<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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[X]Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
or
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file number: 0-24260
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AMEDISYS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 11-3131700
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3029 S. Sherwood Forest Blvd., Ste. 300 Baton Rouge, LA 70816
(Address of principal executive offices including zip code)
(225) 292-2031
(Registrant's telephone number, including area code)
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Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Number of shares of Common Stock outstanding as of March 31, 1999: 3,071,797
shares
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<PAGE>
PART I.
FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.. 3
Consolidated Statements of Operations for the Three Months ended March
31, 1999 and 1998...................................................... 4
Consolidated Statements of Cash Flows for the Three Months ended March
31, 1999 and 1998...................................................... 5
Notes to Consolidated Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 9
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings................................................. 12
Item 2. Changes in Securities............................................. 12
Item 3. Defaults Upon Senior Securities................................... 12
Item 4. Submission of Matters to a Vote of Security Holders............... 12
Item 5. Other Information................................................. 12
Item 6. Exhibits and Reports on Form 8-K.................................. 13
</TABLE>
2
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(Unaudited, in 000s)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash.................................................. $ 2,768 $ 572
Accounts Receivable, Net of Allowance for Doubtful
Accounts of $2,397 in March 1999 and $3,095 in
December 1998........................................ 12,173 7,456
Prepaid Expenses...................................... 771 604
Inventory............................................. 1,304 1,440
Other Current Assets.................................. 170 263
------- -------
Total Current Assets.............................. 17,186 10,335
Notes Receivable from Related Parties................... 0 89
Property, Plant and Equipment, Net...................... 7,916 8,574
Other Assets, Net....................................... 25,528 25,430
------- -------
Total Assets...................................... $50,630 $44,428
======= =======
LIABILITIES
-----------
Current Liabilities:
Notes Payable......................................... $27,673 $18,979
Current Portion of Long-Term Debt..................... 3,141 3,141
Deferred Revenue...................................... 2,119 2,119
Accounts Payable...................................... 6,062 7,295
Accrued Expenses:
Payroll and Payroll Taxes........................... 5,090 5,257
Income Taxes........................................ 0 0
Insurance........................................... 255 368
Other............................................... 6,058 4,456
------- -------
Total Current Liabilities......................... 50,398 41,615
Long-Term Debt.......................................... 5,756 5,447
Deferred Revenue........................................ 7,591 8,121
Other Long-Term Liabilities............................. 826 826
------- -------
Total Liabilities................................. 64,571 56,009
------- -------
Minority interest....................................... 96 103
------- -------
STOCKHOLDERS' EQUITY
Common Stock.......................................... 3 3
Preferred Stock....................................... 1 1
Additional paid-in capital............................ 12,152 12,005
Treasury Stock........................................ (25) (25)
Stock Subscriptions Receivable........................ 0 0
Retained Earnings..................................... (26,168) (23,668)
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Total Stockholders' Equity (deficit).............. (14,037) (11,684)
------- -------
Total Liabilities and Stockholders' Equity...... $50,630 $44,428
======= =======
</TABLE>
See accompanying notes to financial statements.
3
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Ended
-------------------
1999 1998
------- ----------
(Restated)
(Unaudited, in
000s)
<S> <C> <C>
Income:
Service revenue.......................................... $29,005 $ 8,142
Cost of service revenue.................................. 14,289 4,554
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Gross margin........................................... 14,716 3,588
General and administrative expenses:
Salaries and benefits.................................... 8,900 4,693
Other.................................................... 7,522 3,123
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Total general and administrative expenses.............. 16,422 7,816
------- -------
Operating (loss)....................................... (1,706) (4,228)
------- -------
Other income and expense:
Interest income.......................................... 17 12
Interest expense......................................... (580) (202)
Miscellaneous............................................ (236) 8
------- -------
Total other income and expenses........................ (799) (182)
------- -------
(Loss) before income taxes and minority interest, and
discontinued operations................................. (2,505) (4,410)
(Benefit) for estimated income taxes..................... 0 (1,495)
------- -------
(Loss) before minority interest and discontinued opera-
tions................................................... (2,505) (2,915)
Minority interest in consolidated subsidiary............. 7 0
------- -------
(Loss) before discontinued operations.................... (2,498) (2,915)
Discontinued operations:
Income from discontinued operations, net of income tax... 0 394
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Total discontinued operations.......................... 0 394
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Net (Loss)............................................... $(2,498) $(2,521)
======= =======
Weighted average common shares outstanding............... 3,086 3,051
Net (loss) per common share before discontinued opera-
tions................................................... $ (0.81) $ (0.96)
Income from discontinued operations, net of income tax... 0.00 0.13
------- -------
Net (loss) per common share.............................. $ (0.81) $ (0.83)
======= =======
</TABLE>
See accompanying notes to financial statements.
