<PAGE>

                                                                   EXHIBIT 10.12

                              EMPLOYMENT AGREEMENT


                                      FOR


                                 LANE EDENBURN
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                                    TABLE OF CONTENTS
<TABLE>
     <S>                                                                                                       <C>
     Section 1.    Employment.................................................................................  2
                                                                                                                -
     Section 2.    Duties.....................................................................................  2
                                                                                                                -
     Section 3.    Term.......................................................................................  2
                                                                                                                -
                   (a)     Initial Term.......................................................................  2
                                                                                                                -
                   (b)     Extension..........................................................................  2
                                                                                                                -
     Section 4.    Compensation and Benefits..................................................................  3
                                                                                                                -
                   (a)     Salary.............................................................................  3
                                                                                                                -
                   (b)     Management Incentive Bonus.........................................................  3
                                                                                                                -
                   (c)     Vacation and Other Paid Days Off...................................................  3
                                                                                                                -
                   (d)     Insurance Benefits.................................................................  3
                                                                                                                -
     Section 5.    Expenses...................................................................................  3
                                                                                                                -
     Section 6.    Termination................................................................................  4
                                                                                                                -
                   (a)     General............................................................................  4
                                                                                                                -
                           (i)     Death or Disability........................................................  4
                                                                                                                -
                           (ii)    For Cause..................................................................  4
                                                                                                                -
                           (iii)   Without Cause..............................................................  4
                                                                                                                -
                   (b)     Severance Pay......................................................................  5
                                                                                                                -
                           (i)     Termination Upon Death or Disability or For Cause..........................  5
                                                                                                                -
                           (ii)    Termination Without Cause..................................................  5
                                                                                                                -
                           (iii)   Termination by Expiration of the Term......................................  5
                                                                                                                -
     Section 7.    Confidential Information...................................................................  5
                                                                                                                -
                   (a)     Acknowledgment of Proprietary Interest.............................................  5
                                                                                                                -
                   (b)     Confidential Information Defined...................................................  5
                                                                                                                -
                   (c)     Covenant Not To Divulge Confidential Information...................................  6
                                                                                                                -
                   (d)     Return of Materials at Termination.................................................  6
                                                                                                                -
     Section 8.    General....................................................................................  6
                                                                                                                -
                   (a)     Notices............................................................................  6
                                                                                                                -
                   (b)     Withholding........................................................................  7
                                                                                                                -
                   (c)     Equitable Remedies.................................................................  7
                                                                                                                -
                   (d)     Severability.......................................................................  7
                                                                                                                -
                   (e)     Waivers............................................................................  7
                                                                                                                -
                   (f)     Counterparts.......................................................................  7
                                                                                                                -
                   (g)     Captions...........................................................................  7
                                                                                                                -
                   (h)     Reference to Agreement.............................................................  7
                                                                                                                -
                   (i)     Binding Agreement..................................................................  7
                                                                                                                -
                   (j)     Entire Agreement...................................................................  8
                                                                                                                -
                   (k)     Governing Law......................................................................  8
                                                                                                                -
                   (l)     Gender and Number..................................................................  8
                                                                                                                -

Definitions...................................................................................................  8
                                                                                                                -
</TABLE>

                                       1
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                              EMPLOYMENT AGREEMENT

     This Employment Agreement dated as of January 31, 2000, is between
Physicians Resource Group, Inc., a Delaware corporation, and Lane Edenburn.

                                R E C I T A L S:

     A.   Company agrees to employ Employee and Employee accepts employment by
the Company.  Company and Employee desire to enter into a written agreement to
specify the terms and conditions of Employee's employment with Company;

     B.   Employee shall serve as an executive of the Company with the title
Vice President and General Counsel and as an integral member of its management
team during its restructuring process;

     C.   Company considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests;
and

     D.   Company has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Company's management team to their assigned duties without
distraction during the restructuring process.

     NOW, THEREFORE, in consideration of Employee's employment with Company and
other good and valuable consideration, the parties agree as follows:

     Section 1.  Employment.  Company hereby employs Employee, and Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.

     Section 2.  Duties.  Employee shall be employed as Company's Vice President
and General Counsel or such other positions to which he may be appointed by the
Board of Directors. Employee agrees to devote his full time and best efforts to
the performance of the duties attendant to his executive position with Company
at its location in Dallas, Texas.

