| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| (State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| |
||
(Address of principal executive offices) |
(Zip Code) | |
| Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
| ☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company | ||||||
Page |
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| PART I - FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements |
3 |
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3 |
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4 |
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5 |
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7 |
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8 |
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| Item 2. |
16 |
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| Item 3. |
26 |
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| Item 4. |
26 |
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| Item 1. |
27 |
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| Item 1A. |
27 |
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| Item 2. |
28 |
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| Item 6. |
29 |
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30 |
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September 30, 2020 |
December 31, 2019 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Short-term investments |
||||||||
Accounts receivable, net |
||||||||
Prepaid expenses |
||||||||
Income taxes receivable |
||||||||
Other current assets |
||||||||
Assets held for sale |
||||||||
Total current assets |
||||||||
Property and equipment, net |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Operating lease right-of-use |
||||||||
Deferred income tax assets |
||||||||
Other assets |
||||||||
Assets held for sale |
||||||||
Total assets |
$ | $ | ||||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | $ | ||||||
Current portion of finance lease liabilities |
||||||||
Current portion of operating lease liabilities |
||||||||
Income taxes payable |
||||||||
Liabilities held for sale |
||||||||
Total current liabilities |
||||||||
Long-term debt and finance lease liabilities, net |
||||||||
Long-term operating lease liabilities |
||||||||
Long-term professional liabilities |
||||||||
Deferred income tax liabilities |
||||||||
Other liabilities |
||||||||
Liabilities held for sale |
||||||||
Total liabilities |
||||||||
Commitments and contingencies |
||||||||
Shareholders’ equity: |
||||||||
Preferred stock; $ par value; |
||||||||
Common stock; $ par value; |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income |
||||||||
Retained (deficit) earnings |
( |
) | ||||||
Total MEDNAX, Inc. shareholders’ equity |
||||||||
Noncontrolling i nterest |
||||||||
Total equity |
||||||||
Total liabilities and equity |
$ | $ | ||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Net revenue |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Practice salaries and benefits |
||||||||||||||||
| Practice supplies and other operating expenses |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Depreciation and amortization |
||||||||||||||||
| Transformational and restructuring related expenses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
||||||||||||||||
| |
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|
|
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|
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|
|||||||||
| Income from operations |
||||||||||||||||
| Investment and other income |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Equity in earnings of unconsolidated affiliates |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total non-operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Income (loss) from continuing operations before income taxes |
( |
) | ||||||||||||||
| Income tax provision |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| (Loss) income from continuing operations |
( |
) | ( |
) | ||||||||||||
| Loss from discontinued operations, net of tax |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Per common and common equivalent share data: |
||||||||||||||||
| (Loss) income from continuing operations: |
||||||||||||||||
| Basic |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss from discontinued operations: |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Net loss: |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
| Weighted average common shares: |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
Common Stock |
||||||||||||||||||||
Number of |
Additional Paid-in |
Retained (Deficit) |
Total |
|||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Equity |
||||||||||||||||
| 2020 |
||||||||||||||||||||
| Balance at January 1, 2020 |
$ | |
$ | $ | $ | |
||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Unrealized holding loss on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock and conversion of deferred stock to common stock |
( |
) | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at March 31, 2020 |
$ | $ | $ | $ | ||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at June 30, 2020 |
$ | $ | |
$ | ( |
) | $ | |||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Contribution from noncontrolling Interests (1) |
||||||||||||||||||||
| Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock and conversion of deferred stock to common stock |
( |
) | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Presented within retained (deficit) earnings as the balance is immaterial. |
Common Stock |
||||||||||||||||||||
Number of |
Additional Paid-in |
Retained (Deficit) |
Total |
|||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Equity |
||||||||||||||||
| 2019 |
||||||||||||||||||||
| Balance at January 1, 2019 |
$ | |
$ | |
$ | $ | ||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Unrealized holding loss on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
| Stock swaps |
( |
) | — | ( |
) | — | ( |
) | ||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at March 31, 2019 |
$ | $ | $ | $ | ||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Unrealized holding gain on investments, net of tax (1) |
— | — | — | |||||||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock |
( |
) | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | ( |
) | — | — | ||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at June 30, 2019 |
$ | $ | $ | $ | ||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Unrealized holding gain on investments, net of tax (1) |
— | — | — | ( |
) | ( |
) | |||||||||||||
| Common stock issued under employee stock option, employee stock purchase plan and stock purchase plan |
— | |||||||||||||||||||
| Issuance of restricted stock |
— | — | — | — | ||||||||||||||||
| Forfeitures of restricted stock |
( |
) | — | — | — | — | ||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||
| Repurchased common stock |
( |
) | — | ( |
) | — | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at September 30, 2019 |
$ | $ | $ | $ | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(2) |
Presented within retained (deficit) earnings as the balance is immaterial. |
Nine Months Ended September 30, |
||||||||
2020 |
2019 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Loss from discontinued operations |
||||||||
| Adjustments to reconcile net income to net cash from operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Amortization of premiums, discounts and issuance costs |
||||||||
| Stock-based compensation expense |
||||||||
| Deferred income taxes |
( |
) | ||||||
| Other |
( |
) | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
||||||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
| Other long-term assets |
||||||||
| Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
| Income taxes payable / receivable |
( |
) | ( |
) | ||||
| Long-term professional liabilities |
||||||||
| Other liabilities |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by operating activities – continuing operations |
||||||||
| Net cash provided by operating activities—discontinued operations |
||||||||
| |
|
|
|
|||||
| Net cash provided by operating activities |
||||||||
| |
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Acquisition payments, net of cash acquired |
( |
) | ( |
) | ||||
| Purchases of investments |
( |
) | ( |
) | ||||
| Proceeds from maturities or sales of investments |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale of business, net of cash sold |
||||||||
| |
|
|
|
|||||
| Net cash used in investing activities – continuing operations |
( |
) | ( |
) | ||||
| Net cash provided by (used in) investing activities—discontinued operations |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Borrowings on credit agreement |
||||||||
| Payments on credit agreement |
( |
) | ( |
) | ||||
| Proceeds from issuance of senior notes |
||||||||
| Payments for credit facility amendment and financing costs |
( |
) | ( |
) | ||||
| Payments on finance lease obligations |
( |
) | ||||||
| Proceeds from issuance of common stock |
||||||||
| Contribution from noncontrolling interests |
||||||||
| Repurchases of common stock |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash used in financing activities – continuing operations |
( |
) | ( |
) | ||||
| Net cash used in financing activities—discontinued operations |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
||||||||
| |
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| |
|
|
|
|||||
1. |
Basis of Presentation and New Accounting Pronouncements: |
2. |
Coronavirus Pandemic (“COVID-19”): |
3. |
Cash Equivalents and Investments: |
September 30, 2020 |
December 31, 2019 |
|||||||
| Corporate securities |
$ | $ | ||||||
| Municipal debt securities |
||||||||
| Federal home loan securities |
||||||||
| Certificates of deposit |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
4. |
Fair Value Measurements: |
Fair Value |
||||||||||||
Fair Value Category |
September 30, 2020 |
December 31, 2019 |
||||||||||
| Assets: |
||||||||||||
| Money market funds |
Level 1 | $ | $ | |||||||||
| Short-term investments |
Level 2 | |||||||||||
| Mutual Funds |
Level 1 | |||||||||||
September 30, 2020 |
December 31, 2019 |
|||||||||||||||
Carrying Amount |
Fair Value |
Carrying Amount |
Fair Value |
|||||||||||||
| Liabilities: |
||||||||||||||||
| 2023 Notes |
||||||||||||||||
| 2027 Notes |
||||||||||||||||
5. |
Accounts Receivable and Net Revenue: |
September 30, 2020 |
December 31, 2019 |
|||||||
| Gross accounts receivable |
$ | $ | ||||||
| Allowance for contractual adjustments and uncollectibles |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Net patient service revenue |
$ | $ | $ | $ | ||||||||||||
| Hospital contract administrative fees |
||||||||||||||||
| Other revenue |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| $ | $ | $ | $ | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Contracted managed care |
% | % | % | % | ||||||||||||
| Government |
||||||||||||||||
| Other third-parties |
||||||||||||||||
| Private-pay patients |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| % | % | % | % | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
6. |
Business Combinations, Assets Held for Sale and Discontinued Operations: |
September 30, 2020 |
December 31, 2019 |
|||||||
| Assets |
||||||||
| Accounts receivable, net |
$ | $ | ||||||
| Prepaid expenses and other current assets |
||||||||
| Property and equipment, net |
||||||||
| Operating leases right-of-use |
||||||||
| Goodwill |
||||||||
| Intangible assets, net |
||||||||
| Deferred income tax assets |
||||||||
| Other assets |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
| Liabilities |
||||||||
| Accounts payable and accrued expenses |
$ | $ | ||||||
| Operating and finance leases |
||||||||
| Long-term professional liabilities |
||||||||
| Other liabilities |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Net revenue |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Cost of service salaries and benefits |
||||||||||||||||
| Cost of service supplies and other operating expenses |
( |
) | ||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Depreciation and amortization |
||||||||||||||||
| Transformational and restructuring related expenses |
||||||||||||||||
| Goodwill impairment |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Non-operating income, net |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax (provision) benefit |
( |
) | ( |
) | ( |
) | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Net revenue |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Operating expenses: |
||||||||||||||||
| Cost of service salaries and benefits |
||||||||||||||||
| Cost of service supplies and other operating expenses |
||||||||||||||||
| General and administrative expenses |
||||||||||||||||
| Depreciation and amortization |
— | |||||||||||||||
| Transformational and restructuring related expenses |
— | |||||||||||||||
| Goodwill impairment |
— | — | ||||||||||||||
| Loss on sale, net |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Non-operating (expense) income, net |
— | ( |
) | ( |
) | |||||||||||
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| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax benefit |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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7. |
Accounts Payable and Accrued Expenses: |
September 30, 2020 |
December 31, 2019 |
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| Accounts payable |
$ | $ | ||||||
| Accrued salaries and bonuses |
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| Accrued payroll taxes and benefits |
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| Accrued professional liabilities |
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| Accrued interest |
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| Other accrued expenses |
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| $ | $ | |||||||
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8. |
Common and Common Equivalent Shares: |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| Weighted average number of common shares outstanding |
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| Weighted average number of dilutive common share equivalents |
— | — | ||||||||||||||
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| Weighted average number of common and common equivalent shares outstanding (a) |
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| Antidilutive securities not included in the diluted net income per common share calculation |
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(a) |
Due to a loss from continuing operations for the three months and nine months ended September 30, 2020, no incremental shares are included because the effect wou l d be antidilutive. |
9. |
Stock Incentive Plans and Stock Purchase Plans: |
10. |
Common Stock Repurchase Programs: |
11. |
Commitments and Contingencies: |
| • | Clinician Shortage Support |
| • | Strengthening of Supply Chain |
| • | Expanded Virtual Care Offerings |
| • | Early Virus Detection Using Cutting-Edge Imaging Diagnostic Tools |
| • | Virtual Forum to Provide Clinician Support |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
| (Loss) income from continuing operations |
$ | (2,652 | ) | $ | 12,887 | $ | (14,067 | ) | $ | 32,281 | ||||||
| Interest expense |
27,250 | 29,909 | 83,180 | 91,271 | ||||||||||||
| Income tax provision |
6,677 | 7,360 | 10,859 | 12,590 | ||||||||||||
| Depreciation and amortization |
7,195 | 6,408 | 20,749 | 18,830 | ||||||||||||
| Transformational and restructuring related expenses |
34,291 | 12,766 | 60,846 | 32,025 | ||||||||||||
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|
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| Adjusted EBITDA from continuing operations |
$ | 72,761 | $ | 69,330 | $ | 161,567 | $ | 186,997 | ||||||||
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|
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Three Months Ended September 30, |
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2020 |
2019 |
|||||||||||||||
| Weighted average diluted shares outstanding |
83,862 | 82,883 | ||||||||||||||
| (Loss) income from continuing operations and diluted (loss) income from continuing operations per share |
$ | (2,652 | ) | $ | (0.03 | ) | $ | 12,887 | $ | 0.16 | ||||||
| Adjustments (1) : |
||||||||||||||||
| Amortization (net of tax of $601 and $444) |
1,802 | 0.02 | 1,333 | 0.02 | ||||||||||||
| Stock-based compensation (net of tax of $1,132 and $1,902) |
3,398 | 0.04 | 5,706 | 0.07 | ||||||||||||
| Transformational and restructuring related expenses (net of tax of $8,573 and $3,191) |
25,718 | 0.31 | 9,575 | 0.12 | ||||||||||||
| Net impact from discrete tax events |
2,905 | 0.03 | 1,784 | 0.01 | ||||||||||||
| |
|
|
|
|
|
|
|
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| Adjusted income and diluted EPS from continuing operations |
$ | 31,171 | $ | 0.37 | $ | 31,285 | $ | 0.38 | ||||||||
| |
|
|
|
|
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|
|
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(1) |
Our blended statutory tax rate of 25% was used to calculate the tax effects of the adjustments for the three months ended September 30, 2020 and 2019. |
Nine Months Ended September 30, |
||||||||||||||||
2020 |
2019 |
|||||||||||||||
| Weighted average diluted shares outstanding |
83,260 | 84,302 | ||||||||||||||
| (Loss) income from continuing operations and diluted (loss) income from continuing operations per share |
$ | (14,067 | ) | $ | (0.17 | ) | $ | 32,281 | $ | 0.38 | ||||||
| Adjustments (1) : |
||||||||||||||||
| Amortization (net of tax of $1,632 and $1,289) |
4,896 | 0.06 | 3,867 | 0.05 | ||||||||||||
| Stock-based compensation (net of tax of $4,550 and $6,893) |
13,652 | 0.16 | 20,672 | 0.25 | ||||||||||||
| Transformational and restructuring related expenses (net of tax of $15,211 and $8,006) |
45,635 | 0.55 | 24,019 | 0.28 | ||||||||||||
| Net impact from discrete tax events |
7,849 | 0.10 | (5 | ) | — | |||||||||||
| |
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| Adjusted income and diluted EPS from continuing operations |
$ | 57,965 | $ | 0.70 | $ | 80,834 | $ | 0.96 | ||||||||
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(2) |
Our blended statutory tax rate of 25% was used to calculate the tax effects of the adjustments for the nine months ended September 30, 2020 and 2019. |
Nine Months Ended September 30, |
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2020 |
2019 |
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| Operating activities |
$ | 71,645 | $ | 36,237 | ||||
| Investing activities |
(28,179 | ) | (33,729 | ) | ||||
| Financing activities |
(3,496 | ) | (174,662 | ) | ||||
| Period |
Total Number of Shares Repurchased (a) |
Average Price Paid per Share |
Total Number of Shares Purchased as part of the Repurchase Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Programs (a) |
||||||||||||
| July 1 – July 31, 2020 |
290,716 | (b) | $ | 17.65 | — | (a | ) | |||||||||
| August 1 – August 31, 2020 |
— | — | — | (a | ) | |||||||||||
| September 1 – September 30, 2020 |
19,873 | (b) | 16.14 | — | (a | ) | ||||||||||
| |
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| Total |
310,589 | $ | 17.55 | — | (a | ) | ||||||||||
| (a) | We have two active repurchase programs. Our July 2013 program allows us to repurchase shares of our common stock up to an amount sufficient to offset the dilutive impact from the issuance of shares under our equity compensation programs. Our August 2018 repurchase program allows us to repurchase up to an additional $500.0 million of shares of our common stock, of which we repurchased $401.3 million as of September 30, 2020. |
| (b) | Represents shares withheld to satisfy minimum statutory withholding obligations of an aggregate of $5.5 million in connection with the vesting of restricted stock. |
| + | Filed herewith. |
| * | Furnished herewith. |
MEDNAX, INC. | ||||||
| Date: November 6, 2020 | By: | /s/ Mark S. Ordan | ||||
| Mark S. Ordan | ||||||
| Chief Executive Officer | ||||||
| (Principal Executive Officer) | ||||||
| Date: November 6, 2020 | By: | /s/ C. Marc Richards | ||||
| C. Marc Richards | ||||||
| Chief Financial Officer | ||||||
| (Principal Financial Officer) | ||||||
| Date: November 6, 2020 | By: | /s/ John C. Pepia | ||||
| John C. Pepia | ||||||
| Chief Accounting Officer | ||||||
| (Principal Accounting Officer) | ||||||
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between MEDNAX SERVICES, INC., a Florida corporation (“Employer”), and C. Marc Richards (“Employee”) on September 27, 2020 and effective as of September 8, 2020 (the “Effective Date”).
RECITALS
WHEREAS, Employer is presently engaged in “Employer’s Business” as defined on Exhibit A hereto; and
WHEREAS, Employer desires to employ Employee and benefit from Employee’s contributions to Employer.
NOW, THEREFORE, in consideration of the mutual covenants and premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employer and Employee hereby agree as follows:
1. Employment.
1.1 Employment and Term. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer on the terms and conditions set forth herein for an “Initial Term” commencing as of the Effective Date and continuing for a period of three (3) years, unless sooner terminated as hereinafter set forth. Thereafter, the employment of Employee hereunder shall automatically renew for successive one (1) year periods until terminated in accordance herewith. The Initial Term and any automatic renewals shall be referred to as the “Employment Period.”
1.2 Duties of Employee. As of the Effective Date and thereafter during the remaining Employment Period, Employee shall serve as Executive Vice President of Employer and MEDNAX, Inc., a Florida corporation and the parent corporation of Employer (“MEDNAX”), and from October 1, 2020 and thereafter during the remaining Employment Period, Employee shall also serve as Chief Financial Officer of Employer and MEDNAX and perform such duties as are customary to the position Employee holds or as may be assigned to Employee from time to time by the most senior executive officer of MEDNAX (“Employee’s Supervisor”) or the Board of Directors of MEDNAX (the “Board”) including, but not limited to, also serving as an officer and/or director, or equivalent, of subsidiaries and/or affiliates of MEDNAX; provided, that such duties as assigned shall be customary to Employee’s role as an executive officer of Employer and MEDNAX. Employee’s employment shall be full-time and, as such, Employee agrees to devote substantially all of Employee’s attention and professional time to the business and affairs of Employer and MEDNAX. Employee shall perform Employee’s duties honestly, diligently, competently, in good faith and in the best interest of Employer and MEDNAX. During the Employment Period, Employee agrees that Employee will not, without the prior written consent of Employer (which consent shall not be unreasonably withheld), serve as a director on a corporate board of directors or in any other similar capacity for any institution other than Employer and MEDNAX, and their respective subsidiaries and affiliates in accordance with this Section 1.2. During the Employment Period, it shall not be a violation of this Agreement to (i) serve on civic
or charitable boards or committees, or (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, so long as such activities have been approved by Employee’s Supervisor and do not interfere with the performance of Employee’s responsibilities as an employee of Employer in accordance with this Agreement, including the restrictions of Section 8 hereof.
1.3 Place of Performance. Employee shall be based at Employee’s home office located in the Washington, DC metropolitan area, except for required travel relating to Employer’s Business.
2. Base Salary and Performance Bonus.
2.1 Base Salary. Employer shall pay Employee during the Employment Period an annual salary of Five Hundred Thousand Dollars ($500,000) (the “Base Salary”), payable in accordance with Employer’s normal business practices for senior executives (including tax withholding), but in no event less frequently than monthly. Employee’s Base Salary shall be reviewed at least annually by the Compensation Committee of the Board (the “Compensation Committee”) and may be increased in its discretion. After any such increase in Base Salary, the term “Base Salary” shall refer to the increased amount.
2.2 Performance Bonus. Employee shall be eligible to receive a cash bonus (the “Performance Bonus”) for each year (or prorated with respect to any partial years of employment) during the Employment Period, provided that, except as otherwise provided herein, Employee has remained employed by Employer as of the end of the applicable year (or as of the end of the Employment Period for the final calendar year of the Employment Period). Employee’s target bonus opportunity for any particular year (“Target Bonus”) shall be one hundred percent (100%) of Base Salary. The amount of bonus payable to Employee for any particular year will be determined by the Compensation Committee, in its sole discretion, taking into account the performance of Employer and Employee for that particular year (or portion thereof). All such bonuses shall be paid no later than March 15th of the calendar year immediately following the calendar year in which it is earned. Notwithstanding the foregoing, the Performance Bonus with respect to the 2020 calendar year shall be paid at one hundred percent (100%) of Base Salary and shall be prorated (on a daily basis relative to 366) based on the Effective Date.