4
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AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three months ended
---------------------
March 1999 March 1998
---------- ----------
(Unaudited, in 000s)
<S> <C> <C>
Cash Flows from operating activities:
Net (Loss).............................................. $(2,498) $(2,521)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 814 410
Provision for bad debts................................. 527 317
Minority interest in affiliated company................. (7) 0
(Gain) on sale of company assets........................ (100) 0
(Gain) on disposal of durable medical equipment
company................................................ (35) 0
Loss on disposal of property and equipment.............. 0 4
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............. (6,289) 3,376
(Increase) in prepaid expenses......................... (173) (420)
(Increase) decrease in other current assets............ 32 (1,539)
(Increase) decrease in other assets.................... 119 (152)
(Decrease) in accounts payable......................... (20) (335)
Increase in accrued expenses........................... 259 510
(Decrease) in deferred revenue......................... (530) 0
------- -------
Net cash provided by (used in) operating activities... (7,901) (350)
------- -------
Cash flow from investing activities:
Purchase of furniture, fixtures & equipment............. (115) (830)
Cash paid for acquisitions.............................. 0 (1,905)
Proceeds from sale of durable medical equipment
company................................................ 100 0
Decrease in notes receivable from related parties....... 89 22
------- -------
Net cash provided by (used in) investing activities... 74 (2,713)
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Cash flow from financing activities:
Cash received in acquisitions........................... 0 123
Net increase (decrease) in borrowings on line of
credit................................................. 9,957 (2,901)
Payments on notes payable............................... (234) (387)
Proceeds from note payables............................. 300 165
Proceeds from preferred stock........................... 0 3,253
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Net cash provided by financing activities............. 10,023 253
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Net increase in cash and cash equivalents................ 2,196 (2,810)
Cash and cash equivalents at December 31, 1998 and 1997.. 572 4,070
------- -------
Cash and cash equivalents at March 31, 1999 and 1998..... $ 2,768 $ 1,260
======= =======
Supplemental disclosures of cash flow information:
Cash payments for:
Interest................................................ $ 112 $ 225
======= =======
Income taxes............................................ $ 0 $ 19
======= =======
Supplemental schedule of non-cash investing activity (See
note 9 to financial statements):
Value of stock issued in exchange....................... $ 874
Value of note payable issued in exchange................ 375
Cash acquired in exchange............................... 123
Working capital acquired net of cash and cash
equivalents............................................ (3,272)
Fair value of property, plant and equipment acquired.... 279
Fair value of other assets acquired..................... 26
Long term debt assumed.................................. 2,998
Fair value of other liabilities assumed................. 54
-------
Non cash portion of acquisitions........................ 7,146
Cash payment for acquisitions........................... 1,905
-------
Goodwill recorded in exchange........................... $ 9,051
=======
</TABLE>
See accompanying notes to financial statements.
5
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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Amedisys, Inc. (the "Company") is a leading multi-regional provider of home
health nursing services, alternate-site infusion therapy, and ambulatory
surgery centers. The Company operates 71 offices within a network of
subsidiaries in the south and southeastern United States.
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
position at March 31, 1999 and the result of operations and cash flows for the
three months ended March 31, 1999 and 1998. The results of operations for the
interim periods are not necessarily indicative of operating results of
operations for the entire year. These interim consolidated financial statements
should be read in conjunction with the Company's annual financial statements
and related notes in the Company's Form 10-K.
2. Reclassifications
Certain amounts previously reported in the 1998 interim unaudited financial
statements have been reclassified due to the sale of the Staffing division in
September, 1998 which qualified as a discontinued operation.
3. Earnings Per Share
Basic net income (loss) per share of common stock is calculated by dividing
net income (loss) applicable to common stock by the weighted-average number of
common shares outstanding during the year. Diluted net income (loss) per share
is not presented as stock options and convertible securities outstanding (total
2,742,233 shares) during the periods presented were not dilutive.
4. Recent Accounting Pronouncements
Accounting for Derivative Instruments and Hedging Activities. In June 1998,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS 133 is
effective for fiscal years beginning after June 15, 1999 and must be applied to
instruments issued, acquired, or substantively modified after December 31,
1997. The Company does not expect the adoption of the accounting pronouncement
to have a material effect on its financial position or results of operations.
5. Medicare Reimbursement Reductions and Related Restructuring
The Company derives 73% of its revenues from the Medicare system. In 1997,
Congress approved the Balanced Budget Act of 1997 (the "Budget Act"). The
Budget Act established an interim payment system (the "IPS") that provided for
the lowering of reimbursement limits for home health visits until the
Prospective Payment System ("PPS") is implemented. For cost reporting periods
beginning on or after October 1, 1997, Medicare-reimbursed home health
agencies' cost limits were determined as the lesser of (i) their actual costs,
6
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(ii) per visit cost limits based on 105% of median costs of freestanding home
health agencies, or (iii) a per beneficiary limit determined for each specific
agency based on whether the agency was an "old" or "new" provider. An old
provider was defined as an agency which filed a twelve month cost report in
Federal FY 1994 and a new agency as one that did not. An old provider per
beneficiary limit was based on 75% of 98% of the 1994 agency cost adjusted for
inflation, plus 25% of a regional average as determined by Health Care
Financing Administration ("HCFA"). A new provider per beneficiary limit was
based on a national average, as determined by HCFA, adjusted for regional labor
costs. The schedule of per visit limits for cost reporting periods ending on or
after October 1, 1997 was published by HCFA in January, 1998 and the schedule
of per-beneficiary limits for cost reporting periods beginning on or after
October 1, 1997 was published in March, 1998, by HCFA. The new IPS cost limits
apply to the Company for the cost reporting period beginning January 1, 1998
and will remain in effect until the implementation of PPS, which is currently
anticipated to be October, 2000.
As a result of these reimbursement changes, a significant restructuring
effort by the Company was completed during 1998, resulting in office
reorganizations, consolidations, and closures as it transitioned to IPS. After
the acquisition of certain home health care agencies from Columbia/HCA in
November and December, 1998, a similar restructuring effort was implemented and
completed during the 1st quarter of 1999 in an overall effort to reduce costs
and improve efficiencies, while maintaining the same high-quality of patient
care. Since the impact of these cost reductions was not fully-realized in the
1st quarter of 1999, the Company expects to report improved operating results
for the 2nd quarter of 1999.
As the home care industry faces continued changes in reimbursement
structure, Amedisys is committed to improve and streamline systems and take
appropriate actions to offset these changes, creating a company focused on
long-term growth.