     Section 3.  Term.

     (a)  Initial Term.  The Initial Term of employment of Employee hereunder
shall commence on the date of this Agreement (the "Commencement Date") and
terminate twelve (12) months hence, unless earlier terminated pursuant to
Section 6.

     (b)  Extension.  Company may extend the term of employment of Employee by
an additional six (6) month period by delivering a written notice to Employee of
its election to extend at least sixty (60) days before the expiration of the
Initial Term. This Agreement may be extended thereafter by mutual agreement in
writing between the parties.

                                       2
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     Section 4.  Compensation and Benefits. In consideration for the services of
Employee hereunder, Company shall compensate Employee as follows:

     (a)  Salary.  Company shall pay Employee, in twice monthly installments in
arrears, a salary at an annual rate of  $175,000.00.  The Salary may not be
decreased at any time during the term of Employee's employment or any extension
hereunder and shall be reviewed no less than annually by Company.  Any increase
in the Salary shall be in the sole discretion of the Board of Directors of the
Company.

     (b)  Management Incentive Bonus.  Unless this Employment Agreement is
earlier terminated according to Section 6(a)(i) or (ii), Employee shall receive
from Company management incentive bonuses according to the following schedule:
(i) $87,500 on the Commencement Date; (ii) $87,500 six (6) months after the
Commencement Date; (iii) $87,500 twelve (12) months after the Commencement Date
if Company gives timely notice as provided in Section 3(b).  Should Company fail
to give written notice under Section 3(b) of its election to extend this
Agreement, Employee shall receive $100,000, instead of the payment specified in
Section 4(b)(iii), twelve months after the Commencement Date; and (iv) $100,000
eighteen (18) months after the Commencement Date if the Company elects to extend
this Employment Agreement as provided in Section 3(b).  Upon satisfying any
conditions specified in this Section 4(b) entitling Employee to a corresponding
level of Management Incentive Bonus, Employee shall not be required to forfeit
any unpaid bonuses or be required to repay such bonuses that have been paid to
Employee by Company.

     (c)  Vacation and Other Paid Days Off. Employee shall be entitled to twenty
(20) business days of paid leave per year. Employee shall schedule his paid
vacation to be taken at times which are reasonably and mutually convenient to
both Company and Employee.

     (d)  Insurance Benefits. (i)  Company shall provide accident, health,
dental, disability and life insurance for Employee under the group accident,
health, dental, disability and life insurance plans as may be maintained by
Company for its full-time, salaried employees; and  (ii) Company shall also
maintain a Directors' and Officers' Liability Insurance policy covering Employee
in an amount of no less than $10,000,000.

     Section 5.  Expenses.  The parties anticipate that in connection with the
services to be performed by Employee pursuant to the terms of this Agreement,
Employee will be required to make payments for travel, entertainment of business
associates and similar expenses. Company shall promptly reimburse Employee for
all reasonable expenses of types authorized by Company and incurred by Employee
in the performance of his duties hereunder. Employee shall comply with such
budget limitations and approval and reporting requirements with respect to
expenses as Company may establish from time to time. Additionally, Company shall
promptly reimburse Employee for all dues and reasonable and necessary expenses,
including reasonable costs for continuing education courses in Dallas, Texas or
in other locations with the prior approval of the Company, necessary to maintain
Employee's current professional licenses, certifications and memberships.

                                       3
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     Section 6.  Termination.

     (a)  General.  Employee's employment hereunder shall commence on the
Commencement Date and continue until the end of the Term  and any extensions
thereof as exercised in accordance with Section 3, except that the employment of
Employee hereunder shall terminate prior to such time in accordance with the
following:

          (i)   Death or Disability. Upon the death of Employee during the term
     of his employment hereunder or, at the option of Company, in the event of
     Employee's Disability, upon 30 days' notice to Employee.

