential information, soliciting or hiring our physicians, inducing
termination and competing for or soliciting the Company's clients.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists primarily of funds on deposit in
commercial banks.
MARKETABLE SECURITIES
Under Statement of Financial Accounting Standard ("SFAS") 115, "Accounting
for Certain Investments in Debt and Equity Securities," investments in equity
securities that have readily determinable fair values and investments in debt
securities are classified in three categories: held-to-maturity, trading and
available-for-sale. Based on the nature of the assets held by the Company and
management's investment strategy, the Company's investments have been classified
as available-for-sale.
Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, reported as a separate component of net
invested capital unless a decline in value is judged other than temporary. When
this is the case, unrealized losses are reflected in the results of operations.
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.
F-8
138
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Accounts receivable from fee-for-service contracts include an allowance for
contractual adjustments, bad debt 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. Bad debt and other
adjustments represent services provided to patients that are not expected to be
collected at the time service is provided.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives generally ranging from 3 to
10 years for furniture and equipment, from 3 to 5 years for software and 10 to
40 years for buildings and leasehold improvements. 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.
INTANGIBLES
The majority of intangible assets relate to goodwill incurred in the
acquisition of medical groups. Goodwill, which represents costs in excess of net
assets acquired is being amortized on a straight-line basis over periods ranging
between 8 and 20 years, depending upon the nature of the transaction. The
carrying value of goodwill is reviewed if the facts and circumstances suggest
that it may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the carrying value of the
goodwill is reduced by the estimated shortfall of discounted cash flows.
PROFESSIONAL LIABILITY INSURANCE
Professional liability insurance expense consists of premium cost, an
accrual to establish reserves for future payments under the self-insured
retention component, and an accrual to establish a reserve for future claims
incurred but not reported.
INCOME TAXES
The Company files as part of the consolidated federal tax return of
MedPartners. As a result, the provision for income taxes are calculated and
allocated to the Company from MedPartners. All tax accounts have been included
as a component of net invested capital for this presentation.
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.
3. ACCOUNTS RECEIVABLE AND NET REVENUE
Accounts receivable consist of the following (in thousands):
DECEMBER 31,
----------------------
1997 1998
--------- ---------
Gross accounts receivable................................... $ 414,835 $ 512,747
Less allowance for contractual adjustments, bad debt and
other adjustments......................................... (284,058) (364,300)
--------- ---------
$ 130,777 $ 148,447
========= =========
F-9
139
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of credit risk relating to accounts receivable is limited by
the diversity and number of contracting hospitals, patients, payors and the
geographic dispersion of the Company's operations. The Company's most
significant payor, Medicare, represents approximately 18.4% and 17.2% of gross
accounts receivable as of December 31, 1997 and 1998, respectively.
Net revenue consists of the following (in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
Gross revenue.................................. $ 925,694 $1,035,259 $1,210,252
Less provision for contractual adjustments, bad
debt and other adjustments................... (462,314) (524,023) (662,467)
---------- ---------- ----------
Net revenue.................................... $ 463,380 $ 511,236 $ 547,785
========== ========== ==========
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
DECEMBER 31,
--------------------
1997 1998
-------- --------
Buildings and leasehold improvements........................ $ 3,660 $ 2,149
Furniture and equipment..................................... 36,024 38,686
Software.................................................... 1,774 1,714
Less accumulated depreciation............................... (26,595) (27,663)
-------- --------
$ 14,863 $ 14,886
======== ========
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 non-cancelable operating leases are as follows (in thousands):
DECEMBER 31,
1998
------------
1999........................................................ $ 4,400
2000........................................................ 3,610
2001........................................................ 3,171
2002........................................................ 1,958
2003........................................................ 781
Thereafter.................................................. 4,709
-------
$18,629
=======
Rent expense under operating leases for 1996, 1997 and 1998 was
approximately $4.5 million, $5.8 million and $5.7 million, respectively.
F-10
140
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The following table provides a detail listing of amounts included in the
"Other accrued liabilities" account in the consolidated and combined balance
sheets (in thousands):
DECEMBER 31,
----------------
1997 1998
------ ------
Accrued professional fees................................... $2,753 $3,112
Insurance payable........................................... 2,144 247
Accrued merger costs........................................ 2,328 327
Other accrued expenses...................................... 2,343 5,763
------ ------
$9,568 $9,449
====== ======
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
DECEMBER 31,
-----------------
1997 1998
------- ------
Notes payable............................................... $ 5,630 $2,379
Other....................................................... 2,190 165
Less current portion........................................ (5,165) (164)
------- ------
$ 2,655 $2,380
======= ======
The majority of notes payable relate to acquisitions, payable in varying
amounts through 2000, with effective interest rates ranging from 7.50% to
10.80%.
The maturities of long-term debt were as follows (in thousands):
DECEMBER 31,
1998
------------
1999........................................................ $ 164
2000........................................................ 2,380
------
$2,544
======
Interest payments were $1.4 million, $0.6 million and $0.4 million in 1996,
1997 and 1998, respectively.
7. EMPLOYEE BENEFIT PLANS
The Company's employees participated in various employee benefit plans
sponsored by the Company and the Company's parent affiliates. The plans
primarily are defined contribution plans. The various entities acquired or
merged into the Company have various retirement plans that have been terminated,
frozen or amended with terms consistent with the Company's and the Company's
parent affiliate plans.
The Company's contributions to the plans for the years ended December 31,
1996, 1997 and 1998 were approximately $1.2 million, $0.5 million, and $1.2
million, respectively.
Effective January 1, 1998, the Board of Directors of MedPartners approved a
retirement savings plan for employees and affiliates. The plan is a defined
benefit contribution plan in accordance with the provisions of Section 401(k) of
the Internal Revenue Code. Full-time employees and affiliates are eligible to
enroll in the plan in the first quarter following two months of service.
Individuals on a part-time and per
F-11
141
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
diem basis are eligible to participate in the quarter following completion of
one year of service. For employees, the Company makes a matching contribution of
50% of the employee's pre-tax contribution, up to 6% of the employee's
compensation, in any calendar year.
8. DEFERRED COMPENSATION PLAN
A Team Health affiliate, Emergency Professional Services, Inc. ("EPS"),
created a deferred compensation plan in 1987 for the purpose of compensating key
individuals within EPS. Under the plan, the Company is obligated to certain key
employees who have completed five years of service. The plan provides a vesting
schedule of 10% at six years and 100% after fifteen years of service. Effective
with the EPS and MedPartners merger, the plan was frozen. Participants are
eligible for benefit payments following the month in which the sum of their age
and years of service equals 65. Exceptions to this requirement exist for
disability and death of a participant. Account balances remaining at the time of
death of a participant becomes payable to the participant's beneficiary.
Any forfeitures are allocated on the last day of the year to active
participants that have not commenced to receive benefit payments. As of December
31, 1997 and 1998, the aggregate deferred compensation payable was approximately
$4.6 million and $4.1 million, respectively. Charges to expense were
approximately $0.5 million in 1996. There was no charge to expense during 1997
as a result of a merger related accrual established in 1996 for future
non-discounted deferred compensation payments. In addition, there was no charge
to expense during 1998.
9. NET INVESTED CAPITAL
NET TRANSFERS TO/FROM PARENTS AND PARENTS' SUBSIDIARIES
Net transfers to/from parents and parents' subsidiaries includes
third-party liabilities paid on behalf the Company by MedPartners and Physician
Services ("parent companies"). In addition, transfers include advances from
parent companies to fund operating and investing activities, including
acquisitions, net of amounts advanced to parent companies from operating cash
flows generated by the Company. Net transfers are included as part of net
invested capital as Team Health is not required to settle these amounts on a
current basis.
MANAGEMENT FEES
The parent companies provide certain corporate services to the Company,
including legal services, risk management, certain employment benefit
administration, tax advice and preparation of tax returns, software support
services and certain financial and other services. These fees are allocated by
the parent companies to the Company and approximate costs incurred. The amounts
recorded by the Company for these allocations in the accompanying consolidated
and combined statements of income were approximately $1.1 million, $1.7 million
and $2.9 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The amounts allocated by the parent companies are not necessarily
indicative of the actual costs which may have been incurred had the Company
operated as an entity unaffiliated with MedPartners or Physician Services;
however, management of the Company believes that the allocation is reasonable
and in accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 55.
INTEREST EXPENSE
During 1997 and 1998, Team Health and MedPartners had an agreement whereby
MedPartners charged the Company interest earned on a portion of the Company's
net balance payable to MedPartners. Interest expense charged to Team Health by
MedPartners was $0.8 and $5.2 million for the years ended
F-12
142
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997 and December 31, 1998, respectively. No interest expense was
charged during the year ended December 31, 1996.