6. Dispositions
On January 1, 1999, the Company sold all of the issued and outstanding stock
of Amedisys Durable Medical Equipment, Inc. d/b/a Care Medical and Mobility
("ADME") to Ace Drug Medical Equipment, Inc. ("ACE"), a Texas Corporation. The
sales price was $672,385 of which $100,000 was paid at closing; $418,318 was
payable pursuant to a two year note in eight equal quarterly payments of
principal and interest at prime plus 2%, adjusted annually; and $154,067 was
payable pursuant to a one year note, payable in four quarterly payments of
principal plus accrued interest at prime plus 2%. Each note is solitarily
guaranteed by Terry Huckabee, a principal of ACE. ACE acquired substantially
all of the assets and liabilities of ADME. This transaction was accounted for
as a sale by the Company. The Company expects that this disposition will not
have a material effect on net revenues or income of the Company.
7. Discontinued Operations
In September, 1998, the Company sold certain assets, subject to the
assumption of certain liabilities, of its Staffing division. This sale
qualified as a discontinued operation, and has been reflected as such in the
consolidated statements of operations. Summarized financial information for the
discontinued operation is as follows (in 000's):
<TABLE>
<CAPTION>
Three months
ended
March 1998
------------
<S> <C>
Service Revenue............................................ $4,568
Income from discontinued operation before provision for
income taxes.............................................. $ 597
Income from discontinued operations, net of income taxes... $ 394
</TABLE>
8. Income Taxes
For the three month period ending March 31, 1998, the Company established a
deferred tax asset by recording an estimated net income tax benefit of
$1,292,000. This figure is comprised of a $1,495,000 income
7
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tax benefit reflected in the accompanying consolidated statement of operations
as a benefit for income taxes, offset by a $203,000 income tax expense
reflected in the accompanying consolidated statements of operations as a
component of income from discontinued operations. In December, 1998, a
valuation allowance was recorded against this deferred tax asset, effectively
writing-off the deferred tax asset due to the significant losses incurred by
the Company for the year ended December 31, 1998. Due to the continued losses
for the three month period ending March 31, 1999, the Company has not recorded
an estimated income tax benefit.
9. Supplemental Schedule of Non-Cash Investing Activity
The following unaudited table presents (in 000's) the detail of the
acquisitions completed during the first quarter of 1998 presented in the
supplemental schedule to the consolidated cash flow statement. No acquisitions
were completed during the first quarter of 1999.
<TABLE>
<CAPTION>
Alliance Infusion Precision StaffCor
Home Care Health Staffing
Health, PRN, Solutions, Systems, Services,
Inc. Inc. Inc. L.L.C. L.L.C. Total
-------- ---- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Supplemental schedule of
non-cash investing
activity:
Value of stock issued
in exchange.......... $ 874 $ 0 $ 0 $ 0 $ 0 $ 874
Value of note payable
issued in exchange... 0 0 125 250 0 375
Cash acquired in
exchange............. 72 (2) 1 51 0 123
Working capital
acquired net of cash
and cash
equivalents.......... (3,388) 40 18 57 0 (3,272)
Fair value of
property, plant and
equipment acquired... 220 28 0 12 19 279
Fair value of other
assets acquired...... 23 2 0 0 0 26
Long term debt
assumed.............. 2,927 72 0 0 0 2,998
Fair value of other
liabilities assumed.. 0 23 28 3 0 54
------- ---- ---- ---- ---- -------
Non cash portion of
acquisitions......... 6,873 26 134 132 (19) 7,146
Cash payment for
acquisition.......... 300 430 375 770 30 1,905
------- ---- ---- ---- ---- -------
Goodwill recorded in
exchange............. $ 7,173 $456 $509 $902 $ 11 $ 9,051
------- ---- ---- ---- ---- -------
</TABLE>
10. Notes Payable
Notes payable consist primarily of a $25 million asset-based line of credit,
a one-year $14 million note payable to Columbia/HCA, and borrowings under
revolving bank lines of credit of $2,500,000 and $750,000. The $25 million
asset-based line of credit is collateralized by eligible accounts receivable of
the home health care nursing division. Eligible receivables are defined as
receivables, exclusive of workers' compensation and self-pay, that are aged
less than 181 days. The ongoing fees associated with this line of credit equate
to 1% of eligible billed receivables generated during each billing period. The
$14 million note payable to Columbia/HCA is a result of the acquisition
consummated in November, 1998. The revolving bank lines of credit of $2,500,000
and $750,000 bear interest at bank prime plus 1.5% and bank prime plus 1%,
respectively. At March 31, 1999, approximately $656,000 was available under the
combined bank lines of credit. These lines of credit are collateralized by 80%
of eligible receivables in outpatient surgery and infusion, 75% of eligible
receivables in home health care, and 80% of physician notes receivable.
Eligible receivables are defined principally as accounts that are aged less
than 90 days for outpatient surgery and infusion and 120 days for home health
care. Subsequent to March 31, 1999, the $2,500,000 line of credit was decreased
to $2,000,000, with scheduled step-downs in availability until the expiration
of the line on July 31, 1999.
The $2,500,000 bank line of credit is subject to certain covenants,
including a monthly borrowing base, a debt service coverage ratio, and a
leverage ratio. At December 31, 1998 and March 31, 1999, the Company was in
default on the debt service coverage ratio requirement of 1.1 : 1.0 due to the
losses incurred in these periods. This default was waived by the bank through
March 31, 1999.
8
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11. Amounts Due To and Due From Medicare
The Company is currently working to determine the tentative amounts due to
and due from the Medicare program for the first quarter of 1999. The
integration and change of ownership process of the acquired home health
agencies of Columbia/HCA have delayed the rate review process with Medicare.
Rate reviews and reconciliations have been forwarded to Medicare and responses
are expected to be received by the Company by the end of the second quarter of
1999. Based on the information currently available to the Company, the Company
has estimated any amounts due to Medicare or other parties as of March 31, 1999
and such amounts are netted against accounts receivable. For the cost report
year ending December 31, 1998, year-end cost reports have been compiled with an
estimated aggregate payable due to Medicare of $4.4 million which the Company
is in the process of negotiating with Medicare for extended repayment. Although
management expects Medicare to agree to a revised payment plan, there is no
assurance at this time that the proposed terms will be accepted by Medicare.