          (ii)  For Cause. The Company may terminate the Employee's employment
     for "Cause" immediately upon written notice by the Company to Employee. For
     purposes of this Agreement, a termination will be for "Cause" if: (1) the
     Board determines that Employee has been negligent in the performance of his
     duties after the Commencement Date as the Company's Vice President and
     General Counsel or commits a breach of the covenants, terms and provisions
     of this Agreement; or (2) the Board has determined that Employee has failed
     to obey lawful written instructions delivered to Employee by the Board or
     Company President; or (3) Employee has been convicted of a felony. In the
     event of termination pursuant to this subsection, Employee will not be
     entitled to any severance pay or other compensation except that Employee
     will be entitled to receive: (4) prompt payment of any portion of his base
     salary accrued but unpaid from the last monthly payment date to the date of
     termination, (5) expense reimbursements under Section 5 for expenses
     incurred in the performance of his duties hereunder prior to termination
     and (6) all vested benefits under the Company's otherwise applicable plans
     and programs.

          (iii) Without Cause.  Termination without cause shall occur only upon:

                (1) Written notice by the Board of Directors to Employee, or

                (2) Relocation of the office at which Employee is assigned to
          perform his duties, but for which the Company fails or refuses to
          reimburse all reasonable relocation expenses including temporary
          housing.

     (b)  Severance Pay.

          (i)   Termination Upon Death or Disability or For Cause. Employee
     shall not be entitled to any severance pay or other compensation upon
     termination of his employment pursuant to Section 6(a)(i) or (ii) except
     for his Salary earned but unpaid as of the date of termination, unpaid
     expense reimbursements under Section 5 for expenses incurred in accordance
     with the terms hereof prior to termination, and compensation for accrued,
     unused vacation as of the date of termination; provided, however, if
     termination is pursuant to Section 6(a)(i) Employee or his estate shall be
     entitled to a pro rata portion, through the date

                                       4
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     of termination, of the Management Incentive Bonus at the level for which
     Employee would next qualify, as specified in Section 4(b).

          (ii)  Termination Without Cause. In the event Employee's employment
     hereunder is terminated pursuant to Section 6(a)(iii), Company shall pay
     the Management Incentive Bonus specified in Section 4(b) and Employee
     Separation Payments as Employee's sole remedies in connection with such
     termination. "Separation Payments" are payments made at the semi-monthly
     rate of Employee's then current salary in effect immediately preceding the
     date of termination. Separation Payments shall be made for the remainder of
     the term specified in Section 3(a) or Section 3(b) and shall be paid by
     Company in equal semi-monthly payments in arrears. Company shall also pay
     Employee his unpaid expense reimbursements under Section 5 for expenses
     incurred in accordance with the terms hereof prior to termination, and
     compensation for accrued, unused vacation as of the date of termination.

          (iii) Termination by Expiration of the Term. Employee shall be
     entitled to his salary earned but unpaid as of the expiration of the Term
     or extension thereof in accordance with Section 3, unpaid expense
     reimbursements under Section 5 and compensation for accrued, unused leave
     up to a maximum of 120 hours.

     Section 7.  Confidential Information.

     (a)  Acknowledgment of Proprietary Interest.  Employee acknowledges the
proprietary interest of Company in all Confidential Information.  Employee
agrees that all Confidential Information learned by Employee during his
employment with Company or otherwise, whether developed by Employee alone or in
conjunction with others or otherwise, is and shall remain the exclusive property
of Company.  Employee further acknowledges and agrees that his disclosure of any
Confidential Information will result in irreparable injury and damage to
Company.

     (b)  Confidential Information Defined. "Confidential Information" means all
confidential and proprietary information of Company, including without
limitation (i) information derived from reports, investigations, experiments,
research and work in progress, (ii) methods of operation, (iii) market data,
(iv) proprietary computer programs and codes, (v) restructuring plans and
proposals, (vi) marketing and sales programs, (vii) client lists, (viii)
historical financial information and financial projections, (ix) pricing
formulae and policies, (x) all other concepts, ideas, materials and information
prepared or performed for or by Company and (xi) all information related to the
business, products, services, purchases or sales of Company or any of its
suppliers and customers, other than information that is publicly available.

     (c)  Covenant Not To Divulge Confidential Information.  Company is entitled
to prevent the disclosure of Confidential Information.  As a portion of the
consideration for the employment of Employee and for the compensation being paid
to Employee by Company, Employee agrees at all times during the term of his
employment hereunder and thereafter to hold in strict confidence and

                                       5
<PAGE>

not to disclose except as may be required by law or allow to be disclosed to any
person, firm or corporation, other than to persons engaged by Company to further
the business of Company, and not to use except in the pursuit of the business of
Company, the Confidential Information, without the prior written consent of
Company.