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 assets and liabilities, included in net invested
capital, were as follows (in thousands):
DECEMBER 31,
------------------
1997 1998
------- -------
Deferred tax assets:
Accounts receivable....................................... $ 200 $10,923
Accrual and other reserves................................ 514 373
Merger/acquisition costs.................................. 2,272 3,945
Net operating loss carryforward........................... 708 5,294
Deferred compensation accrual............................. 849 649
Accrued compensation...................................... 658 1,687
Malpractice............................................... 8,448 4,639
Other..................................................... 266 1,351
------- -------
Total deferred tax assets................................... 13,915 28,861
Deferred tax liabilities:
Book over tax amortization and depreciation............... (520) --
Change in accounting method from cash to accrual.......... (7,508) (1,375)
Other..................................................... (956) (3,071)
------- -------
Total deferred tax liabilities.............................. (8,984) (4,446)
------- -------
Net deferred tax assets (liabilities)....................... $ 4,931 $24,415
======= =======
Significant components of the federal income tax expense were as follows
(in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
Current:
Federal.......................................... $ 9,647 $ 14,562 $ 27,590
State............................................ 1,617 2,762 4,500
-------- -------- --------
Total current...................................... 11,264 17,324 32,090
Deferred:
Federal.......................................... (1,291) (10,423) (14,025)
State............................................ (121) (2,007) (2,287)
-------- -------- --------
Total expense...................................... $ 9,852 $ 4,894 $ 15,778
======== ======== ========
F-13
143
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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 (in
thousands):
YEAR ENDED DECEMBER 31,
---------------------------
1996 1997 1998
-------- ------ -------
Tax at statutory rate................................... $ 10,082 $2,506 $12,707
State income tax (net of federal tax benefit)........... 972 491 1,438
Tax expense from conversion to C corporation............ 892 -- --
Amortization and goodwill write-off..................... -- -- 1,480
Merger expense.......................................... 242 2,711 --
Income not taxed at corporate level..................... (2,490) (935) --
Other................................................... 154 121 153
-------- ------ -------
$ 9,852 $4,894 $15,778
======== ====== =======
Income taxes paid during 1996, 1997 and 1998 were $17.3 million, $4.7
million and $11.1 million, respectively.
10. PROFESSIONAL LIABILITY INSURANCE
Although Team Health does not principally engage in the practice of
medicine or provide medical services, the Company requires the physicians with
whom it contracts to obtain professional liability insurance coverage and makes
this insurance available to these physicians. Team Health typically provides
claims-made coverage of $1,000,000 per incident and $3,000,000 annual aggregate
per physician to affiliated physicians and other healthcare practitioners. In
addition, Team Health and its affiliates obtain claims-made coverage of
$1,000,000 per incident and $10,000,000 annual aggregate. These limits are
deemed appropriate by management based upon historical claims, the nature and
risks of the business and standard industry practice.
During the period immediately preceding the InPhyNet merger, MedPartners
and InPhyNet developed a program to provide malpractice exposure management for
InPhyNet's physician practice management, government services and hospital-based
businesses. The program was designed to "encapsulate" InPhyNet's malpractice
exposure for all periods prior to the MedPartners merger and to allow InPhyNet
to begin with new first-year claims made insurance coverage as of the effective
date of the merger.
The new program, called the Novation program, involved a payment from
MedPartners to an insurance carrier not previously associated with InPhyNet in
exchange for a guaranteed amount of future payments to MedPartners. These future
payments were actuarially determined by independent third-party actuaries and
were designed to be sufficient to cover the likely future liabilities associated
with the known InPhyNet cases and ones likely to arise in the future from events
occurring in the years covered by the program.
Additional reserves for liabilities within the Novation program are
recorded on Team Health's balance sheets and a related charge was allocated to
Team Health in 1997 and is included in the novation program expense allocation
line item on the consolidated and combined statements of income.
In connection with the proposed recapitalization transaction (as discussed
in Note 19), MedPartners will purchase insurance to cover the liability of
existing claims as of the closing date and the additional liability related to
the Novation program.
F-14
144
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments at December 31,
1998 and 1997 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
sheets 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.
12. ACQUISITIONS
In August 1997, Team Health acquired the operating assets of two emergency
department staffing companies. The acquisition was financed with two promissory
notes of $4.5 million and $0.6 million. The notes payable are included in
long-term debt (see Note 6).
In November 1997, the Company purchased certain operating assets of an
emergency department staffing company. The consideration given for the net
assets was $3.6 million. Of this amount, $1.7 million was paid in cash at
closing and up to $1.9 in future contingent payments or earnouts. The contingent
payments are classified as deferred payment obligations on the balance sheets
and are recorded as a liability of the Company based on management's expectation
that the earnout provisions in the acquisition agreement will be achieved. In
addition, in November 1997, the Company acquired the operating assets of a
radiology group for total consideration of $9.0 million. The consideration paid
was financed by capital transfers from MedPartners and cash flows from
operations. During 1998, the Company recognized a future contingent payment of
$2.5 million related to this acquisition and allocated it as part of the
purchase price.
The excess of the purchase price over net assets acquired in 1997 for these
and other entities acquired approximated $18.7 million. The goodwill balances
are being amortized over the expected life of the contractual arrangement which
range from 8 to 20 years.
In 1998, the Company acquired the stock of two emergency department
staffing companies. The first acquisition closed in January 1998 with a total
consideration of $5.1 million. Of this amount, $3.0 million was paid in cash at
the closing date and up to $2.1 million in future and contingent payments. The
second acquisition closed in June 1998, and had a total consideration of $5.9
million. Of this amount, $3.5 million was paid at closing with $2.4 million in
future and contingent payments.
In March 1998, the Company purchased certain operating assets of an
emergency department staffing company. The consideration given for the net
assets was $13.0 million. Of this amount, $5.0 million was paid in cash at
closing and up to $8.0 million in future contingent payments. In August 1998,
the Company made a second asset acquisition with total consideration of $6.8
million in which $3.6 million was paid at closing and up to $3.2 million in
future contingent payments.
The excess of the purchase price over net assets acquired in 1998 for these
and other entities approximated $34.1 million. The goodwill balances are being
amortized over the expected life of the contractual arrangement which range from
8 to 20 years.
F-15
145
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
All of the aforementioned acquisitions have been accounted for by the
purchase method of accounting. As such, operating results of acquired businesses
are included in the Company's consolidated and combined financial statements as
of their respective dates of acquisition. The operating results of the
acquisitions prior to the respective dates of acquisition are not material to
the Company.
The following unaudited pro forma summary for the three years ended
December 31, 1998 present the results of operations of the Company as if the
acquisitions that occurred during those three years had occurred at the
beginning of each of the fiscal years presented. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisitions been made at the beginning of
the respective fiscal years, or results which may occur in the future.
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
Net revenue................................................. 513,791 551,262 562,889
Income before income taxes.................................. 28,260 12,384 39,708
Net income.................................................. 18,616 5,505 21,531
13. MERGERS
MedPartners merged with several physician groups that have been combined
with Team Health operations during 1996 and 1997 in transactions that were
accounted for as poolings of interests. The following chart summarizes these
transactions:
NUMBER OF
EFFECTIVE DATE MEDPARTNERS'
ACQUIRED ENTITY OF POOLING SHARES ISSUED
--------------- ---------------- -------------
Emergency Physician Associates ("EPA").............. July 1, 1996 1.2 million
Emergency Professional Services ("EPS")............. October 1, 1996 2.1 million
Sheer, Ahearn and Associates ("SAA")................ December 1, 1996 2.3 million
Fischer Mangold ("FM").............................. June 30, 1997 2.0 million
InPhyNet Medical Management, Inc. ("InPhyNet")...... June 30, 1997 19.4 million
During the second half of 1997, MedPartners combined the Hospital Services
operations of InPhyNet with Team Health operations.
Included in income from operations for the year ended December 31, 1996 and
1997 are merger costs totaling $11.5 million and $22.9 million, respectively.
There were no merger costs for the year ended December 31, 1998. The components
of these costs are as follows (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
Investment banking and professional fees.............. $ 4,495 $ 5,198 $ --
Other transition costs................................ 2,077 1,042 --
Severance costs and related benefits.................. 123 6,735 --
Impairment of assets.................................. -- 2,846 --
Conforming accounting policies........................ 500 4,741 --
Operational restructuring............................. -- 280 --
Other charges......................................... 4,330 2,085 --
------- ------- -------
$11,525 $22,927 $ --
======= ======= =======
F-16
146
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
14. CONTINGENCIES
Team Health is a party to various pending legal actions arising in the
ordinary operation of its business such as contractual disputes, employment
disputes and general business actions as well as malpractice actions. Team
Health does not believe that the result of such legal actions, individually or
in the aggregate, will have a material adverse effect on the Company's business
or its results of operations, cash flows or financial condition.