12. Liquidity
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company experienced significant
losses from operations in 1998 and 1997 and has a deficit in stockholders'
equity of $14,037,000 at March 31, 1999. In addition, at March 31, 1999, the
Company has $30,814,000 in debt repayment obligations coming due within one
year and Management's current projections indicate that operations will not
produce sufficient cash flow to fund those obligations. These matters, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. The Company has undertaken a significant restructuring effort to
reduce operating costs by closing unprofitable locations and reducing
components of overhead expenses to minimize this deficit. The Company is
negotiating the restructuring of certain debt obligations and is considering
the possible sale of certain operating assets to generate cash to fund
remaining obligations. Management believes that the strategies it has
undertaken will enable the Company to satisfy its obligations as they become
due; however, there can be no assurance that these strategies will succeed. The
financial statements do not include any adjustments relating to the
recoverability or classification of asset carrying amount or the amount and
classification of liabilities that might result should the company be unable to
continue as a going concern.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
results of operations and financial condition. This discussion should be read
in conjunction with the Consolidated Financial Statements appearing in Item 1.
GENERAL
Amedisys, Inc. is a leading multi-regional provider of fully integrated
alternate-site health care services. The Company offers the following services:
infusion therapy; home health nursing services; and ambulatory surgery centers.
The Company operates 71 offices within a network of subsidiaries in the south
and southeastern United States.
RESULTS OF OPERATIONS
Revenues. Net revenues for the three months ended March 31, 1999 increased
$20,863,000 or 256% to $29,005,000 from $8,142,000 for the three months ended
March 31, 1998. The Home Health Care Nursing division's net revenues increased
$19,983,000 or 394%. This increase was attributed to the acquisition of certain
Columbia/HCA home health care agencies in the latter part of 1998. Visits for
the comparative three month periods increased 229,916, or 232% from 99,144 in
1998 to 329,060 in 1999. Infusion therapy revenues increased $840,000, or 61%,
from $1,371,000 for the three months ended March 31, 1998 to $2,211,000 for the
same period in 1999. The infusion therapy division, which began operations in
the fourth quarter of 1997, has demonstrated continued revenue growth through
the opening of additional locations and expanding services and patient base for
existing locations.
9
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Cost of Revenues. Cost of revenues increased by $9,734,000 to $14,289,000
for the three months ended March 31, 1999 from $4,555,000 for the three months
ended March 31, 1998 primarily attributed to the acquisition of certain
Columbia/HCA home health care agencies. As a percentage of the net revenues,
cost of revenues decreased to 49% from 56% for the three months ended March 31,
1999 and 1998, respectively. This decrease is attributed to cost reduction
efforts implemented during 1998 in all operating divisions. For the home health
care nursing division, all nursing employees were converted to a per-visit
payment basis, thereby increasing overall productivity.
General and Administrative Expenses ("G&A"). General and administrative
expenses increased by $8,606,000 or 110% to $16,422,000 for the three months
ended March 31, 1999 from $7,816,000 for the three months ended March 31, 1998,
primarily attributed to the acquisition of certain Columbia/HCA home health
care agencies. As a percentage of net revenues, general and administrative
expenses decreased to 57% from 96%. This decrease is attributed to the cost
reduction efforts implemented for all operating divisions and corporate
departments in addition to improvements in operating efficiencies. The
operating efficiencies that were gained through these efforts helped to offset
the additional resources needed following the Columbia/HCA acquisition,
resulting in a minimal increase in administrative personnel and resources to
appropriately manage and support the new home health care agencies.
Operating (Loss). The Company had an operating loss of $1,707,000 for the
three months ended March 31, 1999 as compared to an operating loss of
$4,228,000 for the same period in 1998. The reduction in operating losses of
$2,521,000, or 60%, is mainly attributed to the restructuring efforts
implemented during 1998 and the economies of scale achieved with the
acquisition of certain Columbia/HCA home health care agencies.
(Benefit) for Estimated Income Taxes. For the three month period ending
March 31, 1998, the Company established a deferred tax asset by recording an
estimated net income tax benefit of $1,292,000. This figure is comprised of a
$1,495,000 income tax benefit reflected in the accompanying consolidated
statement of operations as a benefit for income taxes, offset by a $203,000
income tax expense reflected in the accompanying consolidated statements of
operations as a component of income from discontinued operations. In December,
1998, a valuation allowance was recorded against this deferred tax asset,
effectively writing-off the deferred tax asset due to the significant losses
incurred by the Company for the year ended December 31, 1998. Due to the
continued losses for the three month period ending March 31, 1999, the Company
has not recorded an estimated income tax benefit.
Discontinued Operations. In September, 1998, the Company sold its Staffing
division and reflected this sale as a discontinued operation in the
accompanying consolidated statements of operations. Net revenues for the
Staffing division were $4,568,000 for the three months ended March 31, 1998 and
net income from discontinued operations, net of income tax of $203,000, was
$394,000 for the three months ended March 31, 1998.
Net (Loss). As a result of the reasons described above, the Company had a
net loss of $2,498,000 for the three months ended March 31, 1999 compared with
a net loss of $2,521,000 for the three months ended March 31, 1998. The company
expects the quarterly losses to decrease throughout 1999 as the full benefit of
the restructuring efforts are realized.
FINANCIAL CONDITION
The Company's principal capital requirements are for additional working
capital to fund current cash requirements of the Company. The Company recorded
a net loss for both the year-ended December 31, 1998 and the three months ended
March 31, 1999 and had negative cash flow from operations. The negative cash
flow from operations is largely attributable to the changes in Medicare
reimbursement which were effective January 1, 1998 for the Company. The Company
has undertaken a significant restructuring effort to reduce operating costs but
expects to record losses for the remainder of 1999. The operating losses and
negative cash flow from operations has impacted the availability of the
Company's current financing sources and has
10
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decreased the Company's overall liquidity position. The Company expects the
negative cash flow from operations to continue on a short-term basis and is
currently evaluating alternative strategies to secure the needed capital until
such time that a positive cash flow from operations is generated.