     (d)  Return of Materials at Termination. In the event of any termination or
cessation of his employment with Company for any reason, Employee agrees to
promptly deliver to Company all documents, data and other information derived
from or otherwise pertaining to Confidential Information. Employee shall not
take or retain any property of Company including documents or other information,
or any reproduction or excerpt thereof, containing or pertaining to any
Confidential Information.

     Section 8.  General.

     (a)  Notices.   All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or communication
shall have specified to the other party in accordance with this Section 8(a):


     If to Company, to:                      with a copy to:

     Physicians Resource Group, Inc.         James Ryan
     5005 Riverway                           Jackson Walker, L.L.P.
     Houston, TX  77056                      901 Main Street, Suite 6000
                                             Dallas, TX  75202

                                             and

                                             Robin Russell
                                             Andrews & Kurth, L.L.P.
                                             600 Travis, Suite 4200
                                             Houston, TX
     If to Employee, to:

     Lane Edenburn
     4308 Hawkhurst Drive
     Plano, TX  75024

                                       6
<PAGE>

     (b)  Withholding.  All payments required to be made to Employee by Company
under this Agreement shall be subject to the withholding of such amounts, if
any, relating to federal, state and local taxes as may be required by law.

     (c)  Equitable Remedies.  Each of the parties hereto acknowledges and
agrees that upon any breach by Employee or Company of his or its obligations
hereunder, Company and Employee shall have no adequate remedy at law and
accordingly shall be entitled to specific performance and other appropriate
injunctive and equitable relief.

     (d)  Severability.  If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

     (e)  Waivers.  No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or privilege,
nor shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.

     (f)  Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

     (g)  Captions.  The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.

     (h)  Reference to Agreement. Use of the words "herein," "hereof," "hereto,"
"hereunder" and the like in this Agreement refer to this Agreement only as a
whole and not to any particular section or subsection of this Agreement, unless
otherwise noted.

     (i)  Binding Agreement.  This Agreement shall be binding upon and inure to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Employee and the successors and assigns of Company.
This Agreement may be assigned by the Company provided that in the event of any
such assignment, the Company shall remain liable for all of its obligations
hereunder and shall be liable for all obligations of all such assignees
hereunder.  If Employee dies while any amounts would still be payable to him
hereunder, such amounts shall be paid to Employee's estate.  This Agreement is
not otherwise assignable by Employee.

                                       7
<PAGE>

     (j)  Entire Agreement.  This Agreement contains the entire understanding of
the parties, supersedes all prior agreements and understandings relating to the
subject matter hereof and may not be amended except by a written instrument
hereafter signed by each of the parties hereto.

     (k)  Governing Law.  This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.

     (l)  Gender and Number.  The masculine gender shall be deemed to denote the
feminine or neuter genders, the singular to denote the plural, and the plural to
denote the singular, where the context so permits.

     Section 9.  Definitions.  As used in this Agreement, the following terms
will have the following meanings:

     (a)  Agreement refers to the Employment Agreement represented by this
          document.

     (b)  Salary has the meaning ascribed to it in Section 4(a).

     (c)  Cause has the meaning ascribed to it in Section 6(a)(ii).

     (d)  Commencement Date has the meaning ascribed to it in Section 3.

     (e)  Company means Physicians Resource Group, Inc., a Delaware Corporation.

     (f)  Confidential Information has the meaning ascribed to it in Section
          7(b).

     (g)  Disability with respect to Employee shall be deemed to exist if he
meets the definition of disability under the terms of the disability insurance
policy referenced in Section 4(d). Any refusal by Employee to submit to a
reasonable medical examination to determine whether Employee is so disabled
shall be deemed conclusively to constitute evidence of Employee's disability.

     (h)  Employee refers to Lane Edenburn.

     (i)  Company refers collectively to the Company and its subsidiaries and
          other affiliates.

     (j)  Initial Term has the meaning ascribed to it in Section 3(a).

                                       8
<PAGE>

     EXECUTED as of the date and year first above written.


                                   Physicians Resource Group, Inc.

                              By:  /s/ David Meyer
                                   ----------------------------------
                                   Chairman, Board of Directors



                                   /s/ Lane Edenburn
                                   ----------------------------------
                                   Lane Edenburn
                                   Vice President and General Counsel

                                       9