Recently, a lawsuit was filed against InPhynet Medical Management, Inc. and
several other unrelated defendants in the United States District Court for the
District of Kansas which basically alleges that InPhynet had inappropriate
financial relationships with emergency room physicians and engaged in
inappropriate billing practices in violation of the False Claims Act and
provisions of the Medicare statute. The complaint lacks specificity and a
specific claim for damages. The Company intends to defend this case vigorously.
Although management believes, based on information currently available, that the
ultimate resolution is not likely to have a material adverse effect on the
operating results and financial condition of the Company, there can be no
assurance that the ultimate resolution of the matter, if adversely determined,
would not have a material adverse effect on the operating results and financial
condition of the Company.
15. RELATED PARTY TRANSACTIONS
The Company leases office space from several partnerships that are
partially or entirely owned by employees of the Company. The leases were assumed
by the Company as part of merger or purchase transactions. Total rent paid was
approximately $1.9 million, $2.0 million and $1.3 million in 1996, 1997 and
1998, respectively.
The Company has contractual arrangements with billing and collection
service companies that are owned or partially owned by employees of the Company.
The majority of these arrangements were assumed as part of merger or purchase
transactions. Billing fees paid for these services were $1.9 million, $2.2
million and $3.5 million in 1996, 1997 and 1998, respectively.
16. YEAR 2000 -- UNAUDITED
The Company is in the process of formulating and implementing a plan
designed to ensure that all application software and hardware used in connection
with the Company's management information systems will recognize a date using
"00" as the year 2000, rather than the year 1900.
The company is making satisfactory progress with its Year 2000 compliance
plan, which consists of the following stages:
1. Production of an inventory of the Company's hardware and software
systems.
2. Identification of where problems exist.
3. Diagnosis of solutions to problems.
4. Implementation of solutions.
5. Confirmation from major suppliers and customers that they will be year
2000 compliant by the year of 1999.
The Company has substantially completed the first three stages of its plan,
and has established timetables for its remediation of the problems that exist.
The Company estimates that its remediation efforts will be complete by September
1999 and at the present time, the remediation efforts are proceeding on schedule
with project timetables.
F-17
147
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The total cost of achieving Year 2000 compliance is forecast to be
approximately $1.9 million in connection with its compliance plan.
17. INTANGIBLES
Goodwill totaling $4.3 million was recorded in connection with the
Company's purchase of the Telerad Group in April 1994. During 1998, the Company
deemed that a portion of Telerad's goodwill totaling $3.0 million was impaired
based upon the provision of SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of." The impairment
was indicated by a loss of contracts resulting in recurring losses from
operations. Accordingly, the goodwill was reduced to fair value by discounting
estimated future cash flows at a discount rate of the Company's projected cost
of capital. The impairment charge is reflected in the consolidated and combined
statement of income for the year ended December 31, 1998. The Company will
continue to evaluate any remaining goodwill for potential impairment.
Effective January 1, 1998, the Company prospectively changed its policy of
determining useful life of goodwill based on criteria that addresses the number
of contracts in each acquisition. This change in policy reduced the amortization
periods from a range of 20 to 40 years to a range of 8 to 20 years.
Effective January 1, 1998, the Company wrote off approximately $1.5 million
in organizational and development costs in accordance with SOP 98 -- 5,
"Reporting on the Costs of Start-Up Activities." This is accounted for as a
cumulative effect of change in accounting principle.
18. PRO FORMA INCOME TAXES
For periods prior to the respective mergers and acquisitions, the acquired
entities were taxed as partnerships and S Corporations and, therefore, federal
and state taxes were assessed to the shareholders. The following reflects the
combined entities' additional tax expense had they been taxed at the Company's
effective rate during those periods. (in thousands)
YEAR ENDED DECEMBER 31,
------------------------
1996 1997 1998
------ ------ ----
Pro forma income taxes:
Federal.................................................. $1,931 $1,985 $616
State.................................................... 246 209 65
------ ------ ----
$2,177 $2,194 $681
====== ====== ====
19. SUBSEQUENT EVENTS
Effective March 16, 1999, Team Health will be recapitalized in a
transaction providing aggregate consideration to MedPartners, Inc. of $344.5
million, consisting of $335.2 million in cash, $6.8 million in equity retained
by MedPartners, Inc.'s wholly-owned subsidiary, Physician Services, and the
assumption of $2.5 million of existing indebtedness of MedPartners, Inc. In
addition, Team Health will assume the potential liability for certain future
earnout payments valued at approximately $19.8 million. The recapitalization
will be funded by the net proceeds from the $100.0 million Senior Subordinated
Notes due 2009, $150.0 million of borrowings by the Company under the term loan
facilities of a senior credit facility, $99.7 million in a cash equity
investment in the Company by an affiliate of different equity sponsors, a cash
equity investment of $8.5 million by senior management of the Company and the
equity of the Company retained by Pacific Physician Services, Inc. with a fair
market value of $6.8 million.
F-18
148
TEAM HEALTH, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In conjunction with the Recapitalization, the Company will make an election
under section 338(h)(10) of the Internal Revenue Code of 1986, as amended. As a
result, the Company will realize an increase in its deferred tax assets as the
Recapitalization is expected to be treated as a taxable business combination for
federal and state income tax purposes, which results in a step-up in the
Company's tax basis. This step-up in basis will result in an anticipated cash
tax benefit of approximately $6.7 million per year over each of the next 15
years, if fully utilized.
F-19
149
TEAM HEALTH, INC.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
Consolidated and Combined Balance Sheets.................... F-21
Consolidated and Combined Statements of Income (Loss)....... F-22
Consolidated and Combined Statements of Cash Flows.......... F-23
Notes to Consolidated and Combined Financial Statements..... F-24
F-20
150
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, MARCH 31,
1998 1999
(NOTE 1) (UNAUDITED)
------------ -----------
ASSETS
Current assets:
Cash and Cash equivalents................................. $ 3,894 $ 20,327
Accounts receivable, net.................................. 148,447 151,502
Prepaid expenses and other current assets................. 2,678 3,657
-------- ---------
Total current assets........................................ 155,019 175,486
Property and equipment, net................................. 14,886 15,089
Intangibles, net............................................ 56,457 66,324
Deferred tax asset.......................................... -- 108,472
Other....................................................... 3,594 5,300
-------- ---------
Total assets................................................ $229,956 $ 370,671
======== =========
LIABILITIES AND STOCKHOLDERS EQUITY/NET INVESTED CAPITAL
Current liabilities:
Accounts payable.......................................... $ 6,495 $ 9,335
Accrued compensation and physician payable................ 38,631 39,173
Other accrued liabilities................................. 9,449 13,061
Income tax payable........................................ -- 432
Current portion of long-term debt......................... 164 10,608
-------- ---------
Total current liabilities................................... 54,739 72,609
Long-term debt, less current portion........................ 2,380 236,900
Professional liability insurance reserves................... 49,697 1,015
Deferred payment obligations................................ 19,775 19,757
Deferred compensation....................................... 3,412 3,218
Other long-term liabilities................................. -- 25
Stockholders' equity/net invested capital:
Preferred stock........................................... -- 100,521
Common stock.............................................. -- 1,505
Additional paid in capital................................ -- 8,799
Shares held in trust...................................... -- (5,537)
Deferred compensation..................................... -- 5,537
Treasury stock (at cost).................................. -- (210,739)
Retained earnings/net invested capital.................... 99,953 137,061
-------- ---------
Total stockholders' equity/net invested capital............. 99,953 37,147
-------- ---------
Total liabilities and stockholders' equity/net invested
capital................................................... $229,956 $ 370,671
======== =========
See accompanying notes.
F-21
151
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
Net revenue................................................. $133,026 $137,877
Professional expenses....................................... 104,886 108,388
-------- --------
Gross profit................................................ 28,140 29,489
General and administrative.................................. 15,127 15,744
Depreciation and amortization............................... 2,038 2,351
-------- --------
Operating income............................................ 10,975 11,394
Management fee.............................................. 735 25
Interest income............................................. (85) (59)
Interest expense............................................ 590 1,631
Recapitalization expense.................................... -- 21,513
Other expenses (income)..................................... 218 105
-------- --------
Income (loss) before income taxes........................... 9,517 (11,821)
Income tax expense (benefit)................................ 3,983 (4,361)
-------- --------
Net income (loss)........................................... $ 5,534 $ (7,460)
======== ========
See accompanying notes.