3. Benefits.
3.1 Expense Reimbursement. Employer shall promptly reimburse Employee for all out-of-pocket expenses reasonably incurred by Employee during the Employment Period on behalf of or in connection with Employer’s Business pursuant to the reimbursement standards and guidelines of Employer in effect from time to time, including reimbursement for appropriate professional organizations. Employee shall account for such expenses and submit reasonable supporting documentation in accordance with Employer’s policies in effect from time to time.
3.2 Employee Benefits. During the Employment Period, Employee shall be entitled to participate in such health, welfare, disability, retirement savings and other fringe benefit plans and programs (subject to the terms and conditions of such plans and programs) as may be provided from time to time to employees of Employer and to the extent that such plans and programs are applicable to other similarly situated employees of Employer.
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3.3 Leave Time. During the Employment Period, Employee shall be entitled to paid vacation and leave days each calendar year in accordance with the leave policies established by Employer from time to time. Any leave time not used during each fiscal year of Employer may be carried over into the next year to the extent permitted by Employer policy.
3.4 Equity Plans. During the Employment Period, the Chief Executive Officer of MEDNAX shall recommend to the Compensation Committee that Employee receive, on an annual basis following the Effective Date, and at the same time as other executive officers of Employer, grants of awards (each an “Equity Award”) pursuant to MEDNAX’s Amended and Restated 2008 Incentive Compensation Plan, as amended (the “2008 Plan”), or any other similar plan adopted by MEDNAX (together with the 2008 Plan, each an “Equity Plan”), with a grant value determined by the Compensation Committee in the same manner as for other executive officers of Employer. Every Equity Award made to Employee shall be subject to the terms and conditions of this Agreement and the terms of the applicable Equity Plan, and shall be made subject to an award agreement that is consistent with terms applicable to other executive officers of Employer. Notwithstanding any contrary provision in this Agreement or any Equity Plan then maintained by MEDNAX, if Employee remains continuously employed with Employer through the date of a Change in Control (as defined in the Equity Plan pursuant to which the Equity Award is issued), then upon such Change in Control (i) all time-based Equity Awards granted to Employee by MEDNAX shall immediately become fully vested, non-forfeitable and, if applicable, exercisable and (ii) all performance-based Equity Awards for which the applicable performance condition has been met at the time of such Change in Control shall immediately become fully vested, non-forfeitable and, if applicable, exercisable. For purposes of clarification, the vesting of any performance-based Equity Awards for which the performance condition has not been met at the time of such Change in Control shall not be accelerated or otherwise modified pursuant to this Section 3.4 but such Equity Awards may nonetheless be accelerated or otherwise modified as determined by the Company under the terms of the Equity Plan.
4. Termination; Compensation and Benefits Upon Termination.
4.1 Termination for Cause. Employer may terminate Employee’s employment under this Agreement for Cause (as defined below). The termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.1 shall be the date specified by Employer in a written notice to Employee of finding of Cause. If Employee’s employment is terminated for Cause, Employer shall pay (i) Employee’s Base Salary through the termination date at the rate in effect at the termination date, (ii) reimbursement for reasonable business expenses incurred prior to the termination date, subject to Employer policy and the provisions of Section 3.1 hereof, and (iii) any other benefits that are vested benefits under applicable Employer benefit plans or that are required by applicable law (the foregoing clauses (i)-(iii), the “Accrued Obligations”).
3
4.2 Disability. Employer may terminate Employee’s employment under this Agreement upon the Disability (as defined below) of Employee. The termination date for a termination of this Agreement pursuant to this Section 4.2 shall be the date specified by Employer in a notice to Employee. In the event of Employee’s Disability, (i) Employee shall continue to receive Employee’s Base Salary for ninety (90) days under the Company’s short term disability policy, which may be amended or modified in the Company’s discretion upon written notice to Employee (the “Initial Disability Period”), and (ii) following such Initial Disability Period, if Employee’s Disability continues, the Company may terminate Employee’s employment immediately upon written notice. If Employee’s employment is terminated in connection with Employee’s Disability, in addition to the Accrued Obligations and subject to and conditioned on Employee’s compliance with the terms of Section 5 hereof, Employee shall be eligible to receive (A) a bonus with respect to Employer’s fiscal year in which the termination date occurs, equal to Employee’s minimum Target Bonus for the year of termination, multiplied by the number of days in the fiscal year prior to and including the date of termination and divided by three hundred sixty five (365) (a “Pro-Rated Bonus”) payable within thirty (30) days of the termination date; and (B) all time-based Equity Awards granted to Employee by MEDNAX prior to termination of Employee’s employment shall immediately become fully vested, non-forfeitable and, if applicable, exercisable, and all performance-based shares awards shall remain outstanding and shall vest based upon actual performance determined at the end of the applicable performance period (the “Equity Acceleration”).
4.3 Death. Employee’s employment under this Agreement shall terminate automatically upon the death of Employee, without any requirement of notice by Employer to Employee’s estate. The date of Employee’s death shall be the termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.3. Upon Employee’s death during the Employment Period, Employer shall pay or provide to the person or entity designated by Employee in a notice filed with Employer or, if no person is designated, to Employee’s estate (i) the Accrued Obligations; (ii) a Pro-Rated Bonus; and (iii) the Equity Acceleration.
4.4 Termination by Employer Without Cause. Employer may terminate Employee’s employment under this Agreement without Cause by giving Employee written notice of such termination. The termination date shall be the date specified by Employer in such notice, which may be up to ninety (90) days from the date of such notice. Upon any termination of Employee’s employment without Cause pursuant to this Section 4.4, in addition to the Accrued Obligations and subject to and conditioned on Employee’s compliance with the terms of Section 5 hereof, Employee shall be eligible to receive: (i) a Pro-Rated Bonus; (ii) severance payments equivalent to Employee’s monthly Base Salary for a period of twenty-four (24) months after the termination date (the “Severance Period”), payable in installments in Employer’s normal payroll; (iii) continuation of health, medical, hospitalization and other similar health insurance programs on the same basis as regular, full-time employees of Employer and their eligible dependents during the Severance Period (or, at Employer’s option, Employer may provide health insurance to Employee and Employee’s eligible dependents through an insurance carrier(s) selected by Employer in lieu of providing the foregoing coverage, provided the coverage afforded by such insurance is substantially comparable to the foregoing coverage, and Employee shall pay the cost of such insurance up to the amount that would have been paid by Employee under the foregoing coverage and Employer shall pay the excess cost, if any); and (iv) an amount equal to the greater of (A) 1.5 times Employee’s Average Annual Performance Bonus (as defined below) or (B) 1.5 times Employee’s Target Bonus amount, payable within thirty (90) days of the termination date.
4
4.5 Termination by Employee without Good Reason. Employee may terminate Employee’s employment under this Agreement without Good Reason (as defined below) upon not less than ninety (90) days prior written notice to Employer. Upon receipt of such notice from Employee, Employer may, at its option, accelerate the effective date of Employee’s termination of employment at any time in advance of the expiration of such ninety (90) day period (which acceleration shall not constitute Good Reason or a termination by Employer without Cause). The termination date under this Section 4.5 shall be the date specified by Employer, but in no event more than ninety (90) days after Employer’s receipt of notice from Employee as contemplated by this Section 4.5. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.5, Employee shall be entitled to the Accrued Obligations.
4.6 Termination by Employee for Good Reason. Employee may terminate Employee’s employment hereunder for Good Reason. If Employee desires to terminate Employee’s employment under this Agreement pursuant to this Section 4.6, Employee must, within ninety (90) days after the occurrence of events giving rise to the Good Reason, provide Employer with a written notice describing the Good Reason in reasonable detail. If Employer fails to cure the matter cited within thirty (30) days after the date of Employee’s notice, then this Agreement shall terminate as of the end of such thirty (30) day cure period, provided, however, that Employer may, at its option, require Employee to terminate employment at any time in advance of the expiration of such thirty (30) day cure period. If Employee’s employment under this Agreement is terminated pursuant to this Section 4.6, then Employee shall be eligible to receive the same payments and benefits, subject to the same conditions, for a termination without Cause as set forth in Section 4.4 hereof.
4.7 Continuation of Benefit Plans. Following any termination that results in the expiration of Employee’s continued benefit plan coverage, Employee and each of Employee’s eligible dependents shall be entitled to elect for continuation of coverage provided pursuant to COBRA.
4.8 Continuing Obligations. The obligations imposed on Employee with respect to non-competition, non-solicitation, confidentiality, non-disclosure and assignment of rights to inventions or developments in this Agreement or any other agreement executed by the parties shall continue, notwithstanding the termination of the employment relationship between the parties and regardless of the reason for such termination.
5. Conditions to Severance; Certain Definitions.
5.1 Release. Employer shall provide Employee with a general release in the form attached as Exhibit B (subject to such modifications as Employer may reasonably request) (the “Release”) within seven (7) days after Employee’s termination date. Payments or benefits to which Employee may be entitled pursuant to Section 4 hereof (other than the Accrued Obligations) (the “Severance Amounts”) shall be conditioned upon (i) Employee executing the Release within twenty one (21) days after receiving it from Employer (or such longer period as may be set forth in the Release) and the Release becoming irrevocable upon the expiration of seven (7) days following Employee’s execution of it, (ii) Employee agreeing to submit to a reasonable exit interview if requested by Employer, and (iii) Employee’s compliance with all post-termination obligations to Employer and its subsidiaries and affiliates and surrendering to Employer all
5
proprietary or confidential information and articles belonging to Employer or its subsidiaries or affiliates. Payment of the Severance Amounts shall be suspended during the period (the “Suspension Period”) that begins on Employee’s termination date and ends on the date (“Suspension Termination Date”) that is at least forty-five (45) days after Employee’s termination date; provided, however, that this suspension shall not apply, and Employer shall be required to provide, any continued health insurance coverage (or COBRA reimbursement) that would be required under Section 4 hereof during the Suspension Period. If Employee executes the Release and the Release becomes irrevocable by no later than the Suspension Termination Date, then payment of any Severance Amounts that were suspended pursuant to this provision shall be made in the first payroll period that follows the Suspension Termination Date, and any Severance Amounts that are payable after the Suspension Termination Date shall be paid at the times provided in Section 4 hereof.
5.2 Certain Definitions. As used in this Agreement:
(a) “Average Annual Performance Bonus” shall mean an amount equal to the average of the percentage of the Performance Bonus target achieved by Employee for the three (3) full calendar years prior to the termination date (or such lesser period as Employee may have been employed by Employer), and calculated based on Employee’s Base Salary and Target Bonus in Employee’s current position. For illustration purposes, if Employee earned 40%, 100% and 70% of Employee’s Target Bonus in each of the three full calendar years prior to termination, and Employee’s current Target Bonus was 100% of Base Salary, and Base Salary was $450,000.00, then Employee’s Average Annual Performance Bonus would equal $315,000.00. ((40%+ 100% + 70%) / 3 x 100% x $450,000.00 = $315,000.00).
(b) “Cause” shall mean the occurrence of any of: (i) Employee’s engagement in (A) willful misconduct resulting in material harm to MEDNAX or Employer, or (B) gross negligence; (ii) Employee’s conviction of, or pleading nolo contendere to, a felony or any other crime involving fraud, financial misconduct, or misappropriation of Employer’s assets; (iii) Employee’s willful and continual failure, after written notice from Employee’s Supervisor or the Board to (A) perform substantially Employee’s employment duties consistent with Employee’s position and authority, or (B) follow, consistent with Employee’s position, duties, and authorities, the reasonable lawful mandates of Employee’s Supervisor or the Board; (iv) Employee’s failure or refusal to comply with a reasonable policy, standard or regulation of Employer in any material respect, including but not limited to Employer’s sexual harassment, other unlawful harassment, workplace discrimination or substance abuse policies; or (v) Employee’s breach of Section 8.4 hereof resulting in material harm to MEDNAX or Employer. No act or omission shall be deemed willful or grossly negligent for purposes of this definition if taken or omitted to be taken by Employee in a good faith belief that such act or omission to act was in the best interests of Employer or MEDNAX or if done at the express direction of the Board.
(c) Subject to the requirements of applicable law, “Disability” shall mean (i) Employee’s inability to perform Employee’s duties hereunder, with or without a reasonable accommodation, as a result of physical or mental illness or injury, and (ii) a determination by an independent qualified physician selected by Employer and acceptable to Employee (which acceptance shall not be unreasonably withheld) that Employee is currently unable to perform such duties and in all reasonable likelihood such inability will continue for a period in excess of an additional ninety (90) or more days in any one hundred twenty (120) day period.
6
(d) “Good Reason” shall mean: (i) a decrease in Employee’s Base Salary; (ii) a decrease in Employee’s Target Bonus opportunity; (iii) Employee is assigned any position, duties, responsibilities or compensation that is inconsistent with the position, duties, or responsibilities of Employee contemplated herein as of the Effective Date or compensation of Employee as of the Effective Date, excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Employer promptly after receipt of written notice; (iv) Employee experiences a material diminution in Employee’s authorities, duties or responsibilities, excluding for this purpose any isolated and inadvertent action not taken in bad faith and which is remedied by Employer promptly after receipt of written notice; (v) Employee is required to report to any person other than the senior most executive officer of MEDNAX, the Board, or a duly constituted committee thereof, or there is a material diminution in the authority, duties or responsibilities of the senior most executive officer of MEDNAX; (vi) the requirement by Employer that Employee be based in any office or location outside of the metropolitan area where Employee resides as of the Effective Date, except for travel reasonably required in the performance of Employee’s duties; (vii) if following a Change in Control (as defined in the 2008 Plan as of the Effective Time), neither the common stock of MEDNAX nor the common equity of its successor, parent, or subsidiary is listed for trading on a national securities exchange; or (viii) any other action or inaction that constitutes a material breach of this Agreement by Employer.
6. Successors; Binding Agreement.
6.1 Successors. Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) acquiring a majority of Employer’s voting common stock or any other successor to all or substantially all of the business and/or assets of Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place and Employee hereby consents to any such assignment. In such event, “Employer” shall mean Employer as previously defined and any successor to its business and/or assets which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Section 6.1 shall not limit Employee’s ability to terminate this Agreement in the circumstances described in Section 4.6 hereof.
6.2 Benefit. This Agreement and all rights of Employee under this Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die after the termination date and amounts would have been payable to Employee under this Agreement if Employee had continued to live, including under Section 5 hereof, then such amounts shall be paid to Employee’s devisee, legatee, or other designee or, if there is no such designee, Employee’s estate.
7
7. Conflicts. Except as otherwise provided in this Agreement, this Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof, and supersedes and revokes any and all prior or existing agreements, written or oral, relating to the subject matter hereof, and this Agreement shall be solely determinative of the subject matter hereof.
8. Restrictive Covenants; Confidential Information; Work Product; Injunctive Relief.
8.1 No Material Competition. Employer and Employee acknowledge and agree that a strong relationship and connection exists between Employer and its current and prospective patients, referral sources, and customers as well as the hospitals and healthcare facilities at which it provides professional services. Employer and Employee further acknowledge and agree that the restrictive covenants described in this Section are designed to enforce, and are ancillary to or part of, the promises contained in this Agreement and are reasonably necessary to protect the legitimate interests of Employer in the following: (1) the use and disclosure of the Confidential Information as described in Section 8.4 hereof; (2) the professional development activities described in Section 1.2 hereof; and (3) the goodwill of Employer, as promoted by Employee as provided in Section 1.2 hereof. The foregoing listing is by way of example only and shall not be construed to be an exclusive or exhaustive list of such interests. Employee acknowledges that the restrictive covenants set forth below are of significant value to Employer and were a material inducement to Employer in agreeing to the terms of this Agreement. Employee further acknowledges that the goodwill and other proprietary interest of Employer will suffer irreparable and continuing damage in the event Employee enters into competition with Employer in violation of this Section.
Therefore, Employee agrees that, except with respect to services performed under this Agreement on behalf of Employer, Employee shall not, at any time during the Restricted Period (as defined below), for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly participate or engage in or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust or other form of business entity, whether as an individual proprietor, partner, joint venturer, officer, director, member, employee, consultant, independent contractor, stockholder, lender, landlord, finder, agent, broker, trustee, or in any manner whatsoever, if such entity or its affiliates is engaged in, directly or indirectly, “Employer’s Business,” as defined on Exhibit A hereto. Employee acknowledges that, as of the date hereof, Employee’s responsibilities will include matters affecting the businesses of Employer listed on Exhibit A. For purposes of this Section 8, the “Restricted Period” shall mean the Employment Period plus (i) eighteen (18) months in the event this Agreement is terminated pursuant to Section 4.1 hereof, and (ii) twenty-four (24) months in the event the Agreement is terminated for any other reason.
8.2 No Hire. Employee further agrees that Employee shall not, at any time during the Employment Period and for a period of eighteen (18) months immediately following termination of this Agreement for any reason, for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly employ, or intentionally, knowingly, or willingly permit any company or business directly or indirectly controlled by Employee to (a) employ or otherwise engage (i) any person who is a then current employee or exclusive independent contractor of Employer or one of its affiliates, or (ii) any person who was an employee or exclusive independent contractor of Employer or one of its
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affiliates in the prior six (6) month period, or (b) take any action that would reasonably be expected to induce an employee or independent contractor of Employer or one of its affiliates to leave his or her employment or engagement with Employer or one of its affiliates (including without limitation for or on behalf of a subsequent employer of Employee).
8.3 Non-Solicitation. Employee further agrees that Employee shall not, at any time during the Employment Period and for a period of eighteen (18) months immediately following termination of this Agreement for any reason, for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly solicit or accept business from or take any action that would reasonably be expected to materially interfere with, diminish or impair the valuable relationships that Employer or its affiliates have with (i) hospitals or other health care facilities with which Employer or its affiliates have contracts to render professional services or otherwise have established relationships, (ii) patients, (iii) referral sources, (iv) vendors, (v) any other clients of Employer or its affiliates, or (vi) prospective hospitals, patients, referral sources, vendors or clients whose business Employee was aware that Employer or any affiliate of Employer was in the process of soliciting at the time of Employee’s termination (including potential acquisition targets).
8.4 Confidential Information. At all times during the term of this Agreement, Employer shall provide Employee with access to “Confidential Information.” As used in this Agreement, the term “Confidential Information” means any and all confidential, proprietary or trade secret information, whether disclosed, directly or indirectly, verbally, in writing or by any other means in tangible or intangible form, including that which is conceived or developed by Employee, applicable to or in any way related to: (i) patients with whom Employer has a physician/patient relationship; (ii) the present or future business of Employer; or (iii) the research and development of Employer. Without limiting the generality of the foregoing, Confidential Information includes: (a) the development and operation of Employer’s medical practices, including information relating to budgeting, staffing needs, marketing, research, hospital relationships, equipment capabilities, and other information concerning such facilities and operations and specifically including the procedures and business plans developed by Employer for use at the hospitals where Employer conducts its business; (b) contractual arrangements between Employer and insurers or managed care associations or other payors; (c) the databases of Employer; (d) the clinical and research protocols of Employer, including coding guidelines; (e) the referral sources of Employer; (f) other confidential information of Employer that is not generally known to the public that gives Employer the opportunity to obtain an advantage over competitors who do not know or use it, including the names, addresses, telephone numbers or special needs of any of its patients, its patient lists, its marketing methods and related data, lists or other written records used in Employer’s business, compensation paid to employees and other terms of employment, accounting ledgers and financial statements, contracts and licenses, business systems, business plan and projections, and computer programs. The parties agree that, as between them, this Confidential Information constitutes important, material, and confidential trade secrets that affect the successful conduct of Employer’s business and its goodwill. Employer acknowledges that the Confidential Information specifically enumerated above is special and unique information and is not information that would be considered a part of the general knowledge and skill Employee has or might otherwise obtain.
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Notwithstanding the foregoing, Confidential Information shall not include any information that (i) was known by Employee from a third party source before disclosure by or on behalf of Employer, (ii) becomes available to Employee from a source other than Employer that is not, to Employee’s knowledge, bound by a duty of confidentiality to Employer, (iii) becomes generally available or known in the industry other than as a result of its disclosure by Employee, or (iv) has been independently developed by Employee and may be disclosed by Employee without breach of this Agreement, provided, in each case, that Employee shall bear the burden of demonstrating that the information falls under one of the above-described exceptions. Pursuant to the Defend Trade Secrets Act of 2016, Employee acknowledges that Employee shall not have criminal or civil liability under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if Employee files a lawsuit for retaliation by Employer for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and may use the trade secret information in the court proceeding, if Employee (X) files any document containing the trade secret under seal and (Y) does not disclose the trade secret, except pursuant to court order.