Notes payable consist primarily of a $25 million asset-based line of credit,
a one-year $14 million note payable to Columbia/HCA, and borrowings under
revolving bank lines of credit of $2,500,000 and $750,000. The $25 million
asset-based line of credit is collateralized by eligible accounts receivable of
the Home Health Care Nursing division. Eligible receivables are defined as
receivables, exclusive of workers' compensation and self-pay, that are aged
less than 181 days. The ongoing fees associated with this line of credit equate
to 1% of eligible billed receivables generated during each billing period. The
$14 million note payable to Columbia/HCA is a result of the acquisition
consummated in November 1998 and is payable in December, 1999. Management of
the Company and representatives from Columbia/HCA are currently in negotiations
to restructure the repayment terms of this note payable. In the event that an
agreement can not be reached, the Company does not expect to have the cash flow
to fund the obligation when due, which raises substantial doubt about the
Company's ability to continue as a going concern. The revolving bank lines of
credit of $2,500,000 and $750,000 bear interest at bank prime plus 1.5% and
bank prime plus 1%, respectively. At March 31, 1999, approximately $656,000 was
available under the combined bank lines of credit. These lines of credit are
collateralized by 80% of eligible receivables in outpatient surgery and
infusion, 75% of eligible receivables in home health care, and 80% of physician
notes receivable. Eligible receivables are defined principally as accounts that
are aged less than 90 days for outpatient surgery and infusion and 120 days for
home health care. Subsequent to March 31, 1999, the $2,500,000 line of credit
was decreased to $2,000,000, with scheduled step-downs in availability until
the expiration on July 31, 1999.
The $2,500,000 bank line of credit is subject to certain covenants,
including a monthly borrowing base, a debt service coverage ratio, and a
leverage ratio. At December 31, 1998 and March 31, 1999, the Company was in
default on the debt service coverage ratio requirement of 1.1 : 1.0 due to the
losses incurred in these periods. This default was waived by the bank through
March 31, 1999.
The Company's operating activities used $7,901,000 during the first three
months of 1999, whereas such activities used $350,000 in cash during the first
three months of 1998. This increase in cash used in operating activities is
primarily attributable to an increase in accounts receivable as a result of the
acquisition of certain home health agencies of Columbia/HCA. The Company's
investing activities provided $74,000 for the three months ended March 31,
1999, whereas investing activities used $2,713,000 for the three months ending
March 31, 1998. Cash used in acquisitions decreased $1,905,000 in addition to a
decrease in purchases of furniture, fixtures and equipment of $716,000 for the
three months ended March 31, 1999 as compared to the same period in 1998. Net
cash provided by financing activities increased to $10,023,000 from $253,000
for the three months ending March 31, 1999 and 1998, respectively. This
increase is due to the net increase in borrowings on the lines of credit of
$12,858,000 resulting from increased expenditures related to the acquired home
health care agencies of Columbia/HCA, offset by a decrease in proceeds from
preferred stock of $3,253,000.
At March 31, 1999, the Company had negative working capital of $33,212,000
and a stockholder's equity deficit of $14,037,000.
YEAR 2000 COMPLIANCE ISSUES
The Company continues to evaluate its entire operation in preparation for
potential problems associated with Year 2000 (Y2K). A task force was
established within the Company to evaluate all areas for compliance issues and
develop correction plans if necessary. Some internal areas and processes being
evaluated include initial charge entry through billing and collections;
accounts payable invoice receipt through processing and payment; bank
processing of receipts and disbursements; computer hardware and software
functionality; and time and/or date-sensitive office and medical equipment
functionality. In preparation for Y2K, the Company has replaced, or is in the
process of replacing, all of its mission critical computer systems that are not
Y2K compliant. The general accounting system was replaced and has been in use
since October, 1998. The
11
<PAGE>
Company's home health care nursing, outpatient surgery center, and infusion
division software systems are Y2K compliant. At present, the Company does not
anticipate any material disruption in its operations or significant costs to be
incurred to attain compliance. There can be no assurance, however, that the
Company will identify or adequately assess all aspects of the business that may
be affected. Due to this uncertainly, a contingency plan is being developed as
each area is evaluated to minimize any negative impact to the Company. In the
event that any of the Company's significant payors, suppliers, or customers do
not successfully and in a timely manner achieve Year 2000 compliance, the
Company's business and/or operations could be adversely affected.
FORWARD LOOKING STATEMENTS
When included in the Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects", "intends",
"anticipates", "believes", "estimates", and analogous expressions are intended
to identify forward-looking statements. Such statements inherently are subject
to a variety of risks and uncertainties that could cause actual results to
differ materially from those projected. Such risks and uncertainties include,
among others, general economic and business conditions, current cash flows and
operating deficits, debt services needs, adverse changes in federal and state
laws relating to the health care industry, competition, regulatory initiatives
and compliance with governmental regulations, customer preferences and various
other matters, many of which are beyond the Company's control. These forward-
looking statements speak only as of the date of the Quarterly Report on Form
10-Q. The Company expressly disclaims any obligation or undertaking to release
publicly any updates or any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on which any
statement is based.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
At March 31, 1999, the Company was in default on the $2,500,000 revolving
bank line of credit. The line of credit is collateralized by accounts
receivable and is subject to certain covenants, including a monthly borrowing
base, a debt service coverage ratio, and a leverage ratio. The Company was in
default on the debt service coverage ratio requirement of 1.1 : 1.0 due to the
losses incurred in these periods. This default was waived by the bank through
March 31, 1999.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
On April 1, 1999, Mitchel G. Morel resigned from the Company. Mr. Morel
served as Chief Financial Officer of the Company from June, 1994 to March,
1999.
