-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VkZhIi7GQsnzFSGmW9UBuqtqStmgt6EJikUusymx7q2iE00X2z38zXC4MD+fvyVf i0GXFDJp6cwQLSowx2I2ig== 0000950123-02-010351.txt : 20021107 0000950123-02-010351.hdr.sgml : 20021107 20021107173037 ACCESSION NUMBER: 0000950123-02-010351 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEAM HEALTH INC CENTRAL INDEX KEY: 0001086795 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 621562558 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-80337 FILM NUMBER: 02813108 BUSINESS ADDRESS: STREET 1: 1900 WINSTON RD CITY: KNOXVILLE STATE: TN ZIP: 37919 BUSINESS PHONE: 8003422898 MAIL ADDRESS: STREET 1: 1900 WINSTON RD CITY: KNOXVILLE STATE: TN ZIP: 37919 10-Q 1 y64947e10vq.txt FORM 10-Q EQUIVALENT: TEAM HEALTH, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q EQUIVALENT(1) [ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 333-80337 --------------------- TEAM HEALTH, INC. (Exact name of registrant as specified in its charter) TENNESSEE 62-1562558 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number)
1900 WINSTON ROAD SUITE 300 KNOXVILLE, TENNESSEE 37919 (865) 693-1000 (Address, zip code, and telephone number, including area code, of registrant's principal executive office.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [ ] Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock par value $0.01 per share -- 10,067,513 shares as of November 1, 2002. (1) This Form 10-Q Equivalent is only being filed solely pursuant to a requirement contained in the indenture governing Team Health, Inc.'s 12% Senior Subordinated Notes due 2009. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORWARD LOOKING STATEMENTS Statements in this document that are not historical facts are hereby identified as "forward looking statements" for the purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 27A of the Securities Act of 1933 (the "Securities Act"). Team Health, Inc. (the "Company") cautions readers that such "forward looking statements", including without limitation, those relating to the Company's future business prospects, revenue, working capital, professional liability expense, liquidity, capital needs, interest costs and income, wherever they occur in this document or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company's senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward looking statements". Such "forward looking statements" should, therefore, be considered in light of the factors set forth in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations". The "forward looking statements" contained in this report are made under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations". Moreover, the Company, through its senior management, may from time to time make "forward looking statements" about matters described herein or other matters concerning the Company. The Company disclaims any intent or obligation to update "forward looking statements" to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. 1 TEAM HEALTH, INC. QUARTERLY REPORT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
PAGE ---- Part 1. Financial Information Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets -- September 30, 2002 and December 31, 2001........................................... 3 Consolidated Statements of Operations -- Three months ended September 30, 2002 and 2001................................. 4 Consolidated Statements of Operations -- Nine months ended September 30, 2002 and 2001................................. 5 Consolidated Statements of Cash Flows -- Nine months ended September 30, 2002 and 2001................................. 6 Notes to Consolidated Financial Statements.................. 7 Item 2. Management's Discussion and Analysis of Financial Condition 15 and Results of Operations................................... Item 3. Quantitative and Qualitative Disclosures of Market Risk..... 23 Item 4. Controls and Procedures..................................... 24 Part 2. Other Information Item 1. Legal Proceedings........................................... 25 Item 2. Changes in Securities and Use of Proceeds................... 25 Item 3. Defaults upon Senior Securities............................. 25 Item 4. Submission of Matters to a Vote of Security Holders......... 25 Item 5. Other Information........................................... 25 Item 6. Exhibits and Reports on Form 8-K............................ 25 Signatures............................................................ 26 Section 302 Certification of Chief Executive Officer and Executive Vice President of Finance and Administration....................... 28
2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TEAM HEALTH, INC. CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------- ------------ (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................. $ 23,655 $ 70,183 Accounts receivable, net.................................. 156,742 119,776 Prepaid expenses and other current assets................. 11,427 7,732 Income tax receivable..................................... 8,820 8,721 -------- -------- Total current assets........................................ 200,644 206,412 Property and equipment, net................................. 19,751 18,806 Intangibles, net............................................ 32,747 19,490 Goodwill.................................................... 159,269 24,202 Deferred income taxes....................................... 68,154 76,374 Other....................................................... 19,156 16,159 -------- -------- $499,721 $361,443 ======== ======== LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable.......................................... $ 13,018 $ 12,758 Accrued compensation and physician payable................ 60,387 49,521 Other accrued liabilities................................. 11,842 11,068 Current maturities of long-term debt...................... 12,250 24,211 Deferred income taxes..................................... 4,039 4,815 -------- -------- Total current liabilities................................... 101,536 102,373 Long-term debt, less current maturities..................... 310,500 193,089 Other non-current liabilities............................... 45,345 34,892 Mandatory redeemable preferred stock........................ 141,096 130,779 Commitments and Contingencies Common stock, $0.01 par value 12,000 shares authorized, 10,068 and 10,000 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively.... 101 100 Additional paid in capital.................................. 644 -- Retained earnings (deficit)................................. (98,311) (99,571) Accumulated other comprehensive loss........................ (1,190) (219) -------- -------- $499,721 $361,443 ======== ========
See accompanying notes to financial statements. 3 TEAM HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2002 2001 -------- -------- (IN THOUSANDS) (UNAUDITED) Fee for service revenue..................................... $240,941 $187,561 Contract revenue............................................ 87,065 41,664 Other revenue............................................... 7,898 4,535 -------- -------- Net revenue............................................... 335,904 233,760 Provision for uncollectibles................................ 111,057 93,001 -------- -------- Net revenue less provision for uncollectibles............. 224,847 140,759 Professional expenses....................................... 181,950 133,393 -------- -------- Gross profit.............................................. 42,897 7,366 General and administrative expenses......................... 21,663 15,751 Management fee and other expenses........................... 125 264 Impairment of intangibles................................... 1,000 -- Depreciation and amortization............................... 5,711 3,763 Interest expense, net....................................... 6,374 5,649 -------- -------- Earnings (loss) before income taxes....................... 8,024 (18,061) Income tax expense (benefit)................................ 4,147 (6,185) -------- -------- Net earnings (loss)......................................... 3,877 (11,876) Dividends on preferred stock................................ 3,309 2,997 -------- -------- Net earnings (loss) attributable to common stockholders... $ 568 $(14,873) ======== ========
See accompanying notes to financial statements. 4 TEAM HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 2002 2001 -------- -------- (IN THOUSANDS) (UNAUDITED) Fee for service revenue..................................... $672,430 $611,145 Contract revenue............................................ 199,794 118,742 Other revenue............................................... 22,718 10,620 -------- -------- Net revenue............................................... 894,942 740,507 Provision for uncollectibles................................ 293,130 277,044 -------- -------- Net revenue less provision for uncollectibles............. 601,812 463,463 Professional expenses....................................... 484,412 389,723 -------- -------- Gross profit.............................................. 117,400 73,740 General and administrative expenses......................... 58,637 46,438 Management fee and other expenses........................... 387 440 Impairment of intangibles................................... 1,000 4,137 Depreciation and amortization............................... 14,298 11,168 Interest expense, net....................................... 17,539 17,256 Refinancing costs........................................... 3,389 -- -------- -------- Earnings (loss) before income taxes and cumulative effect of change in accounting principle...................... 22,150 (5,699) Income tax expense (benefit)................................ 10,556 (1,178) -------- -------- Earnings (loss) before cumulative effect of change in accounting principle................................... 11,594 (4,521) Cumulative effect of change in accounting principle, net of income tax benefit of $209................................ (294) -- -------- -------- Net earnings (loss)......................................... 11,300 (4,521) Dividends on preferred stock................................ 9,820 8,892 -------- -------- Net earnings (loss) attributable to common stockholders... $ 1,480 $(13,413) ======== ========
See accompanying notes to financial statements. 5 TEAM HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 2001 2002 --------- --------- (IN THOUSANDS) (UNAUDITED) OPERATING ACTIVITIES Net earnings (loss)......................................... $ 11,300 $ (4,521) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization............................. 14,298 11,168 Amortization of deferred financing costs.................. 1,226 1,381 Write-off of deferred financing costs..................... 3,389 -- Provision for uncollectibles.............................. 293,130 277,044 Impairment of intangibles................................. 1,000 4,137 Deferred income taxes..................................... 11,105 (6,089) Loss on sale of equipment................................. 44 163 Cumulative effect of change in accounting principle....... 294 -- Equity in joint venture income............................ (233) (558) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable....................................... (304,078) (253,196) Prepaid expenses and other current assets................. (3,726) (960) Income tax receivable..................................... 51 6,235 Accounts payable.......................................... (4,663) (2,966) Accrued compensation and physician payable................ (1,176) 4,935 Other accrued liabilities................................. (891) (4,956) Professional liability reserves........................... 4,464 4,104 --------- --------- Net cash provided by operating activities................... 25,534 35,921 --------- --------- INVESTING ACTIVITIES Purchases of property and equipment......................... (7,167) (3,721) Cash paid for acquisitions, net............................. (166,989) (15,202) Purchase of investments..................................... (1,046) (859) Other investing activities.................................. 997 287 --------- --------- Net cash used in investing activities....................... (174,205) (19,495) FINANCING ACTIVITIES Payments on notes payable................................... (119,550) (11,901) Proceeds from notes payable................................. 225,000 -- Payment of deferred financing costs......................... (5,221) (28) Proceeds from sales of common stock......................... 644 -- Proceeds from sales of preferred stock...................... 1,270 -- --------- --------- Net cash provided by (used in) financing activities......... 102,143 (11,929) --------- --------- Net increase (decrease) in cash............................. (46,528) 4,497 Cash and cash equivalents, beginning of period.............. 70,183 55,404 --------- --------- Cash and cash equivalents, end of period.................... $ 23,655 $ 59,901 ========= ========= Interest paid............................................... $ 19,305 $ 21,575 ========= ========= Taxes paid.................................................. $ 7,565 $ 4,493 ========= =========
6 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Team Health, Inc. (the "Company") and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. In the opinion of management, the accompanying unaudited consolidated 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 balance sheet of the Company at December 31, 2001 has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. These financial statements and footnote disclosures should be read in conjunction with the December 31, 2001 audited consolidated financial statements and the notes thereto included in the Company's Form 10-K. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States 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. IMPLEMENTATION OF NEW ACCOUNTING STANDARDS Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to impairment tests on an annual basis, or more frequently if certain indicators arise. Other intangible assets continue to be amortized over their useful lives. The Company completed its required initial impairment testing of goodwill during the three months ended March 31, 2002. As a result of this review, the Company concluded that a portion of its recorded goodwill was impaired. Accordingly, an impairment loss of $0.5 million ($0.3 million net of taxes) was recorded at March 31, 2002 as the cumulative effect of a change in accounting principle. The impact on net earnings for the three months and nine months ended September 30, 2001, had the nonamortization of goodwill been in effect for such periods, would have been an increase in previously reported net earnings of approximately $0.5 million and $1.5 million, respectively. Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 significantly changes the criteria that has to be met to classify an asset as held-for-sale, and requires expected future operating losses from discontinued operations to be displayed in discontinued operations in the period(s) in which the losses are incurred (rather than as of the measurement date as previously required). In addition, more dispositions qualify for discontinued operations treatment in the statement of operations. The implementation of SFAS No. 144 did not have any impact on the Company's results of operation or financial position. During May 2002, the Financial Accounting Standards Board issued SFAS No. 145 "Rescission of Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". SFAS No. 145 rescinds or changes several previously issued accounting pronouncements. Included among such items is an elimination of Statement No. 4 and specifically the requirement to classify all gains and losses from the extinguishment of debt, if material, as extraordinary items. Consequently, gains and losses from the 7 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) extinguishments of debt are subject to the criteria established in Accounting Principles Board (APB) Opinion 30 "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" with a current view that such extinguishments generally do not meet the criteria of APB Opinion 30 as being "unusual and infrequent". The provisions of SFAS No. 145 related to the classification of gains or losses attributable to debt extinguishments are effective for fiscal years beginning after May 15, 2002. The Company has elected to adopt the provisions of SFAS No. 145 during the three months ended September 30, 2002. Accordingly, the Company's statement of operations for the nine months ended September 30, 2002 includes a reclassification of its previously recorded extraordinary loss due to a refinancing charge to the presentation required under the SFAS. During July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)". SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The scope of SFAS No. 146 also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. The new standard is effective for exit or restructuring activities initiated after December 31, 2002. 8 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 3. INTANGIBLE ASSETS The following is a summary of intangible assets and related amortization as of September 30, 2002 and December 31, 2001 for intangibles that continue to be amortized following the implementation of SFAS 142 on January 1, 2002 (in thousands):
GROSS CARRYING ACCUMULATED AMOUNT AMORTIZATION -------------- ------------ As of September 30, 2002: Contracts................................................. $50,289 $17,900 Other..................................................... 685 327 ------- ------- Total.................................................. $50,974 $18,227 ======= ======= As of December 31, 2001: Contracts................................................. $32,035 $12,977 Other..................................................... 685 253 ------- ------- Total.................................................. $32,720 $13,230 ======= ======= Aggregate amortization expense: For the three months ended September 30, 2002............. $ 3,313 ======= For the nine months ended September 30, 2002.............. $ 7,274 ======= Estimated amortization expense: For the year ended December 31, 2002...................... $10,596 For the year ended December 31, 2003...................... 12,780 For the year ended December 31, 2004...................... 5,003 For the year ended December 31, 2005...................... 3,785 For the year ended December 31, 2006...................... 1,754