Additionally, notwithstanding anything herein to the contrary, nothing in this Agreement or any other agreement between Employer and Employee shall prevent Employee from filing a charge, sharing information and communicating in good faith, without prior notice to Employer, with any federal government agency having jurisdiction over Employer or its operations, and cooperating in any investigation by any such federal government agency.
Unless disclosure is otherwise required by applicable law or stock exchange rules, Employee agrees that the terms of this Agreement shall be deemed Confidential Information for purposes of this Section. Employee shall keep the terms of this Agreement strictly confidential and will not, without the prior written consent of Employer, disclose the details of this Agreement to any third party in any manner whatsoever in whole or in part, with the exception of Employee’s representatives (such as tax advisors and attorneys) who need to know such information.
Employee agrees that Employee will not at any time, whether during or subsequent to the term of Employee’s employment with Employer, in any fashion, form or manner, unless specifically consented to in writing by Employer, either directly or indirectly, use or divulge, disclose, or communicate to any person, firm or corporation, in any manner whatsoever, any Confidential Information of any kind, nature, or description, subject to applicable law. The parties agree that any breach by Employee of any term of this Section 8.4 resulting in material harm to MEDNAX or Employer is a material breach of this Agreement and shall constitute “Cause” for the termination of Employee’s employment hereunder pursuant to Section 4.1 hereof. In the event that Employee is ordered to disclose any Confidential Information, whether in a legal or a regulatory proceeding or otherwise, Employee shall provide Employer with prompt written notice of such request or order so that Employer may seek to prevent disclosure or, if that cannot be achieved, the entry of a protective order or other appropriate protective device or procedure in order to assure, to the extent practicable, compliance with the provisions of this Agreement. In the case of any disclosure required by law, Employee shall disclose only that portion of the Confidential Information that Employee is ordered to disclose in a legally binding subpoena, demand or similar order issued pursuant to a legal or regulatory proceeding.
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All Confidential Information, and all equipment, notebooks, documents, memoranda, reports, files, samples, books, correspondence, lists, other written and graphic records, in any media (including electronic or video) containing Confidential Information or relating to the business of Employer, which Employee shall prepare, use, construct, observe, possess, or control shall be and remain Employer’s sole property (collectively “Employer Property”). Upon termination or expiration of this Agreement, or earlier upon Employer’s request, Employee shall promptly deliver to Employer all Employer Property, retaining none.
8.5 Ownership of Work Product. Employee agrees and acknowledges that (i) all copyrights, patents, trade secrets, trademarks, service marks, or other intellectual property or proprietary rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Employee during the course of performing work for Employer and any other work product conceived, created, designed, developed or contributed by Employee during the term of this Agreement that relates in any way to Employer’s Business (collectively, the “Work Product”), shall belong exclusively to Employer and shall, to the extent possible, be considered a work made for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered a work made for hire owned exclusively by Employer, Employee hereby assigns to Employer all right, title, and interest worldwide in and to such Work Product at the time of its creation, without any requirement of further consideration. Upon request of Employer, Employee shall take such further actions and execute such further documents as Employer may deem necessary or desirable to further the purposes of this Agreement, including without limitation separate assignments of all right, title, and interest in and to all rights of copyright and all right, title, and interest in and to any inventions or patents and any reissues or extensions which may be granted therefore, and in and to any improvements, additions to, or modifications thereto, which Employee may acquire by invention or otherwise, the same to be held and enjoyed by Employer for its own use and benefit, and for the use and benefit of Employer’s successors and assigns, as fully and as entirely as the same might be held by Employee had this assignment not been made.
8.6 Clearance Procedure for Proprietary Rights Not Claimed by Employer. In the event that Employee wishes to create or develop, other than on Employer’s time or using Employer’s resources, anything that may be considered Work Product but to which Employee believes Employee should be entitled to the personal benefit of, Employee agrees to follow the clearance procedure set forth in this Section. Before beginning any such work, Employee agrees to give Employer advance written notice and provide Employer with a sufficiently detailed written description of the work under consideration for Employer to make a determination regarding the work. Unless otherwise agreed in a writing signed by Employer prior to receipt, Employer shall have no obligation of confidentiality with respect to such request or description. Employer will determine in its sole discretion, within thirty (30) days after Employee has fully disclosed such plans to Employer, whether rights in such work will be claimed by Employer. If Employer determines that it does not claim rights in such work, Employer agrees to so notify Employee in writing and Employee may retain ownership of the work to the extent that such work has been expressly disclosed to Employer. If Employer fails to so notify Employee within such thirty (30) day period, then Employer shall be deemed to have agreed that such work is not considered Work Product for purposes of this Agreement. Employee agrees to submit for further review any significant improvement, modification, or adaptation that could reasonably be related to Employer’s Business so that it can be determined whether the improvement, modification, or adaptation relates to the business or interests of Employer. Clearance under this procedure does not relieve Employee of the restrictive covenants set forth in this Section 8.
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8.7 Non-Disparagement. During the Employment Period and for a period of ten (10) years after the termination of this Agreement, Employee will not, directly or indirectly, as an individual or on behalf of a firm, corporation, partnership or other legal entity, intentionally, knowingly, or willingly make any comment that would reasonably be expected to be materially disparaging or negative to any other person or entity regarding Employer or any of its affiliates, agents, attorneys, employees, officers and directors, Employee’s work conditions or circumstances surrounding Employee’s separation from Employer or otherwise impugn or criticize the name or reputation of Employer, its affiliates, agents, attorneys, employees, officers or directors, orally or in writing.
8.8 Review by Employee. Employee has carefully read and considered the terms and provisions of this Section 8, and having done so, agrees that the restrictions set forth in this Section 8 are fair and reasonably required for the protection of the interests of Employer. In the event that any term or provision set forth in this Section 8 shall be held to be invalid or unenforceable by a court of competent jurisdiction, the parties hereto agree that such invalid or unenforceable term(s) or provision(s) may be severed from this Agreement without, in any manner, affecting the remaining portions hereof. Without limiting other possible remedies available to Employer, Employee agrees that injunctive or other equitable relief will be available to enforce the covenants set forth in this Section 8, such relief to be without the necessity of posting a bond. In the event that, notwithstanding the foregoing, any part of the covenants set forth in this Section 8 shall be held to be invalid, overbroad, or unenforceable by an arbitrator or a court of competent jurisdiction, the parties hereto agree that such invalid, overbroad, or unenforceable provision(s) may be modified or severed from this Agreement without, in any manner, affecting the remaining portions of this Section 8 (all of which shall remain in full force and effect). In the event that any provision of this Section 8 related to time period or areas of restriction shall be declared by an arbitrator or a court of competent jurisdiction to exceed the maximum time period, area or activities such arbitrator or court deems reasonable and enforceable, said time period or areas of restriction shall be deemed modified to the minimum extent necessary to make the geographic or temporal restrictions or activities reasonable and enforceable.
8.9 Survival; Notice of Breach and Right to Cure. If Employer reasonably believes that Employee has breached a provision of this Section 8, Employer shall provide prompt written notice thereof to Employee that explains such reasonably believed breach (the “Alleged Breach”). Employer agrees to work in good faith with Employee to provide Employee a reasonable opportunity to promptly cure such Alleged Breach. In the event that Employee, acting in good faith, promptly takes actions that would reasonably be expected to cure the Alleged Breach, including, with respect to a comment made by Employee that Employer reasonably believes is in breach of Section 8.7 hereof, by Employee retracting such comment, then Employee shall be deemed not to be in breach of this Section 8 with respect to the Alleged Breach. Employer and Employee further agree that Employee shall not be deemed to be in breach of any term of Section 8.4 hereof unless such breach results in material harm to MEDNAX or Employer.
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The provisions of this Section 8 shall survive the termination of this Agreement and Employee’s employment with Employer. In the event of a breach of this Section 8 by Employee, as finally determined pursuant to Section 11 hereof, Employer retains the right to terminate any continuing payments to Employee provided for in Section 4 hereof. In the event of a breach of any provisions of this Section 8 by Employee, as finally determined pursuant to Section 11 hereof, the period for which those provisions would remain in effect shall be extended for a period of time equal to that period beginning when such breach commenced and ending when the activities constituting such breach shall have been finally terminated, in each case as finally determined pursuant to Section 11 hereof. The provisions of this Section 8 are expressly intended to benefit and be enforceable by other affiliated entities of Employer, who are express third party beneficiaries hereof. Employee shall not assist others in engaging in any of the activities described in the foregoing restrictive covenants.
9. Tax Matters
9.1 Section 409A
(a) In General. The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party. Employer makes no representation or warranty and shall have no liability to Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, Section 409A.
(b) Six-Month Delay. Anything in this Agreement to the contrary notwithstanding, if at the time of Employee’s separation from service within the meaning of Section 409A of the Code, Employer determines that Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Employee becomes entitled to under this Agreement on account of Employee’s “separation from service” (within the meaning of Section 409A) that would be considered “non-qualified deferred compensation”, such payment shall not be payable and such benefit shall not be provided until the date that is within fifteen (15) days after the end of the six-month period beginning on the date of such “separation from service” or, if earlier, within fifteen (15) days after the appointment of the personal representative or executor of Employee’s estate following Employee’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
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(c) Reimbursements. All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by Employer or incurred by Employee during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) Separation from Service. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Employee’s termination of employment, then such payments or benefits shall be payable only upon Employee’s “separation from service” as defined under Section 409A. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(e) Later Calendar Year. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and not otherwise exempt from the application of Section 409A, then, if the period during which Employee may consider and sign the Release or the period in which the Employer can make a severance payment spans two calendar years, any payment or benefit described in this Agreement will not be made or begin until the later calendar year.
9.2 Section 280G. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by Employer or its affiliates to Employee or for Employee’s benefit pursuant to the terms of this Agreement or otherwise (the “Covered Payments”) constitute parachute payments (the “Parachute Payments”) within the meaning of Section 280G of the Code and, but for this Section 9, would be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
(a) Any such reduction shall be made in accordance with Section 409A and the following: (i) the Covered Payments consisting of cash severance benefits that do not constitute nonqualified deferred compensation subject to Section 409A shall be reduced first, in reverse chronological order; (ii) all other Covered Payments consisting of cash payments, and Covered Payments consisting of accelerated vesting of equity based awards to which Treas. Reg. § 1.280G-1 Q/A-24(c) does not apply, and that in either case do not constitute nonqualified
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deferred compensation subject to Section 409A, shall be reduced second, in reverse chronological order; (iii) all Covered Payments consisting of cash payments that constitute nonqualified deferred compensation subject to Section 409A shall be reduced third, in reverse chronological order; and (iv) all Covered Payments consisting of accelerated vesting of equity-based awards to which Treas. Reg. § 1.280G-1 Q/A-24(c) applies shall be the last Covered Payments to be reduced.
(b) Any determination required under this Section 9 shall be made in writing in good faith by an independent accounting firm selected by Employer (the “Accountants”). Employer and Employee shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 9. For purposes of making the calculations and determinations required by this Section 9, the Accountants may rely on reasonable, good-faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Accountants’ determinations shall be final and binding on Employer and Employee. Employer shall be responsible for all fees and expenses incurred by the Accountants in connection with the calculations required by this Section 9.
(c) It is possible that after the determinations and selections made pursuant to this Section 9, Employee will receive Covered Payments that are in the aggregate more than the amount intended or required to be provided after application of this Section 9 (“Overpayment”) or less than the amount intended or required to be provided after application of this Section 9 (“Underpayment”).
(i) In the event that: (A) the Accountants determine, based upon the assertion of a deficiency by the Internal Revenue Service against either Employer or Employee that the Accountants believe has a high probability of success, that an Overpayment has been made or (B) it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then Employee shall pay any such Overpayment to Employer together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of Employee’s receipt of the Overpayment until the date of repayment.
(ii) In the event that: (A) the Accountants, based upon controlling precedent or substantial authority, determine that an Underpayment has occurred or (B) a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by Employer to or for the benefit of Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount should have otherwise been paid to Employee until the payment date.
9.3 Tax Withholding. All amounts payable under this Agreement shall be subject to applicable income and employment tax withholding.
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10. Dispute Resolution; Injunctive Relief. If any controversy or claim arises out of or relating to this Agreement, or any alleged breach hereof, Employee and Employer shall first try to resolve such controversy or claim through mediation using the services of the American Arbitration Association. If any such controversy or claim cannot be resolved by mediation pursuant to the foregoing, Employee and Employer agree that such controversy or claim shall be finally determined by a single arbitrator, jointly selected by Employee and Employer, provided that if Employee and Employer are unable to agree upon a single arbitrator after reasonable efforts, the arbitrator shall be an impartial arbitrator selected by the American Arbitration Association.
Employer shall bear all costs associated with such mediation and, if necessary, arbitration, including but not limited to all costs of the mediator and arbitrator, and shall reimburse Employee on a monthly basis for Employee’s reasonable legal and other expenses, including all fees, incurred in connection with any such mediation and, if necessary, arbitration, provided, however, that if Employer ultimately prevails in any arbitration (as determined by the arbitrator), the arbitrator shall have the power to require Employee to reimburse Employer for all or a portion of the advanced legal fees and other expenses as determined by the arbitrator (and, if the arbitrator finds that Employer prevailed on certain claims and Employee prevailed on others, the arbitrator shall have the power to require Employee to reimburse Employer for a portion of the advanced legal fees and other expenses determined by the arbitrator based on those claims on which Employer prevailed). The mediation and, if necessary, arbitration proceedings shall be held in Sunrise, Florida, unless otherwise mutually agreed by the parties, and shall be conducted in accordance with the American Arbitration Association National Rules for the Resolution of Employment Disputes then in effect. Judgment on any award rendered by the arbitrator may be entered and enforced by any court having jurisdiction thereof. Any such mediation and, if necessary, arbitration shall be treated as confidential by all parties thereto, except as otherwise provided by law or as otherwise necessary to enforce any judgment or order issued by the arbitrator.
Notwithstanding anything herein to the contrary, if Employer or Employee shall require immediate injunctive relief, then the party shall be entitled to seek such relief in any court having jurisdiction, and if the party elects to do so, the other party hereby consents to the jurisdiction of the state and federal courts sitting in the State of Florida and to the applicable service of process. Employee and Employer hereby waive and agree not to assert, to the fullest extent permitted by applicable law, any claim that (i) they are not subject to the jurisdiction of such courts, (ii) they are immune from any legal process issued by such courts and (iii) any litigation or other proceeding commenced in such courts is brought in an inconvenient forum. In the event that Employer brings suit against Employee seeking injunctive relief, Employer agrees to advance all of Employee’s reasonable legal and other expenses, including all fees, incurred by Employee in connection with such action, provided, however, that if Employer ultimately prevails in seeking injunctive relief, Employee shall reimburse Employer all such advanced legal fees and other expenses.
11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without regard to its conflict of laws principles to the extent that such principles would require the application of laws other than the laws of the State of Florida.
12. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when (i) delivered by hand, (ii) delivered by electronic mail that is confirmed by non-automated means, or (iii) when delivered or delivery is refused if sent by registered or certified U.S. mail, return receipt requested, postage prepaid, or via reputable overnight courier, addressed as follows:
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| If to Employer:
MEDNAX Services, Inc. 1301 Concord Terrace Sunrise, FL 33323 Attention: General Counsel Email: dominic_andreano@mednax.com |
If to Employee:
C. Marc Richards c/o MEDNAX Services, Inc. 1301 Concord Terrace Sunrise, FL 33323 Email: marc_richards@mednax.com |
or to such other addresses as either party hereto may from time to time give notice of to the other in the aforesaid manner.
13. Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns. Notwithstanding the foregoing, Employee may not assign the rights or benefits hereunder without the prior written consent of Employer. This Agreement may be assigned by Employer upon notice to Employee.
14. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area, which would cure such invalidity.
15. Waivers. The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.
16. Damages. Nothing contained herein shall be construed to prevent Employer or Employee from seeking and recovering from the other damages sustained by either or both of them as a result of a breach of any term or provision of this Agreement.
17. No Third Party Beneficiary. Except as provided in Section 8.9 hereof, nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person (other than the parties hereto and, in the case of Employee, Employee’s heirs, personal representative(s) and/or legal representative) any rights or remedies under or by reason of this Agreement. No agreements or representations, oral or otherwise, express or implied, have been made by either party with respect to the subject matter of this Agreement which agreements or representations are not set forth expressly in this Agreement, and this Agreement supersedes any other employment agreement between Employer and Employee.
The remainder of this page has been left blank intentionally.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement this 27th day of September, 2020, effective as of the Effective Date.
| EMPLOYER:
MEDNAX SERVICES, INC. |
EMPLOYEE: | |||||||
| By: | /s/ Mark. S. Ordan |
By: | /s/ C. Marc Richards | |||||
| Mark S. Ordan | C. Marc Richards | |||||||
| Chief Executive Officer | ||||||||
| MEDNAX, INC. | ||||||||
| By: | /s/ Shirley A. Weis |
|||||||
| Shirley A. Weis | ||||||||
| Chair, Compensation Committee | ||||||||
[Signature Page to Employment Agreement]
EXHIBIT A
BUSINESS OF EMPLOYER
As of the date hereof, Employer, directly or through its affiliates, provides professional medical services and all aspects of practice management services in medical practice areas that include, but are not limited to, the following (collectively referred to herein as “Employer’s Business”):
(1) Neonatology, including hospital well baby care;
(2) Maternal-Fetal Medicine, including Obstetrical Hospitalist Care;
(3) Pediatric Cardiology;
(4) Pediatric Intensive Care, including Pediatric Hospitalist Care;
(5) Newborn hearing screening services;
(6) Pediatric Surgery;
(7) Pediatric Emergency Medicine; and
(8) Radiology and Teleradiology.
References to Employer’s Business in this Agreement shall include such other medical service lines, practice management services and other businesses in which Employer is engaged during the Employment Period; provided, that to be considered a part of Employer’s Business, Employer must have engaged in such other service line, practice management service or other business at least six (6) months prior to the termination date of this Agreement. For purposes of this Exhibit A, businesses of Employer shall include the businesses conducted by Employer’s subsidiaries, entities under common control and affiliates as defined under Rule 144 of the Securities Act of 1933, as amended. Such affiliates shall include the professional corporations and associations whose operating results are consolidated with Employer for financial reporting purposes.
Notwithstanding the foregoing, Employer acknowledges and agrees to the following exceptions and clarifications regarding the scope of Employer’s Business.
A. Hospital Services. Employer and Employee acknowledge that, as of the date hereof, Employer does not currently operate hospitals, hospital systems or universities. Nevertheless, the businesses of hospitals, hospital systems and universities would be the same as Employer’s Business where such hospitals, hospital systems or universities provide or contract with others to provide some or all of the medical services included in Employer’s Business. Therefore, the parties desire to clarify their intent with respect to the limitations on Employee’s ability to work for or contract with others to provide services for a hospital, hospital system or university during the Employment Period and during the Restricted Period. Section 8.1 shall not be deemed to restrict Employee’s ability to work for a hospital, hospital system or university if the hospital, hospital system or university does not provide any of the medical services included in Employer’s Business. Furthermore, even if a hospital, hospital system or university provides medical services that are included in Employer’s Business, Employee may work for such hospital, hospital system or university if Employee has no direct supervisory responsibility for or involvement in the hospital’s, hospital system’s or university’s provision of medical services that are Employer’s Business. For the avoidance of doubt, Employer and Employee agree that if
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Employee becomes the Chief Financial Officer, Chief Operating Officer, or Chief Executive Officer of a hospital system or health system, or other executive officer of similar level to the foregoing, that Employee shall not be in breach of the provisions of this Agreement. Finally, Employer agrees that Employee may hold direct supervisory responsibility for or be involved in the medical services of a hospital, hospital system or university that are included in Employer’s Business so long as such hospital, hospital system or university is located at least ten (10) miles from a medical practice owned or operated by Employer or its affiliate. Subject to paragraph B below, the provisions of this paragraph shall not apply to the extent that, after the date hereof, Employer enters into the business of operating a hospital or hospital system.