F-22
152
TEAM HEALTH, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1999
-------- ---------
OPERATING ACTIVITIES
Net income (loss)........................................... $ 5,534 $ (7,460)
Adjustments to reconcile net income:
Depreciation and amortization............................. 2,038 2,351
Amortization of deferred financing costs.................. -- 125
Gain on sale of equipment................................. (15) (10)
Parents' management fees.................................. 735 25
Recapitalization expense.................................. -- 21,513
Changes in operating assets and liabilities, net of effects
of acquisitions........................................... 4,724 (8,214)
-------- ---------
Net cash provided by operating activities................... 13,016 8,330
INVESTING ACTIVITIES
Cash paid for merger expense................................ (625) (128)
Purchases of equipment, net of disposals and transfers to
other divisions........................................... (507) (1,529)
Net cash paid for acquisitions.............................. (9,502) (18)
Additions to intangibles.................................... (196) --
Other investing activities.................................. 111 (124)
-------- ---------
Net cash used in investing activities....................... (10,719) (1,799)
FINANCING ACTIVITIES
Payments on notes payable................................... (184) (5,052)
Additions to notes payable.................................. -- 250,000
Additions to deferred financing costs....................... -- (10,876)
Purchase of treasury stock.................................. -- (210,739)
Cash paid for recapitalization.............................. -- (15,587)
Net transfers from parents and parents' subsidiaries........ 2,086 2,578
Change in tax accounts, included in net invested capital.... 4,030 --
-------- ---------
Net cash provided by financing activities................... 5,932 10,324
-------- ---------
Change in cash and cash equivalents......................... 8,229 16,855
Cash and cash equivalents, beginning of period.............. 5,468 3,894
-------- ---------
Cash and cash equivalents, non-consolidating 1999........... -- (422)
-------- ---------
Cash and cash equivalents, end of period.................... $ 13,697 $ 20,327
======== =========
See accompanying notes.
F-23
153
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
NOTE 1. BASIS OF PRESENTATION
The consolidated and combined financial statements include the accounts of
Team Health, Inc. ("the Company") and its wholly owned subsidiaries and have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited consolidated and
combined financial statements contain all adjustments (consisting of normal
recurring items) necessary for a fair presentation of results for the interim
periods presented. The results of operations for any interim period are not
necessarily indicative of results for the full year. The consolidated and
combined balance sheet of the Company at December 31, 1998 has been derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. These financial statements and
footnote disclosures should be read in conjunction with the December 31, 1998
audited consolidated and combined financials statements and the notes thereto.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated
financial statements and notes. Actual results could differ from those
estimates.
NOTE 2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. SFAS No. 131 will
have no effect on the Company's results of operations, financial position or
cash flows.
In February 1998, FASB issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits." SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
no longer are useful. SFAS No. 132 is effective for financial statements for
fiscal years beginning after December 15, 1997. SFAS No. 132 has no impact on
the Company's results of operations, financial position, or cash flows.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
measured at fair value and recognized as either assets or liabilities on the
balance sheet. Changes in such fair value are required to be recognized
immediately in net income (loss) to the extent the derivatives are not effective
as hedges. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and is effective for interim periods in the initial year of adoption. At
the present time, the Company does not feel the adoption of SFAS No. 133 will
have a material effect on the results of operations, financial position, or cash
flows of the Company.
In March 1998, the EITF concluded its discussion on Issue No. 97-2 related
to the Application of APB Opinion No. 16, "Business Combinations", and FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries to Physician
Practice Management Entities." The Task Force established the criteria for
determining when a Physician Practice Management Entity ("PPM") could
consolidate or combine with a physician's practice. The Company has considered
all implications and does not feel this
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
issue will have a material effect on the results of operations, financial
position, or cash flows of the Company.
NOTE 3. RECAPITALIZATION TRANSACTION
Effective March 12, 1999, Team Health was recapitalized in a transaction
providing aggregate consideration to MedPartners, Inc. ("MedPartners") of $344.5
million, consisting of $335.2 million in cash, $6.8 million in equity retained
by MedPartners wholly-owned subsidiary, Pacific Physician Services, and the
assumption of $2.5 million of existing indebtedness of MedPartners. In addition,
Team Health assumed the potential liability for certain future earnout payments
valued at approximately $19.8 million. The Recapitalization was funded by the
net proceeds from the $100.0 million Senior Subordinated Notes (the "Notes") due
2009, $150.0 million of borrowings by the Company under the term loan facilities
of a Senior Credit Facility, $99.7 million in a cash equity investment in the
Company by an affiliate of Madison Dearborn Partners, Inc., Cornerstone Equity
Investors, LLC, and Beecken Petty and Company, LLC, a cash equity investment of
$8.5 million by senior management of the Company and the equity of the company
retained by Pacific Physician Services, Inc. with a fair market value of $6.8
million.
In conjunction with the Recapitalization, the Company will make an election
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended. As a
result, the Company will realize an increase in its deferred tax assets as the
Recapitalization is expected to be treated as a taxable business combination for
federal and state tax purposes, which results in a step-up in the Company's tax
basis. This step-up in basis will result in an anticipated cash tax benefit of
approximately $6.7 million per year over each of the next 15 years, if fully
utilized.
Total financing fees and legal, accounting, and other related costs of the
Recapitalization amounted to approximately $32.7 million. Of these costs, $21.5
million were expensed at the date of the Recapitalization. Financing costs of
$11.2 million associated with the Senior Credit Facility and Senior Subordinated
Notes were capitalized and will be amortized over the term of the Senior Credit
Facility and Notes.
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
12% Senior Subordinated Notes............................... $100,000 --
Senior Credit Facilities:................................... --
Revolving Credit Facility................................. --
Term Loan Facility........................................ 145,000
Other long-term debt........................................ 2,508 2,544
-------- ------
247,508 2,544
Less current portion........................................ (10,608) (164)
-------- ------
$236,900 $2,380
======== ======
In Conjunction with the Recapitalization, the Company entered into the
Senior Credit Facilities agreement with a syndicate of financial institutions.
The Senior Credit Facilities are comprised of a five-year Revolving Credit
Facility of up to $50.0 million, including a Swing-Line sub-facility of $5.0
million and Letter of Credit sub-facility of $5.0 million and a Term Loan
Facility, consisting of a $60.0 million 5-year tranche A term loan facility and
a $90.0 million 6-year tranche B term loan facility. No funds have
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155
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
been borrowed under the Revolving Credit Facility as of March 31, 1999. The
Senior Credit Facilities are secured by stock and assets of the Company and its
subsidiaries.
Borrowings under the Senior Credit Facilities bear interest at variable
rates based, at the Company's option, on prime or the eurodollar rate. Interest
rates as of March 31, 1999 were as follows:
Revolving Credit Facility -- Commitment..................... 0.50%
Revolving Credit Facility -- Interest....................... 8.31%
Term Loan A Facility........................................ 8.31%
Term Loan B Facility........................................ 8.81%
Borrowings under the Senior Credit Facilities were used to consummate the
Recapitalization and pay fees and expenses related to the transaction.
Additionally, the Senior Credit Facilities will provide financing for future
working capital, capital expenditures, and other general corporate purposes. The
credit facility contains affirmative and negative covenants which include
requirements that the Company maintain certain financial ratios and a minimum
level of EBITDA.
Additionally, as part of the Recapitalization, the Company issued $100
million of Senior Subordinated Notes due March 15, 2009. The Notes are
subordinated in right of payment to all Senior Debt of the Company and are
senior in right of payment to all existing and future subordinated indebtedness
of the Company. Interest on the Notes will accrue at the rate of 12% per annum,
payable semi-annually in arrears on March 15 and September 15 of each year
commencing September 15, 1999.
Prior to March 15, 2002, the Company may redeem a portion of the Notes with
the proceeds of certain offerings of the Company's equity. Beginning March 15,
2004, the Company may redeem some or all of the Notes at any time at various
redemption prices. The Notes were issued under an indenture with a Trustee that
contains affirmative and negative covenants.
The other long-term debt relates to acquisitions, payable in varying
amounts through 2000, with effective interest rates ranging from 7.50% to
10.80%.
Aggregate maturities of long-term debt at March 31, 1999 are as follows:
1999....................................................... 10,608
2000....................................................... 10,500
2001....................................................... 12,900
2002....................................................... 16,500
2003....................................................... 14,500
Thereafter................................................. 182,500
-------
247,508
=======
NOTE 5. PROFESSIONAL LIABILITY INSURANCE
Although Team Health does not principally engage in the practice of
medicine or provide medical services, the Company requires the physicians with
whom it contracts to obtain professional liability insurance coverage and makes
this insurance available to these physicians. Team Health typically provides
claims-made coverage of $1,000,000 per incident and $3,000,000 annual aggregate
per physician to affiliated physicians and other healthcare practitioners. In
addition, Team Health and its affiliates obtain claims-made coverage of
$1,000,000 per incident and $10,000,000 annual aggregate. These limits are
deemed appropriate by management based upon historical claims, the nature and
risks of the business and standard industry practice.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
As part of the Recapitalization transaction, MedPartners retained the
liability for all medical malpractice claims originating prior to the
Recapitalization and purchased insurance coverage to cover such claims. As a
result, approximately $49.5 million of professional liability reserves were
transferred to MedPartners at closing.