12
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Page
No. Identification of Exhibit Number
------- ------------------------- ------
<C> <S> <C>
3.1(ii) --Certificate of Incorporation --
3.2(ii) --Bylaws --
10.1(i) --Stock Purchase Agreement by and among Ace Drug Medical
Corporation and Amedisys Durable Medical Equipment, Inc.
d/b/a Care Medical and Mobility and Amedisys, Inc. 15
27.1(i) --Financial Data Schedule 36
</TABLE>
- --------
(i) Filed herewith.
(ii) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the
year ended December 31, 1994 which is incorporated herein by reference.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the first quarter of 1999.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMEDISYS, INC.
/s/ Larry R. Graham
By: _________________________________
Larry R. Graham
Principal Financial and Accounting
Officer
and duly authorized officer
DATE: May 17, 1999
14
<PAGE>
STOCK PURCHASE AGREEMENT
BY
AND
AMONG
ACE DRUG MEDICAL EQUIPMENT, INC.,
A TEXAS CORPORATION
AND
AMEDISYS DURABLE MEDICAL EQUIPMENT, INC.
D/B/A CARE MEDICAL AND MOBILITY
A LOUISIANA CORPORATION
AND
AMEDISYS, INC.
A DELAWARE COMPANY
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made effective as of
January 1, 1999, by and among ACE DRUG MEDICAL EQUIPMENT, INC., a Texas
corporation, with its registered office at 800 West 34/th/ Street, Suite 100,
Austin, Texas 78705 ("Ace"), AMEDISYS DURABLE MEDICAL EQUIPMENT, INC. D/B/A CARE
MEDICAL AND MOBILITY, a Louisiana corporation with its registered office at 3029
South Sherwood Forest Boulevard, Suite 300, Baton Rouge, Louisiana 70816 (the
"Company"), AMEDISYS, INC., a Delaware corporation having its principal place of
business at 3029 South Sherwood Forest Boulevard, Suite 300, Baton Rouge,
Louisiana 70816 (the "Stockholder"). Ace, the Company and the Stockholder are
sometimes referred to collectively as the "Parties."
RECITALS
WHEREAS, Ace desires to purchase 100% of the issued and outstanding capital
stock of the Company ("Company Stock") from the Stockholder as hereinafter
provided and the Stockholder desires to effect such purchase; and
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, and in consideration of the representations, warranties, and
covenants contained herein, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
meanings indicated:
1.01. Closing: The consummation of the transactions contemplated by this
Agreement.
1.02 Default: The failure of either of the Parties to perform any of
their respective obligations hereunder.
1.03 Excluded Liabilities: Those liabilities of Company, notwithstanding
this Agreement, which shall not be assumed by Ace, as set forth on Schedule
3.20.
1.04. GAAP: Generally accepted accounting principles.
1.05. Health Care Laws: All federal, state and local laws, regulations and
ordinances related to the business of the Company including but not limited
to Medicaid, Medicare and regulations of the Health Care Finance
Administration.
1.06. Knowledge: means actual knowledge which Company or Stockholder has
or should have, after reasonable investigation.
1.07. Material Adverse Effect: Any change in the financial condition or
operation of the business that would materially affect the Company's
business adversely, including, but not limited to, material changes to
management, business conditions, or financial condition.
1.08. Operating Licenses: Licenses, permits and registrations issued by
the appropriate state and federal agencies, which are necessary to the
operation of the Company's business.
<PAGE>
1.09. Prime. The prime interest rate as designated daily by The Wall
Street Journal.
2. Terms of Stock Purchase. On the basis of the representations,
warranties, covenants, and agreements contained in this Agreement and subject to
the terms and conditions of this Agreement:
2.01. Transfer. The Stockholder shall assign, transfer and convey at the
Closing the Company Stock, representing 100% of the issued and outstanding
capital stock of the Company, to Ace. The Stockholder shall deliver at Closing
a Stock Power in the form attached hereto as Schedule 2.01.
2.02. Consideration. Ace shall pay Stockholder SIX HUNDRED SEVENTY TWO
THOUSAND THREE HUNDRED EIGHTY FIVE AND 80/100 ($672,385.80) DOLLARS, to be paid
as follows:
(i) The total sum of ONE HUNDRED THOUSAND AND NO/100 ($100,000.00) DOLLARS,
cash in hand, at Closing; and
(ii) Ace will deliver and execute a promissory note ("Long Term Note"), the
form of which is attached hereto as Schedule 2.02(ii), payable to the
order of Amedisys, Inc., for the principal amount of FOUR HUNDRED
EIGHTEEN THOUSAND THREE HUNDRED EIGHTEEN AND 80/100 ($418,318.80)
DOLLARS. The Long Term Note shall bear interest from the date of the
Closing until paid on the unpaid principal balance at a per annum
interest rate equal to the Prime plus two percentage points, adjusted
on an annual basis, and shall be payable, principal plus interest, in
eight (8) equal quarterly installments. The Long Term Note shall be
solidarily guaranteed by Terry Huckabee, in his individual capacity
(the "Guarantor"), shall provide for acceleration of the entire
principal balance in the event of default by Ace in the payment of any
installment thereunder or under this Agreement and shall provide for
the payment of the reasonable attorney fees incurred by Stockholder in
the collection thereof. Ace shall be entitled, upon the mutual written
consent of the Parties hereto, to an offset of payment due pursuant to
the Long Term Note for any undisclosed debts, claims or liabilities
incurred by Company prior to the Closing.