B. De Minimus Exception. Employer agrees that a medical service line (other than those listed in items (1) through (8) above), practice management service or other business in which Employer is engaged shall not be considered to be a part of Employer’s Business if such medical service line, practice management service or other business constitutes less than three percent (3%) of Employer’s annual revenues.
C. Divested Lines of Service. Employer agrees that any medical service line (including those listed in items (1) through (8) above), practice management, or other business in which Employer is engaged that is divested pursuant to a disposition, sale of assets or equity, or otherwise after the Effective Date shall not be considered to be a part of Employer’s Business effective as of the effective date of such divestiture.
D. Certain Ownership Interests. It shall not be deemed to be a violation of Section 8.1 for Employee to: (i) own, directly or indirectly, one percent (1%) or less of a publicly-traded entity that has a market capitalization of $1 billion or more; (ii) own, directly or indirectly, five percent (5%) or less of a publicly-traded entity that has a market capitalization of less than $1 billion; or (iii) own, directly or indirectly, less than ten percent (10%) of a privately-held business or company, if Employee is at all times a passive investor with no board representation, management authority or other special rights to control operations of such business or company.
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EXHIBIT B
FORM OF RELEASE
GENERAL RELEASE OF CLAIMS
1. C. Marc Richards (“Employee”), for himself or herself and his or her family, heirs, executors, administrators, legal representatives and their respective successors and assigns, in exchange for the consideration received pursuant to Section 4.[●] of that certain Employment Agreement, dated as of September 27, 2020, by and between Employee and Employer, to which this release is attached as Exhibit B (the “Employment Agreement”), does hereby release and forever discharge MEDNAX Services, Inc. (“Employer”), its subsidiaries, affiliated companies, successors and assigns, and its current or former directors, officers, employees, shareholders or agents in such capacities (collectively with Employer, the “Released Parties”) from any and all actions, causes of action, suits, controversies, claims and demands whatsoever, for or by reason of any matter, cause or thing whatsoever, whether known or unknown including, but not limited to, all claims under any applicable laws arising under or in connection with Employee’s employment or termination thereof, whether for discrimination, harassment, retaliation, tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the job or incurred as a result of loss of employment. Employee acknowledges that Employer encouraged Employee to consult with an attorney of Employee’s choosing, and through this General Release of Claims encourages Employee to consult with Employee’s attorney with respect to possible claims under the Age Discrimination in Employment Act (“ADEA”) and that Employee understands that the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefits and benefit plans. Without limiting the generality of the release provided above, Employee expressly waives any and all claims under ADEA that Employee may have as of the date hereof. Employee further understands that by signing this General Release of Claims Employee is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of Claims shall not apply to (i) any actions to enforce rights to receive any payments or benefits which may be due Employee pursuant to Section 4.[●] of the Employment Agreement, or under any of Employer’s employee benefit plans, (ii) any rights or claims that may arise as a result of events occurring after the date this General Release of Claims is executed, (iii) any indemnification rights Employee may have as a former officer or director of Employer or its subsidiaries or affiliated companies, (iv) any claims for benefits under any directors’ and officers’ liability policy maintained by Employer or its subsidiaries or affiliated companies in accordance with the terms of such policy, (v) any rights as a holder of equity securities of Employer, (vi) any claims that cannot be waived as a matter of law, (vii) any claims Employee may have to government-sponsored and administered benefits such as unemployment insurance, workers’ compensation insurance (excluding claims for retaliation under workers’ compensation laws), state disability insurance, and paid family leave benefits, and (viii) any benefits that vested on or prior to the termination date pursuant to a written benefit plan sponsored by Employer and governed by the federal law known as “ERISA”.
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2. Employee represents that Employee has not filed against the Released Parties any complaints, charges, or lawsuits arising out of Employee’s employment, or any other matter arising on or prior to the date of this General Release of Claims, and covenants and agrees that Employee will never individually or with any person file, or commence the filing of, any charges, lawsuits, complaints or proceedings with any governmental agency, or against the Released Parties with respect to any of the matters released by Employee pursuant to paragraph 1 hereof (a “Proceeding”), provided, however, Employee retains the right to commence a Proceeding to challenge whether Employee knowingly and voluntarily waived Employee’s rights under ADEA.
3. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement or any other agreement between Employer and Employee shall prevent Employee from filing a charge, sharing information and communicating in good faith, without prior notice to Employer, with any federal government agency having jurisdiction over Employer or its operations, and cooperating in any investigation by any such federal government agency; however, to the maximum extent permitted by law, Employee agrees that if such an administrative claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies, provided that, for purposes of clarity, this limitation on monetary recovery does not apply to whistleblower proceedings before the United States Securities and Exchange Commission.
4. Employee hereby acknowledges that Employer has informed Employee that Employee has up to twenty-one (21) days to sign this General Release of Claims and Employee may knowingly and voluntarily waive that twenty-one (21) day period by signing this General Release of Claims earlier. Employee also understands that Employee shall have seven (7) days following the date on which Employee signs this General Release of Claims within which to revoke it by providing a written notice of Employee’s revocation to Employer.
5. Employee acknowledges that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the State of Florida applicable to contracts made and to be performed entirely within such State.
6. Employee acknowledges that Employee has read this General Release of Claims, that Employee has been advised that Employee should consult with an attorney before Employee executes this general release of claims, and that Employee understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
7. This General Release of Claims shall take effect on the eighth day following Employee’s execution of this General Release of Claims unless Employee’s written revocation is delivered to Employer within seven (7) days after such execution.
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Exhibit 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into by and between MEDNAX SERVICES, INC., a Florida corporation (“Employer”), and Dominic J. Andreano (“Employee”) effective as of September 27, 2020 (the “Effective Date”).
RECITALS
WHEREAS, Employer is presently engaged in “Employer’s Business” as defined on Exhibit A hereto;
WHEREAS, Employer desires to continue employing Employee and benefit from Employee’s contributions to Employer; and
WHEREAS, Employer and Employee previously entered in an Amended and Restated Employment Agreement dated February 13, 2020, as amended, which will be superseded in its entirety upon the execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employer and Employee hereby agree as follows:
1. Employment.
1.1 Employment and Term. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer on the terms and conditions set forth herein for an “Initial Term” commencing as of the Effective Date and continuing for a period of three (3) years, unless sooner terminated as hereinafter set forth. Thereafter, the employment of Employee hereunder shall automatically renew for successive one (1) year periods until terminated in accordance herewith. The Initial Term and any automatic renewals shall be referred to as the “Employment Period.”
1.2 Duties of Employee. As of the Effective Date and thereafter during the remaining Employment Period, Employee shall serve as Executive Vice President, General Counsel and Secretary of Employer and MEDNAX, Inc., a Florida corporation and the parent corporation of Employer (“MEDNAX”), and perform such duties as are customary to the position Employee holds or as may be assigned to Employee from time to time by the most senior executive officer of MEDNAX (“Employee’s Supervisor”) or the Board of Directors of MEDNAX (the “Board”) including, but not limited to, also serving as an officer and/or director, or equivalent, of subsidiaries and/or affiliates of MEDNAX; provided, that such duties as assigned shall be customary to Employee’s role as an executive officer of Employer and MEDNAX. Employee’s employment shall be full-time and, as such, Employee agrees to devote substantially all of Employee’s attention and professional time to the business and affairs of Employer and MEDNAX. Employee shall perform Employee’s duties honestly, diligently, competently, in good faith and in the best interest of Employer and MEDNAX. During the Employment Period, Employee agrees that Employee will not, without the prior written consent of Employer (which consent shall not be unreasonably withheld), serve as a director on a corporate board of directors
or in any other similar capacity for any institution other than Employer and MEDNAX, and their respective subsidiaries and affiliates in accordance with this Section 1.2. During the Employment Period, it shall not be a violation of this Agreement to (i) serve on civic or charitable boards or committees, or (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, so long as such activities have been approved by Employee’s Supervisor and do not interfere with the performance of Employee’s responsibilities as an employee of Employer in accordance with this Agreement, including the restrictions of Section 8 hereof.
1.3 Place of Performance. Employee shall be based at Employer’s offices located in Sunrise, Florida, except for required travel relating to Employer’s Business.
2. Base Salary and Performance Bonus.
2.1 Base Salary. Employer shall pay Employee during the Employment Period an annual salary of Five Hundred Thousand Dollars ($500,000) (the “Base Salary”), payable in accordance with Employer’s normal business practices for senior executives (including tax withholding), but in no event less frequently than monthly. Employee’s Base Salary shall be reviewed at least annually by the Compensation Committee of the Board (the “Compensation Committee”) and may be increased in its discretion. After any such increase in Base Salary, the term “Base Salary” shall refer to the increased amount.
2.2 Performance Bonus. Employee shall be eligible to receive a cash bonus (the “Performance Bonus”) for each year (or prorated with respect to any partial years of employment) during the Employment Period, provided that, except as otherwise provided herein, Employee has remained employed by Employer as of the end of the applicable year (or as of the end of the Employment Period for the final calendar year of the Employment Period). Employee’s target bonus opportunity for any particular year (“Target Bonus”) shall be one hundred percent (100%) of Base Salary. The amount of bonus payable to Employee for any particular year will be determined by the Compensation Committee, in its sole discretion, taking into account the performance of Employer and Employee for that particular year (or portion thereof). All such bonuses shall be paid no later than March 15th of the calendar year immediately following the calendar year in which it is earned. Notwithstanding the foregoing, the Performance Bonus with respect to the 2020 calendar year shall be paid at one hundred percent (100%) of Base Salary.
3. Benefits.
3.1 Expense Reimbursement. Employer shall promptly reimburse Employee for all out-of-pocket expenses reasonably incurred by Employee during the Employment Period on behalf of or in connection with Employer’s Business pursuant to the reimbursement standards and guidelines of Employer in effect from time to time, including reimbursement for appropriate professional organizations. Employee shall account for such expenses and submit reasonable supporting documentation in accordance with Employer’s policies in effect from time to time.
3.2 Employee Benefits. During the Employment Period, Employee shall be entitled to participate in such health, welfare, disability, retirement savings and other fringe benefit plans and programs (subject to the terms and conditions of such plans and programs) as may be provided from time to time to employees of Employer and to the extent that such plans and programs are applicable to other similarly situated employees of Employer.
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3.3 Leave Time. During the Employment Period, Employee shall be entitled to paid vacation and leave days each calendar year in accordance with the leave policies established by Employer from time to time. Any leave time not used during each fiscal year of Employer may be carried over into the next year to the extent permitted by Employer policy.
3.4 Equity Plans. During the Employment Period, the Chief Executive Officer of MEDNAX shall recommend to the Compensation Committee that Employee receive, on an annual basis following the Effective Date, and at the same time as other executive officers of Employer, grants of awards (each an “Equity Award”) pursuant to MEDNAX’s Amended and Restated 2008 Incentive Compensation Plan, as amended (the “2008 Plan”), or any other similar plan adopted by MEDNAX (together with the 2008 Plan, each an “Equity Plan”), with a grant value determined by the Compensation Committee in the same manner as for other executive officers of Employer. Every Equity Award made to Employee shall be subject to the terms and conditions of this Agreement and the terms of the applicable Equity Plan, and shall be made subject to an award agreement that is consistent with terms applicable to other executive officers of Employer. Notwithstanding any contrary provision in this Agreement or any Equity Plan then maintained by MEDNAX, if Employee remains continuously employed with Employer through the date of a Change in Control (as defined in the Equity Plan pursuant to which the Equity Award is issued), then upon such Change in Control (i) all time-based Equity Awards granted to Employee by MEDNAX shall immediately become fully vested, non-forfeitable and, if applicable, exercisable and (ii) all performance-based Equity Awards for which the applicable performance condition has been met at the time of such Change in Control shall immediately become fully vested, non-forfeitable and, if applicable, exercisable. For purposes of clarification, the vesting of any performance-based Equity Awards for which the performance condition has not been met at the time of such Change in Control shall not be accelerated or otherwise modified pursuant to this Section 3.4 but such Equity Awards may nonetheless be accelerated or otherwise modified as determined by the Company under the terms of the Equity Plan.
4. Termination; Compensation and Benefits Upon Termination.
4.1 Termination for Cause. Employer may terminate Employee’s employment under this Agreement for Cause (as defined below). The termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.1 shall be the date specified by Employer in a written notice to Employee of finding of Cause. If Employee’s employment is terminated for Cause, Employer shall pay (i) Employee’s Base Salary through the termination date at the rate in effect at the termination date, (ii) reimbursement for reasonable business expenses incurred prior to the termination date, subject to Employer policy and the provisions of Section 3.1 hereof, and (iii) any other benefits that are vested benefits under applicable Employer benefit plans or that are required by applicable law (the foregoing clauses (i)-(iii), the “Accrued Obligations”).
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4.2 Disability. Employer may terminate Employee’s employment under this Agreement upon the Disability (as defined below) of Employee. The termination date for a termination of this Agreement pursuant to this Section 4.2 shall be the date specified by Employer in a notice to Employee. In the event of Employee’s Disability, (i) Employee shall continue to receive Employee’s Base Salary for ninety (90) days under the Company’s short term disability policy, which may be amended or modified in the Company’s discretion upon written notice to Employee (the “Initial Disability Period”), and (ii) following such Initial Disability Period, if Employee’s Disability continues, the Company may terminate Employee’s employment immediately upon written notice. If Employee’s employment is terminated in connection with Employee’s Disability, in addition to the Accrued Obligations and subject to and conditioned on Employee’s compliance with the terms of Section 5 hereof, Employee shall be eligible to receive (A) a bonus with respect to Employer’s fiscal year in which the termination date occurs, equal to Employee’s minimum Target Bonus for the year of termination, multiplied by the number of days in the fiscal year prior to and including the date of termination and divided by three hundred sixty five (365) (a “Pro-Rated Bonus”) payable within thirty (30) days of the termination date; and (B) all time-based Equity Awards granted to Employee by MEDNAX prior to termination of Employee’s employment shall immediately become fully vested, non-forfeitable and, if applicable, exercisable, and all performance-based shares awards shall remain outstanding and shall vest based upon actual performance determined at the end of the applicable performance period (the “Equity Acceleration”).
4.3 Death. Employee’s employment under this Agreement shall terminate automatically upon the death of Employee, without any requirement of notice by Employer to Employee’s estate. The date of Employee’s death shall be the termination date for a termination of Employee’s employment under this Agreement pursuant to this Section 4.3. Upon Employee’s death during the Employment Period, Employer shall pay or provide to the person or entity designated by Employee in a notice filed with Employer or, if no person is designated, to Employee’s estate (i) the Accrued Obligations; (ii) a Pro-Rated Bonus; and (iii) the Equity Acceleration.
4.4 Termination by Employer Without Cause. Employer may terminate Employee’s employment under this Agreement without Cause by giving Employee written notice of such termination. The termination date shall be the date specified by Employer in such notice, which may be up to ninety (90) days from the date of such notice. Upon any termination of Employee’s employment without Cause pursuant to this Section 4.4, in addition to the Accrued Obligations and subject to and conditioned on Employee’s compliance with the terms of Section 5 hereof, Employee shall be eligible to receive: (i) a Pro-Rated Bonus; (ii) severance payments equivalent to Employee’s monthly Base Salary for a period of twenty-four (24) months after the termination date (the “Severance Period”), payable in installments in Employer’s normal payroll; (iii) continuation of health, medical, hospitalization and other similar health insurance programs on the same basis as regular, full-time employees of Employer and their eligible dependents during the Severance Period (or, at Employer’s option, Employer may provide health insurance to Employee and Employee’s eligible dependents through an insurance carrier(s) selected by Employer in lieu of providing the foregoing coverage, provided the coverage afforded by such insurance is substantially comparable to the foregoing coverage, and Employee shall pay the cost of such insurance up to the amount that would have been paid by Employee under the foregoing coverage and Employer shall pay the excess cost, if any); and (iv) an amount equal to the greater of (A) 1.5 times Employee’s Average Annual Performance Bonus (as defined below) or (B) 1.5 times Employee’s Target Bonus amount, payable within thirty (90) days of the termination date.
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4.5 Termination by Employee without Good Reason. Employee may terminate Employee’s employment under this Agreement without Good Reason (as defined below) upon not less than ninety (90) days prior written notice to Employer. Upon receipt of such notice from Employee, Employer may, at its option, accelerate the effective date of Employee’s termination of employment at any time in advance of the expiration of such ninety (90) day period (which acceleration shall not constitute Good Reason or a termination by Employer without Cause). The termination date under this Section 4.5 shall be the date specified by Employer, but in no event more than ninety (90) days after Employer’s receipt of notice from Employee as contemplated by this Section 4.5. Upon any termination of Employee’s employment under this Agreement pursuant to this Section 4.5, Employee shall be entitled to the Accrued Obligations; provided, however, that if Employee provides notice of termination without Good Reason within ninety (90) days prior to the second (2nd) anniversary of the Effective Date, then Employee shall be eligible to receive the same payments and benefits, subject to the same conditions, for a termination without Cause as set forth in Section 4.4 hereof.
4.6 Termination by Employee for Good Reason. Employee may terminate Employee’s employment hereunder for Good Reason. If Employee desires to terminate Employee’s employment under this Agreement pursuant to this Section 4.6, Employee must, within ninety (90) days after the occurrence of events giving rise to the Good Reason, provide Employer with a written notice describing the Good Reason in reasonable detail. If Employer fails to cure the matter cited within thirty (30) days after the date of Employee’s notice, then this Agreement shall terminate as of the end of such thirty (30) day cure period, provided, however, that Employer may, at its option, require Employee to terminate employment at any time in advance of the expiration of such thirty (30) day cure period. If Employee’s employment under this Agreement is terminated pursuant to this Section 4.6, then Employee shall be eligible to receive the same payments and benefits, subject to the same conditions, for a termination without Cause as set forth in Section 4.4 hereof.
4.7 Continuation of Benefit Plans. Following any termination that results in the expiration of Employee’s continued benefit plan coverage, Employee and each of Employee’s eligible dependents shall be entitled to elect for continuation of coverage provided pursuant to COBRA.
4.8 Continuing Obligations. The obligations imposed on Employee with respect to non-competition, non-solicitation, confidentiality, non-disclosure and assignment of rights to inventions or developments in this Agreement or any other agreement executed by the parties shall continue, notwithstanding the termination of the employment relationship between the parties and regardless of the reason for such termination.
5. Conditions to Severance; Certain Definitions.
5.1 Release. Employer shall provide Employee with a general release in the form attached as Exhibit B (subject to such modifications as Employer may reasonably request) (the “Release”) within seven (7) days after Employee’s termination date. Payments or benefits to which Employee may be entitled pursuant to Section 4 hereof (other than the Accrued Obligations) (the “Severance Amounts”) shall be conditioned upon (i) Employee executing the Release within twenty one (21) days after receiving it from Employer (or such longer period as may be set forth
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in the Release) and the Release becoming irrevocable upon the expiration of seven (7) days following Employee’s execution of it, (ii) Employee agreeing to submit to a reasonable exit interview if requested by Employer, and (iii) Employee’s compliance with all post-termination obligations to Employer and its subsidiaries and affiliates and surrendering to Employer all proprietary or confidential information and articles belonging to Employer or its subsidiaries or affiliates. Payment of the Severance Amounts shall be suspended during the period (the “Suspension Period”) that begins on Employee’s termination date and ends on the date (“Suspension Termination Date”) that is at least forty-five (45) days after Employee’s termination date; provided, however, that this suspension shall not apply, and Employer shall be required to provide, any continued health insurance coverage (or COBRA reimbursement) that would be required under Section 4 hereof during the Suspension Period. If Employee executes the Release and the Release becomes irrevocable by no later than the Suspension Termination Date, then payment of any Severance Amounts that were suspended pursuant to this provision shall be made in the first payroll period that follows the Suspension Termination Date, and any Severance Amounts that are payable after the Suspension Termination Date shall be paid at the times provided in Section 4 hereof.
5.2 Certain Definitions. As used in this Agreement:
(a) “Average Annual Performance Bonus” shall mean an amount equal to the average of the percentage of the Performance Bonus target achieved by Employee for the three (3) full calendar years prior to the termination date (or such lesser period as Employee may have been employed by Employer), and calculated based on Employee’s Base Salary and Target Bonus in Employee’s current position. For illustration purposes, if Employee earned 40%, 100% and 70% of Employee’s Target Bonus in each of the three full calendar years prior to termination, and Employee’s current Target Bonus was 100% of Base Salary, and Base Salary was $450,000.00, then Employee’s Average Annual Performance Bonus would equal $315,000.00. ((40%+ 100% + 70%) / 3 x 100% x $450,000.00 = $315,000.00).