NOTE 6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities were as follows (in
thousands):
MARCH 31,
1999
---------
Deferred tax assets:
Amortization & Depreciation.............................. 100,297
Recapitalization Expense................................. 8,175
-------
Net deferred tax asset..................................... 108,472
=======
Significant components of federal income tax expense were as follows (in
thousands):
QUARTER ENDED
MARCH 31, 1999
--------------
Current:
Federal.............................................. 2,213
State................................................ 306
------
Total current.......................................... 2,519
Deferred:
Federal.............................................. (6,044)
State................................................ (836)
------
Total deferred......................................... (6,880)
------
Total expense.......................................... (4,361)
======
The reconciliation of income tax expense computed at the federal statutory
tax rate to income tax expense is as follows for the years ended December 31 (in
thousands):
QUARTER ENDED
MARCH 31, 1999
--------------
Tax at statutory rate.................................. (4,129)
State income tax (net of federal tax benefit).......... (345)
Meals and Entertainment................................ 112
Other.................................................. 1
------
(4,361)
======
NOTE 7. STOCKHOLDERS' EQUITY
Effective March 12, 1999, in conjunction with the Recapitalization, the
Company exchanged with MedPartners all outstanding common stock for 100,000 new
shares of 10% cumulative preferred stock ($.01 par) and 150,492,442.67 new
shares of common stock ($.01 par) in the Company.
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157
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
The Company purchased from MedPartners 140,492,442.67 shares of outstanding
common stock for $210.7 million. These shares have been recorded as Treasury
Stock and are carried at cost.
As part of the Recapitalization, the Company established a deferred
compensation plan and related Rabbi Trust for the benefit of certain members of
the Company's senior management. The Company funded the Rabbi Trust with $5.5
million as of the closing. The Rabbi Trust used these funds to purchase
preferred stock in the parent company of the Company. The deferred compensation
liability under this newly created plan as well as the investments of the Rabbi
Trust are carried as components of the stockholders' equity in the consolidated
and combined financial statements of the Company.
Prior to the Recapitalization, all equity accounts of the Company were
combined and reported as Net Invested Capital on the consolidated and combined
financial statements due to the Company's status as a subsidiary of MedPartners.
NOTE 8. RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated and combined
balance sheet as of December 31, 1998 to conform to the March 31, 1999
presentation.
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999 CONFIDENTIAL
TEAM HEALTH, INC.
$100,000,000
12% SENIOR SUBORDINATED NOTES DUE 2009
----------------------------------------------------------------------
PROSPECTUS
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS OFFERING MEMORANDUM. YOU MUST NOT RELY ON
UNAUTHORIZED INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF , 1999.
- --------------------------------------------------------------------------------
159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Tennessee Business Corporation Act ("TBCA") provides that a corporation
may indemnify any of its directors and officers against liability incurred in
connection with a proceeding if (i) the director or officer acted in good faith,
(ii) in the case of conduct in his or her official capacity with the
corporation, the director or officer reasonably believed such conduct was in the
corporation's best interests, (iii) in all or other cases, the director or
officer reasonably believed that his or her conduct was not opposed to the best
interest of the corporation, and (iv) in connection with any criminal
proceeding, the director or officer had no reasonable cause to believe that his
or her conduct was unlawful. In actions brought by or in the right of the
corporation, however, the TBCA provides that no indemnification may be made if
the director or officer was adjudged to be liable to the corporation. In cases
where the director or officer is wholly successful, on the merits or otherwise,
in the defense of any proceeding instigated because of his or her status as an
officer or director of a corporation, the TBCA mandates that the corporation
indemnify the director or officer against reasonable expenses incurred in the
proceeding. The TBCA also provides that in connection with any proceeding
charging improper personal benefit to an officer or director, no indemnification
may be made if such officer or director is adjudged liable on the basis that
personal benefit was improperly received. Notwithstanding the foregoing, the
TBCA provides that a court of competent jurisdiction, upon application, may
order that an officer or director be indemnified if, in consideration of all
relevant circumstances, the court determines that such individual is fairly and
reasonably entitled to indemnification, whether or not the director met the
standard of conduct set forth above or was adjudged liable, provided that if
such officer or director was adjudged liable, indemnification is limited to
reasonable expenses.
The Company's Charter provides that the Company may indemnify expenses to
persons who are or were directors or officers of the Company. Additionally, the
Charter provides that no director of the Company shall be personally liable to
the Company or any of its shareholders, and no such person may be sued by the
Company or its shareholders, for monetary damages for breach of any fiduciary
duty as a director except for liability arising from (i) any breach of a
director's duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, or (iii) any unlawful distributions.
[Directors' and officers' liability insurance has also been obtained by the
Company, the effect of which is to indemnify certain directors and officers of
the Company against certain damages and expenses because of certain claims made
against them caused by their negligent act, error or omission.]
The above discussion of the Charter and the TBCA is not intended to be
exhaustive and is qualified in its entirety by reference thereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