During the three and nine months ended September 30, 2002, the Company recorded an additional $2.9 million and $135.7 million of goodwill and $4.1 million and $21.5 million, respectively, of contract intangibles as a result of its acquisitions during the periods and contingent acquisition payments made for previous acquisitions. Contract intangibles are being amortized over their estimated lives which range from approximately twenty months to seven years. The carrying value of goodwill and other intangibles is routinely evaluated by the Company to determine whether such assets may be impaired with respect to their recorded values. If this evaluation indicates that certain intangibles may not be recoverable, as determined based on the undiscounted cash flows derived from the recorded assets over their remaining estimated useful lives, the carrying value of the intangibles is reduced by the estimated shortfall of discounted cash flows. During the three months ended September 30, 2002, the Company concluded that one of its contract intangibles was impaired. Accordingly, the contract intangible was reduced to its estimated fair value by recording an impairment loss of approximately $1.0 million at September 30, 2002. The Company had previously recorded an impairment loss of $4.1 million in the nine months ended September 30, 2001 relating to a portion of its radiology operations. NOTE 4. ACQUISITIONS Effective September 1, 2002, the Company acquired all of the outstanding stock of three corporations held by a single stockholder. The acquired corporations provide hospital emergency department and hospital physician staffing services under five contracts for locations in West Virginia and Virginia. The purchase price 9 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for the acquired corporations was $8.6 million of which $5.2 million was paid in cash at September 1, 2002 with the remainder of the purchase price due in four annual installments of $0.9 million, $0.9 million, $1.1 million and $0.5 million commencing on October 31, 2003. In addition, the Company may have to pay up to $2.0 million in future contingent payments. On May 1, 2002, the Company acquired all of the operations of Spectrum Health Resources ("SHR"), a provider of physician and other professional medical staffing to military treatment facilities. The agreement provided for the Company to acquire the operations of SHR through the purchase of all of the outstanding stock of the parent company of SHR and the refinancing of the parent company's outstanding debt for cash of $147.0 million. The purchase price of SHR of $147.0 million, in addition to adjustment for transaction costs, was also subject to adjustment during the 90-day period subsequent to April 30, 2002 for actual net working capital at April 30, 2002. The total purchase price for SHR after consideration of the aforementioned adjustments was approximately $145.5 million. SHR is the leading provider of permanent healthcare staffing services to military treatment facilities. The acquisition of SHR, which provides services similar to the existing staffing operations of the Company, significantly expands the Company's base of business by providing an entry into a portion of the healthcare staffing market not presently served by the Company. The Company's three equity sponsors control a majority of the Company's voting common stock. Those three equity sponsors were also controlling equity investors in SHR prior to and at the time of entering into the definitive purchase agreement. Prior to negotiating the final purchase price and entering into the definitive purchase agreement to acquire SHR, the Board of Directors took the following steps: 1. The Board of Directors appointed a Special Committee, consisting of three Directors who are not affiliated with the equity sponsors. The Special Committee was authorized to (i) consider, negotiate and approve the acquisition of SHR, (ii) retain such legal counsel and advisers and consultants as they deem appropriate, (iii) consider, negotiate and approve the terms of any financing related to the transaction, and (iv) expend any funds in furtherance of the duties granted to it. The final authority to approve the acquisition and financing rested with the full Board of Directors, but the Board of Directors could not approve any transaction not recommended by the Special Committee. 2. Two of the three equity sponsors along with the Company's management members assisted the Special Committee in the evaluations and negotiations of the transaction on behalf of the Company. The largest common equity sponsor in SHR and the Company represented SHR in its evaluation and negotiation of the transaction. 3. The Special Committee obtained an opinion by the investment banking firm of SunTrust Robinson Humphrey, a division of SunTrust Capital Markets, Inc., that the purchase price paid for SHR was fair from a financial point of view to the equity holders of the Company as well as its bond holders. Effective January 1, 2002, the Company completed the acquisition of certain of the assets and related business operations of two businesses. The operations acquired include those of L&S Medical Management, Inc. ("L&S") and a pediatric services business. L&S provides billing and other management services on a management fee basis to anesthesiologist practices, principally in the Southeastern portion of the United States. The pediatric services operation provides evenings and weekend pediatric urgent care and non-trauma emergency practice services at three locations in Florida. The pediatric services provided are billed by the Company on a fee-for-service basis. The assets and operations of L&S were acquired for $6.4 million in cash and the Company may have to make up to $3.9 million in future contingent payments for the existing L&S contracts as of December 31, 2001. In addition, the Company has agreed to pay the owners of L&S, as additional purchase price consideration, a multiple of earnings before interest, taxes and depreciation and amortization for certain 10 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) potential new contract locations identified at the date of closing. The additional amount(s) of purchase price will only be paid if the owners of L&S are successful in the completion of their marketing efforts as evidenced by such locations having entered into contracts for services within specified time frames following December 31, 2001. The additional purchase price, if any, for such subsequent contracts is not able to be estimated at this time. The assets and operations of the three pediatric services locations were acquired for $4.7 million in cash. The Company may have to make up to $3.2 million in future contingent payments for the existing business operations if targeted future earnings levels are achieved. The results of operations from the above acquisitions have been included with those of the Company since their respective dates of acquisition. The portion of the purchase prices allocated to intangibles and goodwill was approximately $153.5 million including $142.7 million which is not deductible for tax purposes. Amounts allocated to intangibles are being amortized over their estimated lives which range from twenty months to seven years. The following is a summary of the net assets acquired in 2002 (in thousands): Current assets.............................................. $ 31,038 Property and equipment...................................... 848 Intangibles................................................. 21,510 Goodwill.................................................... 132,036 Deferred income taxes....................................... 907 Other assets................................................ 1,101 -------- 187,440 Less -- liabilities assumed................................. 20,944 -------- $166,496 ========
The following unaudited pro forma information presents the results of operations of the Company as if the acquisitions noted above had taken place as of January 1, 2002 and 2001, respectively (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2002 2001 2002 2001 -------- -------- -------- -------- Net revenues less provision................ $227,058 $183,993 $668,202 $591,026 Earnings (loss) before cumulative effect of accounting change........................ 3,902 (12,382) 12,408 (6,090) Net earnings (loss)........................ 3,902 (12,382) 12,114 (6,090)
The unaudited pro forma results of operations have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred as of January 1, 2002 and 2001, respectively. 11 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5. LONG-TERM DEBT Long-term debt as of September 30, 2002 consists of the following (in thousands): Term Loan Facility.......................................... $222,750 12% Senior Subordinated Notes............................... 100,000 322,750 Less current portion........................................ (12,250) -------- $310,500 ========
On May 1, 2002, in conjunction with the acquisition of SHR, the Company entered into a new senior credit facility agreement with a group of banks. The senior credit facilities were to refinance the Company's outstanding bank term loans and to provide for a new revolving credit facility. The senior credit facilities consisted of the following: - $75 million Senior Secured Revolving Credit Facility - $75 million Senior Secured Term Loan A - $150 million Senior Secured Term Loan B The $225 million in proceeds from the new term loans, along with the use of $39.9 million of existing cash balances, were used to fund the acquisition of SHR and to retire the Company's outstanding loan balances as of April 30, 2002, under its previous senior credit facility. The interest rates for any senior revolving credit facility borrowings and for the Term Loan A amounts outstanding for the first six months of the agreement are equal to either the eurodollar rate plus 2.75% or the agent bank's base rate plus .75%. Thereafter, the revolver and Term Loan A interest rates are based on a grid which is based on the consolidated ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA), both as defined in the credit agreement. The interest rate on the Term Loan B amount outstanding is equal to the eurodollar rate plus 3.25% or the agent bank's base rate plus 1.25%. The interest rates at September 30, 2002 were 4.88% and 5.44% for term loans A and B, respectively. The Company pays a commitment fee for the revolving credit facility which was equal to 0.5% of the commitment at September 30, 2002. No funds have been borrowed under the revolving credit facility as of September 30, 2002, but the Company had $1.6 million of standby letters of credit outstanding against the revolving credit facility commitment. On July 3, 2002, the Company entered into a forward interest rate swap agreement effective November 7, 2002, to effectively convert $62,500,000 of floating-rate borrowings to 3.86% fixed-rate borrowings through April 30, 2005. The new senior credit facility agreement contains both affirmative and negative covenants, including limitations on the Company's ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire its capital stock, acquire the capital stock or assets of another business, pay dividends, and requires the Company to meet or exceed certain coverage, leverage and indebtedness ratios. In addition, the new senior credit agreement includes a provision for the prepayment of a portion of the outstanding term loan amounts at any year-end if the Company generates "excess cash flow," as defined in the agreement. 12 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Aggregate maturities of long-term debt due within one year of September 30, 2002 (in thousands) are as follows: 2003........................................................ $ 12,250 2004........................................................ 15,500 2005........................................................ 19,250 2006........................................................ 21,625 Thereafter.................................................. 254,125 -------- $322,750 ========
In conjunction with entering into the new senior credit facilities, the Company expensed deferred financing costs on its previously outstanding bank debt of approximately $3.4 million during the three months ended June 30, 2002. NOTE 6. NET REVENUE ADJUSTMENT During the three months ended September 30, 2001, the Company recorded a provision of $24.5 million to increase its contractual allowances for patient accounts receivable. The charge resulted from a change in estimated collection rates based on a detailed analysis of the Company's outstanding accounts receivable using additional data developed during the period. The results of the additional research indicated that the Company's estimated collection rates for prior periods were lower than originally estimated. NOTE 7. CONTINGENCIES LITIGATION 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 professional liability 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 related reserves, and such liabilities, if incurred, should not have a significant negative effect on the results of operations and financial condition of our Company. INDEMNITIES In connection with the recapitalization of the Company in 1999, subject to certain limitations, the Company's previous owner, MedPartners, and related entities, have jointly and severally agreed to indemnify us against certain losses relating to litigation arising out of incidents occurring prior to the recapitalization in 1999 to the extent those losses are not covered by third party insurance. With respect to certain 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 operations of the Company and its subsidiaries prior to the closing date of the recapitalization transactions for which the Company or any of its subsidiaries or physicians becomes liable. In connection with the acquisition of SHR on May 1, 2002, subject to certain limitations, the previous shareholders of SHR and related entities have indemnified us against certain potential losses attributable to events or conditions that existed prior to May 1, 2002. The indemnity limit is $10.0 million, with certain potential losses, as defined, subject to a $.5 million "basket" before such losses are recoverable from the previous shareholders. In addition, a separate indemnification exists with a limit of $10.0 million relating to 13 TEAM HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) any claims asserted against SHR during the three years subsequent to the date of SHR's acquisition related to tax matters whose origin was attributable to tax periods prior to May 1, 2002. HEALTHCARE REGULATORY MATTERS Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation as well as significant regulatory action. From time to time, governmental regulatory agencies will conduct inquiries and audits of the Company's practices. It is the Company's current practice and future intent to cooperate fully with such inquiries. In addition to laws and regulations governing the Medicare and Medicaid programs, there are a number of federal and state laws and regulations governing such matters as the corporate practice of medicine and fee splitting arrangements, anti-kickback statutes, physician self-referral laws, false or fraudulent claims filing and patient privacy requirements. The failure to comply with any of such laws or regulations could have an adverse impact on our operations and financial results. It is management's belief that the Company is in substantial compliance in all material respects with such laws and regulations. CONTINGENT ACQUISITION PAYMENTS As of September 30, 2002, the Company may have to pay up to $11.3 million in future contingent payments as additional consideration for acquisitions made prior to September 30, 2002. These payments will be made and recorded as additional purchase price should the acquired operations achieve the financial targets contracted in the respective agreements related to their acquisition. NOTE 8. COMPREHENSIVE EARNINGS The components of comprehensive earnings, net of related taxes, are as follows (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 2002 2001 2002 2001 ------- -------- ------ -------- Net earnings (loss) attributable to common shareholders................................ $ 568 $(14,873) $1,480 $(13,413) Cumulative effect of change in accounting principle -- fair value of interest rate swaps....................................... -- -- -- 54 Net change in fair value of interest rate swaps....................................... (1,409) (58) (1,190) (476) ------- -------- ------ -------- Other comprehensive loss...................... (1,409) (58) (1,190) (422) ------- -------- ------ -------- Comprehensive earnings (loss)................. $ (841) $(14,931) $ 290 $(13,835) ======= ======== ====== ========
Accumulated other comprehensive loss, net of related taxes, was $1.2 million and $0.4 million at September 30, 2002 and 2001, respectively, relating to the fair value of interest rate swaps. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION We believe we are the largest national provider of outsourced physician staffing and administrative services to hospitals and other healthcare providers in the United States. Since our inception, we have focused primarily on providing outsourced services to hospital emergency departments and urgent care centers, which accounts for the majority of our net revenue. Spectrum Healthcare Resources ("SHR"), which was acquired effective May 1, 2002, and also provides outsourced physician staffing and administrative services, is the leading provider of medical staffing to military treatment facilities. SHR, in addition to providing physician staffing in various specialties, also provides a broad array of non-physician health care services including specialty technical staffing, para-professionals and nurse staffing on a permanent basis. Our regional operating models include comprehensive programs for emergency medicine, radiology, anesthesiology, inpatient care, pediatrics and other health care services, principally within hospital departments and other health care treatment facilities. The following discussion provides an assessment of the Company's results of operations, liquidity and capital resources and should be read in conjunction with the consolidated financial statements of the Company and notes thereto included elsewhere in this document. CRITICAL ACCOUNTING POLICIES The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates and assumptions. A significant portion of the Company's revenue is derived from fee-for-service patient visits. The recognition of net revenue (gross charges less contractual allowances) from such visits is dependent on such factors as proper completion of medical charts following a patient visit, the forwarding of such charts to one of the Company's six billing centers for medical coding and entering into the Company's billing systems, and the verification of each patient's submission or representation at the time services are rendered as to the payor(s) responsible for payment of such services. Net revenues are recorded based on the information known at the time of entering of such information into our billing system as well as an estimate of the net revenues associated with medical charts for a given service period that have not been processed yet into the Company's billing systems. The above factors and estimates are subject to change. For example, patient payor information may change following an initial attempt to bill for services due to a change in payor status. Such changes in payor status have an impact on recorded net revenue due to differing payors being subject to different contractual allowance amounts. Such changes in net revenue are recognized in the period that such changes in payor become known. Similarly, the actual volume of medical charts not processed into our billing systems may be different from the amounts estimated. Such differences in net revenue are adjusted in the following month based on actual chart volumes processed. Net revenue less provision for uncollectibles reflects management's estimate of billed amounts to ultimately be collected. Management, in estimating the amounts to be collected resulting from millions of annual patient visits and procedures, considers such factors as prior contract collection experience, current period changes in payor mix and patient acuity indicators, reimbursement rate trends in governmental and private sector insurance programs and trends in collections from self-pay patients. Such estimates are performed at the individual contract level, reviewed periodically and adjusted, if subsequent actual collection experience indicates a change in estimate is necessary. Such provisions and any subsequent changes in estimates may result in adjustments to our operating results with a corresponding adjustment to our accounts receivable allowance for uncollectibles on our balance sheet. The Company's revenue recognition accounting policy along with its other critical accounting policies have been disclosed in its 2001 Annual Report on Form 10K. There have been no changes to these critical accounting policies or their application during the nine months ended September 30, 2002. 15 RESULTS OF OPERATIONS The following discussion provides an analysis of our results of operations and should be read in conjunction with our unaudited consolidated financial statements. The operating results of the periods presented were not significantly affected by general inflation in the U.S. economy. Net revenue less the provision for uncollectibles is an estimate of future cash collections and as such it is a key measurement by which management evaluates performance of individual contracts as well as the Company as a whole. The following table sets forth the components of net earnings as a percentage of net revenue less provision for uncollectibles for the periods indicated:
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- 2002 2001 2002 2001 ------- ------- ------- ------- Fee for service revenue.................................. 107.2% 133.2% 111.7% 131.9% Contract revenue......................................... 38.7 29.6 33.2 25.6 Other revenue............................................ 3.5 3.2 3.8 2.3 Net revenue.............................................. 149.4 166.0 148.7 159.8 Provision for uncollectibles............................. 49.4 66.0 48.7 59.8 Net revenue less provision for uncollectibles............ 100.0 100.0 100.0 100.0 Professional expenses.................................... 80.9 94.8 80.5 84.1 Gross profit............................................. 19.1 5.2 19.5 15.9 General and administrative expenses...................... 9.6 11.2 9.7 10.0 Management fee and other expenses........................ 0.1 0.1 0.1 0.1 Impairment of intangibles................................ 0.4 -- 0.1 0.9 Depreciation and amortization............................ 2.6 2.6 2.4 2.4 Interest expense, net.................................... 2.8 4.0 2.9 3.7 Refinancing costs........................................ -- -- 0.6 -- Earnings (loss) before income tax expense (benefit) and cumulative effect of change in accounting principle.... 3.6 (12.7) 3.7 (1.2) Income tax expense (benefit)............................. 1.9 (4.3) 1.8 (0.2) Earnings (loss) before cumulative effect of change in accounting principle................................... 1.7 (8.4) 1.9 1.0 Cumulative effect of change in accounting principle, net of income tax benefit.................................. -- -- 0.1 -- Net earnings (loss)...................................... 1.7 (8.4) 1.8 (1.0) Dividends on preferred stock............................. 1.5 2.1 1.6 1.9 Net earnings (loss) attributable to common stockholders........................................... 0.2 (10.5) 0.2 (2.9)
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2001 Net Revenue. Net revenue for the three months ended September 30, 2002 increased $102.1 million, or 43.7%, to $335.9 million from $233.8 million for the three months ended September 30, 2001. During the three months ending September 30, 2001, the Company recorded a charge of $24.5 million to increase its contractual allowances for patient accounts receivable for periods prior to 2001. The impact of this charge was to reduce fee-for-service net revenue for the three months ended September 30, 2001 by $24.5 million. See footnote 6 to the unaudited consolidated financial statements for additional information. The increase in net revenue of $102.1 million included an increase of $53.4 million in fee-for-service revenue, $45.4 million in contract revenue and $3.3 million in other revenue. For the three month periods ended September 30, 2002 and 2001, fee-for-service revenue was 71.7% of net revenue in 2002 compared to 80.2% in 2001, contract revenue was 25.9% of net revenue in 2002 compared to 17.8% in 2001 and other revenue was 2.4% of net revenue in 2002 compared to 1.9% in 2001. The change in the mix of revenues is principally due to the 16 acquisition of SHR in 2002. SHR derives a higher percentage of its revenues from hourly contract billings than fee-for-service contracts. Provision for Uncollectibles. The provision for uncollectibles was $111.1 million for the three months ended September 30, 2002 compared to $93.0 million for the three months ended September 30, 2001, an increase of $18.1 million or 19.5%. As a percentage of net revenue the provision for uncollectibles was 33.1% for the three months ended September 30, 2002 compared to 39.8% for the three months ended September 30, 2001. The provision for uncollectibles is primarily related to revenue generated under fee-for-service contracts which is not expected to be fully collected. The lower percentage of net revenue in the three months ended September 30, 2002 is the result of the lower mix of fee-for-service revenue within the total revenues of SHR which was acquired on May 1, 2002. During the fourth quarter of 2001, the Company revised its estimate of the allocation of deductions from net revenues for contractual allowances and uncollectibles. The adjustment had the effect of reducing the 2001 full year provision for uncollectibles in the fourth quarter of 2001 from the amounts provided in the first nine months of 2001, with an offsetting adjustment to contractual allowances. The estimate of the Company's provision for uncollectibles for the three months ended September 30, 2002 is consistent with the calculation methodology used for the fourth quarter of 2001. The Company believes that the revised estimating methodology results in a better allocation of deductions between contractual allowances and provisions for uncollectibles. Net Revenue Less Provision for Uncollectibles. Net revenue less provision for uncollectibles for the three months ended September 30, 2002 increased $84.0 million, or 59.7% ($59.6 million, or 36.1%, after giving effect to the charge of $24.5 million in 2001), to $224.8 million from $140.8 million for the corresponding three months in 2001. Same contract revenue less provision for uncollectibles, which consists of contracts under management from the beginning of the prior period through the end of the subsequent period, increased $9.1 million or 6.0%, to $161.3 million in 2002 from $152.2 million in 2001. The increase in same contract revenue of 6.0% includes the effects of both increased billing volume and higher estimated net revenue per billing unit between periods. Overall, same contract revenue increased approximately 2.7% between periods due to an increase in billing volume. Beginning January 1, 2002, the Company's reimbursement under the Medicare Program was reduced. The estimated effect of such reduction in the three months ended September 30, 2002 was $2.3 million. In addition, net estimated revenue per billing unit was adversely impacted between periods by a less favorable payor mix. Acquisitions contributed $49.1 million and new contracts obtained through internal sales contributed $10.8 million of the remaining increase. The increases noted above were partially offset by $9.4 million of revenue derived from contracts that terminated during the periods. Professional Expenses. Professional expenses for the three months ended September 30, 2002 were $182.0 million compared to $133.4 million for the three months ended September 30, 2001, an increase of $48.6 million or 36.4%. The increase of $48.6 million included $38.0 million resulting from acquisitions between periods. As a percentage of net revenue less provision for uncollectibles, professional expenses were 80.9% for the three months ended September 30, 2002 compared to 94.8% for the three months ended September 30, 2001 (68.2% after giving effect to the charge of $24.5 million in 2001). Physician costs, billing and collection expenses and other professional expenses, excluding professional liability expense and the effect of acquisitions, increased $9.5 million, or 7.5% between periods. The increase in these professional expenses was principally due to increases in physician hours and rates and costs associated with the addition of capacity in our billing operations between periods. In addition, the Company experienced increased usage of mid-level practitioners and physician assistants in 2002 in an effort to improve emergency department productivity and to meet increased emergency department volumes. Professional liability expense was $9.6 million for the three months ended September 30, 2002 compared with $8.0 million for the three months ended September 30, 2001, resulting in an increase between periods of $1.6 million or 19.7%. The increase in the Company's professional liability expense, in addition to increases resulting from acquisitions ($0.6 million), reflects higher premium costs between periods due to a "hardening" of the insurance market for such coverage as well as a provision for claim losses in excess of insurance limits. Gross Profit. Gross profit increased to $42.9 million for the three months ended September 30, 2002 from $7.4 million for the corresponding period in 2001. The increase in gross profit after giving effect to the 17 charge of $24.5 million in 2001 is attributable to the contribution of acquisitions. Gross profit as a percentage of revenue less provision for uncollectibles was 19.1% for the three months ended September 30, 2002 compared to 5.2% for the three months ended September 30, 2001 due to the factors described above. General and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2002 increased to $21.7 million from $15.8 million for the three months ended September 30, 2001, for an increase of $5.9 million, or 37.5% between periods. General and administrative expenses as a percentage of net revenue less provision for uncollectibles were 9.6% for the three months ended September 30, 2002 compared to 11.2% for the three months ended September 30, 2001. The increase in general and administrative expenses between periods included expenses associated with acquired operations of $4.1 million accounting for 26.3% of the 37.5% increase between periods. The remaining net increase of 11.2% was principally due to increases in salaries and related benefit costs resulting from annual wage increases and the full year effect of additional staff added in prior periods. Management Fee and Other Expenses. Management fee and other expenses were $0.1 and $0.3 million for the three months ended September 30, 2002 and 2001, respectively. Impairment of Intangibles. Impairment of intangibles for the three months ended September 30, 2002 was $1.0 million and was related to one of the Company's contract intangibles. Depreciation and Amortization. Depreciation and amortization was $5.7 million for the three months ended September 30, 2002 compared to $3.8 million for the three months ended September 30, 2001, an increase of $1.9 million or 51.8%. Depreciation increased by $0.3 million between periods while amortization expense increased by $1.6 million between periods. The increase in depreciation expense was due to capital expenditures made during 2001 and 2002. Amortization expense increased $1.6 million between periods principally due to amortization of identifiable intangibles resulting from acquisitions made during 2001 and 2002, partially offset by no longer amortizing goodwill subsequent to January 1, 2002 (amortization of goodwill was $0.5 million for the three months ended September 30, 2001) as a result of implementing SFAS No. 142, Goodwill and Other Intangible Assets. Net Interest Expense. Net interest expense increased $0.8 million to $6.4 million for the three months ended September 30, 2002 compared to $5.6 million for the corresponding period in 2001. The increase in net interest expense is principally due to an increase in outstanding debt due to the refinancing of bank debt in conjunction with the acquisition of SHR partially offset by lower interest rates between periods. Earnings (Loss) before Income Taxes. Earnings before income taxes for the three months ended September 30, 2002 were $8.0 million compared to a loss of $18.1 million for the three months ended September 30, 2001. Income Tax Expense (Benefit). Income tax expense for the three months ended September 30, 2002 was $4.1 million compared to a benefit of $6.2 million for the three months ended September 30, 2001. The increase in income tax expense for the three months ended September 30, 2002 over the same period in 2001 was primarily due to the increased level of earnings before income taxes in 2002. Net Earnings (Loss). Net earnings for the three months ended September 30, 2002 were $3.9 million compared to a net loss of $11.9 million for the three months ended September 30, 2001. Dividends on Preferred Stock. The Company accrued $3.3 million and $3.0 million of dividends for the three months ended September 30, 2002 and 2001, respectively, on its outstanding Class A mandatory redeemable preferred stock. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2001 Net Revenue. Net revenue for the nine months ended September 30, 2002 increased $154.4 million, or 20.9%, to $894.9 million from $740.5 million for the nine months ended September 30, 2001. During the three months ending September 30, 2001, the Company recorded a charge of $24.5 million to increase its contractual allowances for patient accounts receivable for periods prior to 2001. The impact of this charge was to reduce fee-for-service net revenue for the nine months ended September 30, 2001 by $24.5 million. See 18 footnote 6 to the unaudited consolidated financial statements for additional information. The increase in net revenue of $154.4 million included an increase of $61.3 million in fee-for-service revenue, $81.1 million in contract revenue and $12.1 million in other revenue. For the nine month periods ended September 30, 2002 and 2001, fee-for-service revenue was 75.2% of net revenue in 2002 compared to 82.6% in 2001, contract revenue was 22.3% of net revenue in 2002 compared to 16.0% in 2001 and other revenue was 2.5% of net revenue in 2002 compared to 1.4% in 2001. The change in the mix of revenues is principally due to the acquisition of SHR in 2002. SHR derives a higher percentage of its revenues from hourly contract billings than fee-for-service contracts. Provision for Uncollectibles. The provision for uncollectibles was $293.1 million for the nine months ended September 30, 2002 compared to $277.0 million for the nine months ended September 30, 2001, an increase of $16.1 million or 5.8%. As a percentage of net revenue the provision for uncollectibles was 32.8% for the nine months ended September 30, 2002 compared to 37.4% for the nine months ended September 30, 2001. The provision for uncollectibles is primarily related to revenue generated under fee-for-service contracts which is not expected to be fully collected. The lower percentage of net revenue in the nine months ended September 30, 2002 is partially the result of the lower mix of fee-for-service revenue within the total revenues of SHR which was acquired on May 1, 2002. During the fourth quarter of 2001, the Company revised its estimate of the allocation of deductions from net revenue for contractual allowances and uncollectibles. The adjustment had the effect of reducing the 2001 full year provision for uncollectibles in the fourth quarter of 2001 from the amounts provided in the first nine months of 2001, with an offsetting adjustment to contractual allowances. The estimate of the Company's provision for uncollectibles for the nine months ended September 30, 2002 is consistent with the calculation methodology used for the fourth quarter of 2001. The Company believes that the revised estimating methodology results in a better allocation of deductions between contractual allowances and provisions for uncollectibles. Net Revenue Less Provision for Uncollectibles. Net revenue less provision for uncollectibles for the nine months ended September 30, 2002 increased $138.3 million, or 29.9% ($113.8 million, or 23.3%, after giving effect to the $24.5 million charge in 2001), to $601.8 million from $463.5 million for the corresponding nine months in 2001. Same contract revenue less provision for uncollectibles, which consists of contracts under management from the beginning of the prior period through the end of the subsequent period, increased $22.9 million or 5.3%, to $452.5 million during 2002 from $429.6 million during 2001. The increase in same contract revenue of 5.3% includes the effects of both increased billing volume and higher estimated net revenue per billing unit between periods. Overall, same contract revenue increased approximately 3.0% between periods due to an increase in billing volume. Beginning January 1, 2002, the Company's reimbursement under the Medicare Program was reduced. The estimated effect of such reduction in the nine months ended September 30, 2002 was $6.9 million. Acquisitions contributed $88.5 million and new contracts obtained through internal sales contributed $33.4 million of the remaining increase. The increases noted above were partially offset by $31.0 million of revenue derived from contracts that terminated during the periods. Professional Expenses. Professional expenses for the nine months ended September 30, 2002 were $484.4 million compared to $389.7 million for the nine months ended September 30, 2001, an increase of $94.7 million or 24.3%. The increase of $94.7 million included $64.1 million resulting from acquisitions between periods. As a percentage of net revenue less provision for uncollectibles, professional expenses were 80.5% for the nine months ended September 30, 2002 compared to 84.1% for the nine months ended September 30, 2001 (79.9% after giving effect to the charge of $24.5 million in 2001). Physician costs, billing and collection expenses and other professional expenses, excluding professional liability expense and the effect of acquisitions, increased $25.8 million, or 7.1% between periods. The increase in these professional expenses was principally due to increases in physician hours and rates and costs associated with the addition of capacity in our billing operations between periods. In addition, the Company experienced increased usage of mid-level practitioners and physician assistants in 2002 in an effort to improve emergency department productivity and to meet increased emergency department volumes. Professional liability expense was $27.4 million for the nine months ended September 30, 2002 compared with $21.8 million for the nine months ended September 30, 2001, resulting in an increase between periods of $5.6 million or 25.8%. The increase in the Company's professional liability insurance cost in addition to increases resulting from acquisitions ($0.9 million), reflects 19 the cost of higher premiums between periods due to a "hardening" of the insurance market for such coverage as well as a provision for claim losses in excess of insurance limits. Gross Profit. Gross profit increased to $117.4 million for the nine months ended September 30, 2002 from $73.7 million for the corresponding period in 2001. The increase in gross profit after giving effect to the charge of $24.5 million in 2001 is attributable to the contribution of acquisitions. Gross profit from other than acquired operations declined approximately $5.2 million between periods, principally due to increases in professional expenses, including professional liability costs, in excess of related revenue increases. Gross profit as a percentage of revenue less provision for uncollectibles increased to 19.5% for the nine months ended September 30, 2002 compared to 15.9% for the nine months ended September 30, 2001 due to the factors described above. General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2002 increased to $58.6 million from $46.4 million for the nine months ended September 30, 2001, for an increase of $12.2 million, or 26.3% between periods. General and administrative expenses as a percentage of net revenue less provision for uncollectibles were 9.7% for the nine months ended September 30, 2002 compared to 10.0% for the nine months ended September 30, 2001. The increase in general and administrative expenses between periods included expenses associated with acquired operations of $9.6 million accounting for 20.7% of the 26.3% increase between periods. The remaining net increase of 5.6% was principally due to increases in salaries and related benefit costs resulting from annual wage increases and the full year effect of additional staff added in prior periods. Management Fee and Other Expenses. Management fee and other expenses were $0.4 million for the nine months ended September 30, 2002 and 2001. Impairment of Intangibles. Impairment of intangibles was $1.0 million and $4.1 million for the nine months ended September 30, 2002 and 2001, respectively. Intangibles related to a contract in 2002 and in 2001 a portion of the Company's intangibles relating to its radiology operations were reduced to their estimated fair market value. Depreciation and Amortization. Depreciation and amortization was $14.3 million for the nine months ended September 30, 2002 compared to $11.2 million for the nine months ended September 30, 2001. Depreciation increased by $1.0 million between periods while amortization expense increased by $2.1 million between periods. The increase in depreciation expense was due to capital expenditures made during 2001 and 2002. Amortization expense increased $2.1 million between periods principally due to amortization of identifiable intangibles resulting from acquisitions made during 2001 and 2002, partially offset by no longer amortizing goodwill subsequent to January 1, 2002 (amortization of goodwill was $1.5 million for the nine months ended September 30, 2001) as a result of implementing SFAS No. 142, Goodwill and Other Intangible Assets. Net Interest Expense. Net interest expense increased $0.2 million to $17.5 million for the nine months ended September 30, 2002 compared to $17.3 million for the corresponding period in 2001. The increase in net interest expense is principally due to additional debt outstanding resulting from the acquisition of SHR partially offset by lower interest rates between periods. Refinancing Costs. In conjunction with implementing SFAS No. 145, "Rescission of Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections", the Company reclassified its previously recorded extraordinary loss of $3.4 million ($2.0 million net of income tax benefit of $1.4 million) due to the write-off of its previously deferred