(iii) Ace will deliver and execute a promissory note ("Short Term Note"),
the form of which is attached hereto as Schedule 2.02(iii), payable
to the order of Amedisys, Inc., for the principal amount of ONE
HUNDRED FIFTY FOUR THOUSAND SIXTY SEVEN AND 64/100 ($154,067.64)
DOLLARS. The Short Term Note shall bear interest from the date of
the Closing until paid on the unpaid principal balance at a per
annum interest rate equal to the Prime plus two percentage points,
adjusted on an annual basis, and shall be payable, principal plus
interest, in four (4) equal quarterly installments. The Short Term
Note shall be solidarily guaranteed by Terry Huckabee, in his
individual capacity (the "Guarantor"), shall provide for
acceleration of the entire principal balance in the event of default
by Ace in the payment of any installment thereunder or under this
Agreement and shall provide for the payment of the reasonable
attorney fees incurred by Stockholder in the collection thereof.
2.03. The Company Stock referred to in Section 2.01. and the consideration
to be paid by Ace referred to in Section 2.02. shall constitute all of the
consideration to be paid in connection with the transactions contemplated by
this Agreement.
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<PAGE>
2.04. The Closing. The Closing of the transactions contemplated by
this Agreement shall be on or before January 31, 1999, at the Stockholder's
offices, 3029 S. Sherwood Forest Blvd., Suite 300, Baton Rouge, Louisiana, or at
some other location mutually agreed upon by the Parties. The Closing shall be
effective as of 12:01 A.M. January 1, 1999.
3. Representations and Warranties of the Company and the
Stockholder. The Company and the Stockholder hereby agree, represent, and
warrant to Ace, on the date of this Agreement and on the date of the Closing, as
follows:
3.01. Organization and Qualification. The Company does not own any
interest in any other business enterprise or legal entity, except as disclosed
in Schedule 3.01. Schedule 3.01 also correctly sets forth as to the Company its
state of incorporation, principal place of business, and jurisdictions in which
it is qualified to do business. The Company is a Louisiana corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with all requisite power and authority to conduct
its business and is not in breach of, or in default with respect to, any term of
its Certificate of Incorporation, Bylaws or other organizational documents,
except where such breach would not have a Material Adverse Effect. The Company
has obtained all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits of and from, and declarations and filings
with, all federal, state, local, and other governmental authorities and all
courts and other tribunals, to own, lease, license, and use its properties and
assets and to carry on the business in which it is now engaged and the business
in which it contemplates engaging, except where the failure to do so would not
have a Material Adverse Effect. The Company is duly qualified to transact the
business in which it is engaged in every jurisdiction in which its ownership,
leasing, licensing, or use of property or assets or the conduct of its business
makes such qualification necessary, except where the failure to do so would not
have a Material Adverse Effect.
3.02. Capitalization. The Stockholder owns 1,000 shares of the Company
Common Stock, which constitutes all of the outstanding capital stock of Company.
The Company Stock is not owned or held in violation of any preemptive right of
any other person or entity, is validly authorized, validly issued, fully paid
and non-assessable, and is owned of record and beneficially by the Stockholder.
The shares of Company Stock held by the Stockholder are free and clear of all
liens, security interests, pledges, charges, encumbrances, voting agreements,
and voting trusts. There is no commitment, plan, or arrangement to issue, and
no outstanding option, warrant, or other right calling for the issuance of, any
shares of capital stock of the Company or any security or other instrument
convertible into, exercisable for, or exchangeable for capital stock of the
Company. There is outstanding no security or other instrument convertible into
or exchangeable for capital stock of the Company. As of the Closing, Company
has not been put on notice of any adverse claim of or to ownership in the
capital stock of the Company.
3.03. Due Authorization; Third Party Consents. The Company has the
right, power, legal capacity, and authority to enter into and perform its
obligations under this Agreement and, except as set forth on Schedule 3.03 to
this Agreement, no approval or consent of any person other than the Company is
necessary in connection with the execution, delivery, or performance of this
Agreement. The execution, delivery, and performance of this Agreement by the
Company has been duly authorized by its board of directors and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement constitutes a legal and binding obligation of the Company, and is
valid and enforceable against the Company in accordance with its terms except
that (i) the enforcement of certain rights and remedies created by this
Agreement is subject to bankruptcy, insolvency, reorganization, and similar laws
of general application
-3-
<PAGE>
affecting the rights and remedies of parties, (ii) the enforceability of any
particular provision of this Agreement under principles of equity or the
availability of equitable remedies, such as specific performance, injunctive
relief, waiver or other equitable remedies, is subject to the discretion of
courts of competent jurisdiction, and (iii) any court or administrative body may
refuse to enforce the choice of law provision of Section 9.11 of this Agreement.
3.04. Litigation. Except as set forth in Schedule 3.04, there is not any
claim, suit, action, arbitration, or legal, administrative, or other proceeding
or governmental investigation (formal or informal), pending or to the best of
Company's or Stockholder's Knowledge threatened (or any basis therefor known to
the Company or the Stockholder), with respect to the Company or the Stockholder
(as it relates to the business of the Company), including but not limited to any
action or claim under any federal, state, local or other governmental act, rule,
regulation, or any interpretations thereof, relating to environmental matters or
the protection of the safety and health of persons connected with the Company's
business (including but not limited to the transportation, treatment, storage,
recycling, disposal, or release into the environment of hazardous or toxic
materials or waste), or any basis on which any proceeding or investigation
against the Company or the Stockholder might reasonably be undertaken or
brought. The Company and the Stockholder have informed Ace of, and upon request
has furnished or made available to Ace copies of all relevant court papers and
other documents relating to, the matters set forth in Schedule 3.04. Included
in Schedule 3.04 is a list of all suits, actions, arbitrations, or other
proceedings or investigations in which the Company has been involved during the
five year period immediately preceding the Closing. The Company is not
presently engaged in any legal action to recover monies due to the Company, for
damages sustained by the Company, or amounts owed to the Company, except as set
forth on Schedule 3.04.