2.1 Recapitalization Agreement dated January 25, 1999 by and
among Team Health, Inc., MedPartners, Inc., Pacific
Physician Services, Inc. and Team Health Holdings, L.L.C.*
3.1 Articles of Amendment to the Articles of Incorporation of
Alliance Corporation dated January 15, 1997.*
3.2 By-laws of Alliance Corporation.*
3.3 Articles of Incorporation of Emergency Management
Specialists, Inc. dated August 12, 1983.*
3.4 By-laws of Emergency Management Specialists, Inc.*
3.5 Articles of Incorporation of EMSA South Broward, Inc. dated
December 3, 1996.*
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160
3.6 By-laws of EMSA South Broward, Inc.*
3.7 Articles of Incorporation of Herschel Fischer, Inc. dated
February 18, 1997.*
3.8 By-laws of Herschel Fischer, Inc. dated February 21, 1997.*
3.9 Articles of Incorporation of IMBS, Inc. dated November 30,
1995.*
3.10 By-laws of IMBS, Inc.*
3.11 Articles of Incorporation of InPhyNet Hospital Services,
Inc. dated November 30, 1995.*
3.12 By-laws of InPhyNet Hospital Services, Inc.*
3.13 Certificate of Amendment of Certificate of Incorporation of
InPhyNet Medical Management Institute, Inc. dated February
28, 1996.*
3.14 By-laws of InPhyNet Medical Management Institute, Inc.*
3.15 Articles of Incorporation of Karl G. Mangold, Inc. dated
February 14, 1997.*
3.16 By-laws of Karl G. Mangold, Inc. dated February 20, 1997.*
3.17 Amended and Restated Articles of Incorporation of Charles L.
Springfield, Inc. dated November 21, 1997.*
3.18 Amendment to By-laws of Charles L. Springfield, Inc. dated
November 20, 1997.*
3.19 Articles of Amendment to the Charter of Clinic Management
Services, Inc. dated March 25, 1994.*
3.20 By-laws of Clinic Management Services, Inc.*
3.21 Articles of Incorporation of Daniel & Yeager, Inc. dated
October 25, 1989.*
3.22 By-laws of Daniel & Yeager, Inc. dated October 6, 1989.*
3.23 Articles of Incorporation of Drs. Sheer, Ahearn &
Associates, Inc. dated March 31, 1969.*
3.24 Amended and Restated By-laws of Drs. Sheer, Ahearn &
Associates, Inc. dated February 15, 1989.*
3.25 Articles of Amendment to the Charter of Emergency Coverage
Corporation dated February 15, 1993.*
3.26 Amendment to By-laws of Emergency Coverage Corporation dated
June 12, 1995.*
3.27 Restated Certificate of Incorporation of Emergency Physician
Associates, Inc. dated June 25, 1996.*
3.28 By-laws of Emergency Physician Associates, Inc.*
3.29 Articles of Incorporation of Emergency Physicians of
Manatee, Inc. dated June 1, 1988.*
3.30 By-laws of Emergency Physicians of Manatee, Inc.*
3.31 Certificate to Amend the Articles of Incorporation of
Emergency Professional Services, Inc. dated September 30,
1997.*
3.32 Code Regulations of Emergency Professional Services, Inc.
amended June 22, 1987.*
3.33 Amended and Restated Charter of Emergicare Management,
Incorporated dated February 28, 1995.*
3.34 By-laws of Emergicare Management, Incorporated dated
December 29, 1972.*
3.35 Articles of Incorporation of EMSA Contracting Service, Inc.
dated November 30, 1995.*
3.36 By-laws of EMSA Contracting Service, Inc.*
3.37 Articles of Amendment of EMSA Louisiana, Inc. dated May 28,
1989.*
3.38 By-laws of EMSA Louisiana, Inc.*
3.39 Articles of Amendment to the Charter of Hospital Based
Physician Services, Inc. dated March 25, 1994.*
3.40 By-laws of Hospital Based Physician Services, Inc. dated
July 18, 1993.*
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161
3.41 Articles of Incorporation of InPhyNet Anesthesia of West
Virginia, Inc. dated February 28, 1997.*
3.42 By-laws of InPhyNet Anesthesia of West Virginia, Inc.*
3.43 Articles of Amendment to the Charter of Med: Assure Systems,
Inc. dated October 28, 1992.*
3.44 By-laws of Med: Assure Systems, Inc. dated February 25,
1987.*
3.45 Articles of Incorporation of MetroAmerican Radiology, Inc.
dated April 19, 1989.*
3.46 By-laws of MetroAmerican Radiology, Inc. dated April 23,
1989.*
3.47 Articles of Incorporation of Neo-Med, Inc. dated November
15, 1993.*
3.48 By-laws of Neo-Med, Inc.*
3.49 Articles of Incorporation of Northwest Emergency Physicians,
Incorporated dated June 4, 1985.*
3.50 By-laws of Northwest Emergency Physicians, Incorporated.*
3.51 Certificate of Amendment of Certificate of Incorporation of
Paragon Anesthesia, Inc. dated September 20, 1994.*
3.52 By-laws of Paragon Anesthesia, Inc.*
3.53 Articles of Incorporation of Paragon Contracting Services,
Inc. dated November 30, 1995.
3.54 By-laws of Paragon Contracting Services, Inc.*
3.55 Certificate of Amendment of Certificate of Incorporation of
Paragon Imaging Consultants, Inc. dated May 7, 1993.*
3.56 By-laws of Paragon Imaging Consultants, Inc.*
3.57 Articles of Incorporation of Quantum Plus, Inc. dated
January 27, 1997.*
3.58 By-laws of Quantum Plus, Inc. dated February 1, 1997.*
3.59 Amendment and Restated Articles of Incorporation of Reich,
Seidelmann & Janicki Co. dated November 7, 1997.*
3.60 Code Regulations of Reich, Seidelmann & Janicki Co.*
3.61 Articles of Incorporation of Rosendorf, Marguiles, Borushok
& Shoenbaum Radiology Associates of Hollywood, Inc. dated
October 25, 1968.*
3.62 By-laws of Rosendorf, Marguiles, Borushok & Shoenbaum
Radiology Associates of Hollywood, Inc.*
3.63 Articles of Amendment to the Articles of Incorporation of
Sarasota Emergency Medical Consultants, Inc. dated August
7, 1997.*
3.64 By-laws of Sarasota Emergency Medical Consultants, Inc.*
3.65 Articles of Amendment to the Charter of Southeastern
Emergency Physicians, Inc. dated November 25, 1992.*
3.66 By-laws of Southeastern Emergency Physicians, Inc. dated
July 1, 1986.*
3.67 Articles of Amendment to the Charter of Southeastern
Emergency Physicians of Memphis, inc. dated June 15,
1992.*
3.68 By-laws of Southeastern Emergency Physicians of Memphis,
Inc.*
3.69 Charter of Team Health Financial Services, Inc. dated
October 9, 1997.*
3.70 By-laws of Team Health Financial Services, Inc.*
3.71 Articles of Incorporation of Team Radiology, Inc. dated
October 6, 1993.*
3.72 By-laws of Team Radiology, Inc. dated November 5, 1993.*
3.73 Certificate of Incorporation of THBS, Inc. dated October 20,
1997.*
3.74 By-laws of THBS, Inc.*
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162
3.75 Amended and Restated Articles of Incorporation of The Emergency Associates for Medicine, Inc. dated
August 30, 1996.*
3.76 By-laws of The Emergency Associates for Medicine, Inc.*
3.77 Articles of Incorporation of Virginia Emergency Physicians, Inc. dated June 25, 1992.*
3.78 Amended and Restated By-laws of Virginia Emergency Physicians, Inc.*
3.79 Articles of Incorporation of EMSA Joilet, Inc. dated December 30, 1988.*
3.80 By-laws of EMSA Joilet, Inc.*
3.81 Certificate of limited Partnership of Paragon Healthcare Limited Partnership, dated August 3, 1993.*
3.82 Certificate of Limited Partnership of Team Health Southwest, L.P., dated May 20, 1998.*
3.83 Certificate of Limited Partnership of Team Health Billing Services, L.P., dated October 21, 1997.*
3.84 Partnership Agreement of Fischer Mangold Group Partnership, dated February 21, 1996.*
3.85 Partnership Agreement of Mt. Diablo Emergency Physicians, a California General Partnership, dated June 1,
1997.*
4.1 Indenture dated as of March 12, 1999 by and among Team Health, Inc. the Guarantors listed on the
signature pages thereto and the United States Trust Company of New York.*
5.1 Opinion of Kirkland & Ellis.*
9.1 Stockholders Agreement dated as of March 12, 1999 by and among Team Health, Inc., Team Health Holdings,
L.L.C., Pacific Physicians Services, Inc., and certain other stockholders of the Team Health, Inc. who
are from time to time party hereto.*
9.2 Securityholders Agreement dated as of March 12, 1999 by and among Team Health Holdings, L.L.C., each of
the persons listed on Schedule A thereto and certain other securityholders of Team Health Holdings,
L.L.C. who are from time to time party thereto.*
10.1 Registration Rights Agreement dated as of March 12, 1999 by and among Team Health, Inc., the guarantors
listed on the signature pages thereto and Donaldson, Lufkin & Jenrette Securities Corporation,
NationsBanc Montgomery Securities LLC and Fleet Securities, Inc.*
10.2 Purchase Agreement dated as of March 5, 1999 by and among Team Health, Inc. and the guarantors listed on
the signature pages thereto and Donaldson, Lufkin & Jenrette Securities Corporation, NationsBanc
Montgomery Securities LLC and Fleet Securities, Inc.*
10.3 Equity Deferred Compensation Plan of Team Health, Inc. effective January 25, 1999.*
10.4 Management Services Agreement dated as of March 12, 1999 by and among Team Health, Inc., Madison Dearborn
Partners II, L.P., Beecken, Petty & Company, L.L.C. and Cornerstone Equity Investors LLC.*
10.5 Registration Agreement dated as of March 12, 1999 by and among Team Health, Inc., Team Health Holdings,
L.L.C., Pacific Physician Services, Inc. and certain other stockholders of Team Health, Inc. who are
from time to time party thereto.*
10.6 Registration Agreement dated as of March 12, 1999 by and among Team Health Holdings, L.L.C., each of the
persons listed on Schedule A thereto and certain other securityholders of Team Health, Inc. who are
from time to time party thereto.*
10.7 Trust Agreement dated as of January 25, 1999 by and among Team Health, Inc. and The Trust Company of
Knoxville.*
10.8 Credit Agreement dated as of March 12, 1999 by and among Team Health, Inc., the banks, financial
institutions and other institutional lenders named herein, Fleet National Bank, NationsBank, N.A.,
NationsBanc Montgomery Securities LLC and Donaldson, Lufkin & Jenrette Securities Corporation.*
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163
..9 10 Sheer Ahearn & Associates Plan Provision Nonqualified Excess Deferral Plan effective
September 1, 1998.*
10.10 Amendment and Restatement of Emergency Professional Services, Inc. Deferred
Compensation Plan effective January 31, 1996.*
10.11 Lease Agreement dated August 27, 1992 between Med: Assure Systems and Winston Road
Properties for our corporate headquarters located at 1900 Winston Road, Knoxville,
TN.*
10.12 Lease Agreement dated August 27, 1999 between Americare Medical Services, Inc. and
Winston Road Properties for space located at 1900 Winston Road, Knoxville, TN.*
12.1 Statement of Ratio of Earnings to Fixed Charges.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Ernst & Young, LLP.*
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature pages).*
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Letter of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
- ---------------
* Filed herewith.
ITEM 21(B). FINANCIAL STATEMENT SCHEDULES.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
ADDITIONS CHARGED TO
BALANCE AT -------------------- BALANCE AT
BEGINNING COSTS AND END OF
FISCAL YEAR END OF PERIOD EXPENSES OTHER DEDUCTIONS PERIOD
- --------------- ---------- ---------- ------ ---------- ----------
December 31, 1996....................... $181,525 $462,314 $-- $376,361 $267,478
December 31, 1997....................... 267,478 524,023 -- 507,443 284,058
December 31, 1998....................... 284,058 662,467 -- 582,225 364,300
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission, except for Schedule II
above, have been omitted because they are not required under the related
instructions, or are inapplicable, or because the information has been provided
in the Consolidated and Combined Financial Statements or the Notes thereto.