financing cost to the presentation required under the new SFAS. Earnings (Loss) before Income Taxes and Cumulative Effect of Change in Accounting Principle. Earnings before income taxes and cumulative effect of change in accounting principle for the nine months ended September 30, 2002 was $22.2 million compared to a loss of $5.7 million for the nine months ended September 30, 2001. Income Tax Expense (Benefit). Income tax expense for the nine months ended September 30, 2002 was $10.6 million compared to a benefit of $1.2 million for the nine months ended September 30, 2001. The 20 increase in income tax expense for the nine months ended September 30, 2002 over the same period in 2001 was primarily due to the increased level of earnings before income taxes in 2002. Earnings (Loss) before Cumulative Effect of Change in Accounting Principle, Net of Taxes. Earnings before cumulative effect of change in accounting principle, net of taxes, for the nine months ended September 30, 2002, was $11.6 million compared to a loss of $4.5 million for the nine months ended September 30, 2001. Cumulative Effect of Change in Accounting Principle. In connection with implementing SFAS No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002, the Company completed a transitional impairment test of existing goodwill and concluded that a portion of its goodwill was impaired. Accordingly, an impairment loss of $0.5 million ($.3 million net of taxes) was recorded as the cumulative effect of a change in accounting principle during the three months ended March 31, 2002. Net Earnings (Loss). Net earnings for the nine months ended September 30, 2002 and 2001 were $11.3 million and a loss of $4.5 million, respectively. Dividends on Preferred Stock. The Company accrued $9.8 million and $8.9 million of dividends for the nine months ended September 30, 2002 and 2001, respectively, on its outstanding Class A mandatory redeemable preferred stock. LIQUIDITY AND CAPITAL RESOURCES The Company's principal uses of cash are to meet working capital requirements, fund debt obligations and to finance its capital expenditures and acquisitions. Funds generated from operations during the past two years, with the exception of the acquisition of SHR on May 1, 2002, have been sufficient to meet the Company's cash requirements. Cash provided by operating activities in the nine months ended September 30, of 2002 and 2001 was $25.5 million and $35.9 million, respectively. The decrease in cash provided by operating activities is principally due to requirements to fund the Company's growth in its accounts receivable relating to both fee-for-service and contract revenues, as well as to fund growth resulting from acquisitions between periods. The Company spent $7.2 million in the first nine months of 2002 and $3.7 million in the first nine months of 2001 for capital expenditures. These capital expenditures are primarily for information technology related maintenance capital and development projects. The Company has historically been an acquirer of other physician staffing businesses and interests. Such acquisitions in recent years have been completed for cash. The acquisition of SHR on May 1, 2002, at a purchase price of $147.0 million (before transaction costs and adjustment for net working capital) was financed through the use of available cash of approximately $39.9 million and the use of new bank senior credit facilities. The acquisitions in many cases (excluding the acquisition of SHR) include contingent purchase price payment amounts that are payable in years subsequent to the years of acquisition. Cash payments made in connection with acquisitions, including contingent payments, were $167.0 million during the nine months ended September 30, 2002 and $15.2 million in the corresponding period in 2001. Future contingent payment obligations are approximately $11.3 million as of September 30, 2002. The Company made scheduled debt maturity payments of $8.6 million in the first nine months of 2002 and $11.9 million during the corresponding period in 2001 in accordance with its term loan facilities. In addition, in conjunction with the acquisition of SHR, the Company on May 1, 2002, entered into a new senior credit facility to finance the acquisition of SHR and to repay its outstanding bank term facilities in the amount of $110.9 million on May 1, 2002. The senior credit facility provides for up to $75 million of borrowings under a senior revolving credit facility and provided $225 million of new term loans. Borrowings outstanding under the senior credit facility mature in various years with a final maturity date of October 31, 2008. The senior credit facility agreement contains both affirmative and negative covenants, including limitations on the Company's ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire its capital stock, acquire the 21 capital stock or assets of another business, pay dividends, and requires the Company to meet or exceed certain coverage, leverage and indebtedness ratios. In addition, the senior credit agreement includes a provision for the prepayment of a portion of the outstanding term loan amounts at any year-end if the Company generates "excess cash flow," as defined in the agreement. Except for four days in 2002 and in all of 2001, the Company's cash needs were met from internally generated operating sources and there were no borrowings by the Company under its revolving credit facility. The Company in March 2001 renewed its professional liability insurance, which provides coverage for potential liabilities on a "claims-made" basis. The coverage is in effect for a two-year period through March 12, 2003. The Company's options for continued coverage beyond March 12, 2003 for claims incurred but not reported before that date include the option of exercising a "tail" policy, which would cover such potential claims. The cost of such tail policy is approximately $30.6 million and, if exercised, would be payable in March 2003. At this time, we have not yet determined if we will exercise our option to purchase this "tail" policy. The Company as of September 30, 2002, had cash and cash equivalents of approximately $23.7 million and a revolving credit facility borrowing availability of $73.4 million. The Company believes that its cash needs, other than for significant acquisitions, will continue to be met through the use of its remaining existing available cash, cash flows derived from future operating results and cash generated from borrowings under its senior revolving credit facility. INFLATION We do not believe that general inflation in the U.S. economy has had a material impact on our financial position or results of operations. The Company renewed an agreement on March 12, 2001, with an insurance company to provide professional liability insurance for claims made during the four-year period ending March 12, 2003. A number of other health care providers attempting to renew or secure new professional liability insurance coverage have experienced significant increases in the cost of such coverage in recent months. The Company is not able to estimate at this time the effect on its professional liability insurance costs for such coverage subsequent to the expiration of its current policy coverage period. MEDICARE PROGRAM PHYSICIAN REIMBURSEMENT RATES A portion of the Company's revenues are derived from services provided to patients covered under the Medicare Program and commercial insurance plans whose reimbursement rates are tied to Medicare rates. Physician reimbursement rates for services provided to such Medicare Program beneficiaries are established annually by the Centers for Medicare and Medicaid Services ("CMS"). CMS has not formally announced its Physician Fee Schedule for 2003. However, CMS has indicated based on preliminary estimates that certain of those physician reimbursement rates will decrease from their corresponding levels in 2002. The Company has estimated the impact of such estimated decreased rates on its revenues in 2003 from Medicare and commercial insurance plans with fee schedules based on Medicare rates at approximately $6.4 million based on its 2002 estimated patient volume. TRICARE PROGRAM Substantially all of the revenue derived by SHR is for services rendered to military personnel and their dependents as a subcontractor under the Tricare program administered by the Department of Defense. The Department of Defense has a requirement for an integrated health care delivery system that includes a contractor managed care support contract to provide health, medical and administrative support services to its eligible beneficiaries. SHR currently provides its services through subcontract arrangements with certain of the managed care organizations that contract directly with the Tricare program. On August 1, 2002, the Department of Defense issued a request for proposals ("RFP") for the managed care support contracts, also 22 known as Tricare Next Generation ("T-Nex"). The intent of the RFP is to replace the existing managed care support contracts on a phased-in basis between April 2004 and November 2004. The responses to the RFP by interested managed care organizations are currently scheduled to be submitted in December 2002. SHR is actively pursuing contractual relationships with several of the managed care organizations responding to the RFP's. The current T-Nex proposal provides for awarding prime contracts to three managed care organizations to cover three distinct geographical regions of the country. The award of such prime contracts is currently expected to occur in mid-2003 with the start of the delivery of health care services in 2004 as noted above. The impact on the results of operations of SHR resulting from the changes stemming from the T-Nex proposal are not known or able to be estimated at this time. In the event that the managed care organizations that SHR has established relationships with in response to the RFP process are not awarded prime contracts, SHR expects that it will be able to pursue direct service contracts with individual military treatment facilities. The potential success and impact on the results of operations of SHR in obtaining direct service contracts is similarly not known or able to be estimated at this time. If SHR is unable to establish contracts with military treatment facilities either directly or through managed care organizations, then it could have a material adverse effect on our financial condition and results of operations. SEASONALITY Historically, the Company's revenues and operating results have reflected minimal seasonal variations due to the geographic diversification of the contract base. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK The Company is exposed to market risk related to changes in interest rates. The Company does not use derivative financial instruments for speculative or trading purposes. The Company's earnings are affected by changes in short-term interest rates as a result of its borrowings under its senior credit facilities. Interest rate swap agreements are used to manage a portion of the Company's interest rate exposure. The Company was obligated under the terms of the new senior credit facility agreement to obtain within 90 days of the date of entering into the agreement interest rate hedge agreements covering at least 50% of all funded debt, as defined, of the Company. Such hedge agreements are required to be maintained for at least the first three years of the senior credit facility agreement. On July 3, 2002, the Company entered into a forward interest rate swap agreement effective November 7, 2002, to effectively convert $62.5 million of floating-rate borrowings to 3.86% fixed-rate borrowings. The agreement is a contract to exchange, on a quarterly basis, floating interest rate payments based on the eurodollar rate, for fixed interest rate payments over the life of the agreement. The contract has a final expiration date of April 30, 2005. This agreement exposes the Company to credit losses in the event of non-performance by the counterparty to the financial instrument. The counterparty is a creditworthy financial institution and the Company believes the counterparty will be able to fully satisfy its obligations under the contract. At September 30, 2002, the fair value of the Company's total debt, which has a carrying value of $322.8 million, was approximately $330.8 million. The Company had $225.8 million of variable debt outstanding at September 30, 2002. If the market interest rates for the Company's variable rate borrowings averaged 1% more during the twelve months subsequent to September 30, 2002, the Company's interest expense would increase, and earnings before income taxes would decrease, by approximately $2.2 million. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Company's financial structure. 23 ITEM 4. CONTROLS AND PROCEDURES (a) The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chairman and Chief Executive Officer along with the Company's Executive Vice President of Finance and Administration, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon that evaluation the Company's Chief Executive Officer along with the Company's Executive Vice President of Finance and Administration concluded that as of November 4, 2002 the Company's disclosure controls and procedures (1) are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings and (2) are adequate to ensure that information required to be disclosed by the Company in the reports filed or submitted by the Company under the Exchange Act is recorded, processed and summarized and reported within the time periods specified in the SEC's rules and forms. (b) There have been no significant changes in the Company's internal controls or in other factors which could significantly effect internal controls subsequent to the date the Company carried out its evaluation. 24 PART 2. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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 results 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. See note 7 to the financial statements for a description of legal actions to which we are party. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits Exhibit 3.118 Certificate of Incorporation of Kelly Medical Corporation dated August 13, 1985 Exhibit 3.119 Amended and restated bylaws of Kelly Medical Corporation Exhibit 3.120 Certificate of Incorporation of Medical Services, Inc. dated February 4, 1992 Exhibit 3.121 Amended and restated bylaws of Medical Services, Inc. Exhibit 3.122 Certificate of Incorporation of Health Care Alliance, Inc. dated January 4, 1995 Exhibit 3.123 Amended and restated bylaws of Health Care Alliance, Inc. Exhibit 3.124 Certificate of Amendment to the Articles of Incorporation of Kelly Medical Corporation dated September 16, 2002 Exhibit 4.2 Supplemental Indenture dated March 28, 2001 Exhibit 4.3 Supplemental Indenture dated September 3, 2001 Exhibit 4.4 Supplemental Indenture dated May 31, 2002
Reports on Form 8-K During the nine months ended September 30, 2002 we filed the following reports on form 8-K: (1) Report dated April 2, 2002 announcing the signing of a definitive agreement to acquire Spectrum Healthcare Resources. (2) Report dated May 15, 2002 announcing the completion of the acquisition of Spectrum Healthcare Resources. (3) Report dated July 12, 2002, amending its Current Report on Form 8-K, dated May 15, 2002 relating to the acquisition of Spectrum Healthcare Resources (SHR) for the purpose of including the required financial statements and pro forma financial information with respect to SHR in accordance with the requirements of Form 8-K. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q Equivalent to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Knoxville, Tennessee, on November 6, 2002. TEAM HEALTH, INC. /s/ H. LYNN MASSINGALE -------------------------------------- H. Lynn Massingale, Chief Executive Officer /s/ ROBERT J. ABRAMOWSKI -------------------------------------- Robert J. Abramowski Executive Vice President Finance & Administration /s/ DAVID P. JONES -------------------------------------- David P. Jones Chief Financial Officer 26 SECTION 302 CERTIFICATE I, H. Lynn Massingale, Chief Executive Officer of Team Health, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Team Health, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 6, 2002 By: /s/ H. LYNN MASSINGALE ---------------------------------- H. Lynn Massingale Chief Executive Officer 27 SECTION 302 CERTIFICATE I, Robert J. Abramowski, Executive Vice President of Finance and Administration of Team Health, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Team Health, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 6, 2002 By: /s/ ROBERT J. ABRAMOWSKI ---------------------------------- Robert J. Abramowski Executive Vice President of Finance and Administration 28 EX-3.118 3 y64947exv3w118.txt CERTIFICATE OF INCORPORATION Exhibit 3.118 UNITED STATES OF AMERICA STATE OF WEST VIRGINIA [SECRETARY OF STATE LOGO] In the name and by the authority of the State of West Virginia CERTIFICATE I, Ken Hechler, Secretary of State, hereby certify that, pursuant to the provisions of Chapter 31, Article 1, Section 28 of the Official Code of West Virginia, 1931, as amended, duplicate originals of Articles of Incorporation of KELLY MEDICAL CORPORATION have been received in my office, and are hereby found to conform to law. I therefore declare the same to be, from this date, a Corporation by the name and for the purposes set forth in the said Articles, with the right of perpetual existence. Accordingly, I hereby issue this CERTIFICATE OF INCORPORATION In witness whereof, I have hereunto set my hand, and affixed the Great seal of the State of West Virginia. Given under my hand, and the Great Seal of the State of West Virginia this Thirtieth day of August, 1985 /s/ Ken Hechler [SEAL] --------------------------------- SECRETARY OF STATE [illegible] II. The address of the principal office of said corporation, will be located at 1000 Overlook Drive street, in the City of Beckley, in the County of Raleigh and State of West Virginia, Zip 25801. III. The purpose or purposes for which this corporation is formed are as follows: SEE ATTACHED SHEET (Please type double space. If not sufficient room to cover this point, add one or more sheets of paper of this size.) IV. Provisions granting preemptive rights are: Note 3 The stockholders of this corporation shall have no preemptive rights to exercise for the purpose of acquiring additional stock issued by this corporation. V. Provisions for the regulation of the internal affairs of the corporation are: Note 4 NONE VI. The amount of the total authorized capital stock of said corporation shall be $5,000.00 dollars, which shall be divided into 50 shares of the par value of $100.00 dollars each. Note 2 NOTE: In the case of a corporation NOT organized for profit and not authorized to issue capital stock, a statement to that effect shall be set forth. VII. The full names and addresses of the incorporator(s), including street and street numbers, if any, and the city, town, or village, including Zip number, and if a stock corporation, the number of shares subscribed by each. NAME ADDRESS NO. OF SHARES Michael A. Kelly 1000 Overlook Drive, Beckley, WV - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- VIII. The existence of this corporation is to be perpetual. IX. The name and address of the appointed person to whom notice or process may be sent: Michael A. Kelly, M.D., 1000 Overlook Drive, Beckley, WV 25801 X. The number of directors constituting the initial board of directors of the corporation is one, and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are: NAME ADDRESS Michael A. Kelly, M.D. 1000 Overlook Drive, Beckley, WV 25801 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- III. The purpose or purposes for which this corporation is formed are as follows: 1. To engage in the business of operating and/or staffing and/or managing hospital and other emergency room facilities and out-patient departments for the care, nursing and treatment of persons who are sick, injured or otherwise disabled or helpless. 2. To acquire, by purchase or otherwise, real and personal property of every kind and description and to sell, lease and otherwise dispose of the same in connection with any of the business operated by said corporation. 3. To engage in any business which is lawful to engage in under the Laws of the State of West Virginia. 4. To do purchase, hold, cancel, reissue, sell and transfer its own shares, bonds or otherwise evidences of indebtedness. 5. To do or perform any and all other lawful acts in furtherance of any of the aforesaid corporate purposes or any other lawful purposes which the said corporation may elect to undertake. 