(b) “Cause” shall mean the occurrence of any of: (i) Employee’s engagement in (A) willful misconduct resulting in material harm to MEDNAX or Employer, or (B) gross negligence; (ii) Employee’s conviction of, or pleading nolo contendere to, a felony or any other crime involving fraud, financial misconduct, or misappropriation of Employer’s assets; (iii) Employee’s willful and continual failure, after written notice from Employee’s Supervisor or the Board to (A) perform substantially Employee’s employment duties consistent with Employee’s position and authority, or (B) follow, consistent with Employee’s position, duties, and authorities, the reasonable lawful mandates of Employee’s Supervisor or the Board; (iv) Employee’s failure or refusal to comply with a reasonable policy, standard or regulation of Employer in any material respect, including but not limited to Employer’s sexual harassment, other unlawful harassment, workplace discrimination or substance abuse policies; or (v) Employee’s breach of Section 8.4 hereof resulting in material harm to MEDNAX or Employer. No act or omission shall be deemed willful or grossly negligent for purposes of this definition if taken or omitted to be taken by Employee in a good faith belief that such act or omission to act was in the best interests of Employer or MEDNAX or if done at the express direction of the Board.
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(c) Subject to the requirements of applicable law, “Disability” shall mean (i) Employee’s inability to perform Employee’s duties hereunder, with or without a reasonable accommodation, as a result of physical or mental illness or injury, and (ii) a determination by an independent qualified physician selected by Employer and acceptable to Employee (which acceptance shall not be unreasonably withheld) that Employee is currently unable to perform such duties and in all reasonable likelihood such inability will continue for a period in excess of an additional ninety (90) or more days in any one hundred twenty (120) day period.
(d) “Good Reason” shall mean: (i) a decrease in Employee’s Base Salary; (ii) a decrease in Employee’s Target Bonus opportunity; (iii) Employee is assigned any position, duties, responsibilities or compensation that is inconsistent with the position, duties, or responsibilities of Employee contemplated herein as of the Effective Date or compensation of Employee as of the Effective Date, excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Employer promptly after receipt of written notice; (iv) Employee experiences a material diminution in Employee’s authorities, duties or responsibilities, excluding for this purpose any isolated and inadvertent action not taken in bad faith and which is remedied by Employer promptly after receipt of written notice; (v) Employee is required to report to any person other than the senior most executive officer of MEDNAX, the Board, or a duly constituted committee thereof, or there is a material diminution in the authority, duties or responsibilities of the senior most executive officer of MEDNAX; (vi) the requirement by Employer that Employee be based in any office or location outside of the metropolitan area where Employee resides as of the Effective Date, except for travel reasonably required in the performance of Employee’s duties; (vii) if following a Change in Control (as defined in the 2008 Plan as of the Effective Time), neither the common stock of MEDNAX nor the common equity of its successor, parent, or subsidiary is listed for trading on a national securities exchange, or (viii) any other action or inaction that constitutes a material breach of this Agreement by Employer.
6. Successors; Binding Agreement.
6.1 Successors. Employer shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) acquiring a majority of Employer’s voting common stock or any other successor to all or substantially all of the business and/or assets of Employer to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Employer would be required to perform it if no such succession had taken place and Employee hereby consents to any such assignment. In such event, “Employer” shall mean Employer as previously defined and any successor to its business and/or assets which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. This Section 6.1 shall not limit Employee’s ability to terminate this Agreement in the circumstances described in Section 4.6 hereof.
6.2 Benefit. This Agreement and all rights of Employee under this Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die after the termination date and amounts would have been payable to Employee under this Agreement if Employee had continued to live, including under Section 5 hereof, then such amounts shall be paid to Employee’s devisee, legatee, or other designee or, if there is no such designee, Employee’s estate.
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7. Conflicts. Except as otherwise provided in this Agreement, this Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof, and supersedes and revokes any and all prior or existing agreements, written or oral, relating to the subject matter hereof, and this Agreement shall be solely determinative of the subject matter hereof.
8. Restrictive Covenants; Confidential Information; Work Product; Injunctive Relief.
8.1 No Material Competition. Employer and Employee acknowledge and agree that a strong relationship and connection exists between Employer and its current and prospective patients, referral sources, and customers as well as the hospitals and healthcare facilities at which it provides professional services. Employer and Employee further acknowledge and agree that the restrictive covenants described in this Section are designed to enforce, and are ancillary to or part of, the promises contained in this Agreement and are reasonably necessary to protect the legitimate interests of Employer in the following: (1) the use and disclosure of the Confidential Information as described in Section 8.4 hereof; (2) the professional development activities described in Section 1.2 hereof; and (3) the goodwill of Employer, as promoted by Employee as provided in Section 1.2 hereof. The foregoing listing is by way of example only and shall not be construed to be an exclusive or exhaustive list of such interests. Employee acknowledges that the restrictive covenants set forth below are of significant value to Employer and were a material inducement to Employer in agreeing to the terms of this Agreement. Employee further acknowledges that the goodwill and other proprietary interest of Employer will suffer irreparable and continuing damage in the event Employee enters into competition with Employer in violation of this Section.
Therefore, Employee agrees that, except with respect to services performed under this Agreement on behalf of Employer, Employee shall not, at any time during the Restricted Period (as defined below), for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly participate or engage in or own an interest in, directly or indirectly, any individual proprietorship, partnership, corporation, joint venture, trust or other form of business entity, whether as an individual proprietor, partner, joint venturer, officer, director, member, employee, consultant, independent contractor, stockholder, lender, landlord, finder, agent, broker, trustee, or in any manner whatsoever, if such entity or its affiliates is engaged in, directly or indirectly, “Employer’s Business,” as defined on Exhibit A hereto. Employee acknowledges that, as of the date hereof, Employee’s responsibilities will include matters affecting the businesses of Employer listed on Exhibit A. For purposes of this Section 8, the “Restricted Period” shall mean the Employment Period plus (i) eighteen (18) months in the event this Agreement is terminated pursuant to Section 4.1 hereof, and (ii) twenty-four (24) months in the event the Agreement is terminated for any other reason.
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8.2 No Hire. Employee further agrees that Employee shall not, at any time during the Employment Period and for a period of eighteen (18) months immediately following termination of this Agreement for any reason, for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly employ, or intentionally, knowingly, or willingly permit any company or business directly or indirectly controlled by Employee to (a) employ or otherwise engage (i) any person who is a then current employee or exclusive independent contractor of Employer or one of its affiliates, or (ii) any person who was an employee or exclusive independent contractor of Employer or one of its affiliates in the prior six (6) month period, or (b) take any action that would reasonably be expected to induce an employee or independent contractor of Employer or one of its affiliates to leave his or her employment or engagement with Employer or one of its affiliates (including without limitation for or on behalf of a subsequent employer of Employee).
8.3 Non-Solicitation. Employee further agrees that Employee shall not, at any time during the Employment Period and for a period of eighteen (18) months immediately following termination of this Agreement for any reason, for Employee or on behalf of any other person, persons, firm, partnership, corporation or employer, intentionally, knowingly, or willingly solicit or accept business from or take any action that would reasonably be expected to materially interfere with, diminish or impair the valuable relationships that Employer or its affiliates have with (i) hospitals or other health care facilities with which Employer or its affiliates have contracts to render professional services or otherwise have established relationships, (ii) patients, (iii) referral sources, (iv) vendors, (v) any other clients of Employer or its affiliates, or (vi) prospective hospitals, patients, referral sources, vendors or clients whose business Employee was aware that Employer or any affiliate of Employer was in the process of soliciting at the time of Employee’s termination (including potential acquisition targets).
8.4 Confidential Information. At all times during the term of this Agreement, Employer shall provide Employee with access to “Confidential Information.” As used in this Agreement, the term “Confidential Information” means any and all confidential, proprietary or trade secret information, whether disclosed, directly or indirectly, verbally, in writing or by any other means in tangible or intangible form, including that which is conceived or developed by Employee, applicable to or in any way related to: (i) patients with whom Employer has a physician/patient relationship; (ii) the present or future business of Employer; or (iii) the research and development of Employer. Without limiting the generality of the foregoing, Confidential Information includes: (a) the development and operation of Employer’s medical practices, including information relating to budgeting, staffing needs, marketing, research, hospital relationships, equipment capabilities, and other information concerning such facilities and operations and specifically including the procedures and business plans developed by Employer for use at the hospitals where Employer conducts its business; (b) contractual arrangements between Employer and insurers or managed care associations or other payors; (c) the databases of Employer; (d) the clinical and research protocols of Employer, including coding guidelines; (e) the referral sources of Employer; (f) other confidential information of Employer that is not generally known to the public that gives Employer the opportunity to obtain an advantage over competitors who do not know or use it, including the names, addresses, telephone numbers or special needs of any of its patients, its patient lists, its marketing methods and related data, lists or other written records used in Employer’s business, compensation paid to employees and other terms of employment, accounting ledgers and financial statements, contracts and licenses, business systems, business plan and projections, and computer programs. The parties agree that, as between them, this Confidential Information constitutes important, material, and confidential trade secrets that affect the successful conduct of Employer’s business and its goodwill. Employer acknowledges that the Confidential Information specifically enumerated above is special and unique information and is not information that would be considered a part of the general knowledge and skill Employee has or might otherwise obtain.
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Notwithstanding the foregoing, Confidential Information shall not include any information that (i) was known by Employee from a third party source before disclosure by or on behalf of Employer, (ii) becomes available to Employee from a source other than Employer that is not, to Employee’s knowledge, bound by a duty of confidentiality to Employer, (iii) becomes generally available or known in the industry other than as a result of its disclosure by Employee, or (iv) has been independently developed by Employee and may be disclosed by Employee without breach of this Agreement, provided, in each case, that Employee shall bear the burden of demonstrating that the information falls under one of the above-described exceptions. Pursuant to the Defend Trade Secrets Act of 2016, Employee acknowledges that Employee shall not have criminal or civil liability under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if Employee files a lawsuit for retaliation by Employer for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney and may use the trade secret information in the court proceeding, if Employee (X) files any document containing the trade secret under seal and (Y) does not disclose the trade secret, except pursuant to court order.
Additionally, notwithstanding anything herein to the contrary, nothing in this Agreement or any other agreement between Employer and Employee shall prevent Employee from filing a charge, sharing information and communicating in good faith, without prior notice to Employer, with any federal government agency having jurisdiction over Employer or its operations, and cooperating in any investigation by any such federal government agency.
Unless disclosure is otherwise required by applicable law or stock exchange rules, Employee agrees that the terms of this Agreement shall be deemed Confidential Information for purposes of this Section. Employee shall keep the terms of this Agreement strictly confidential and will not, without the prior written consent of Employer, disclose the details of this Agreement to any third party in any manner whatsoever in whole or in part, with the exception of Employee’s representatives (such as tax advisors and attorneys) who need to know such information.
Employee agrees that Employee will not at any time, whether during or subsequent to the term of Employee’s employment with Employer, in any fashion, form or manner, unless specifically consented to in writing by Employer, either directly or indirectly, use or divulge, disclose, or communicate to any person, firm or corporation, in any manner whatsoever, any Confidential Information of any kind, nature, or description, subject to applicable law. The parties agree that any breach by Employee of any term of this Section 8.4 resulting in material harm to MEDNAX or Employer is a material breach of this Agreement and shall constitute “Cause” for the termination of Employee’s employment hereunder pursuant to Section 4.1 hereof. In the event that Employee is ordered to disclose any Confidential Information, whether in a legal or a regulatory proceeding or otherwise, Employee shall provide Employer with prompt written notice of such request or order so that Employer may seek to prevent disclosure or, if that cannot be
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achieved, the entry of a protective order or other appropriate protective device or procedure in order to assure, to the extent practicable, compliance with the provisions of this Agreement. In the case of any disclosure required by law, Employee shall disclose only that portion of the Confidential Information that Employee is ordered to disclose in a legally binding subpoena, demand or similar order issued pursuant to a legal or regulatory proceeding.
All Confidential Information, and all equipment, notebooks, documents, memoranda, reports, files, samples, books, correspondence, lists, other written and graphic records, in any media (including electronic or video) containing Confidential Information or relating to the business of Employer, which Employee shall prepare, use, construct, observe, possess, or control shall be and remain Employer’s sole property (collectively “Employer Property”). Upon termination or expiration of this Agreement, or earlier upon Employer’s request, Employee shall promptly deliver to Employer all Employer Property, retaining none.
8.5 Ownership of Work Product. Employee agrees and acknowledges that (i) all copyrights, patents, trade secrets, trademarks, service marks, or other intellectual property or proprietary rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Employee during the course of performing work for Employer and any other work product conceived, created, designed, developed or contributed by Employee during the term of this Agreement that relates in any way to Employer’s Business (collectively, the “Work Product”), shall belong exclusively to Employer and shall, to the extent possible, be considered a work made for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered a work made for hire owned exclusively by Employer, Employee hereby assigns to Employer all right, title, and interest worldwide in and to such Work Product at the time of its creation, without any requirement of further consideration. Upon request of Employer, Employee shall take such further actions and execute such further documents as Employer may deem necessary or desirable to further the purposes of this Agreement, including without limitation separate assignments of all right, title, and interest in and to all rights of copyright and all right, title, and interest in and to any inventions or patents and any reissues or extensions which may be granted therefore, and in and to any improvements, additions to, or modifications thereto, which Employee may acquire by invention or otherwise, the same to be held and enjoyed by Employer for its own use and benefit, and for the use and benefit of Employer’s successors and assigns, as fully and as entirely as the same might be held by Employee had this assignment not been made.
8.6 Clearance Procedure for Proprietary Rights Not Claimed by Employer. In the event that Employee wishes to create or develop, other than on Employer’s time or using Employer’s resources, anything that may be considered Work Product but to which Employee believes Employee should be entitled to the personal benefit of, Employee agrees to follow the clearance procedure set forth in this Section. Before beginning any such work, Employee agrees to give Employer advance written notice and provide Employer with a sufficiently detailed written description of the work under consideration for Employer to make a determination regarding the work. Unless otherwise agreed in a writing signed by Employer prior to receipt, Employer shall have no obligation of confidentiality with respect to such request or description. Employer will determine in its sole discretion, within thirty (30) days after Employee has fully disclosed such plans to Employer, whether rights in such work will be claimed by Employer. If Employer determines that it does not claim rights in such work, Employer agrees to so notify Employee in
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writing and Employee may retain ownership of the work to the extent that such work has been expressly disclosed to Employer. If Employer fails to so notify Employee within such thirty (30) day period, then Employer shall be deemed to have agreed that such work is not considered Work Product for purposes of this Agreement. Employee agrees to submit for further review any significant improvement, modification, or adaptation that could reasonably be related to Employer’s Business so that it can be determined whether the improvement, modification, or adaptation relates to the business or interests of Employer. Clearance under this procedure does not relieve Employee of the restrictive covenants set forth in this Section 8.
8.7 Non-Disparagement. During the Employment Period and for a period of ten (10) years after the termination of this Agreement, Employee will not, directly or indirectly, as an individual or on behalf of a firm, corporation, partnership or other legal entity, intentionally, knowingly, or willingly make any comment that would reasonably be expected to be materially disparaging or negative to any other person or entity regarding Employer or any of its affiliates, agents, attorneys, employees, officers and directors, Employee’s work conditions or circumstances surrounding Employee’s separation from Employer or otherwise impugn or criticize the name or reputation of Employer, its affiliates, agents, attorneys, employees, officers or directors, orally or in writing.
8.8 Review by Employee. Employee has carefully read and considered the terms and provisions of this Section 8, and having done so, agrees that the restrictions set forth in this Section 8 are fair and reasonably required for the protection of the interests of Employer. In the event that any term or provision set forth in this Section 8 shall be held to be invalid or unenforceable by a court of competent jurisdiction, the parties hereto agree that such invalid or unenforceable term(s) or provision(s) may be severed from this Agreement without, in any manner, affecting the remaining portions hereof. Without limiting other possible remedies available to Employer, Employee agrees that injunctive or other equitable relief will be available to enforce the covenants set forth in this Section 8, such relief to be without the necessity of posting a bond. In the event that, notwithstanding the foregoing, any part of the covenants set forth in this Section 8 shall be held to be invalid, overbroad, or unenforceable by an arbitrator or a court of competent jurisdiction, the parties hereto agree that such invalid, overbroad, or unenforceable provision(s) may be modified or severed from this Agreement without, in any manner, affecting the remaining portions of this Section 8 (all of which shall remain in full force and effect). In the event that any provision of this Section 8 related to time period or areas of restriction shall be declared by an arbitrator or a court of competent jurisdiction to exceed the maximum time period, area or activities such arbitrator or court deems reasonable and enforceable, said time period or areas of restriction shall be deemed modified to the minimum extent necessary to make the geographic or temporal restrictions or activities reasonable and enforceable.
8.9 Survival; Notice of Breach and Right to Cure. If Employer reasonably believes that Employee has breached a provision of this Section 8, Employer shall provide prompt written notice thereof to Employee that explains such reasonably believed breach (the “Alleged Breach”). Employer agrees to work in good faith with Employee to provide Employee a reasonable opportunity to promptly cure such Alleged Breach. In the event that Employee, acting in good faith, promptly takes actions that would reasonably be expected to cure the Alleged Breach, including, with respect to a comment made by Employee that Employer reasonably believes is in breach of Section 8.7 hereof, by Employee retracting such comment, then Employee shall be deemed not to be in breach of this Section 8 with respect to the Alleged Breach. Employer and Employee further agree that Employee shall not be deemed to be in breach of any term of Section 8.4 hereof unless such breach results in material harm to MEDNAX or Employer.
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The provisions of this Section 8 shall survive the termination of this Agreement and Employee’s employment with Employer. In the event of a breach of this Section 8 by Employee, as finally determined pursuant to Section 11 hereof, Employer retains the right to terminate any continuing payments to Employee provided for in Section 4 hereof. In the event of a breach of any provisions of this Section 8 by Employee, as finally determined pursuant to Section 11 hereof, the period for which those provisions would remain in effect shall be extended for a period of time equal to that period beginning when such breach commenced and ending when the activities constituting such breach shall have been finally terminated, in each case as finally determined pursuant to Section 11 hereof. The provisions of this Section 8 are expressly intended to benefit and be enforceable by other affiliated entities of Employer, who are express third party beneficiaries hereof. Employee shall not assist others in engaging in any of the activities described in the foregoing restrictive covenants.
9. Tax Matters
9.1 Section 409A
(a) In General. The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party. Employer makes no representation or warranty and shall have no liability to Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, Section 409A.
(b) Six-Month Delay. Anything in this Agreement to the contrary notwithstanding, if at the time of Employee’s separation from service within the meaning of Section 409A of the Code, Employer determines that Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Employee becomes entitled to under this Agreement on account of Employee’s “separation from service” (within the meaning of Section 409A) that would be considered “non-qualified deferred compensation”, such payment shall not be payable and such benefit shall not be provided until the date that is within fifteen (15) days after the end of the six-month period beginning on the date of such “separation from service” or, if earlier, within fifteen (15) days after the appointment of the personal representative or executor of Employee’s estate following Employee’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
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(c) Reimbursements. All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by Employer or incurred by Employee during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) Separation from Service. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Employee’s termination of employment, then such payments or benefits shall be payable only upon Employee’s “separation from service” as defined under Section 409A. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(e) Later Calendar Year. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and not otherwise exempt from the application of Section 409A, then, if the period during which Employee may consider and sign the Release or the period in which the Employer can make a severance payment spans two calendar years, any payment or benefit described in this Agreement will not be made or begin until the later calendar year.
9.2 Section 280G. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by Employer or its affiliates to Employee or for Employee’s benefit pursuant to the terms of this Agreement or otherwise (the “Covered Payments”) constitute parachute payments (the “Parachute Payments”) within the meaning of Section 280G of the Code and, but for this Section 9, would be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
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(a) Any such reduction shall be made in accordance with Section 409A and the following: (i) the Covered Payments consisting of cash severance benefits that do not constitute nonqualified deferred compensation subject to Section 409A shall be reduced first, in reverse chronological order; (ii) all other Covered Payments consisting of cash payments, and Covered Payments consisting of accelerated vesting of equity based awards to which Treas. Reg. § 1.280G-1 Q/A-24(c) does not apply, and that in either case do not constitute nonqualified deferred compensation subject to Section 409A, shall be reduced second, in reverse chronological order; (iii) all Covered Payments consisting of cash payments that constitute nonqualified deferred compensation subject to Section 409A shall be reduced third, in reverse chronological order; and (iv) all Covered Payments consisting of accelerated vesting of equity-based awards to which Treas. Reg. § 1.280G-1 Q/A-24(c) applies shall be the last Covered Payments to be reduced.