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
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164
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 20 or otherwise, each
undersigned registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Each undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
Each undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Team Health, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Team
Health, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President, Chief Executive Officer, Assistant
- --------------------------------------------- Secretary and Director (principal executive
H. Lynn Massingale, M.D. officer)
/s/ MICHAEL HATCHER Chief Operating Officer
- ---------------------------------------------
Michael Hatcher
/s/ DAVID JONES Chief Financial Officer, Treasurer and
- --------------------------------------------- Assistant Secretary (principal financial
David Jones officer and accounting officer)
/s/ STEPHEN SHERLIN Executive Vice President, Finance and
- --------------------------------------------- Administration
Stephen Sherlin
/s/ DANA J. O'BRIEN Director
- ---------------------------------------------
Dana J. O'Brien
/s/ TIMOTHY P. SULLIVAN Director
- ---------------------------------------------
Timothy P. Sullivan
/s/ TYLER WOLFRAM Director
- ---------------------------------------------
Tyler Wolfram
II-7
166
SIGNATURE CAPACITY
--------- --------
/s/ NICHOLAS W. ALEXOS Director
- ---------------------------------------------
Nicholas W. Alexos
/s/ TIMOTHY P. SULLIVAN Director
- ---------------------------------------------
Timothy P. Sullivan
II-8
167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Alliance Corporation
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Alliance Corporation), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-9
168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Charles L. Springfield, Inc.
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Charles L. Springfield, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President (principal executive officer)
- ---------------------------------------------
Richard Gillespie, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-10
169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Clinic Management Services, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Clinic
Management Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-11
170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Daniel & Yeager, Inc.
By: /s/ JOHN DANIEL
------------------------------------
Name: John Daniel
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Daniel
& Yeager, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JOHN DANIEL President (principal executive officer)
- ---------------------------------------------
John Daniel
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-12
171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Drs. Sheer, Ahearn & Associates, Inc.
By:/s/ H. KIRBY BLANKENSHIP, M.D.
------------------------------------
Name: H. Kirby Blankenship, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Drs.
Sheer, Ahearn & Associates, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. KIRBY BLANKENSHIP, M.D. President (principal executive officer)
- ---------------------------------------------
H. Kirby Blankenship, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-13
172
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergency Coverage Corporation
By: /s/ JOHN STALEY, M.D.
------------------------------------
Name: John Staley, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergency Coverage Corporation), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JOHN STALEY, M.D. President (principal executive officer)
- ---------------------------------------------
John Staley, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-14
173
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergency Management Specialists, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergency Management Specialists, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-15
174
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergency Physician Associates, Inc.
By: /s/ JAMES E. GEORGE, M.D.
------------------------------------
Name: James E. George, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergency Physician Associates, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES E. GEORGE, M.D. President (principal executive officer)
- ---------------------------------------------
James E. George, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-16
175
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergency Physicians of Manatee, Inc.
By: /s/ JAMES V. HILLMAN, M.D.
------------------------------------
Name: James V. Hillman, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergency Physicians of Manatee, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES V. HILLMAN, M.D. President (principal executive officer)
- ---------------------------------------------
James V. Hillman, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-17
176
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergency Professional Services, Inc.
By: /s/ JAMES L. RYBACK, M.D.
------------------------------------
Name: James L. Ryback, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergency Professional Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES L. RYBACK, M.D. President (principal executive officer)
- ---------------------------------------------
James L. Ryback, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-18
177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Emergicare Management, Incorporated
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Emergicare Management, Incorporated), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-19
178
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Fischer Mangold Partnership
By: Herschel Fischer, Inc.,
Its General Partner
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
By: Karl G. Mangold, Inc.,
Its General Partner
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Fischer Mangold Partnership), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President of each of Herschel Fischer, Inc. and Karl
- --------------------------------------------- G. Mangold, Inc. (principal executive officer)
Richard Gillespie, M.D.
/s/ DAVID JONES Vice President and Treasurer of each of Herschel
- --------------------------------------------- Fischer, Inc. and Karl G. Mangold, Inc. (principal
David Jones financial officer and accounting officer)
/s/ H. LYNN MASSINGALE Vice President and Director of each of Herschel
- --------------------------------------------- Fischer, Inc. and Karl G. Mangold, Inc.
H. Lynn Massingale
/s/ MICHAEL HATCHER Vice President, Secretary and Director of each of
- --------------------------------------------- Herschel Fischer, Inc. and Karl G. Mangold, Inc.
Michael Hatcher
II-20
179
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Herschel Fischer, Inc.
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Herschel Fischer, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President (principal executive officer)
- ---------------------------------------------
Richard Gillespie, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE Vice President and Director
- ---------------------------------------------
H. Lynn Massingale
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-21
180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Hospital Based Physician Services,
Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Hospital Based Physician Services, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-22
181
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
IMBS, Inc.
By: /s/ JEFFREY BETTINGER, M.D.
------------------------------------
Name: Jeffrey Bettinger, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of IMBS,
Inc.), to sign any or all amendments (including post-effective amendments) to
this registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JEFFREY BETTINGER, M.D. President (principal executive officer)
- ---------------------------------------------
Jeffrey Bettinger, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-23
182
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Anesthesia of West Virginia,
Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Anesthesia of West Virginia, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-24
183
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Contracting Services, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Contracting Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-25
184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Hospital Services, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Hospital Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-26
185
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Joliet, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Joliet, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-27
186
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Louisiana, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Louisiana, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-28
187
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet Medical Management Institute,
Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet Medical Management Institute, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-29
188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
InPhyNet South Broward, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
InPhyNet South Broward, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-30
189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Karl G. Mangold, Inc.
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Karl
G. Mangold, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President (principal executive officer)
- ---------------------------------------------
Richard Gillespie, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-31
190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Med: Assure Systems, Inc.
By: /s/ JEFFREY BETTINGER, M.D.
------------------------------------
Name: Jeffrey Bettinger, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Med:
Assure Systems, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JEFFREY BETTINGER, M.D. President (principal executive officer)
- ---------------------------------------------
Jeffrey Bettinger, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-32
191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
MetroAmerican Radiology, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale,M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
MetroAmerican Radiology, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-33
192
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
MT. DIABLO EMERGENCY PHYSICIANS
By: Herschel Fischer, Inc.,
its general partner
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
By: Karl G. Mangold, Inc.,
its general partner
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Mt.
Diablo Emergency Physicians), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999:
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President (principal executive officer) of each
- --------------------------------------------------- of Herschel Fischer, Inc. and Karl G.
Richard Gillespie, M.D. Mangold, Inc.
/s/ DAVID JONES Vice President and Treasurer (principal
- --------------------------------------------------- financial officer
David Jones and accounting officer) of each of Herschel
Fischer, Inc. and Karl G. Mangold, Inc.
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director of each of Herschel
- --------------------------------------------------- Fischer, Inc. and Karl G. Mangold, Inc.
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director of each
- --------------------------------------------------- of Herschel Fischer, Inc. and Karl G.
Michael Hatcher Mangold, Inc.
II-34
193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Neo-Med, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Neo-Med, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-35
194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Northwest Emergency Physicians,
Incorporated
By: /s/ GERARD LASALLE, M.D.
------------------------------------
Name: Gerard LaSalle, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Northwest Emergency Physicians, Incorporated), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ GERARD LASALLE, M.D. President (principal executive officer)
- ---------------------------------------------
Gerard LaSalle, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-36
195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Paragon Anesthesia, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Paragon Anesthesia, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-37
196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Paragon Contracting Services, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Paragon Contracting Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-38
197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Paragon Healthcare Limited Partnership
By: InPhyNet Hospital Services, Inc.,
its general partner
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Paragon Healthcare Limited Partnership), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer) of
- --------------------------------------------------- InPhyNet Hospital Services, Inc.
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------------- officer and accounting officer) of InPhyNet
David Jones Hospital Services, Inc.
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director of InPhyNet Hospital
- --------------------------------------------------- Services, Inc.
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director of
- --------------------------------------------------- InPhyNet Hospital Services, Inc.
Michael Hatcher
II-39
198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Paragon Imaging Consultants, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Paragon Imaging Consultants, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-40
199
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Quantum Plus, Inc.
By: /s/ RICHARD GILLESPIE, M.D.