6. To do all and everything necessary, suitable or proper for the accomplishment of any of the purposes, the attainment of any of the objects, or the furtherance of any of the powers herein set forth, either alone or in connection with other corporations, firms or individuals and either as principal or agent. 7. To exercise without limitation hereof all other powers conferred upon stock corporations by Chapter 31, Article 1, of the Official Code of West Virginia and amendments thereto. (e) 8. Upon election to date, to operate as a small business corporation under the provisions of the Internal Revenue Code Section 1244 and any regulations issued thereunder or any amendments to said law or regulations. I/WE, THE UNDERSIGNED, for the purpose of forming a Corporation under the laws of the State of West Virginia, do make and file this ARTICLES OF INCORPORATION, and we have accordingly hereunto set our respective hands this 27th day of August, 1985. /s/ Michael A. Kelly, M.D. Articles of Incorporation prepared by: E.M. Payne III Attorney at Law Drawer L Beckley, WV 25802-2810 STATE OF WEST VIRGINIA COUNTY OF RALEIGH, To-Wit: I, Pamela L. Houchins, a Notary Public, in and for the County and State aforesaid hereby certify that MICHAEL A. KELLY, M.D. (Names of all incorporators as shown in Article VII and signatures of same must be inserted in this space by official taking acknowledgments.) Names and signatures must appear alike. whose names are signed to the foregoing Articles, bearing date on the 27th day of August, 1985, this day personally appeared before me in my said County and severally acknowledged their signature to the same. Given under my hand and the official seal this 27th day of August, 1985. (NOTARIAL SEAL) /s/ Pamela L. Houchins --------------------------- Notary Public My commission expires: December 13, 1989 ------------------------ ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF KELLY MEDICAL CORPORATION Pursuant to the provisions of Section 31, Article 1, Chapter 31 of the West Virginia Code, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the Corporation is Kelly Medical Corporation. SECOND: The following resolution amending the Corporation's Articles of Incorporation was adopted by all of the Shareholders and all of the members of the Board of Directors by unanimous execution of a written agreement and consent in lieu of meeting in the manner prescribed by Section 73, Article 1, Chapter 31 of the West Virginia Code: RESOLVED, that Article I of the Articles of Incorporation of the Corporation be deleted in its entirety and the following be substituted therefor: I. The name of the Corporation shall be Kelly Medical Services Corporation. Dated this 16th day of September, 2002. KELLY MEDICAL CORPORATION By /s/ Randall Dabbs ------------------------------------- Its President and By /s/ Mike Hatcher ------------------------------------- Its Secretary STATE OF TENNESSEE, COUNTY OF KNOX, To-Wit: I, John R. Stair, do hereby certify that on this 27th day of October, 2002, personally appeared before me Randal Dabbs, M.D., who being by me first duly sworn, declares that he is President of Kelly Medical Services Corporation, and that the statements herein are true. My commission expires: June 2, 2005 /s/ John R. Stair ------------------------------- Notary Public STATE OF TENNESSEE, COUNTY OF KNOX, To-Wit: I, John R. Stair, do hereby certify that on this 27th day of October, 2002, personally appeared before me Michael Hatcher, who being by me first duly sworn, declares that he is Secretary of Kelly Medical Services Corporation, and that the statements herein are true. My commission expires: June 2, 2005 /s/ John R. Stair ------------------------------- Notary Public Prepared by: James W. Thomas Jackson & Kelly PLLC Post Office Box 553 Charleston, West Virginia 25322 3 EX-3.119 4 y64947exv3w119.txt A/R BYLAWS Exhibit 3.119 AMENDED AND RESTATED BYLAWS OF KELLY MEDICAL CORPORATION ARTICLE I. OFFICES The principal office of the corporation in the State of West Virginia shall be One Pavilion Drive, Daniels, West Virginia 25832. The corporation may have such other offices, either within or without the State of West Virginia as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE II. SHAREHOLDERS SECTION 1. ANNUAL MEETING. There shall be an annual meeting of the shareholders on the first Monday in December of each year, at the hour of 10:00 A.M., for such business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of West Virginia, such meeting shall be held on the next business day. SECTION 2. SPECIAL MEETING. Special meetings of the shareholders for any purpose or purposes may be called by the President or the Secretary or by the Board of Directors and shall be called by the President at the request of any number of shareholders owning in the aggregate at least ten per cent (10%) of the number of voting shares of the corporation. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of West Virginia as the place of meeting for any annual meeting or special meeting of shareholders called by the Board of Directors. A Waiver of Notice signed by all the shareholders entitled to vote at a meeting may designate any place, either within or without the State of West Virginia as the place for the holding of such meeting. If no designation is made, or if a special meeting otherwise be called, the place of meeting shall be the principal office of the corporation in the State of West Virginia. SECTION 4. NOTICE. Written notice stating the place, day and hour of the meeting and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be in writing and mailed or delivered to each shareholder not more than fifty (50) days nor less than three (3) days prior to such meeting. Such notice shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his last known address with postage thereon prepaid. A Waiver of Notice of any such meeting signed by a shareholder will obviate the 1 necessity of giving such shareholder written notice. SECTION 5. INFORMAL ACTION BY SHAREHOLDER. Any action required to be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. SECTION 6. QUORUM. A majority of the outstanding shares of the corporation entitled to vote represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Subject to Section 8 of this Article II, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of the shareholders. SECTION 7. PROXIES. At all meetings of the shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. SECTION 8. CUMULATIVE VOTING FOR DIRECTORS. At each election for directors, every shareholder entitled to vote at such election shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote, or to cumulate his votes by giving one candidate as many votes as the numbers of such directors multiplied by the number of his shares shall equal or by distributing such votes on the same principal among any number of candidates. ARTICLE III. BOARD OF DIRECTORS. SECTION 1. DUTIES AND NUMBER OF DIRECTORS The business property and affairs of the corporation shall be managed and controlled by a Board of Directors of two (2) members. Section 2. Tenure and Qualification. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected or qualified. Directors need not be residents of the State of West Virginia nor shareholders of the corporation. 2 SECTION 3. QUORUM. A majority of the number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. SECTION 4. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 5. ACTION WITHOUT A MEETING. Any action that may be taken by the Board of Directors at a meeting may be taken without a meeting if the consent in writing setting forth the action by all the directors is obtained. SECTION 6. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, directors may be removed as herein provided: The entire Board of Directors may be removed with or without cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. If less than the entire Board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. ARTICLE IV. MEETING OF THE BOARD OF DIRECTORS SECTION 1. REGULAR MEETING. There shall be a regular meeting of the Board of Directors immediately following and at the same place as the annual shareholders meeting. No notice other than this bylaw need be given for such meeting. The Board of Directors may provide, by resolution, the time and place either with or without the State of West Virginia for the holding of additional regular meetings without notice other than such resolution. SECTION 2. SPECIAL MEETINGS. 3 Special meetings of the Board of Directors may be called by or at the request of the President or Treasurer or by the Secretary when requested in writing by a majority of the directors. SECTION 3. NOTICE. Notice of any special meeting shall be given at least three (3) days previous thereto by written notice delivered personally or mailed to each director at his last known address. If mailed, such notice shall be deemed to have been delivered at the time deposited in the United States Mail so addressed with postage thereon prepaid. Any director may, before of after such meeting, waive notice and such waiver will obviate the necessity of any notice. The attendance of a director at a meeting shall be deemed a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting because the meeting was not lawfully called or convened. SECTION 4. COMPENSATION OF DIRECTORS. By resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a stated salary as a director, a fixed sum for attendance at each meeting, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V. OFFICERS SECTION 1. NUMBER OF OFFICERS. The Board of Directors shall elect, either from their own body or otherwise, a President, a Secretary and a Treasurer. Such other officers, vice or assistant officers, agents and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person except those of President and Secretary. If the Board of Directors does not select a Vice President or if, for any reason, a vacancy exists in the office of Vice President, the Treasurer shall fulfill those duties and responsibilities and have those powers and authorities. SECTION 2. COMPENSATION OF OFFICERS AND AGENTS. The Board of Directors shall have the power to fix the salaries and compensation of all officers, assistant officers and agents whether or not such officers, assistant officers or agents be directors. SECTION 3. ELECTION AND TERM OF OFFICE. The election of the officers of the corporation shall be held at the annual regular election of the Board of Directors. An officer shall hold office until his successor shall have been duly elected or until his death or until he shall resign or shall have been removed by the Board of 4 Directors. ARTICLE VI. DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall preside at all meetings of the Board of Directors and the shareholders when present. He shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all the business and affairs of the corporation. He may sign and acknowledge any and all instruments requiring the signature and acknowledgment of the corporation and may affix the corporate seal. SECTION 2. VICE PRESIDENT. In the absence of the President or in the event of his death, inability or refusal to act, the Vice President shall perform the duties of the President and when so acting shall have all the powers of and be subjected to all the restrictions upon the President. The Vice President may sign with the Secretary certificates for shares of the corporation; and shall perform such other duties as shall be assigned from time to time by the President and the Board of Directors. SECTION 3. SECRETARY. The Secretary shall keep the records, books and papers of the corporation; he shall attend and keep correct minutes of meetings of the Board of Directors and the shareholders, and shall see that all notices are duly given in accordance with provision of the bylaws or as required by law. The Secretary shall keep a register of the mailing addresses of each shareholder when furnished with such address by the shareholder, and shall have general charge of the stock transfer books of the corporation; he shall perform such other duties as the Board of Directors or the President may from time to time require. The records, books and papers shall be kept at such place or places as the Board of Directors shall designate. SECTION 4. TREASURER. The Treasurer shall have charge of all money of the corporation; he shall receive and receipt for, in the name of the corporation, all monies due and payable to the corporation and shall deposit the same to the credit of the company in some bank of deposit; he shall audit for payment, subject to the order of the Board of Directors, all bills, vouchers and accounts. SECTION 5. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation and receiving compensation as a director. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFERS 5 SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or Vice President and by the Secretary and sealed with a corporate seal or facsimile thereof. SECTION 2. LOST OR DESTROYED CERTIFICATES. In the event that a certificate for shares should become lost or destroyed, the owner (as shown on the stock transfer book of the corporation) may file an affidavit with the Board of Directors setting forth the circumstances of such loss or destruction. Thereupon the Board of Directors, by unanimous vote, may cause a new certificate to be issued to such owner in lieu of the lost or destroyed certificate. The Board of Directors, in their discretion, may require such owner to post a security bond with sufficient surety and publish notice of the loss or destruction of such certificate or certificates as set forth by the Statutes of the State of West Virginia. SECTION 3. TRANSFERS OF SHARES OF STOCK. Shares of stock of the corporation shall be transferable only on the books of the corporation by the holder thereof in person or by his attorney, upon surrender and cancellation of certificates of a like number of shares. ARTICLE VIII. CORPORATE SEAL Section 1. The seal, an impression of which is made here, shall be the corporate seal of the corporation. ARTICLE IX. NOTICES Whenever any notice is required to be given to any shareholders or any director of the corporation under the provisions of these bylaws or under the provisions of the statutes of the State of West Virginia, a waiver thereof in writing signed by the person or persons entitled to such notice shall be deemed equivalent to the timely giving of such notice. ARTICLE X. BYLAWS These bylaws may be altered, amended, repealed or added to at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, by affirmative vote of a majority of the directors. ARTICLE XI. INDEMNIFICATION It shall be the policy of this corporation to indemnify any person who serves, or has served, as a director, officer, employee or agent of this corporation, or who serves or has served as a director, officer, partner, employee, or agent of any other corporation, partnership, joint venture, trust or enterprise at the request or direction of this corporation, against expenses 6 (including attorneys' fees), judgments, fines, taxes, penalties, interest, and payments in settlement, in connection with any threatened, pending or completed action or proceeding, and to pay any such expenses in advance of the final disposition of any such action or proceeding, to the full extent contemplated and permitted by Section 9 of Chapter 31, Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or determination as shall be requisite or appropriate under said section; and the corporation is specifically empowered and authorized to purchase and maintain, at the expense of the corporation, insurance on behalf of any such director, officer, partner, employee or agent against any liability asserted against him or her in such capacity or arising out of his or her status as such, whether or not this corporation would have the power to indemnify him or her under the provisions of said section. ARTICLE XII TELEPHONIC CONFERENCES One or more directors or shareholders may participate in a meeting of the board, committee of the board, or of the shareholders by means of conference, telephone or other similar electronic communication equipment by means of which all persons participating in a meeting can hear each other. Whenever a vote of the shareholders or directors is required or permitted in connection with any corporate action its vote may be taken orally during the electronic conference. The agreement thus reached shall have like effect and validity as the actual or duly taken actions of the shareholders or directors at a meeting of shareholders or directors if the agreement is reduced to writing and approved by the shareholders or directors at the next regular meeting of the shareholders or directors after the conference. ATTEST: /s/ Joanne Kelly - ----------------------------- Secretary 7 EX-3.120 5 y64947exv3w120.txt CERTIFICATE OF INCORPORATION Exhibit 3.120 STATE OF WEST VIRGINIA [STATE OF WEST VIRGINIA SEAL] CERTIFICATE I, Ken Hechler, Secretary of State of the State of West Virginia, hereby certify that by the provisions of Chapter 31, Article 1, Sections 27 and 28 of the West Virginia Code, the Articles of Incorporation of MEDICAL SERVICES, INC. conform to law and are filed in my office. I therefore declare the organization to be a Corporation for the purposes set forth in its Articles, with the right of perpetual existence, and I issue this CERTIFICATE OF INCORPORATION to which I have attached a duplicate original of the Articles of Incorporation. Given under my hand and the Great Seal of the State of [STATE OF WEST VIRGINIA SEAL] West Virginia, on this Fourth day of February 1992. /s/ Ken Hechler --------------------------- Secretary of State ARTICLES OF INCORPORATION OF MEDICAL SERVICES, INC. I. The undersigned agrees to become a corporation by the name of Medical Services, Inc. II. The address of the principal office of the corporation shall be located at 205 Brookshire Lane, Beckley, West Virginia 25801. III. The purposes for which this corporation is formed are as follows: (a). To do all those things and possess all those powers authorized by and conferred upon all business corporations incorporated in the State of West Virginia under the provisions of Chapter 31, Article 1, Section 8 of the West Virginia Corporation Act of 1974; (b). The performance, for and on behalf of third party clients, including, without limitation, physicians, clinics, institutions and health care providers of all sorts, and for appropriate fees, of the rendering of fee bills, rendered by such clients to patients, statements and billings of all sorts for services and related expenses, whether the same be directed to the patients themselves, their insurance carriers or other responsible parties, and the preparing and filing of claim forms as may be required by insurers, third party payors, state and federal agencies and others, to collect payment for charges so billed, to account for the same to clients, and, generally, to do all things reasonable and necessary to facilities the regular and efficient rendering of such bills and statements and the prompt and regular collection of amounts due to clients thereunder. (c) To acquire, own, hold, improve, develop, operate, exploit, sell, convey, assign, lease, exchange, transfer, dispose of, pledge, mortgage, create security interests in, deal in, and loan or borrow money upon, alone, or in conjunction with others, real and personal property, tangible and intangible, of every kind, character, and description, or any interest therein, and all kinds and forms of securities, shares of capital stock, scrip, bonds, debentures, coupons, mortgages, notes, bills of exchange, acceptance, acceptances, assignments, accounts, fees, evidences of indebtedness, obligations, trust certificates, interim receipts, warrants, and certificates issued or created by or being claims against any corporation, association, partnership, syndicate, entity, or person, or governmental, municipal, or public subdivision, district or authority. (d) To engage in the business of operating and/or staffing and/or managing hospital and other emergency room facilities and out-patient departments for the care, nursing and treatment of persons who are sick, injured or otherwise disabled or helpless. (e) To operate as a small business corporation under the provisions of the Internal Revenue Code Section 1244 and any regulations issued hereunder of any amendments to said law or regulations. (f) To invest and deal with the funds of this corporation in any manner, and to acquire by purchase or otherwise the stocks, bonds, notes, debentures, and other securities and obligations of any government, state, municipality, corporation, association, or partnership, domestic or foreign and, while owner of any such securities