(b) Any determination required under this Section 9 shall be made in writing in good faith by an independent accounting firm selected by Employer (the “Accountants”). Employer and Employee shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 9. For purposes of making the calculations and determinations required by this Section 9, the Accountants may rely on reasonable, good-faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Accountants’ determinations shall be final and binding on Employer and Employee. Employer shall be responsible for all fees and expenses incurred by the Accountants in connection with the calculations required by this Section 9.
(c) It is possible that after the determinations and selections made pursuant to this Section 9, Employee will receive Covered Payments that are in the aggregate more than the amount intended or required to be provided after application of this Section 9 (“Overpayment”) or less than the amount intended or required to be provided after application of this Section 9 (“Underpayment”).
(i) In the event that: (A) the Accountants determine, based upon the assertion of a deficiency by the Internal Revenue Service against either Employer or Employee that the Accountants believe has a high probability of success, that an Overpayment has been made or (B) it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then Employee shall pay any such Overpayment to Employer together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of Employee’s receipt of the Overpayment until the date of repayment.
(ii) In the event that: (A) the Accountants, based upon controlling precedent or substantial authority, determine that an Underpayment has occurred or (B) a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by Employer to or for the benefit of Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount should have otherwise been paid to Employee until the payment date.
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9.3 Tax Withholding. All amounts payable under this Agreement shall be subject to applicable income and employment tax withholding.
10. Dispute Resolution; Injunctive Relief. If any controversy or claim arises out of or relating to this Agreement, or any alleged breach hereof, Employee and Employer shall first try to resolve such controversy or claim through mediation using the services of the American Arbitration Association. If any such controversy or claim cannot be resolved by mediation pursuant to the foregoing, Employee and Employer agree that such controversy or claim shall be finally determined by a single arbitrator, jointly selected by Employee and Employer, provided that if Employee and Employer are unable to agree upon a single arbitrator after reasonable efforts, the arbitrator shall be an impartial arbitrator selected by the American Arbitration Association.
Employer shall bear all costs associated with such mediation and, if necessary, arbitration, including but not limited to all costs of the mediator and arbitrator, and shall reimburse Employee on a monthly basis for Employee’s reasonable legal and other expenses, including all fees, incurred in connection with any such mediation and, if necessary, arbitration, provided, however, that if Employer ultimately prevails in any arbitration (as determined by the arbitrator), the arbitrator shall have the power to require Employee to reimburse Employer for all or a portion of the advanced legal fees and other expenses as determined by the arbitrator (and, if the arbitrator finds that Employer prevailed on certain claims and Employee prevailed on others, the arbitrator shall have the power to require Employee to reimburse Employer for a portion of the advanced legal fees and other expenses determined by the arbitrator based on those claims on which Employer prevailed). The mediation and, if necessary, arbitration proceedings shall be held in Sunrise, Florida, unless otherwise mutually agreed by the parties, and shall be conducted in accordance with the American Arbitration Association National Rules for the Resolution of Employment Disputes then in effect. Judgment on any award rendered by the arbitrator may be entered and enforced by any court having jurisdiction thereof. Any such mediation and, if necessary, arbitration shall be treated as confidential by all parties thereto, except as otherwise provided by law or as otherwise necessary to enforce any judgment or order issued by the arbitrator.
Notwithstanding anything herein to the contrary, if Employer or Employee shall require immediate injunctive relief, then the party shall be entitled to seek such relief in any court having jurisdiction, and if the party elects to do so, the other party hereby consents to the jurisdiction of the state and federal courts sitting in the State of Florida and to the applicable service of process. Employee and Employer hereby waive and agree not to assert, to the fullest extent permitted by applicable law, any claim that (i) they are not subject to the jurisdiction of such courts, (ii) they are immune from any legal process issued by such courts and (iii) any litigation or other proceeding commenced in such courts is brought in an inconvenient forum. In the event that Employer brings suit against Employee seeking injunctive relief, Employer agrees to advance all of Employee’s reasonable legal and other expenses, including all fees, incurred by Employee in connection with such action, provided, however, that if Employer ultimately prevails in seeking injunctive relief, Employee shall reimburse Employer all such advanced legal fees and other expenses.
11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without regard to its conflict of laws principles to the extent that such principles would require the application of laws other than the laws of the State of Florida.
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12. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when (i) delivered by hand, (ii) delivered by electronic mail that is confirmed by non-automated means, or (iii) when delivered or delivery is refused if sent by registered or certified U.S. mail, return receipt requested, postage prepaid, or via reputable overnight courier, addressed as follows:
| If to Employer:
MEDNAX Services, Inc. 1301 Concord Terrace Sunrise, FL 33323 Attention: Chief Financial Officer Email: marc_richards@mednax.com |
If to Employee:
Dominic J. Andreano c/o MEDNAX Services, Inc. 1301 Concord Terrace Sunrise, FL 33323 Email: dominic_andreano@mednax.com |
or to such other addresses as either party hereto may from time to time give notice of to the other in the aforesaid manner.
13. Benefits; Binding Effect. This Agreement shall be for the benefit of and binding upon the parties hereto and their respective heirs, personal representatives, legal representatives, successors and, where applicable, assigns. Notwithstanding the foregoing, Employee may not assign the rights or benefits hereunder without the prior written consent of Employer. This Agreement may be assigned by Employer upon notice to Employee.
14. Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted. If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area, which would cure such invalidity.
15. Waivers. The waiver by either party hereto of a breach or violation of any term or provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach or violation.
16. Damages. Nothing contained herein shall be construed to prevent Employer or Employee from seeking and recovering from the other damages sustained by either or both of them as a result of a breach of any term or provision of this Agreement.
17. No Third Party Beneficiary. Except as provided in Section 8.9 hereof, nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person (other than the parties hereto and, in the case of Employee, Employee’s heirs, personal representative(s) and/or legal representative) any rights or remedies under or by reason of this Agreement. No agreements or representations, oral or otherwise, express or implied, have been made by either party with respect to the subject matter of this Agreement which agreements or representations are not set forth expressly in this Agreement, and this Agreement supersedes any other employment agreement between Employer and Employee.
The remainder of this page has been left blank intentionally.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the Effective Date.
| EMPLOYER:
MEDNAX SERVICES, INC. |
EMPLOYEE: | |||||||
| By: | /s/ Mark S. Ordan |
By: | /s/ Dominic J. Andreano | |||||
| Mark S. Ordan Chief Executive Officer |
Dominic J. Andreano | |||||||
| MEDNAX, INC. | ||||||||
| By: | /s/ Shirley A. Weis |
|||||||
| Shirley A. Weis Chair, Compensation Committee |
||||||||
[Signature Page to Amended and Restated Employment Agreement]
EXHIBIT A
BUSINESS OF EMPLOYER
As of the date hereof, Employer, directly or through its affiliates, provides professional medical services and all aspects of practice management services in medical practice areas that include, but are not limited to, the following (collectively referred to herein as “Employer’s Business”):
(1) Neonatology, including hospital well baby care;
(2) Maternal-Fetal Medicine, including Obstetrical Hospitalist Care;
(3) Pediatric Cardiology;
(4) Pediatric Intensive Care, including Pediatric Hospitalist Care;
(5) Newborn hearing screening services;
(6) Pediatric Surgery;
(7) Pediatric Emergency Medicine; and
(8) Radiology and Teleradiology.
References to Employer’s Business in this Agreement shall include such other medical service lines, practice management services and other businesses in which Employer is engaged during the Employment Period; provided, that to be considered a part of Employer’s Business, Employer must have engaged in such other service line, practice management service or other business at least six (6) months prior to the termination date of this Agreement. For purposes of this Exhibit A, businesses of Employer shall include the businesses conducted by Employer’s subsidiaries, entities under common control and affiliates as defined under Rule 144 of the Securities Act of 1933, as amended. Such affiliates shall include the professional corporations and associations whose operating results are consolidated with Employer for financial reporting purposes.
Notwithstanding the foregoing, Employer acknowledges and agrees to the following exceptions and clarifications regarding the scope of Employer’s Business.
A. Hospital Services. Employer and Employee acknowledge that, as of the date hereof, Employer does not currently operate hospitals, hospital systems or universities. Nevertheless, the businesses of hospitals, hospital systems and universities would be the same as Employer’s Business where such hospitals, hospital systems or universities provide or contract with others to provide some or all of the medical services included in Employer’s Business. Therefore, the parties desire to clarify their intent with respect to the limitations on Employee’s ability to work for or contract with others to provide services for a hospital, hospital system or university during the Employment Period and during the Restricted Period. Section 8.1 shall not be deemed to restrict Employee’s ability to work for a hospital, hospital system or university if the hospital, hospital system or university does not provide any of the medical services included in Employer’s Business. Furthermore, even if a hospital, hospital system or university provides medical services that are included in Employer’s Business, Employee may work for such hospital, hospital system or university if Employee has no direct supervisory responsibility for or involvement in the hospital’s, hospital system’s or university’s provision of medical services that are Employer’s Business. For the avoidance of doubt, Employer and Employee agree that if
A-1
Employee becomes the Chief Operating Officer, Chief Legal Officer, General Counsel or Chief Executive Officer of a hospital system or health system, or other executive officer of similar level to the foregoing, that Employee shall not be in breach of the provisions of this Agreement. Finally, Employer agrees that Employee may hold direct supervisory responsibility for or be involved in the medical services of a hospital, hospital system or university that are included in Employer’s Business so long as such hospital, hospital system or university is located at least ten (10) miles from a medical practice owned or operated by Employer or its affiliate. Subject to paragraph B below, the provisions of this paragraph shall not apply to the extent that, after the date hereof, Employer enters into the business of operating a hospital or hospital system.
B. De Minimus Exception. Employer agrees that a medical service line (other than those listed in items (1) through (8) above), practice management service or other business in which Employer is engaged shall not be considered to be a part of Employer’s Business if such medical service line, practice management service or other business constitutes less than three percent (3%) of Employer’s annual revenues.
C. Divested Lines of Service. Employer agrees that any medical service line (including those listed in items (1) through (8) above), practice management, or other business in which Employer is engaged that is divested pursuant to a disposition, sale of assets or equity, or otherwise after the Effective Date shall not be considered to be a part of Employer’s Business effective as of the effective date of such divestiture.
D. Certain Ownership Interests. It shall not be deemed to be a violation of Section 8.1 for Employee to: (i) own, directly or indirectly, one percent (1%) or less of a publicly-traded entity that has a market capitalization of $1 billion or more; (ii) own, directly or indirectly, five percent (5%) or less of a publicly-traded entity that has a market capitalization of less than $1 billion; or (iii) own, directly or indirectly, less than ten percent (10%) of a privately-held business or company, if Employee is at all times a passive investor with no board representation, management authority or other special rights to control operations of such business or company.
A-2
EXHIBIT B
FORM OF RELEASE
GENERAL RELEASE OF CLAIMS
1. Dominic J. Andreano (“Employee”), for himself or herself and his or her family, heirs, executors, administrators, legal representatives and their respective successors and assigns, in exchange for the consideration received pursuant to Section 4.[●] of that certain Employment Agreement, dated as of September 27, 2020, by and between Employee and Employer, to which this release is attached as Exhibit B (the “Employment Agreement”), does hereby release and forever discharge MEDNAX Services, Inc. (“Employer”), its subsidiaries, affiliated companies, successors and assigns, and its current or former directors, officers, employees, shareholders or agents in such capacities (collectively with Employer, the “Released Parties”) from any and all actions, causes of action, suits, controversies, claims and demands whatsoever, for or by reason of any matter, cause or thing whatsoever, whether known or unknown including, but not limited to, all claims under any applicable laws arising under or in connection with Employee’s employment or termination thereof, whether for discrimination, harassment, retaliation, tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the job or incurred as a result of loss of employment. Employee acknowledges that Employer encouraged Employee to consult with an attorney of Employee’s choosing, and through this General Release of Claims encourages Employee to consult with Employee’s attorney with respect to possible claims under the Age Discrimination in Employment Act (“ADEA”) and that Employee understands that the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefits and benefit plans. Without limiting the generality of the release provided above, Employee expressly waives any and all claims under ADEA that Employee may have as of the date hereof. Employee further understands that by signing this General Release of Claims Employee is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of Claims shall not apply to (i) any actions to enforce rights to receive any payments or benefits which may be due Employee pursuant to Section 4.[●] of the Employment Agreement, or under any of Employer’s employee benefit plans, (ii) any rights or claims that may arise as a result of events occurring after the date this General Release of Claims is executed, (iii) any indemnification rights Employee may have as a former officer or director of Employer or its subsidiaries or affiliated companies, (iv) any claims for benefits under any directors’ and officers’ liability policy maintained by Employer or its subsidiaries or affiliated companies in accordance with the terms of such policy, (v) any rights as a holder of equity securities of Employer, (vi) any claims that cannot be waived as a matter of law, (vii) any claims Employee may have to government-sponsored and administered benefits such as unemployment insurance, workers’ compensation insurance (excluding claims for retaliation under workers’ compensation laws), state disability insurance, and paid family leave benefits, and (viii) any benefits that vested on or prior to the termination date pursuant to a written benefit plan sponsored by Employer and governed by the federal law known as “ERISA”.
B-1
2. Employee represents that Employee has not filed against the Released Parties any complaints, charges, or lawsuits arising out of Employee’s employment, or any other matter arising on or prior to the date of this General Release of Claims, and covenants and agrees that Employee will never individually or with any person file, or commence the filing of, any charges, lawsuits, complaints or proceedings with any governmental agency, or against the Released Parties with respect to any of the matters released by Employee pursuant to paragraph 1 hereof (a “Proceeding”), provided, however, Employee retains the right to commence a Proceeding to challenge whether Employee knowingly and voluntarily waived Employee’s rights under ADEA.
3. Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement or any other agreement between Employer and Employee shall prevent Employee from filing a charge, sharing information and communicating in good faith, without prior notice to Employer, with any federal government agency having jurisdiction over Employer or its operations, and cooperating in any investigation by any such federal government agency; however, to the maximum extent permitted by law, Employee agrees that if such an administrative claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies, provided that, for purposes of clarity, this limitation on monetary recovery does not apply to whistleblower proceedings before the United States Securities and Exchange Commission.
4. Employee hereby acknowledges that Employer has informed Employee that Employee has up to twenty-one (21) days to sign this General Release of Claims and Employee may knowingly and voluntarily waive that twenty-one (21) day period by signing this General Release of Claims earlier. Employee also understands that Employee shall have seven (7) days following the date on which Employee signs this General Release of Claims within which to revoke it by providing a written notice of Employee’s revocation to Employer.
5. Employee acknowledges that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the State of Florida applicable to contracts made and to be performed entirely within such State.
6. Employee acknowledges that Employee has read this General Release of Claims, that Employee has been advised that Employee should consult with an attorney before Employee executes this general release of claims, and that Employee understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
7. This General Release of Claims shall take effect on the eighth day following Employee’s execution of this General Release of Claims unless Employee’s written revocation is delivered to Employer within seven (7) days after such execution.
|
|
| , 20 |
B-2
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark S. Ordan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of MEDNAX, Inc.; |
| 2. | Based on my knowledge, this 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 report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 6, 2020 | ||||||
| By: | /s/ Mark S. Ordan | |||||
| Mark S. Ordan | ||||||
| Chief Executive Officer | ||||||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, C. Marc Richards, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of MEDNAX, Inc.; |
| 2. | Based on my knowledge, this 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 report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 6, 2020 | ||||||
| By: | /s/ C. Marc Richards | |||||
| C. Marc Richards | ||||||
| Chief Financial Officer | ||||||
| (Principal Financial Officer) |
Exhibit 32.1
Certification Pursuant to 18 U.S.C Section 1350
(Adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report of MEDNAX, Inc. on Form 10-Q for the quarter ended September 30, 2020 (the “Report”), each of the undersigned hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of MEDNAX, Inc.