------------------------------------
Name: Richard Gillespie, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Quantum Plus, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RICHARD GILLESPIE, M.D. President (principal executive officer)
- ---------------------------------------------
Richard Gillespie, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-41
200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Reich, Seidelman & Janicki Co.
By: /s/ NORBERT REICH, D.O.
------------------------------------
Name: Norbert Reich, D.O.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Reich,
Seidelman & Janicki Co.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NORBERT REICH, D.O. President (principal executive officer)
- ---------------------------------------------
Norbert Reich, D.O.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-42
201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Rosendorf, Margulies, Borushok &
Schoenbaum
Radiology Associates of
Hollywood, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale,M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Rosendorf, Margulies, Borushor & Schoenbaum Radiology Associates of Hollywood,
Inc.), to sign any or all amendments (including post-effective amendments) to
this registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-43
202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Sarasota Emergency Medical
Consultants, Inc.
By: /s/ JAMES HILLMAN, M.D.
------------------------------------
Name: James Hillman, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Sarasota Emergency Medical Consultants, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES HILLMAN, M.D. President (principal executive officer)
- ---------------------------------------------
James Hillman, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-44
203
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Southeastern Emergency Physicians of
Memphis,
Inc.
By: /s/ RANDAL DABBS, M.D.
------------------------------------
Name: Randal Dabbs, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Southeastern Emergency Physicians of Memphis, Inc.), to sign any or all
amendments (including post-effective amendments) to this registration statement
and any subsequent registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RANDAL DABBS, M.D. President (principal executive officer)
- ---------------------------------------------
Randal Dabbs, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-45
204
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Southeastern Emergency Physicians Inc.
By: /s/ RANDAL DABBS, M.D.
------------------------------------
Name: Randal Dabbs, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Southeastern Emergency Physicians, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ RANDAL DABBS, M.D. President (principal executive officer)
- ---------------------------------------------
Randal Dabbs, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial and
- --------------------------------------------- accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-46
205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Team Health Billing Services, L.P.
By: Team Health, Inc., its general
partner
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Team
Health Billing Services, L.P.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President, Chief Executive Officer, Assistant
- --------------------------------------------- Secretary and Director of Team Health, Inc.
H. Lynn Massingale, M.D. (principal executive officer)
/s/ DAVID JONES Vice President and Treasurer of Team Health, Inc.
- --------------------------------------------- (principal financial officer and accounting officer)
David Jones
/s/ DANA J. O'BRIEN Director of Team Health, Inc.
- ---------------------------------------------
Dana J. O'Brien
/s/ TIMOTHY P. SULLIVAN Director of Team Health, Inc.
- ---------------------------------------------
Timothy P. Sullivan
/s/ TYLER WOLFRAM Director of Team Health, Inc.
- ---------------------------------------------
Tyler Wolfram
II-47
206
SIGNATURE CAPACITY
--------- --------
/s/ NICHOLAS W. ALEXOS Director of Team Health, Inc.
- ---------------------------------------------
Nicholas W. Alexos
/s/ KENNETH O'KEEFE Director of Team Health, Inc.
- ---------------------------------------------
Kenneth O'Keefe
II-48
207
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Team Health Financial Services, Inc.
By: /s/ JEFFREY BETTINGER, M.D.
------------------------------------
Name: Jeffrey Bettinger, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Team
Health Financial Services, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JEFFREY BETTINGER, M.D. President (principal executive officer)
- ---------------------------------------------
Jeffrey Bettinger, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-49
208
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
TEAM HEALTH SOUTHWEST, L.P.
By: Team Radiology, Inc., its general
partner
By:
/s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Team
Health Southwest, L.P.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director of
- --------------------------------------------------- of Team Radiology, Inc.
H. Lynn Massingale, M.D. (principal executive officer)
/s/ DAVID JONES Vice President and Treasurer of Team Radiology,
- --------------------------------------------------- Inc. (principal financial officer and
David Jones accounting officer)
/s/ MICHAEL HATCHER Vice President, Secretary and Director of Team
- --------------------------------------------------- Radiology, Inc.
Michael Hatcher
II-50
209
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Team Radiology, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of Team
Radiology, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-51
210
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
THBS, Inc.
By: /s/ H. LYNN MASSINGALE, M.D.
------------------------------------
Name: H. Lynn Massingale, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of THBS,
Inc.), to sign any or all amendments (including post-effective amendments) to
this registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ H. LYNN MASSINGALE, M.D. President and Director (principal executive officer)
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-52
211
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
The Emergency Associates for Medicine,
Inc.
By: /s/ JAMES V. HILLMAN
------------------------------------
Name: James V. Hillman
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of The
Emergency Associates for Medicine, Inc.), to sign any or all amendments
(including post-effective amendments) to this registration statement and any
subsequent registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES V. HILLMAN President (principal executive officer)
- ---------------------------------------------
James V. Hillman
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-53
212
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on June 9, 1999.
Virginia Emergency Physicians, Inc.
By: /s/ NEIL J. PRINCIPE, M.D.
------------------------------------
Name: Neil J. Principe, M.D.
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person who signature appears
below constitutes and appoints David Jones his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (including his or her capacity as a director and/or officer of
Virginia Emergency Physicians, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on June 9, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ NEIL J. PRINCIPE, M.D. President (principal executive officer)
- ---------------------------------------------
Neil J. Principe, M.D.
/s/ DAVID JONES Vice President and Treasurer (principal financial
- --------------------------------------------- officer and accounting officer)
David Jones
/s/ H. LYNN MASSINGALE, M.D. Vice President and Director
- ---------------------------------------------
H. Lynn Massingale, M.D.
/s/ MICHAEL HATCHER Vice President, Secretary and Director
- ---------------------------------------------
Michael Hatcher
II-54
213
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Recapitalization Agreement dated January 25, 1999 by and
among Team Health, Inc., MedPartners, Inc., Pacific
Physician Services, Inc. and Team Health Holdings, L.L.C.*
3.1 Articles of Amendment to the Articles of Incorporation of
Alliance Corporation dated January 15, 1997.*
3.2 By-laws of Alliance Corporation.*
3.3 Articles of Incorporation of Emergency Management
Specialists, Inc. dated August 12, 1983.*
3.4 By-laws of Emergency Management Specialists, Inc.*
3.5 Articles of Incorporation of EMSA South Broward, Inc. dated
December 3, 1996.*
3.6 By-laws of EMSA South Broward, Inc.*
3.7 Articles of Incorporation of Herschel Fischer, Inc. dated
February 18, 1997.*
3.8 By-laws of Herschel Fischer, Inc. dated February 21, 1997.*
3.9 Articles of Incorporation of IMBS, Inc. dated November 30,
1995.*
3.10 By-laws of IMBS, Inc.*
3.11 Articles of Incorporation of InPhyNet Hospital Services,
Inc. dated November 30, 1995.*
3.12 By-laws of InPhyNet Hospital Services, Inc.*
3.13 Certificate of Amendment of Certificate of Incorporation of
InPhyNet Medical Management Institute, Inc. dated February
28, 1996.*
3.14 By-laws of InPhyNet Medical Management Institute, Inc.*
3.15 Articles of Incorporation of Karl G. Mangold, Inc. dated
February 14, 1997.*
3.16 By-laws of Karl G. Mangold, Inc. dated February 20, 1997.*
3.17 Amended and Restated Articles of Incorporation of Charles L.
Springfield, Inc. dated November 21, 1997.*
3.18 Amendment to By-laws of Charles L. Springfield, Inc. dated
November 20, 1997.*
3.19 Articles of Amendment to the Charter of Clinic Management
Services, Inc. dated March 25, 1994.*
3.20 By-laws of Clinic Management Services, Inc.*
3.21 Articles of Incorporation of Daniel & Yeager, Inc. dated
October 25, 1989.*
3.22 By-laws of Daniel & Yeager, Inc. dated October 6, 1989.*
3.23 Articles of Incorporation of Drs. Sheer, Ahearn &
Associates, Inc. dated March 31, 1969.*
3.24 Amended and Restated By-laws of Drs. Sheer, Ahearn &
Associates, Inc. dated February 15, 1989.*
3.25 Articles of Amendment to the Charter of Emergency Coverage
Corporation dated February 15, 1993.*
3.26 Amendment to By-laws of Emergency Coverage Corporation dated
June 12, 1995.*
3.27 Restated Certificate of Incorporation of Emergency Physician
Associates, Inc. dated June 25, 1996.*
3.28 By-laws of Emergency Physician Associates, Inc.*
3.29 Articles of Incorporation of Emergency Physicians of
Manatee, Inc. dated June 1, 1988.*
3.30 By-laws of Emergency Physicians of Manatee, Inc.*
3.31 Certificate to Amend the Articles of Incorporation of
Emergency Professional Services, Inc. dated September 30,
1997.*