or obligations, to exercise all the rights, powers and privileges of ownership, including among other things the right to vote thereon for any and all purposes. (g) To restrict the sale of the capital stock of the corporation in such manner and to such persons as the Board of Directors or Stockholders may from time to time determine. (h) To do all and everything necessary, suitable, and proper for the attainment of any of the purposes, the accomplishment of any of the obligations or the furtherance of any of the powers hereinbefore set forth; to carry on any other lawful business whatsoever which may seem to the corporation capable of being carried on in connection with the foregoing or calculated directly or indirectly to promote the interest of the corporation or enhance the value of its property; and to have, enjoy and exercise any and all rights, powers, and privileges which are now or which may be hereafter authorized by statute for the benefit of corporations such as this; if such statute is enacted by the legislature of the State of West Virginia or the Congress of the United States. IV. Provisions granting preemptive rights are as follows: when and if the authorized capital of the corporation is increased, and at all such times, the additional shares so authorized shall be offered first to their holdings at not less than par value. V. Provisions for the regulation of the internal affairs of the corporation: The Board of Directors is hereby expressly empowered to govern and manage the corporation, including but not limited to, the power to create restrictions on the sale of the capital stock of the corporation, restricting the manner in which said capital stock may be transferred, the price at which said stock may be sold, and other provisions necessary to the implementation of said restrictions. VI. The amount of the total authorized capital stock of the corporation shall be Five Thousand Dollars ($5,000.00), which shall be divided into five thousand shares with a par value of One Dollar ($1.00) each. VII. The full name and address of the incorporator is as follows: Michael Anthony Kelly, 205 Brookshire Lane, Beckley, West Virginia 25801. VIII. The name and address of the appointed person to whom notice or process may be sent is: Michael Anthony Kelly, 205 Brookshire Lane, Beckley, West Virginia 25801. IX. Number of directors constituting the initial board of directors of the corporation is one (1), and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are as follows: Michael Anthony Kelly, 205 Brookshire Lane, West Virginia 25801. I, the undersigned, for the purpose of forming a corporation under the laws of the State of West Virginia, do make and file these Articles of Incorporation, and have accordingly hereunto set my hand on this 13th day of December, 1991. /s/ Michael Anthony Kelly -------------------------- MICHAEL ANTHONY KELLY STATE OF WEST VIRGINIA, COUNTY OF RALEIGH, TO WIT: I, JOHANNA L. MARTIN, a Notary Public of the said County of Raleigh, in and for the County and State aforesaid, do hereby certify that Michael Anthony Kelly, whose name is signed to the foregoing writing, bearing date the 13th day of December, 1991 as PRESIDENT of Medical Services, Inc. has this day acknowledged the same before me in my said County and State to be the act and deed of said corporation. Given under my hand this 13th day of December, 1991. /s/ Johanna L. Martin ---------------------- NOTARY PUBLIC [NOTARY SEAL] My Commission expires: August 17, 1998 [STATE OF WEST VIRGINIA LETTERHEAD] Honorable Ken Hechler Secretary of State Capitol Building Charleston, West Virginia 25305 Dear Mr. Hechler: Under the provisions of Chapter 30, Article 3, Section 15 of the Code of West Virginia, the West Virginia Board of Medicine issued Certificate of Authorization Number 1090 to Michael A. Kelly, M.D. to practice medicine and surgery in the State of West Virginia as a medical corporation under the name of Medical Services, Inc. effective on January 1, 1992, with offices at 205 Brookshire Lane, Beckley, WV 25801. Sincerely yours, /s/ Ronald D. Walton ------------------------------ Ronald D. Walton Executive Director RDW:lbs CC: E.M. Payne, III, Esq. EX-3.121 6 y64947exv3w121.txt A/R BYLAWS EXHIBIT 3.121 AMENDED AND RESTATED BYLAWS OF MEDICAL SERVICES, INC. ARTICLE I. OFFICES The principal office of the corporation in the State of West Virginia shall be One Pavilion Drive, Daniels, West Virginia 25832. The corporation may have such other offices, either within or without the State of West Virginia as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE II. SHAREHOLDERS SECTION 1. ANNUAL MEETING. There shall be an annual meeting of the shareholders on the first Monday in December of each year, at the hour of 10:00 A.M., for such business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of West Virginia, such meeting shall be held on the next business day. SECTION 2. SPECIAL MEETING. Special meetings of the shareholders for any purpose or purposes may be called by the President or the Secretary or by the Board of Directors and shall be called by the President at the request of any number of shareholders owning in the aggregate at least ten per cent (10%) of the number of voting shares of the corporation. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of West Virginia as the place of meeting for any annual meeting or special meeting of shareholders called by the Board of Directors. A Waiver of Notice signed by all the shareholders entitled to vote at a meeting may designate any place, either within or without the State of West Virginia as the place for the holding of such meeting. If no designation is made, or if a special meeting otherwise be called, the place of meeting shall be the principal office of the corporation in the State of West Virginia. SECTION 4. NOTICE. Written notice stating the place, day and hour of the meeting and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be in writing and mailed or delivered to each shareholder not more than fifty (50) days nor less than three (3) days prior to such meeting. Such notice shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his last known address with postage thereon prepaid. A Waiver of Notice of any such meeting signed by a shareholder will obviate the 1 necessity of giving such shareholder written notice. SECTION 5. INFORMAL ACTION BY SHAREHOLDER. Any action required to be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. SECTION 6. QUORUM. A majority of the outstanding shares of the corporation entitled to vote represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Subject to Section 8 of this Article II, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of the shareholders. SECTION 7. PROXIES. At all meetings of the shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. SECTION 8. CUMULATIVE VOTING FOR DIRECTORS. At each election for directors, every shareholder entitled to vote at such election shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal or by distributing such votes on the same principal among any number of candidates. ARTICLE III. BOARD OF DIRECTORS SECTION 1. DUTIES AND NUMBER OF DIRECTORS. The business property and affairs of the corporation shall be managed and controlled by a Board of Directors of two (2) members. SECTION 2. TENURE AND QUALIFICATION. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected or qualified. Directors need not be residents of the State of West Virginia nor shareholders of the corporation. 2 SECTION 3. QUORUM. A majority of the number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. SECTION 4. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 5. ACTION WITHOUT A MEETING. Any action that may be taken by the Board of Directors at a meeting may be taken without a meeting if the consent in writing setting forth the action by all the directors is obtained. SECTION 6. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, directors may be removed as herein provided: The entire Board of Directors may be removed with or without cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. If less than the entire Board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. ARTICLE IV. MEETING OF THE BOARD OF DIRECTORS SECTION 1. REGULAR MEETING. There shall be a regular meeting of the Board of Directors immediately following and at the same place as the annual shareholders meeting. No notice other than this bylaw need be given for such meeting. The Board of Directors may provide, by resolution, the time and place either with or without the State of West Virginia for the holding of additional regular meetings without notice other than such resolution. SECTION 2. SPECIAL MEETINGS. 3 Special meetings of the Board of Directors may be called by or at the request of the President or Treasurer or by the Secretary when requested in writing by a majority of the directors. SECTION 3. NOTICE. Notice of any special meeting shall be given at least three (3) days previous thereto by written notice delivered personally or mailed to each director at his last known address. If mailed, such notice shall be deemed to have been delivered at the time deposited in the United States Mail so addressed with postage thereon prepaid. Any director may, before or after such meeting, waive notice and such waiver will obviate the necessity of any notice. The attendance of a director at a meeting shall be deemed a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting because the meeting was not lawfully called or convened. SECTION 4. COMPENSATION OF DIRECTORS. By resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a stated salary as a director, a fixed sum for attendance at each meeting, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V. OFFICERS SECTION 1. NUMBER OF OFFICERS. The Board of Directors shall elect, either from their own body or otherwise, a President, a Secretary and a Treasurer. Such other officers, vice or assistant officers, agents and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person except those of President and Secretary. If the Board of Directors does not select a Vice President or if, for any reason, a vacancy exists in the office of Vice President, the Treasurer shall fulfill those duties and responsibilities and have those powers and authorities. SECTION 2. COMPENSATION OF OFFICERS AND AGENTS. The Board of Directors shall have the power to fix the salaries and compensation of all officers, assistant officers and agents whether or not such officers, assistant officers or agents be directors. SECTION 3. ELECTION AND TERM OF OFFICE. The election of the officers of the corporation shall be held at the annual regular election of the Board of Directors. An officer shall hold office until his successor shall have been duly elected or until his death or until he shall resign or shall have been removed by the Board of 4 Directors. ARTICLE VI. DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall preside at all meetings of the Board of Directors and the shareholders when present. He shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all the business and affairs of the corporation. He may sign and acknowledge any and all instruments requiring the signature and acknowledgment of the corporation and may affix the corporate seal. SECTION 2. VICE PRESIDENT. In the absence of the President or in the event of his death, inability or refusal to act, the Vice President shall perform the duties of the President and when so acting shall have all the powers of and be subjected to all the restrictions upon the President. The Vice President may sign with the Secretary certificates for shares of the corporation; and shall perform such other duties as shall be assigned from time to time by the President and the Board of Directors. SECTION 3. SECRETARY. The Secretary shall keep the records, books and papers of the corporation; he shall attend and keep correct minutes of meetings of the Board of Directors and the shareholders, and shall see that all notices are duly given in accordance with provision of the bylaws or as required by law. The Secretary shall keep a register of the mailing addresses of each shareholder when furnished with such address by the shareholder, and shall have general charge of the stock transfer books of the corporation; he shall perform such other duties as the Board of Directors or the President may from time to time require. The records, books and papers shall be kept at such place or places as the Board of Directors shall designate. SECTION 4. TREASURER. The Treasurer shall have charge of all money of the corporation; he shall receive and receipt for, in the name of the corporation, all monies due and payable to the corporation and shall deposit the same to the credit of the company in some bank of deposit; he shall audit for payment, subject to the order of the Board of Directors, all bills, vouchers and accounts. SECTION 5. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation and receiving compensation as a director. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFERS 5 SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or Vice President and by the Secretary and sealed with a corporate seal or facsimile thereof. SECTION 2. LOST OR DESTROYED CERTIFICATES. In the event that a certificate for shares should become lost or destroyed, the owner (as shown on the stock transfer book of the corporation) may file an affidavit with the Board of Directors setting forth the circumstances of such loss or destruction. Thereupon the Board of Directors, by unanimous vote, may cause a new certificate to be issued to such owner in lieu of the lost or destroyed certificate. The Board of Directors, in their discretion, may require such owner to post a security bond with sufficient surety and publish notice of the loss or destruction of such certificate or certificates as set forth by the Statutes of the State of West Virginia. SECTION 3. TRANSFERS OF SHARES OF STOCK. Shares of stock of the corporation shall be transferable only on the books of the corporation by the holder thereof in person or by his attorney, upon surrender and cancellation of certificates of a like number of shares. ARTICLE VIII. CORPORATE SEAL Section 1. The seal, an impression of which is made here, shall be the corporate seal of the corporation. ARTICLE IX. NOTICES Whenever any notice is required to be given to any shareholders or any director of the corporation under the provisions of these bylaws or under the provisions of the statutes of the State of West Virginia, a waiver thereof in writing signed by the person or persons entitled to such notice shall be deemed equivalent to the timely giving of such notice. ARTICLE X. BYLAWS These bylaws may be altered, amended, repealed or added to at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, by affirmative vote of a majority of the directors. ARTICLE XI. INDEMNIFICATION It shall be the policy of this corporation to indemnify any person who serves, or has served, as a director, officer, employee or agent of this corporation, or who serves or has served as a director, officer, partner, employee, or agent of any other corporation, partnership, joint venture, trust or enterprise at the request or direction of this corporation, against expenses 6 (including attorneys' fees), judgments, fines, taxes, penalties, interest, and payments in settlement, in connection with any threatened, pending or completed action or proceeding, and to pay any such expenses in advance of the final disposition of any such action or proceeding, to the full extent contemplated and permitted by Section 9 of Chapter 31, Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or determination as shall be requisite or appropriate under said section; and the corporation is specifically empowered and authorized to purchase and maintain, at the expense of the corporation, insurance on behalf of any such director, officer, partner, employee or agent against any liability asserted against him or her in such capacity or arising out of his or her status as such, whether or not this corporation would have the power to indemnify him or her under the provisions of said section. ARTICLE XII TELEPHONIC CONFERENCES One or more directors or shareholders may participate in a meeting of the board, committee of the board, or of the shareholders by means of conference, telephone or other similar electronic communication equipment by means of which all persons participating in a meeting can hear each other. Whenever a vote of the shareholders or directors is required or permitted in connection with any corporate action its vote may be taken orally during the electronic conference. The agreement thus reached shall have like effect and validity as the actual or duly taken actions of the shareholders or directors at a meeting of shareholders or directors if the agreement is reduced to writing and approved by the shareholders or directors at the next regular meeting of the shareholders or directors after the conference. ATTEST: /s/ Joanne Kelly - ------------------------- Secretary 7 EX-3.122 7 y64947exv3w122.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.122 STATE OF WEST VIRGINIA [STATE SEAL] CERTIFICATE I, Ken Hechler, Secretary of State of the State of West Virginia, hereby certify that by the provisions of Chapter 31, Article 1, Sections 27 and 28 of the West Virginia Code, the Articles of Incorporation of HEALTH CARE ALLIANCE, INC. conform to law and are filed in my office. I therefore declare the organization to be a Corporation for the purposes set forth in its Articles, with the right of perpetual existence, and I issue this CERTIFICATE OF INCORPORATION to which I have attached a duplicate original of the Articles of Incorporation. Given under my hand and the [STATE SEAL] Great Seal of the State of West Virginia, on this Fourth day of January 1995 /s/ Ken Hechler ---------------------- Secretary of the State KEN HECHLER FILE IN DUPLICATE ORIGINALS Secretary of State FEE: AS PER SCHEDULE ON PAGE 4 State Capital, W-139 -- BUSINESS CORPORATION Charleston, WV 25305 (stock, for profit): (304) 342-8000 Complete all items except 3-A. -- NON-PROFIT CORPORATION (membership, nonstock): Complete all items except 3.0. & 7 [STATE OF WEST VIRGINIA SEAL] WEST VIRGINIA ARTICLES OF INCORPORATION of HEALTH CARE ALLIANCE, INC. - -------------------------------------------------------------------------------- The undersigned, acting as incorporator(s) of a corporation under Chapter 31, Article 1, Section 27 of the West Virginia Code, adopt(s) the following Articles of Incorporation for such corporation: 1. The undersigned agree to become a West Virginia corporation by the name of Health Care Alliance, Inc. -----------------------------------------------------------------------------. (The name of the corporation shall contain one of the words "corporation," "company," "incorporated," "limited" or shall contain an abbreviation of one of such words. (Section 31-1-11, W. Va. Code) 2. A. The address at the physical location of the principal office of the corporation will be --------------------------------------------------- One Pavilion Drive --------------------------------------------------------- street, in the Daniels Raleigh city, town or village of ----------------, county of ------------------, West Virginia 25832 State of --------------------------------, Zip Code -------------------. The mailing address of the above location, if different, will be ------- -----------------------------------------------------------------------. B. The address at the physical location of the principal place of business in West Virginia of the corporation, if different than the above same as above address, will be ----------------- street, in the city, town of village of -----------------------, --------------------- County, West Virginia, Zip Code --------------. The mailing address of the above location, if different, will be ------- -----------------------------------------------------------------------. 3. This corporation is organized as: A. Non-stock, non-profit ---------------------. or B. Stock, for profit -----x--------, and the aggregate value of the $5,000.00 authorized capital stock of said profit corporation will be ------------ 5,000 dollars, which shall be divided into ----------------- shares of the ($1.00) one par value of -------------------------------------------- dollars each, (or state "without par value," if applicable) (if the shares are to be divided into more than one class or if the corporation is to issue shares in any preferred or special class in series, additional statements are required within the articles of incorporation.) 4. The period of duration of the corporation, which may be perpetual, is perpetual ----------------------------. 