A signed original of this written statement required by Section 906 has been provided to MEDNAX, Inc. and will be retained by MEDNAX, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
| November 6, 2020 | ||
| By: | /s/ Mark S. Ordan | |
| Mark S. Ordan | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ C. Marc Richards | |
| C. Marc Richards | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, issued | 0 | 0 |
| Common stock, par value | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 85,504,000 | 84,248,000 |
| Common stock, shares outstanding | 85,504,000 | 84,248,000 |
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|||
| Income Statement [Abstract] | ||||||
| Net revenue | $ 460,635 | $ 454,913 | $ 1,317,321 | $ 1,321,159 | ||
| Operating expenses: | ||||||
| Practice salaries and benefits | 309,904 | 301,306 | 909,168 | 880,686 | ||
| Practice supplies and other operating expenses | 22,440 | 22,581 | 66,455 | 72,688 | ||
| General and administrative expenses | 66,346 | 63,284 | 194,276 | 185,318 | ||
| Depreciation and amortization | 7,195 | 6,408 | 20,749 | 18,830 | ||
| Transformational and restructuring related expenses | 34,291 | 12,766 | 60,846 | 32,025 | ||
| Total operating expenses | 440,176 | 406,345 | 1,251,494 | 1,189,547 | ||
| Income from operations | 20,459 | 48,568 | 65,827 | 131,612 | ||
| Investment and other income | 10,534 | 802 | 13,064 | 2,777 | ||
| Interest expense | (27,250) | (29,909) | (83,180) | (91,271) | ||
| Equity in earnings of unconsolidated affiliates | 282 | 786 | 1,081 | 1,753 | ||
| Total non-operating expenses | (16,434) | (28,321) | (69,035) | (86,741) | ||
| Income (loss) from continuing operations before income taxes | 4,025 | 20,247 | (3,208) | 44,871 | ||
| Income tax provision | (6,677) | (7,360) | (10,859) | (12,590) | ||
| (Loss) income from continuing operations | (2,652) | 12,887 | (14,067) | 32,281 | ||
| Loss from discontinued operations, net of tax | (38,392) | (1,268,803) | (718,125) | (1,539,314) | ||
| Net loss | $ (41,044) | $ (1,255,916) | $ (732,192) | $ (1,507,033) | ||
| (Loss) income from continuing operations: | ||||||
| Basic | $ (0.03) | $ 0.16 | $ (0.17) | $ 0.39 | ||
| Diluted | (0.03) | 0.16 | (0.17) | 0.38 | ||
| Loss from discontinued operations: | ||||||
| Basic | (0.46) | (15.39) | (8.62) | (18.36) | ||
| Diluted | (0.46) | (15.31) | (8.62) | (18.26) | ||
| Net loss: | ||||||
| Basic | (0.49) | (15.23) | (8.79) | (17.97) | ||
| Diluted | $ (0.49) | $ (15.15) | $ (8.79) | $ (17.88) | ||
| Weighted average common shares: | ||||||
| Basic | 83,862 | 82,441 | 83,260 | 83,846 | ||
| Diluted | [1] | 83,862 | 82,883 | 83,260 | 84,302 | |
| ||||||
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Cash flows from operating activities: | ||
| Net loss | $ (732,192) | $ (1,507,033) |
| Loss from discontinued operations | 718,125 | 1,539,314 |
| Adjustments to reconcile net income to net cash from operating activities: | ||
| Depreciation and amortization | 20,749 | 18,830 |
| Amortization of premiums, discounts and issuance costs | 4,076 | 4,293 |
| Stock-based compensation expense | 36,120 | 27,512 |
| Deferred income taxes | 30,214 | (13,484) |
| Other | (30) | 3,370 |
| Changes in assets and liabilities: | ||
| Accounts receivable | 30,006 | 7,491 |
| Prepaid expenses and other current assets | (1,716) | (22,545) |
| Other long-term assets | 7,703 | 21,825 |
| Accounts payable and accrued expenses | (36,433) | (2,238) |
| Income taxes payable / receivable | (28,837) | (25,838) |
| Long-term professional liabilities | 15,703 | 4,508 |
| Other liabilities | 8,157 | (19,768) |
| Net cash provided by operating activities – continuing operations | 71,645 | 36,237 |
| Net cash provided by operating activities—discontinued operations | 144,841 | 186,177 |
| Net cash provided by operating activities | 216,486 | 222,414 |
| Cash flows from investing activities: | ||
| Acquisition payments, net of cash acquired | (2,225) | (31,200) |
| Purchases of investments | (36,090) | (13,907) |
| Proceeds from maturities or sales of investments | 30,865 | 26,240 |
| Purchases of property and equipment | (21,809) | (14,862) |
| Proceeds from sale of business, net of cash sold | 1,080 | 0 |
| Net cash used in investing activities – continuing operations | (28,179) | (33,729) |
| Net cash provided by (used in) investing activities—discontinued operations | 3,079 | (20,793) |
| Net cash used in investing activities | (25,100) | (54,522) |
| Cash flows from financing activities: | ||
| Borrowings on credit agreement | 527,500 | 1,225,800 |
| Payments on credit agreement | (527,500) | (1,755,500) |
| Proceeds from issuance of senior notes | 0 | 500,000 |
| Payments for credit facility amendment and financing costs | (510) | (9,194) |
| Payments on finance lease obligations | (433) | 0 |
| Proceeds from issuance of common stock | 5,697 | 9,157 |
| Contribution from noncontrolling interests | 245 | 0 |
| Repurchases of common stock | (8,495) | (144,925) |
| Net cash used in financing activities – continuing operations | (3,496) | (174,662) |
| Net cash used in financing activities—discontinued operations | (1,248) | (8,909) |
| Net cash used in financing activities | (4,744) | (183,571) |
| Net increase (decrease) in cash and cash equivalents | 186,642 | (15,679) |
| Cash and cash equivalents at beginning of period | 107,870 | 40,774 |
| Cash and cash equivalents at end of period | $ 294,512 | $ 25,095 |
Basis of Presentation and New Accounting Pronouncements |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 | |||
| Accounting Policies [Abstract] | |||
| Basis of Presentation and New Accounting Pronouncements |
The accompanying unaudited Consolidated Financial Statements of the Company and the notes thereto presented in this Form 10-Q have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements, and do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the r esults of the interim periods presented. The financial statements include all the accounts of MEDNAX, Inc. and its consolidated subsidiaries (collectively, “MDX”) together with the accounts of MDX’s affiliated business corporations or professional associations, professional corporations, limited liability companies and partnerships (the “affiliated professional contractors”). Certain subsidiaries of MDX have contractual management arrangements with its affiliated professional contractors, which are separate legal entities that provide physician services in certain states and Puerto Rico. The terms “MEDNAX” and the “Company” refer collectively to MEDNAX, Inc., its subsidiaries and the affiliated professional contractors.The Company is a party to a joint venture in which it owns a 37.5% economic interest. The Company accounts for this joint venture under the equity method of accounting because the Company exercises significant influence over, but does not control, this entity. In August 2020, the Company entered into a joint venture in which it owns a 51% economic interest and for which it is deemed the primary beneficiary. The equity interests of the outside investor in the equity of this consolidated entity is accounted for and presented as noncontrolling interests on the Company’s Consolidated Balance Sheets. Although the joint venture was formed during the third quarter of 2020, it has not yet begun operations. Any future results of operations attributable to the noncontrolling interests will be accounted for and presented as such on the Company’s Consolidated Statements of Income. The consolidated results of operations for the interim periods presented are not necessarily indicative of the results to be experienced for the entire fiscal year. In addition, the accompanying unaudited Consolidated Financial Statements and the notes thereto should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company’s most recent Annual Report on Form 10-K (the “Form In October 2019, the Company divested its management services organization, which operated as MedData, to allow the Company to focus on its core physician services business. The operating results of MedData are reported as discontinued operations in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2019. In May 2020, the Company divested its anesthesiology services medical group. The operating results of this medical group are reported as discontinued operations in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019. On September 9, 2020, the Company entered into a definitive agreement to divest its radiology services medical group. The operating results of this medical group are reported as discontinued operations in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019. Reclassifications have been made to certain prior period financial statements and footnote disclosures to reflect the impact of discontinued operations. See Note 6 – Assets Held for Sale and Discontinued Operations for additional information. New Accounting Pronouncements In December 2019, accounting guidance related to income taxes was issued with the goal of enhancing and simplifying various aspects of the income tax accounting guidance, including requirements related to hybrid tax regimes, deferred taxes on
step-up in tax basis of goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, deferred tax liabilities on outside basis differences, and interim-period accounting for enacted changes in tax law and certain year-to-date |
Coronavirus Pandemic ("COVID-19") |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 | |||
| Extraordinary Items [Abstract] | |||
| Coronavirus Pandemic ("COVID-19") |
COVID-19 and related “stay at home” and social distancing measures implemented across the country have significantly impacted demand for medical services provided by the Company’s affiliated clinicians. Beginning in mid-March 2020, the Company experienced a significant decline in the number of elective surgeries at the facilities where the Company’s affiliated clinicians provided anesthesiology services. Much of this decline was due to the closure of operating suites or facilities following federal advisories to cancel non-urgent procedures and the prohibition of such procedures by several states. Within the Company’s radiology services medical group, orders for radiological studies declined by a meaningful amount from historically normal levels, with much of this reduction focused in non-urgent studies. See Note 6 – Assets Held for Sale and Discontinued Operations for information regarding the divestment of the Company’s anesthesiology services medical group and the planned divestment of the Company’s radiology services medical group. The Company’s affiliated office-based practices, which specialize in maternal-fetal medicine, pediatric cardiology, and numerous pediatric subspecialties, experienced a significant elevation of appointment cancellations compared to historical normal levels. At this time, the Company has not experienced, nor does it currently anticipate, any significant impact to neonatal intensive care unit (NICU) patient volumes as a result of COVID-19. Overall, the Company’s operating results were significantly impacted by COVID-19 beginning in mid-March 2020. The Company implemented a number of actions to preserve financial flexibility and partially mitigate the significant anticipated impact of COVID-19. These steps included a suspension of most activities related to the Company’s transformational and restructuring programs, limiting these expenditures to those that provide essential support for the Company’s response to COVID-19. In addition, (i) the Company temporarily reduced executive and key management base salaries, including 50% reductions in salaries for its named executive officers through June 30, 2020; (ii) the Board of Directors agreed to forego their annual cash retainer and cash meeting payments, also through June 30, 2020; (iii) the Company enacted a combination of salary reductions and furloughs for non-clinical employees; and (iv) the Company enacted significant operational and practice-specific expense reduction plans across its clinical operations. The Company also divested its anesthesiology services medical group in May 2020, where operating results were significantly impacted by COVID-19. In response to the anticipated impact of COVID-19 on the Company’s results of operations, on March 25, 2020, the Company amended and restated its Credit Agreement to, among other things, (i) establish a deemed Consolidated EBITDA of $139.2 million for the second and third quarters of 2020, reflecting average Adjusted EBITDA from continuing operations for the prior eight quarters (calculated for purposes of the Credit Agreement), which will be used in the calculation of rolling four consecutive quarter Consolidated EBITDA under the Credit Agreement, (ii) temporarily increase the maximum consolidated net leverage ratio required to be maintained by the Company from 4.50:1:00 to 5.00:1:00 for the second and third quarters of 2020 and 4.75:1:00 for the fourth quarter of 2020, before returning to 4.50:1:00 for the first quarter of 2021 and beyond, (iii) require that the Company maintains minimum availability under the Credit Agreement of $300.0 million through the third quarter of 2021, (iv) provide for a weekly repayment of borrowings under the Credit Agreement through the second quarter of 2021 using unrestricted cash on hand in excess of $300.0 million, plus a reserve for certain payables, and (v) temporarily restrict the Company’s ability to make restricted payments under the Credit Agreement for the remainder of 2020, subject to certain exceptions. At September 30, 2020, the Company believes it was in compliance, in all material respects, with the financial covenants and other restrictions applicable to the Company under its Credit Agreement, its 5.25% senior unsecured notes due 2023 and its 6.25% senior unsecured notes due 2027. The Company believes it will be in compliance with these covenants for the next twelve months. At September 30, 2020, the Company had no outstanding principal balance on its Credit Agreement. The Company had outstanding letters of credit of $0.2 million which reduced the amount available on its Credit Agreement to $899.8 million at September 30, 2020, after giving effect to the temporary reduction of the capacity of its Credit Agreement described above through September 30, 2021.CARES Act On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing up to $100 billion in aid to the healthcare industry to reimburse healthcare providers for lost revenue and expenses attributable to COVID-19. The remaining $70 billion in aid is intended to focus on providers in areas particularly impacted by COVID-19, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans. It is unknown what, if any, portion of the remaining healthcare industry funding on the CARES Act the Company and its affiliated physician practices will qualify for and receive. The Department of Health and Human Services (“HHS”) is administering this program and began disbursing funds in April 2020, of which the Company’s affiliated physician practices within continuing operations In addition, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. The Company intends to utilize this deferral option throughout 2020. The COVID-19 pandemic has materially impacted the Company’s financial results, but due to the rapidly evolving environment and continued uncertainties surrounding the timeline of and impacts from COVID-19, the Company is unable to predict the ultimate impact on its business, financial condition, results of operations and cash flows. The Company, however, believes it will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months. |
Cash Equivalents and Investments |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Equivalents and Investments |
As of September 30, 2020 and December 31, 2019, the Company’s cash equivalents consisted entirely of money market funds totaling $2.4 million and $16.8 million, respectively. Investments consisted of corporate securities, municipal debt securities, federal home loan securities and certificates of deposit. All investments are classified as current. Investments held at September 30, 2020 and December 31, 2019 are summarized as follows (in thousands):
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures |
The accounting guidance establishes a fair value hierarchy that prioritizes valuati o n inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels: Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. The following table presents information about the Company’s financial instruments that are accounted for at fair value on a recurring basis at September 30, 2020 and December 31, 2019 (in thousands):
The following table presents information about the Company’s financial instruments that are not carried at fair value at September 30, 2020 and December 31, 2019 (in thousands):
The carrying amounts of cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value due to the short maturities of the respective instruments. The carrying value of the Company’s line of credit approximates fair value. If the Company’s line of credit was measured at fair value, it would be categorized as Level 2 in the fair value hierarchy. |
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Accounts Receivable and Net Revenue |
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| Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable and Net Revenue |
Accounts receivable, net consists of the following (in thousands):
Patient service revenue is recognized at the time services are provided by the Company’s affiliated physicians. The Company’s performance obligations related to the delivery of services to patients are satisfied at the time of service. Accordingly, there are no performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period with respect to patient service revenue. Almost all of the Company’s patient service revenue is reimbursed by government-sponsored healthcare programs (“GHC Programs”) and third-party insurance payors. Payments for services rendered to the Company’s patients are generally less than billed charges. The Company monitors its revenue and receivables from these sources and records an estimated contractual allowance to properly account for the anticipated differences between billed and reimbursed amounts. Accordingly, patient service revenue is presented net of an estimated provision for contractual adjustments and uncollectibles. The Company estimates allowances for contractual adjustments and uncollectibles on accounts receivable based upon historical experience and other factors, including days sales outstanding (“DSO”) for accounts receivable, evaluation of expected adjustments and delinquency rates, past adjustments and collection experience in relation to amounts billed, an aging of accounts receivable, current contract and reimbursement terms, changes in payor mix and other relevant information. Contractual adjustments result from the difference between the physician rates for services performed and the reimbursements by GHC Programs and third-party insurance payors for such services. Collection of patient service revenue the Company expects to receive is normally a function of providing complete and correct billing information to the GHC Programs and third-party insurance payors within the various filing deadlines and typically occurs within 30 to 60 days of billing. Some of the Company’s hospital agreements require hospitals to pay the Company administrative fees. Some agreements provide for fees if the hospital does not generate sufficient patient volume in order to guarantee that the Company receives a specified minimum revenue level. The Company also receives fees from hospitals for administrative services performed by its affiliated physicians providing medical director or other services at the hospital. The following table summarizes the Company’s net revenue by category (in thousands):
The approximate percentage of net patient service revenue by type of payor was as follows:
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Business Combinations, Assets Held for Sale and Discontinued Operations |
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| Business Combinations Assets Held For Sale And Discontinued Operations Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations, Assets Held for Sale and Discontinued Operations |
Business Combinations During the nine months ended September 30, 2020, the Company completed the acquisition of one pediatric subspecialty practice for total consideration of $2.1 million, of which $1.9 million was paid in cash and $0.2 million was recorded as a contingent consideration liability. This acquisition expanded the Company’s national network of physician practices. In connection with this acquisition, the Company recorded non-deductible goodwill of $0.8 million and other intangible assets consisting primarily of physician and hospital agreements of $1.3 million.Divestiture of the Radiology Services Medical Group On September 9 2020, the Company entered into a , securities purchase agreement with Radiology Partners, Inc., pursuant to which Radiology Partners, Inc. will acquire the Company’s radiology services medical group for $885 million cash, subject to certain customary adjustments. This divestiture will allow the Company to focus solely on its Pediatrix and Obstetrix medical groups. The Company determined that the criterion to classify the radiology services medical group as assets held for sale within the Company’s Consolidated Balance Sheets effective September 30, 2020 were met. Accordingly, the assets and liabilities of the radiology services medical group were classified as current assets and current liabilities held for sale at September 30, 2020 as the Company expects to divest of the radiology services medical group within the next twelve months. The classification to assets held for sale impacted the net book value of the assets and liabilities expected to be transferred upon sale. The estimated fair value of the radiology services medical group was determined using the purchase price in the purchase agreement along with estimated broker, accounting, legal and other selling expenses. The Company deemed the carrying amount of other within the medical group, specifically accounts receivable and property and equipment, to represent fair value and therefore recorded a non-cash charge of $43.0 million against goodwill, which represented the difference between the estimated fair value of the radiology services medical group and the carrying amount of the net assets held for sale. Recognition of the charge against goodwill resulted in a tax benefit which generated an additional $4.0 million deferred tax asset that increased the fair value of the medical group. An incremental non-cash charge is then required to reduce the radiology services non-cash charge of $4.0 million for a total non-cash charge of $47.0 million, reducing the goodwill balance of the radiology services medical group. Upon completion of the divestiture, the Company could record an additional gain or loss on disposal at the time final net proceeds are determined.In addition, in accordance with accounting guidance for discontinued operations, the expected divestiture of the radiology services medical group was deemed to represent a fundamental strategic shift that will have a major effect on the Company’s operations, and accordingly, the operating results of the radiology services medical group were reported as discontinued operations in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 with prior periods recast to conform with the current period presentation. The following table represents the major classes of assets and liabilities of the radiology services medical group that are included as assets and liabilities held for sale in the accompanying Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (in thousands):
The following table summarizes the results of discontinued operations related to the radiology services medical group for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Divestiture of the Anesthesiology Services Medical Group On May 6, 2020, the Company entered into a securities purchase agreement with an affiliate of North American Partners in Anesthesia (“NAPA”) to divest the Company’s anesthesiology services medical group, and the transaction closed on May 6, 2020. Pursuant to the terms and conditions of the agreement, at the closing of the transaction, the Company received a cash payment of $50.0 million, subject to certain customary adjustments, as well as a contingent economic interest in NAPA with a value ranging from $0 to $250 million based upon the multiple of invested capital returned to NAPA’s owners upon exit of the investment. The Company will begin to receive a payment on its economic interest at an exit multiple of 2.0, with such payment reaching $250 million at an exit multiple of 5.0. In addition, the Company retained the accounts receivable of the anesthesiology services medical group, which net of various other working capital items, approximated $110.0 million at March 31, 2020. operating results of the anesthesiology services medical group service line were reported as a component of discontinued operations, net of income taxes, in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019. A single anesthesiology practice was not included in the divestiture of the anesthesiology services medical group, and continues to operate as an affiliate of the Company. Its results of operations are reflected in the three months ended September 30, 2020 while the incremental loss on sale of the anesthesiology services medical group recorded during the three months ended September 30, 2020 reflects a true up of various divested account balances during the third quarter of 2020. The total preliminary loss on sale of the anesthesiology services medical group true-up, final net proceeds will be determined, and the Company will adjust the loss on sale at that time. In addition, as a result of the sale, the Company currently estimates that it will generate an approximately $1.68 billion capital loss carryforward that will expire The following table summarizes the results of discontinued operations related to the anesthesiology services medical group for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Divestiture of MedData The Company divested of
its true-up and incremental reserves related to indemnification matters, partially offset by the completion of its preliminary valuation for the contingent economic consideration. This incremental loss is reflected as a component of discontinued operations, net of income taxes, in the Company’s Consolidated Statements of Income for the nine months ended September 30, 2020. The operating results of MedData were reported as a component of discontinued operations, net of income taxes, in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2019. |
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Accounts Payable and Accrued Expenses |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses |
Accounts payable and accrued expenses consist of the following (in thousands):
The net decrease in accrued salaries and bonuses of $35.1 million, from December 31, 2019 to September 30, 2020, is primarily due to the payment of performance-based incentive compensation, principally to the Company’s affiliated physicians, partially offset by performance-based incentive compensation accrued during the nine months ended September 30, 2020. A majority of the Company’s payments for performance-based incentive compensation is paid annually during the first quarter. |
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Common and Common Equivalent Shares |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common and Common Equivalent Shares |
Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share is calculated by dividing net income by the weighted average number of common and potential common shares outstanding during the period. Potential common shares consist of outstanding restricted stock, deferred stock and stock options and is calculated using the treasury stock method. The calculation of shares used in the basic and diluted net income per common share calculation for the three and nine months ended September 30, 2020 and 2019 is as follows (in thousands):
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Stock Incentive Plans and Stock Purchase Plans |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 | |||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
| Stock Incentive Plans and Stock Purchase Plans |
The Company’s Amended and Restated 2008 Incentive Compensation Plan (the “A&R 2008 Incentive Plan”) provides for grants of stock options, stock appreciation rights, restricted stock, deferred stock, and other stock-related awards and performance awards that may be settled in cash, stock or other property. Under the A&R 2008 Incentive Plan, options to purchase shares of common stock may be granted at a price not less than the fair market value of the shares on the date of grant. The options must be exercised within 10 years from the date of grant and generally become exercisable on a pro rata basis over a three-year period from the date of grant. The Company issues new shares of its common stock upon exercise of its stock options. Restricted stock awards generally vest over periods of three years upon the fulfillment of specified service-based conditions and in certain instances performance-based conditions. Deferred stock awards generally vest upon the satisfaction of specified performance-based conditions and service-based conditions. The Company recognizes compensation expense related to its restricted stock, deferred stock awards and stock options ratably over the corresponding vesting periods. During the nine months ended September 30, 2020, the Company granted 1.4 million shares of restricted stock and 1.0 million shares of stock underlying non-qualified stock options to its employees and non-employee directors under the A&R 2008 Incentive Plan. At September 30, 2020, the Company had 5.0 million shares available for future grants and awards under the A&R 2008 Incentive Plan.Under the Company’s 1996 Non-Qualified Employee Stock Purchase Plan, as amended (the “ESPP”), employees are permitted to purchase the Company’s common stock at 85% of market value on January 1st, April 1st, July 1st and October 1st of each year. Under the Company’s 2015 Non-Qualified Stock Purchase Plan (the “SPP”), certain eligible non-employee service providers are permitted to purchase the Company’s common stock at 90% of market value on January 1st, April 1st, July 1st and October 1st of each year.Each of the ESPP and the SPP provide for the issuance of an aggregate of 2.6 million shares of the Company’s common stock less the number of shares of common stock purchased under the other plan. The Company recognizes stock-based compensation expense for the discount received by participating employees and non-employee service providers. During the nine months ended September 30, 2020, approximately 0.4 million shares in the aggregate were issued under the ESPP and SPP. At September 30, 2020, the Company had approximately 0.6 million shares in the aggregate reserved for issuance under the ESPP and SPP.During the three and nine months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $4.5 million and $18.2 million, and $7.6 million and $27.6 million, respectively. |
Common Stock Repurchase Programs |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 | |||
| Text Block [Abstract] | |||
| Common Stock Repurchase Programs |
In July 2013, the Company’s Board of Directors authorized the repurchase of shares of the Company’s common stock up to an amount sufficient to offset the dilutive impact from the issuance of shares under the Company’s equity compensation programs. The share repurchase program allows the Company to make open market purchases from time-to-time In August 2018, the Company announced that its Board of Directors had authorized the repurchase of up to $500.0 million of the Company’s common stock in addition to its existing share repurchase program, of which $107.2 million remained available for repurchase as of December 31, 2019. Under this share repurchase program, during the nine months ended September 30, 2020, the Company withheld approximately 0.5 million shares of its common stock to satisfy minimum statutory withholding obligations of $8.5 million in connection with the vesting of restricted stock and deferred stock. The Company intends to utilize various methods to effect any future share repurchases, including, among others, open market purchases and accelerated share repurchase programs. The amount and timing of repurchases will depend upon several factors, including general economic and market conditions and trading restrictions. |
Commitments and Contingencies |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 | |||
| Commitments and Contingencies Disclosure [Abstract] | |||
| Commitments and Contingencies |
The Company expects that audits, inquiries and investigations from government authorities and agencies will occur in the ordinary course of business. Such audits, inquiries and investigations and their ultimate resolutions, individually or in the aggregate, could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and the trading price of its securities. The Company has not included an accrual for these matters as of September 30, 2020 in its Consolidated Financial Statements, as the variables affecting any potential eventual liability depend on the currently unknown facts and circumstances that arise out of, and are specific to, any particular future audit, inquiry and investigation and cannot be reasonably estimated at this time. In the ordinary course of business, the Company becomes involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services provided by the Company’s affiliated physicians. The Company’s contracts with hospitals generally require the Company to indemnify them and their affiliates for losses resulting from the negligence of the Company’s affiliated physicians. The Company may also become subject to other lawsuits which could involve large claims and significant costs. The Company believes, based upon a review of pending actions and proceedings, that the outcome of such legal actions and proceedings will not have a material adverse effect on its business, financial condition, results of operations, cash flows and the trading price of its securities. The outcome of such actions and proceedings, however, cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and the trading price of its securities. Although the Company currently maintains liability insurance coverage intended to cover professional liability and certain other claims, the Company cannot assure that its insurance coverage will be adequate to cover liabilities arising out of claims asserted against it in the future where the outcomes of such claims are unfavorable. With respect to professional liability risk, the Company generally self-insures a portion of this risk through its wholly owned captive insurance subsidiary. Liabilities in excess of the Company’s insurance coverage, including coverage for professional liability and certain other claims, could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and the trading price of its securities. |
Basis of Presentation and New Accounting Pronouncements (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Accounting Policies [Abstract] | |
| New Accounting Pronouncements | New Accounting Pronouncements In December 2019, accounting guidance related to income taxes was issued with the goal of enhancing and simplifying various aspects of the income tax accounting guidance, including requirements related to hybrid tax regimes, deferred taxes on
step-up in tax basis of goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, deferred tax liabilities on outside basis differences, and interim-period accounting for enacted changes in tax law and certain year-to-date |
Cash Equivalents and Investments (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Investments | Investments held at September 30, 2020 and December 31, 2019 are summarized as follows (in thousands):
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table presents information about the Company’s financial instruments that are accounted for at fair value on a recurring basis at September 30, 2020 and December 31, 2019 (in thousands):
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| Financial Instruments Measured At Carrying Amount | The following table presents information about the Company’s financial instruments that are not carried at fair value at September 30, 2020 and December 31, 2019 (in thousands):
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Accounts Receivable and Net Revenue (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Receivable, Net | Accounts receivable, net consists of the following (in thousands):
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| Schedule of Net Revenue | The following table summarizes the Company’s net revenue by category (in thousands):
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| Schedule of Percentage of Net Revenue | The approximate percentage of net patient service revenue by type of payor was as follows:
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Business Combinations, Assets Held for Sale and Discontinued Operations (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Radiology Partners Inc [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disposal Groups, Including Discontinued Operations | The following table represents the major classes of assets and liabilities of the radiology services medical group that are included as assets and liabilities held for sale in the accompanying Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (in thousands):
The following table summarizes the results of discontinued operations related to the radiology services medical group for the three and nine months ended September 30, 2020 and 2019 (in thousands):
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| North American Partners In Anesthesia [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disposal Groups, Including Discontinued Operations | The following table summarizes the results of discontinued operations related to the anesthesiology services medical group for the three and nine months ended September 30, 2020 and 2019 (in thousands):
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Accounts Payable and Accrued Expenses (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consist of the following (in thousands):
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Common and Common Equivalent Shares (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Calculation of Shares Used in Basic and Diluted Net Income Per Share | The calculation of shares used in the basic and diluted net income per common share calculation for the three and nine months ended September 30, 2020 and 2019 is as follows (in thousands):
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Basis of Presentation and New Accounting Pronouncements - Additional Information (Detail) |
Sep. 30, 2020 |
Aug. 31, 2020 |
|---|---|---|
| Corporate Joint Venture [Member] | ||
| Basis Of Presentation [Line Items] | ||
| Equity method ownership percentage in joint venture | 51.00% | |
| Unnamed Corporate Joint Venture One [Member] | ||
| Basis Of Presentation [Line Items] | ||
| Equity method ownership percentage in joint venture | 37.50% |
Coronavirus Pandemic ("COVID-19") - Additional Information (Detail) - USD ($) $ in Millions |
9 Months Ended | ||
|---|---|---|---|
Mar. 27, 2020 |
Mar. 25, 2020 |
Sep. 30, 2020 |
|
| Line of credit remaining borrowing capacity | $ 899.8 | ||
| Senior Unsecurd Notes 2023 [Member] | |||
| Debt Instrument Interest Rate | 5.25% | ||
| Senior Unsecurd Notes 2027 [Member] | |||
| Debt Instrument Interest Rate | 6.25% | ||
| Letters of Credit [Member] | |||
| Line of credit outstanding | $ 0.2 | ||
| Forecast For Second And Third Quarters Of 2020 [Member] | Credit Agreement [Member] | |||
| Estimated EBITDA | $ 139.2 | ||
| Forecast For Second And Third Quarters Of 2020 [Member] | Credit Agreement [Member] | Maximum [Member] | |||
| Leverage ratio | 5.00:1:00 | ||
| Forecast For Second And Third Quarters Of 2020 [Member] | Credit Agreement [Member] | Minimum [Member] | |||
| Leverage ratio | 4.50:1:00 | ||
| Forecast For Fourth Quarter Of 2020 [Member] | Credit Agreement [Member] | |||
| Leverage ratio | 4.75:1:00 | ||
| Forecast For First Quarter Of 2021 [Member] | Credit Agreement [Member] | |||
| Leverage ratio | 2020 | ||
| Forecast For Second Quarter Of 2021 [Member] | Credit Agreement [Member] | |||
| Credit Facility Borrowing Capacity | $ 300.0 | ||
| COVID-19 [Member] | |||
| Reimbursement of Lost Revenue | $ 100.0 | ||
| Proceeds From Contribution In Aid Of Reimbursement of Lost Revenue | $ 20.0 | ||
| Deferred Payment Of Social Security Taxes | % | 50.00% | ||
| COVID-19 [Member] | Rural Area [Member] | |||
| Reimbursement of Lost Revenue | $ 70.0 | ||
| COVID-19 [Member] | Executive Officer [Member] | |||
| Decrease In Salary | % | 50.00% |
Cash Equivalents and Investments - Additional Information (Detail) - USD ($) $ in Millions |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Cash Equivalents [Member] | ||
| Cash Equivalents And Investments [Line Items] | ||
| Cash equivalents | $ 2.4 | $ 16.8 |
Cash Equivalents and Investments - Schedule of Investments (Detail) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Available-for-sale [Line Items] | ||
| Available-for-sale Securities | $ 81,574 | $ 74,510 |
| Corporate Securities [Member] | ||
| Available-for-sale [Line Items] | ||
| Available-for-sale Securities | 56,680 | 32,962 |
| Municipal Debt Securities [Member] | ||
| Available-for-sale [Line Items] | ||
| Available-for-sale Securities | 13,523 | 29,066 |
| Federal Home Loan Securities [Member] | ||
| Available-for-sale [Line Items] | ||
| Available-for-sale Securities | 6,529 | 8,013 |
| Certificates of Deposit [Member] | ||
| Available-for-sale [Line Items] | ||
| Available-for-sale Securities | $ 4,842 | $ 4,469 |
Fair Value Measurements - Schedule of fair value on a recurring basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Fair Value, Inputs, Level 1 [Member] | ||
| Assets: | ||
| Money market funds | $ 2,411 | $ 16,775 |
| Mutual Funds | 14,446 | 14,264 |
| Fair Value, Inputs, Level 2 [Member] | ||
| Assets: | ||
| Short-term investments | $ 81,574 | $ 74,510 |
Fair Value Measurements - Schedule of financial instruments that are not carried at fair value (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| 2023 Notes [Member] | ||
| Liabilities: | ||
| Notes Payable | $ 750,000 | $ 750,000 |
| Liabilities: | ||
| Notes Payable Fair Value Disclosure | 759,375 | 766,875 |
| 2027 Notes [Member] | ||
| Liabilities: | ||
| Notes Payable | 1,000,000 | 1,000,000 |
| Liabilities: | ||
| Notes Payable Fair Value Disclosure | $ 1,035,000 | $ 1,025,600 |
Accounts Receivable and Net Revenue - Schedule of Accounts Receivable, Net (Detail) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Receivables [Abstract] | ||
| Gross accounts receivable | $ 1,119,171 | $ 1,750,264 |
| Allowance for contractual adjustments and uncollectibles | (852,046) | (1,315,998) |
| Accounts receivable, net | $ 267,125 | $ 434,266 |
Accounts Receivable and Net Revenue - Schedule of Net Revenue (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Disaggregation of Revenue [Abstract] | ||||
| Net revenue | $ 460,635 | $ 454,913 | $ 1,317,321 | $ 1,321,159 |
| Net patient service revenue [Member] | ||||
| Disaggregation of Revenue [Abstract] | ||||
| Net revenue | 382,936 | 400,330 | 1,133,313 | 1,159,363 |
| Hospital contract administrative fees [Member] | ||||
| Disaggregation of Revenue [Abstract] | ||||
| Net revenue | 61,186 | 51,149 | 154,840 | 149,407 |
| Other revenue [Member] | ||||
| Disaggregation of Revenue [Abstract] | ||||
| Net revenue | $ 16,513 | $ 3,434 | $ 29,168 | $ 12,389 |
Accounts Receivable and Net Revenue - Schedule of Net Patient Service Revenue by Type of Payor (Detail) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
| Percentage of net patient service revenue | 100.00% | 100.00% | 100.00% | 100.00% |
| Contracted Managed Care [Member] | ||||
| Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
| Percentage of net patient service revenue | 69.00% | 68.00% | 69.00% | 68.00% |
| Government [Member] | ||||
| Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
| Percentage of net patient service revenue | 26.00% | 26.00% | 26.00% | 26.00% |
| Other Third-Parties [Member] | ||||
| Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
| Percentage of net patient service revenue | 4.00% | 5.00% | 4.00% | 5.00% |
| Private-Pay Patients [Member] | ||||
| Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
| Percentage of net patient service revenue | 1.00% | 1.00% | 1.00% | 1.00% |
Business Combinations, Assets Held for Sale and Discontinued Operations - Additional information (Detail) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
|
May 06, 2020
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2019
USD ($)
|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
| Net incremental loss on the sale of MedData | $ (38,392) | $ (1,268,803) | $ (718,125) | $ (1,539,314) | |||
| Goodwill | 1,480,668 | 1,480,668 | $ 1,479,850 | ||||
| Pediatric Subspecialty Practice [Member] | |||||||
| Business acquisition total consideration | 2,100 | ||||||
| Business acquisition consideration paid in cash | 1,900 | ||||||
| Goodwill | 800 | 800 | |||||
| Other intangible assets | 1,300 | $ 1,300 | |||||
| Number of other pediatric subspecialty practices acquired | 1 | ||||||
| Business acquisition contingent consideration liability | 200 | $ 200 | |||||
| Deferred Tax Assets, Goodwill and Intangible Assets | 4,000 | 4,000 | |||||
| North American Partners In Anesthesia [Member] | |||||||
| Preliminary and incremental gain loss on sale | 648,700 | ||||||
| Increase decrease in valuation allowance deferred tax assets | 419,000 | ||||||
| Net incremental loss on the sale of MedData | (4,698) | $ (1,176,187) | (684,063) | $ (1,139,525) | |||
| Proceeds from Divestiture of Businesses | $ 50,000 | ||||||
| Maximum consideration receivable | 250,000 | ||||||
| Accounts receivable retained | $ 110,000 | ||||||
| North American Partners In Anesthesia [Member] | Tax Year Two Thousand and Twenty Five [Member] | |||||||
| Capital loss carry forward | 1,680,000 | 1,680,000 | |||||
| North American Partners In Anesthesia [Member] | Maximum [Member] | |||||||
| Maximum consideration receivable | 250,000 | ||||||
| North American Partners In Anesthesia [Member] | Minimum [Member] | |||||||
| Maximum consideration receivable | $ 0 | ||||||
| Divestiture of MedData [Member] | |||||||
| Net incremental loss on the sale of MedData | 5,800 | ||||||
| Radiology Services Medical Group [Member] | |||||||
| Maximum consideration receivable | $ 885,000 | 885,000 | |||||
| Non-cash charge against goodwill | 43,000 | ||||||
| Deferred Tax Assets Goodwill [Member] | Pediatric Subspecialty Practice [Member] | |||||||
| Non-cash charge against goodwill | $ 47,000 | ||||||
Business Combinations, Assets Held for Sale and Discontinued Operations - Schedule of Management Services Service Line (Detail) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Assets | ||
| Other assets | $ 0 | $ 1,641,580 |
| Radiology Services Medical Group [Member] | ||
| Assets | ||
| Accounts receivable, net | 54,284 | 64,603 |
| Prepaid expenses and other current assets | 9,819 | 9,744 |
| Property and equipment, net | 20,078 | 19,204 |
| Operating leases right-of-use assets | 14,165 | 15,008 |
| Goodwill | 640,818 | 685,170 |
| Intangible assets, net | 170,059 | 180,978 |
| Deferred income tax assets | 6,020 | 18,183 |
| Other assets | 36,305 | 40,724 |
| Total Assets | 951,548 | 1,033,614 |
| Liabilities | ||
| Accounts payable and accrued expenses | 39,505 | 42,474 |
| Operating and finance leases | 13,619 | 14,355 |
| Long-term professional liabilities | 23,744 | 21,978 |
| Other liabilities | 1,844 | 81 |
| Total Liabilities | $ 78,712 | $ 78,888 |
Business Combinations, Assets Held for Sale and Discontinued Operations - Schedule of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Operating expenses: | ||||
| Net loss | $ (38,392) | $ (1,268,803) | $ (718,125) | $ (1,539,314) |
| Radiology Partners Inc [Member] | ||||
| Net revenue | 125,765 | 125,650 | 340,133 | 366,678 |
| Operating expenses: | ||||
| Cost of service salaries and benefits | 84,718 | 80,336 | 234,169 | 238,402 |
| Cost of service supplies and other operating expenses | 1,449 | 1,532 | 4,273 | (1,468) |
| General and administrative expenses | 19,876 | 20,734 | 57,178 | 64,490 |
| Depreciation and amortization | 5,090 | 7,595 | 20,328 | 22,757 |
| Transformational and restructuring related expenses | 2,491 | 441 | 6,517 | 1,487 |
| Goodwill impairment | 46,963 | 117,924 | 46,963 | 117,924 |
| Total operating expenses | 160,587 | 228,562 | 369,428 | 443,592 |
| Loss from operations | (34,822) | (102,912) | (29,295) | (76,914) |
| Non-operating (expense) income, net | 1,369 | 2,059 | 3,035 | 4,768 |
| Loss before income taxes | (33,453) | (100,853) | (26,260) | (72,146) |
| Income tax (provision) benefit | (62) | 3,907 | (1,988) | (3,687) |
| Net loss | (33,515) | (96,946) | (28,248) | (75,833) |
| North American Partners In Anesthesia [Member] | ||||
| Net revenue | 2,700 | 309,602 | 377,661 | 924,845 |
| Operating expenses: | ||||
| Cost of service salaries and benefits | 2,746 | 250,157 | 351,408 | 746,237 |
| Cost of service supplies and other operating expenses | 38 | 2,837 | 5,254 | 9,537 |
| General and administrative expenses | 215 | 18,338 | 31,179 | 57,909 |
| Depreciation and amortization | 5,605 | 6,308 | 17,863 | |
| Transformational and restructuring related expenses | 6,785 | 28,634 | 17,506 | |
| Goodwill impairment | 1,331,291 | 1,331,291 | ||
| Loss on sale, net | 4,499 | 644,653 | ||
| Total operating expenses | 7,498 | 1,615,013 | 1,067,436 | 2,180,343 |
| Loss from operations | (4,798) | (1,305,411) | (689,775) | (1,255,498) |
| Non-operating (expense) income, net | (17) | 51 | (14) | |
| Loss before income taxes | (4,798) | (1,305,428) | (689,724) | (1,255,512) |
| Income tax (provision) benefit | 100 | 129,241 | 5,661 | 115,987 |
| Net loss | $ (4,698) | $ (1,176,187) | $ (684,063) | $ (1,139,525) |
Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Detail) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accounts payable | $ 60,956 | $ 35,410 |
| Accrued salaries and bonuses | 158,579 | 193,631 |
| Accrued payroll taxes and benefits | 48,474 | 54,768 |
| Accrued professional liabilities | 55,469 | 44,699 |
| Accrued interest | 26,940 | 32,910 |
| Other accrued expenses | 38,099 | 49,219 |
| Accounts payable and accrued expenses, total | $ 388,517 | $ 410,637 |
Accounts Payable and Accrued Expenses - Additional Information (Detail) $ in Millions |
9 Months Ended |
|---|---|
|
Sep. 30, 2020
USD ($)
| |
| Net decrease in accrued salaries and bonuses | $ 35.1 |
Common and Common Equivalent Shares - Schedule of Calculation of Shares Used in Basic and Diluted Net Income Per Share (Detail) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|||
| Earnings Per Share [Abstract] | ||||||
| Weighted average number of common shares outstanding | 83,862 | 82,441 | 83,260 | 83,846 | ||
| Weighted average number of dilutive common share equivalents | 442 | 456 | ||||
| Weighted average number of common and common equivalent shares outstanding | [1] | 83,862 | 82,883 | 83,260 | 84,302 | |
| Antidilutive securities not included in the diluted net income per common share calculation | 829 | 962 | 1,004 | 796 | ||
| ||||||
Stock Incentive Plans and Stock Purchase Plans - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Common stock, aggregate shares authorized | 200,000,000 | 200,000,000 | 200,000,000 | ||
| Stock-based compensation expense | $ 4.5 | $ 7.6 | $ 18.2 | $ 27.6 | |
| Stock Option [Member] | Maximum [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Vesting period of options, maximum years | 10 years | ||||
| Restricted Stock [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Award vesting period | 3 years | ||||
| 1996 Non-Qualified Employee Stock Purchase Plan [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Percentage of market value of common stock at which employees are permitted to purchase | 85.00% | ||||
| 2015 Non-Qualified Stock Purchase Plan [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Percentage of market value of common stock at which employees are permitted to purchase | 90.00% | ||||
| Amended and Restated 2008 Plan [Member] | Stock Option [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Shares available for future grants and awards under Stock Incentive Plans | 5,000,000.0 | 5,000,000.0 | |||
| Amended and Restated 2008 Plan [Member] | Restricted Stock [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 1,400,000 | ||||
| Amended and Restated 2008 Plan [Member] | Non Qualified Stock Options [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 1,000,000.0 | ||||
| 1996 Non-Qualified Employee Stock Purchase Plan and 2015 Non-Qualified Stock Purchase Plan [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Common stock, aggregate shares authorized | 2,600,000 | 2,600,000 | |||
| Aggregate number Shares issued under Stock Purchase Plans | 400,000 | ||||
| Common stock, reserved for issuance | 600,000 | 600,000 | |||
Common Stock Repurchase Programs - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
Aug. 31, 2018 |
|
| Common Stock [Line Items] | |||
| Common stock authorized for repurchase | $ 500.0 | ||
| Company's Common stock repurchased | $ 107.2 | ||
| Restricted Stock [Member] | |||
| Common Stock [Line Items] | |||
| Number of shares withheld to satisfy minimum statutory tax withholding obligations | 0.5 | ||
| Amount withheld to satisfy minimum statutory tax withholding obligations | $ 8.5 |
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