1 PLEASE DOUBLE SPACE, IF MORE SPACE IS NEEDED, USE ADDITIONAL SPACE ON PAGE 4 AND ADD PAGES. 5. The purpose(s) for which this corporation is formed (which may be stated to be, or to include, the transaction of any or all lawful business for which corporations may be incorporated in West Virginia), is (are) as follows: The nature of the business and the objects and purposes to be transacted, promoted or carried on by the Corporation are to engage in any lawful act or activity for which a Corporation may be organized under the Corporation Law of West Virginia. 6. The provisions for the regulation of the internal affairs of the corporation, which the incorporators elect to set forth in the articles of incorporation, are as follows: None 7. The provisions granting, limiting or denying preemptive rights to shareholders, if any, are as follows: The shareholders shall have preemptive rights. 8. The full name(s) and address(es) of the incorporator(s), including street and street numbers, if any, and the city, town or village, including the zip code, and the number of shares subscribed for by each is(are) as follows: Number of Shares NAME ADDRESS (Optional) Robert S. Kiss P.O. Drawer AU, Beckley, WV 25802-2843 -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 9. The number of directors constituting the initial board of directors of the corporation is Three and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders/members, or until their successors are elected and shall qualify, are as follows: NAME ADDRESS Michael Kelly One Pavilion Drive, Daniels, WV 25832 -------------------------------------------------------------------------- JoAnn Kelly One Pavilion Drive, Daniels, WV 25832 -------------------------------------------------------------------------- Jeff Peterson One Pavilion Drive, Daniels, WV 25832 -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 10. The name and address of the appointed person to whom notice or process may be sent is Michael Kelly One Pavilion Drive, Daniels, WV 25832 . ---------------------------------------------------------- ACKNOWLEDGEMENT I(We), the undersigned, for the purpose of forming a corporation under the laws of the State of West Virginia, do make and file this "Articles of Incorporation." In witness whereof, I(we) have accordingly hereunto set my(our) respective hands this day of , 19 . --------- --------------------------------- -- (All incorporators must sign below. Names and signatures must appear the same throughout the Articles of Incorporation.) PHOTOCOPIES OF THE SIGNATURES OF THE INCORPORATORS AND THE NOTARY PUBLIC CANNOT BE ACCEPTED. /s/ ILLEGIBLE - ------------------------------------ - ------------------------------------ ------------------------------------ STATE OF West Virginia ---------------------------------------- COUNTY OF Raleigh --------------------------------------- I, Sherri M. Groves, a Notary Public, in and for the county and state aforesaid, hereby certify that (names of all incorporators as shown in Item 8 must be inserted in this space by official taking acknowledgement) /s/ Robert S. Kiss - ------------------------------------ - ------------------------------------ ------------------------------------ whose name(s) is(are) signed to the foregoing Articles of Incorporation, this day personally appeared before me in my said county and acknowledged his(her) signatures(s). My commission expires Sept. 17, 1996 -------------- [Notary Seal] /s/ Sherri M. Groves -------------------------------------- (Notary Public) ARTICLES OF INCORPORATION PREPARED BY Robert S. Kiss -------------- whose mailing address is P.O. Drawer AU, Beckley, WV 25802-2843 -------------------------------------- Official Form 101 3 [STATE OF WEST VIRGINIA LETTERHEAD] Honorable Ken Hechler Secretary of State Capitol Building Charleston, WV 25305 Dear Mr. Hechler: Under the provisions of Chapter 30, Article 3, Section 15 of the Code of West Virginia, the West Virginia Board of Medicine issued Certificate of Authorization Number 1169 to Michael A. Kelly, M.D. to practice medicine and surgery in the State of West Virginia as a medical corporation under the name of Health Care Alliance, Inc. effective on January 1, 1995, with offices at One Pavilion Drive, Daniels, West Virginia 25832. Sincerely yours, /s/ Ronald D. Walton -------------------- Ronald D. Walton Executive Director RDW:lbs cc: Robert S. Kiss, Esq. [STAMP/SEAL] EX-3.123 8 y64947exv3w123.txt A/R BYLAWS EXHIBIT 3.123 AMENDED AND RESTATED BYLAWS OF HEALTH CARE ALLIANCE, INC. ARTICLE I. OFFICES The principal office of the corporation in the State of West Virginia shall be One Pavilion Drive, Daniels, West Virginia 25832. The corporation may have such other offices, either within or without the State of West Virginia as the Board of Directors may designate or as the business of the corporation may require from time to time. ARTICLE II. SHAREHOLDERS SECTION 1. ANNUAL MEETING. There shall be an annual meeting of the shareholders on the first Monday in December of each year, at the hour of 10:00 A.M., for such business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of West Virginia, such meeting shall be held on the next business day. SECTION 2. SPECIAL MEETING. Special meetings of the shareholders for any purpose or purposes may be called by the President or the Secretary or by the Board of Directors and shall be called by the President at the request of any number of shareholders owning in the aggregate at least ten per cent (10%) of the number of voting shares of the corporation. SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place, either within or without the State of West Virginia as the place of meeting for any annual meeting or special meeting of shareholders called by the Board of Directors. A Waiver of Notice signed by all the shareholders entitled to vote at a meeting may designate any place, either within or without the State of West Virginia as the place for the holding of such meeting. If no designation is made, or if a special meeting otherwise be called, the place of meeting shall be the principal office of the corporation in the State of West Virginia. SECTION 4. NOTICE. Written notice stating the place, day and hour of the meeting and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be in writing and mailed or delivered to each shareholder not more than fifty (50) days nor less than three (3) days prior to such meeting. Such notice shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his last known address with postage thereon prepaid. A Waiver of Notice of any such meeting signed by a shareholder will obviate the 1 necessity of giving such shareholder written notice. SECTION 5. INFORMAL ACTION BY SHAREHOLDER. Any action required to be taken at a meeting of the shareholders, or any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. SECTION 6. QUORUM. A majority of the outstanding shares of the corporation entitled to vote represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Subject to Section 8 of this Article II, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of the shareholders. SECTION 7. PROXIES. At all meetings of the shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. SECTION 8. CUMULATIVE VOTING FOR DIRECTORS. At each election for directors, every shareholder entitled to vote at such election shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote, or to cumulate his votes by giving one candidate as many votes as the numbers of such directors multiplied by the number of his shares shall equal or by distributing such votes on the same principal among any number of candidates. ARTICLE III. BOARD OF DIRECTORS. SECTION 1. DUTIES AND NUMBER OF DIRECTORS. The business property and affairs of the corporation shall be managed and controlled by a Board of Directors of two (2) members. SECTION 2. TENURE AND QUALIFICATION. Each director shall hold office until the next annual meeting of shareholders and until his successor shall have been elected or qualified. Directors need not be residents of the State of West Virginia nor shareholders of the corporation. 2 SECTION 3. QUORUM. A majority of the number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. SECTION 4. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 5. ACTION WITHOUT A MEETING. Any action that may be taken by the Board of Directors at a meeting may be taken without a meeting if the consent in writing setting forth the action by all the directors is obtained. SECTION 6. REMOVAL OF DIRECTORS. At a meeting called expressly for that purpose, directors may be removed as herein provided: The entire Board of Directors may be removed with or without cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. If less than the entire Board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. ARTICLE IV. MEETING OF THE BOARD OF DIRECTORS SECTION 1. REGULAR MEETING. There shall be a regular meeting of the Board of Directors immediately following and at the same place as the annual shareholders meeting. No notice other than this bylaw need be given for such meeting. The Board of Directors may provide, by resolution, the time and place either with or without the State of West Virginia for the holding of additional regular meetings without notice other than such resolution. SECTION 2. SPECIAL MEETINGS. 3 Special meetings of the Board of Directors may be called by or at the request of the President or Treasurer or by the Secretary when requested in writing by a majority of the directors. SECTION 3. NOTICE. Notice of any special meeting shall be given at least three (3) days previous thereto by written notice delivered personally or mailed to each director at his last known address. If mailed, such notice shall be deemed to have been delivered at the time deposited in the United States Mail so addressed with postage thereon prepaid. Any director may, before or after such meeting, waive notice and such waiver will obviate the necessity of any notice. The attendance of a director at a meeting shall be deemed a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting because the meeting was not lawfully called or convened. SECTION 4. COMPENSATION OF DIRECTORS. By resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a stated salary as a director, a fixed sum for attendance at each meeting, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V. OFFICERS SECTION 1. NUMBER OF OFFICERS. The Board of Directors shall elect, either from their own body or otherwise, a President, a Secretary and a Treasurer. Such other officers, vice or assistant officers, agents and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person except those of President and Secretary. If the Board of Directors does not select a Vice President or if, for any reason, a vacancy exists in the office of Vice President, the Treasurer shall fulfill those duties and responsibilities and have those powers and authorities. SECTION 2. COMPENSATION OF OFFICERS AND AGENTS. The Board of Directors shall have the power to fix the salaries and compensation of all officers, assistant officers and agents whether or not such officers, assistant officers or agents be directors. SECTION 3. ELECTION AND TERM OF OFFICE. The election of the officers of the corporation shall be held at the annual regular election of the Board of Directors. An officer shall hold office until his successor shall have been duly elected or until his death or until he shall resign or shall have been removed by the Board of 4 Directors. ARTICLE VI. DUTIES OF OFFICERS SECTION 1. PRESIDENT. The President shall preside at all meetings of the Board of Directors and the shareholders when present. He shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control all the business and affairs of the corporation. He may sign and acknowledge any and all instruments requiring the signature and acknowledgment of the corporation and may affix the corporate seal. SECTION 2. VICE PRESIDENT. In the absence of the President or in the event of his death, inability or refusal to act, the Vice President shall perform the duties of the President and when so acting shall have all the powers of and be subjected to all the restrictions upon the President. The Vice President may sign with the Secretary certificates for shares of the corporation; and shall perform such other duties as shall be assigned from time to time by the President and the Board of Directors. SECTION 3. SECRETARY. The Secretary shall keep the records, books and papers of the corporation; he shall attend and keep correct minutes of meetings of the Board of Directors and the shareholders, and shall see that all notices are duly given in accordance with provision of the bylaws or as required by law. The Secretary shall keep a register of the mailing addresses of each shareholder when furnished with such address by the shareholder, and shall have general charge of the stock transfer books of the corporation; he shall perform such other duties as the Board of Directors or the President may from time to time require. The records, books and papers shall be kept at such place or places as the Board of Directors shall designate. SECTION 4. TREASURER. The Treasurer shall have charge of all money of the corporation; he shall receive and receipt for, in the name of the corporation, all monies due and payable to the corporation and shall deposit the same to the credit of the company in some bank of deposit; he shall audit for payment, subject to the order of the Board of Directors, all bills, vouchers and accounts. SECTION 5. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation and receiving compensation as a director. ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFERS 5 SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or Vice President and by the Secretary and sealed with a corporate seal or facsimile thereof. SECTION 2. LOST OR DESTROYED CERTIFICATES. In the event that a certificate for shares should become lost or destroyed, the owner (as shown on the stock transfer book of the corporation) may file an affidavit with the Board of Directors setting forth the circumstances of such loss or destruction. Thereupon the Board of Directors, by unanimous vote, may cause a new certificate to be issued to such owner in lieu of the lost or destroyed certificate. The Board of Directors, in their discretion, may require such owner to post a security bond with sufficient surety and publish notice of the loss or destruction of such certificate or certificates as set forth by the Statutes of the State of West Virginia. SECTION 3. TRANSFERS OF SHARES OF STOCK. Shares of stock of the corporation shall be transferable only on the books of the corporation by the holder thereof in person or by his attorney, upon surrender and cancellation of certificates of a like number of shares. ARTICLE VIII. CORPORATE SEAL Section 1. The seal, an impression of which is made here, shall be the corporate seal of the corporation. ARTICLE IX. NOTICES Whenever any notice is required to be given to any shareholders or any director of the corporation under the provisions of these bylaws or under the provisions of the statutes of the State of West Virginia, a waiver thereof in writing signed by the person or persons entitled to such notice shall be deemed equivalent to the timely giving of such notice. ARTICLE X. BYLAWS These bylaws may be altered, amended, repealed or added to at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, by affirmative vote of a majority of the directors. ARTICLE XI. INDEMNIFICATION It shall be the policy of this corporation to indemnify any person who serves, or has served, as a director, officer, employee or agent of this corporation, or who serves or has served as a director, officer, partner, employee, or agent of any other corporation, partnership, joint venture, trust or enterprise at the request or direction of this corporation, against expenses 6 (including attorneys' fees), judgments, fines, taxes, penalties, interest, and payments in settlement, in connection with any threatened, pending or completed action or proceeding, and to pay any such expenses in advance of the final disposition of any such action or proceeding, to the full extent contemplated and permitted by Section 9 of Chapter 31, Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or determination as shall be requisite or appropriate under said section; and the corporation is specifically empowered and authorized to purchase and maintain, at the expense of the corporation, insurance on behalf of any such director, officer, partner, employee or agent against any liability asserted against him or her in such capacity or arising out of his or her status as such, whether or not this corporation would have the power to indemnify him or her under the provisions of said section. ARTICLE XII TELEPHONIC CONFERENCES One or more directors or shareholders may participate in a meeting of the board, committee of the board, or of the shareholders by means of conference, telephone or other similar electronic communication equipment by means of which all persons participating in a meeting can hear each other. Whenever a vote of the shareholders or directors is required or permitted in connection with any corporate action its vote may be taken orally during the electronic conference. The agreement thus reached shall have like effect and validity as the actual or duly taken actions of the shareholders or directors at a meeting of shareholders or directors if the agreement is reduced to writing and approved by the shareholders or directors at the next regular meeting of the shareholders or directors after the conference. ATTEST: /s/ Joanne Kelly - ----------------------------- Secretary 7 EX-3.124 9 y64947exv3w124.txt CERTIFICATE OF AMENDMENT TO AOI Exhibit 3.124 STATE OF WEST VIRGINIA [WEST VIRGINIA STATE SEAL] ========== CERTIFICATE ========== I, JOE MANCHIN III, SECRETARY OF STATE OF THE STATE OF WEST VIRGINIA, HEREBY CERTIFY THAT Articles of Amendment to the Articles of Incorporation of KELLY MEDICAL CORPORATION Are filed in my office as required by the provisions of the West Virginia Code and are found to conform to law. Therefore, I issue this, CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION changing the name of the corporation to KELLY MEDICAL SERVICES CORPORATION GIVEN UNDER MY HAND AND THE GREAT SEAL OF THE STATE OF [WEST VIRGINIA STATE SEAL] WEST VIRGINIA ON THIS DAY OF OCTOBER 3, 2002 /s/ Joe Manchin Secretary of State FILED OCT 03 2002 IN THE OFFICE OF JOE MANCHIN III SECRETARY OF STATE ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF KELLY MEDICAL CORPORATION Pursuant to the provisions of 31D-10-1006 of the West Virginia Code, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the Corporation is Kelly Medical Corporation. SECOND: The following resolution amending the Corporation's Articles of Incorporation was adopted by all of the Shareholders and all of the members of the Board of Directors by unanimous execution of a written agreement and consent in lieu of meeting in the manner prescribed by Section 73, Article 1, Chapter 31 of the West Virginia Code: RESOLVED, that Article I of the Articles of Incorporation of the Corporation be deleted in its entirety and the following be substituted therefor: I. The name of the Corporation shall be Kelly Medical Services Corporation. - -------------------------------------------------------------------------------- Dated this 16th day of September, 2002. KELLY MEDICAL CORPORATION By /s/ Randal Dabbs ------------------------------ Its President and By /s/ Michael Hatcher ------------------------------ Its Secretary STATE OF TENNESSEE, COUNTY OF KNOX, To-Wit: I, John R. Stair, do hereby certify that on this 27th day of October, 2002, personally appeared before me Randal Dabbs, M.D., who being by me first duly sworn, declares that he is President of Kelly Medical Services Corporation, and that the statements herein are true. My commission expires: June 2, 2005. /s/ John R. Stair ___________________________ Notary Public STATE OF TENNESSEE, COUNTY OF KNOX, To-Wit: I, John R. Stair, do hereby certify that on this 27th day of October, 2002, personally appeared before me Michael Hatcher, who being by me first duly sworn, declares that he is Secretary of Kelly Medical Services Corporation, and that the statements herein are true. My commission expires: June 2, 2005. /s/ John R. Stair ___________________________ Notary Public Prepared by: James W. Thomas Jackson & Kelly PLLC Post Office Box 553 Charleston, West Virginia 25322 3 EX-4.2 10 y64947exv4w2.txt SUPPLEMENTAL INDENTURE Exhibit 4.2 SUPPLEMENTAL INDENTURE THIS SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as of March 28, 2001, among ACCESS NURSE PM, INC., a Utah corporation, ACUTE CARE SPECIALISTS CO., a Pennsylvania corporation, MEDICAL MANAGEMENT RESOURCES, INC., a Florida corporation, PARK MED OF FLORIDA, INC., a Florida corporation, SENTINEL MEDICAL SERVICES, INC., a Florida corporation, and TEAM ANESTHESIA, INC., a Tennessee corporation (the "Guaranteeing Subsidiaries"), each a subsidiary corporation of Team Health, Inc. (the "Company"), a Tennessee corporation, the Company, the other Guarantors (as defined in the Indenture referred to herein) and United States Trust Company of New York, as trustee under the Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of March 12, 1999, providing for the issuance of an aggregate principal amount of up to $100.0 million of 12% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee(s)"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. Each of the Guaranteeing Subsidiaries hereby agrees as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) These Subsidiary Guarantees shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, these Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiaries shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of these Subsidiary Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of these Subsidiary Guarantees. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such Guarantor under article 10 of the Indenture shall result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 2 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell, assign, transfer convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless: (i) the Company or a Guarantor is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or the entity or Person to which such sale, transfer, conveyance or other disposition is made assumes all the obligations of such Guarantor under the Notes, the Indenture and the Subsidiaries Guarantee, pursuant to a supplemental indenture in the form of Exhibit F to the Indenture; (iii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iv) the Company (i) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (ii) will, at the time of such transaction and 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 Section 4.09 of the Indenture; (b) In case of any such consolidation, merger, sale, or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiaries Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary guarantees theretofore and thereafter issued in accordance with the terms of the indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent 3 any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relived of any obligations under these Subsidiary Guarantees; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 10 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present, or future director, officer, employee, incorporator, stockholder, or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiaries under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. 4 IN WITNESS WHEREOF, the undersigned, through their duly-authorized representatives, have executed this Supplemental Indenture effective as of the date first set forth above. GUARANTEEING SUBSIDIARIES: ACCESS NURSE PM, INC. ACUTE CARE SPECIALISTS CO. MEDICAL MANAGEMENT RESOURCES, INC. PARK MED OF FLORIDA, INC. SENTINEL MEDICAL SERVICES, INC. TEAM ANESTHESIA, INC. By: /s/ David P. Jones -------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. COMPANY: TEAM HEALTH, INC. By: /s/ David P. Jones -------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. GUARANTORS: ALLIANCE CORPORATION HERSCHEL FISCHER, INC. IMBS, INC. INPHYNET HOSPITAL SERVICES, INC. INPHYNET MEDICAL MANAGEMENT INSTITUTE, INC. KARL G. MANGOLD, INC. CHARLES L. SPRINGFIELD, INC. CLINIC MANAGEMENT SERVICES, INC. DANIEL & YEAGER, INC. EMERGENCY COVERAGE CORPORATION EMERGICARE MANAGEMENT, INCORPORATED INPHYNET CONTRACTING SERVICES, INC. INPHYNET LOUISIANA, INC. HOSPITAL BASED PHYSICIAN SERVICES, INC. INPHYNET ANESTHESIA OF WEST VIRGINIA, INC. MED ASSURE SYSTEMS, INC. METROAMERICAN RADIOLOGY, INC. NEO-MED, INC. PARAGON ANESTHESIA, INC. PARAGON CONTRACTING SERVICES, INC. 5 PARAGON IMAGING CONSULTANTS, INC. QUANTUM PLUS, INC. REICH, SEIDLEMANN & JANICKI CO. ROSENDORF, MARGULIES, BORUSHOK & SCHOENBAUM RADIOLOGY ASSOCIATES OF HOLLYWOOD, INC. SARASOTA EMERGENCY MEDICAL CONSULTANTS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS OF MEMPHIS, INC. TEAM HEALTH FINANCIAL SERVICES, INC. TEAM RADIOLOGY, INC. THBS, INC. VIRGINIA EMERGENCY PHYSICIANS, INC. DRS. SHEER, AHEARN & ASSOCIATES, INC. EMERGENCY PHYSICIAN ASSOCIATES, INC. EMERGENCY PROFESSIONAL SERVICES, INC. THE EMERGENCY ASSOCIATES FOR MEDICINE, INC. EMERGENCY PHYSICIANS OF MANATEE, INC. EMERGENCY MANAGEMENT SPECIALISTS, INC. INPHYNET SOUTH BROWARD, INC. NORTHWEST EMERGENCY PHYSICIANS, INCORPORATED INPHYNET JOLIET, INC. By: /s/ David P. Jones ------------------------------------ Name: DAVID JONES Title: VICE PRES/TREAS. FISCHER MANGOLD PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones ------------------------------------ Name: DAVID JONES Title: VICE PRES/TREAS. By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones ------------------------------------ Name: DAVID JONES Title: VICE PRES/TREAS. 6 MT. DIABLO EMERGENCY PHYSICIANS, A CALIFORNIA GENERAL PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones --------------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones ----------------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. PARAGON HEALTHCARE LIMITED PARTNERSHIP By: Inphynet Hospital Services, Inc., General Partner By: /s/ David P. Jones --------------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. TEAM HEALTH SOUTHWEST, L.P. By: Team Radiology, Inc., General Partner By: /s/ David P. Jones --------------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. TEAM HEALTH BILLING SERVICES, L.P. By: T.H.B.S., INC., General Partner By: /s/ David P. Jones --------------------------------------- Name: DAVID JONES Title: VICE PRES/TREAS. TRUSTEE: UNITED STATES TRUST COMPANY OF NEW YORK as Trustee By: /s/ Patricia Gallagher --------------------------------------- Name: PATRICIA GALLAGHER Title: ASSISTANT VICE PRESIDENT 7 EX-4.3 11 y64947exv4w3.txt SUPPLEMENTAL INDENTURE Exhibit 4.3 SUPPLEMENTAL INDENTURE THIS SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") dated as of September 3, 2001, among INTEGRATED SPECIALISTS MANAGEMENT SERVICES, INC., a California corporation, PHYSICIAN INTEGRATION CONSULTING SERVICES, INC., a California corporation (the "Guaranteeing Subsidiaries"), both subsidiary corporations of Team Health, Inc., a Tennessee corporation (the "Company"), the other Guarantors (as defined in the Indenture and First Supplemental Indenture referred to herein) and The Bank of New York as successor in interest to United States Trust Company of New York, as trustee under the Indenture and First Supplemental Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of March 12, 1999, providing for the issuance of an aggregate principal amount of up to $100.0 million of 12% Senior Subordinated Notes due 2009 (the "Notes"); and WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantees"); and WHEREAS, the Company has heretofore executed and delivered to the Trustee a supplemental indenture dated as of March 28, 2001 (the "First Supplemental Indenture"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries hereby agree as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that; (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and 1 (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following are hereby waived: diligence, presentment, demand or payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) These Subsidiary Guarantees shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, these Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiaries shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of these Subsidiary Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of these Subsidiary Guarantees. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees. (i) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture shall result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 2 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiaries agree that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantees. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell, assign, transfer convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless: (i) the Company or a Guarantor is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or the entity or Person to which such sale, transfer, conveyance or other disposition is made assumes all the obligations of such Guarantor under the Notes, the Indenture and the Subsidiary Guarantees, pursuant to a supplemental indenture in the form of Exhibit F to the Indenture; (iii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iv) the Company (i) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (ii) will, at the time of such transaction and 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 Section 4.09 of the Indenture; (b) In case of any such consolidation, merger, sale, or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantees endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary guarantees theretofore and thereafter issued in accordance with the terms of the indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. 3 (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under these Subsidiary Guarantees; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantees. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantees shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 10 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present, or future director, officer, employee, incorporator, stockholder, or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiaries under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals 4 contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. IN WITNESS WHEREOF, the undersigned, through their duly-authorized representatives, have executed this Supplemental Indenture effective as of the date first set forth above. GUARANTEEING SUBSIDIARIES: INTEGRATED SPECIALISTS MANAGEMENT SERVICES, INC. By: /s/ David P. Jones --------------------------------------- Name: Title: PHYSICIAN INTEGRATION CONSULTING SERVICES, INC. By: /s/ David P. Jones --------------------------------------- Name: Title: COMPANY: TEAM HEALTH, INC. By: /s/ David P. Jones --------------------------------------- Name: Title: GUARANTORS: ALLIANCE CORPORATION HERSCHEL FISHER, INC. IMBS, INC. INPHYNET HOSPITAL SERVICES, INC. INPHYNET MEDICAL MANAGEMENT INSTITUTE, INC. KARL G. MANGOLD, INC. CHARLES L. SPRINGFIELD, INC. CLINIC MANAGEMENT SERVICES, INC. DANIEL & YEAGER, INC. EMERGENCY COVERAGE CORPORATION EMERGICARE MANAGEMENT, INCORPORATED INPHYNET CONTRACTING SERVICES, INC. INPHYNET LOUISIANA, INC. 5 HOSPITAL BASED PHYSICIAN SERVICES, INC. INPHYNET ANESTHESIA OF WEST VIRGINIA, INC. MED ASSURE SYSTEMS, INC. METROAMERICAN RADIOLOGY, INC. NEO-MED, INC. PARAGON ANESTHESIA, INC. PARAGON CONTRACTING SERVICES, INC. PARAGON IMAGING CONSULTANTS, INC. QUANTUM PLUS, INC. REICH, SEIDLEMANN & JANICKI CO. ROSENDORF, MARGULIES, BORUSHOK & SCHOENBAUM RADIOLOGY ASSOCIATES OF HOLLYWOOD, INC. SARASOTA EMERGENCY MEDICAL CONSULTANTS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS OF MEMPHIS, INC. TEAM HEALTH FINANCIAL SERVICES, INC. TEAM RADIOLOGY, INC. THBS, INC. VIRGINIA EMERGENCY PHYSICIANS, INC. DRS. SHEER, AHEARN & ASSOCIATES, INC. EMERGENCY PHYSICIAN ASSOCIATES, INC. EMERGENCY PROFESSIONAL SERVICES, INC. THE EMERGENCY ASSOCIATES FOR MEDICINE, INC. EMERGENCY PHYSICIANS OF MANATEE, INC. EMERGENCY MANAGEMENT SPECIALISTS, INC. INPHYNET SOUTH BROWARD, INC. NORTHWEST EMERGENCY PHYSICIANS, INCORPORATED INPHYNET JOLIET, INC. ACCESS NURSE PM, INC. ACUTE CARE SPECIALISTS CO. MEDICAL MANAGEMENT RESOURCES, INC. PARK MED OF FLORIDA, INC. SENTINEL MEDICAL SERVICES, INC. TEAM ANESTHESIA, INC. By: /s/ David P. Jones --------------------------------------- Name: Title: 6 FISCHER MANGOLD PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones --------------------------------------- Name: Title: By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones -------------------------------------- Name: Title: MT. DIABLO EMERGENCY PHYSICIANS, A CALIFORNIA GENERAL PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones -------------------------------------- Name: Title: By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones -------------------------------------- Name: Title: PARAGON HEALTHCARE LIMITED PARTNERSHIP By: Inphynet Hospital Services, Inc., General Partner By: /s/ David P. Jones -------------------------------------- Name: Title: TEAM HEALTH SOUTHWEST, L.P. By: Team Radiology, Inc., General Partner By: /s/ David P. Jones -------------------------------------- Name: Title: 7 TEAM HEALTH BILLING SERVICES, L.P. By: T.H.B.S., INC., General Partner By: /s/ David P. Jones ------------------------------------- Name: Title: TRUSTEE: THE BANK OF NEW YORK as Trustee By: /s/ Patricia Gallagher ------------------------------------- Name: Patricia Gallagher Title: Authorized Signer 8 EX-4.4 12 y64947exv4w4.txt SUPPLEMENTAL INDENTURE Exhibit 4.4 SUPPLEMENTAL INDENTURE THIS SUPPLEMENTAL INDENTURE (the "Supplemental Indenture") dated as of May 31, 2002, among AFTER HOURS PEDIATRIC PRACTICES, INC., a Florida corporation, SPECTRUM CRUISE CARE, INC., a Delaware corporation, SPECTRUM HEALTHCARE, INC., a Delaware corporation, SPECTRUM HEALTHCARE NATIONWIDE, INC., a Delaware corporation, SPECTRUM HEALTHCARE RESOURCES, INC., a Delaware corporation, SPECTRUM HEALTHCARE RESOURCES OF DELAWARE, INC., a Delaware corporation, SPECTRUM HEALTHCARE SERVICES, INC., a Delaware corporation, SPECTRUM PRIMARY CARE OF DELAWARE, INC., a Delaware corporation, and SPECTRUM PRIMARY CARE, INC., a Delaware corporation (the "Guaranteeing Subsidiaries"), all subsidiary corporations of Team Health, Inc., a Tennessee corporation (the "Company"), the other Guarantors (as defined in the Indenture, the First Supplemental Indenture and the Second Supplemental Indenture referred to herein) and The Bank of New York as successor in interest to United States Trust Company of New York, as trustee under the Indenture, the First Supplemental Indenture and the Second Supplemental Indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture") dated as of March 12, 1999, providing for the issuance of an aggregate principal amount of up to $100.0 million of 12% Senior Subordinated Notes due 2009 (the "Notes"); and WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantees"); and WHEREAS, the Company has heretofore executed and delivered to the Trustee a supplemental indenture dated as of March 28, 2001 (the "First Supplemental Indenture"); and WHEREAS, the Company has heretofore executed and delivered to the Trustee a supplemental indenture dated as of September 3, 2001 (the "Second Supplemental Indenture"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries hereby agree as follows: (a) Along with all other Guarantors, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors 1 and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) These Subsidiary Guarantees shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, these Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiaries shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of these Subsidiary Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of these Subsidiary Guarantees. 2 (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees. (i) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture shall result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. The Guaranteeing Subsidiaries agree that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantees. 4. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell, assign, transfer convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless: (i) the Company or a Guarantor is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) or the entity or Person to which such sale, transfer, conveyance or other disposition is made assumes all the obligations of such Guarantor under the Notes, the Indenture and the Subsidiary Guarantees, pursuant to a supplemental indenture in the form of Exhibit F to the Indenture; (iii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iv) the Company (i) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (ii) will, at the time of such transaction and 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 Section 4.09 of the Indenture; (b) In case of any such consolidation, merger, sale, or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantees endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the 3 indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All of the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary guarantees theretofore and thereafter issued in accordance with the terms of the indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under the Subsidiary Guarantees; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 10 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present, or future director, officer, employee, incorporator, stockholder, or agent of the Guaranteeing Subsidiaries, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiaries under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 4 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company. IN WITNESS WHEREOF, the undersigned, through their duly-authorized representatives, have executed this Supplemental Indenture effective as of the date first set forth above. GUARANTEEING SUBSIDIARIES: AFTER HOURS PEDIATRIC PRACTICES, INC. SPECTRUM CRUISE CARE, INC. SPECTRUM HEALTHCARE, INC. SPECTRUM HEALTHCARE NATIONWIDE, INC. SPECTRUM HEALTHCARE RESOURCES, INC. SPECTRUM HEALTHCARE RESOURCES OF DELAWARE, INC. SPECTRUM HEALTHCARE SERVICES, INC. SPECTRUM PRIMARY CARE OF DELAWARE, INC. SPECTRUM PRIMARY CARE, INC. By: /s/ David P. Jones -------------------------- Name: Title: COMPANY: TEAM HEALTH, INC. By: /s/ David P. Jones -------------------------- Name: Title: 5 GUARANTORS: ALLIANCE CORPORATION HERSCHEL FISCHER, INC. INPHYNET HOSPITAL SERVICES, INC. INPHYNET MEDICAL MANAGEMENT INSTITUTE, INC. KARL G. MANGOLD, INC. CHARLES L. SPRINGFIELD, INC. CLINIC MANAGEMENT SERVICES, INC. DANIEL & YEAGER, INC. EMERGENCY COVERAGE CORPORATION INPHYNET CONTRACTING SERVICES, INC. INPHYNET LOUISIANA, INC. HOSPITAL BASED PHYSICIAN SERVICES, INC. INPHYNET ANESTHESIA OF WEST VIRGINIA, INC. MED ASSURE SYSTEMS, INC. METROAMERICAN RADIOLOGY, INC. NEO-MED, INC. PARAGON ANESTHESIA, INC. PARAGON CONTRACTING SERVICES, INC. PARAGON IMAGING CONSULTANTS, INC. QUANTUM PLUS, INC. REICH, SEIDLEMANN & JANICKI CO. ROSENDORF, MARGULIES, BORUSHOK & SCHOENBAUM RADIOLOGY ASSOCIATES OF HOLLYWOOD, INC. SARASOTA EMERGENCY MEDICAL CONSULTANTS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS, INC. SOUTHEASTERN EMERGENCY PHYSICIANS OF MEMPHIS, INC. TEAM HEALTH FINANCIAL SERVICES, INC. TEAM RADIOLOGY, INC. THBS, INC. VIRGINIA EMERGENCY PHYSICIANS, INC. DRS. SHEER, AHEARN & ASSOCIATES, INC. EMERGENCY PHYSICIAN ASSOCIATES, INC. EMERGENCY PROFESSIONAL SERVICES, INC. THE EMERGENCY ASSOCIATES FOR MEDICINE, INC. EMERGENCY PHYSICIANS OF MANATEE, INC. EMERGENCY MANAGEMENT SPECIALISTS, INC. INPHYNET SOUTH BROWARD, INC. NORTHWEST EMERGENCY PHYSICIANS, INCORPORATED INPHYNET JOLIET, INC. ACCESS NURSE PM, INC. ACUTE CARE SPECIALISTS CO. 6 MEDICAL MANAGEMENT RESOURCES, INC. PARK MED OF FLORIDA, INC. SENTINEL MEDICAL SERVICES, INC. TEAM ANESTHESIA, INC. INTEGRATED SPECIALISTS MANAGEMENT SERVICES, INC. PHYSICIAN INTEGRATION CONSULTING SERVICES, INC. By: /s/ David P. Jones ------------------------------------- Name: Title: IMBS, INC. By: /s/ Robert Joyner ------------------------------------- Name: Title: FISCHER MANGOLD PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones ------------------------------------- Name: Title: By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones ------------------------------------- Name: Title: MT. DIABLO EMERGENCY PHYSICIANS, A CALIFORNIA GENERAL PARTNERSHIP By: Herschel Fischer, Inc., General Partner By: /s/ David P. Jones ------------------------------------- Name: Title: By: Karl G. Mangold, Inc., General Partner By: /s/ David P. Jones ------------------------------------- Name: Title: 7 PARAGON HEALTHCARE LIMITED PARTNERSHIP BY: Inphynet Hospital Services, Inc., General Partner By: /s/ David P. Jones -------------------------------- Name: Title: TEAM HEALTH SOUTHWEST, L.P. By: Team Radiology, Inc., General Partner By: /s/ David P. Jones -------------------------------- Name: Title: TEAM HEALTH BILLING SERVICES, L.P. By: T.H.B.S., INC., General Partner By: /s/ David P. Jones -------------------------------- Name: Title: TRUSTEE: THE BANK OF NEW YORK as Trustee By: /s/ Patricia Gallagher -------------------------------- Name: Patricia Gallagher Title: Authorized Signer 8 -----END PRIVACY-ENHANCED MESSAGE-----