3.05. Employees. The Company does not have, or contribute to, any
pension, profit-sharing, option, other incentive plan, or other Employee Benefit
Plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974), or has any obligation to or customary arrangement with employees for
bonuses, incentive compensation, vacations, severance pay, insurance, or other
benefits, except as set forth in Schedule 3.05. Schedule 3.05. contains a true
and correct statement of the names, relationship with the Company, and present
rates of compensation for employees of the Company.
3.06. No Violation of Employee Contracts. No employee of the Company is
in violation of any term of any employment contract, non-competition agreement,
or any other contract or agreement or any restrictive covenant with, or any
other common law obligation to, a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted by the Company or of the use of trade secrets or proprietary
information of others. There is neither pending nor, to the Knowledge of the
Company or the Stockholder, threatened, any actions, suits, proceedings, or
claims with respect to any contract, agreement, covenant, or obligation referred
to in the preceding sentence, except as listed in Schedule 3.06.
3.07. Insurance. Schedule 3.07 sets forth an accurate and complete list
and brief description of all policies of insurance or indemnity bonds held by
the Company. The Company is not in default with respect to any provisions of
any such policy or indemnity bond and has not failed to give any notice or
present any claim thereunder in due and timely fashion, which failure or
failures to give such notice or present such claim, individually or in the
aggregate, could have a Material Adverse Effect on the business of the Company.
All such policies and bonds are (i) in full force and effect, (ii) with
insurance companies believed by the Company and the Stockholder to be
financially sound and reputable, (iii) are sufficient for compliance by the
Company with all requirements of law and of all agreements and instruments to
which
-4-
<PAGE>
the Company is a party, (iv) provide that they will remain in full force and
effect through the respective dates set forth in Schedule 3.07, and (v) will not
in any significant respect be affected by, and will not terminate or lapse by
reason of, the transactions contemplated by this Agreement. Schedule 3.07 sets
forth an accurate and complete list of all accident or other liability claims
received by or known by the Company and the Stockholder for the three year
period immediately preceding the Closing, as well as a description of the status
of each such claim. Such claims are covered by one or more insurance policies
set forth in Schedule 3.07. Ace reserves the rights to any insurance proceeds
arising from any claim for insurance coverage made by the Company prior to
Closing relating to any claim for loss of or damage to Company property.
3.08. Contracts, Agreements and Instruments. Schedule 3.08 accurately and
completely sets forth the information required to be contained therein. The
Company has furnished to Ace:
3.08.01. The Certificate of Incorporation, Bylaws and other
organizational documents of the Company and all amendments thereto, as
presently in effect, certified by the president of the Company;
3.08.02. True and correct copies of all contracts, agreements and
other instruments having a value in excess of $5,000.00 referred to in
Schedule 3.08;
3.08.03. True and correct written descriptions of all service,
material supply, distribution, agency, financing or other arrangements
or understandings referred to in Schedule 3.08 involving an obligation
on the part of the Company in excess of $5,000.
Except for matters which, in the aggregate, would not have a Material Adverse
Effect or are otherwise disclosed in the Agreement, to the Knowledge of the
Company and the Stockholder, no other party to any such contract, agreement,
instrument, leases, or license is now in violation or breach of, or in default
with respect to complying with, any material provision thereof, and each such
contract, agreement, instrument, lease, or license contained in the Schedules
hereto is in full force and effect and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in accordance
with its terms. Each such service, supply, distribution, agency, financing, or
other arrangement or understanding contained in the Schedules hereto is a valid
and continuing arrangement or understanding, except for matters which, in the
aggregate, would not have a Material Adverse Effect; neither the Company, the
Stockholder, nor any other party to any such arrangement or understanding has
given notice of termination or taken any action inconsistent with the
continuance of such arrangement or understanding, except for matters which, in
the aggregate, would not have a Material Adverse Effect; and the execution,
delivery, and performance of this Agreement will not prejudice any such
arrangement or understanding in any way contained in the Schedules hereto,
except for matters which, in the aggregate, would not have a Material Adverse
Effect. The Company is not a member of a customer or user organization or of a
trade association which relationship would be materially affected by the
execution and performance of this Agreement.
3.09. Compliance With Laws. The Company has complied with, and is not in
violation of any (i) term or provision of its Certificate of Incorporation or
Bylaws; or (ii) to the Company's and the Stockholder's Knowledge term or
provision of any applicable judgment, decree, order, statute, injunction, rule,
ordinance; (iii) to the Company's and the Stockholder's Knowledge any Health
Care Law; or (iv) or the Company's and the Stockholder's Knowledge, foreign,
United States, state or local statutes, laws, rules, or regulations.
-5-
<PAGE>
3.10. Financial Condition. The Company has delivered to Ace true and
correct copies of the following: the balance sheet ("the Company's Last Balance
Sheet") dated as of December 31, 1998 ("the Company's Last Balance Sheet Date"),
and an unaudited income statement and unaudited consolidated statement of the
Company for the twelve month period ended December 31, 1998. Each such balance
sheet presents fairly the financial condition, assets and liabilities of the
Company as of its date; each such statement of income presents fairly the
results of operations of the Company for the period indicated. The financial
statements referred to in this Section 3.10 have been prepared in accordance
with GAAP and all applicable laws and government regulations, consistently
applied throughout the periods involved, are correct and complete in all
material respects, and are in accordance with the books and records of the
Company.
3.11. Permits and Licenses. The Company has all permits, licenses, and
other similar authorizations necessary for the conduct of its business as now
being conducted by it, and it is not in default in any respect under any such
permits, licenses, or authorizations. All permits, licenses, and other similar
authorizations necessary for the conduct of the Company's business as now being
conducted by it are as set forth in Schedule 3.11. Except as set forth in
Schedule 3.11, no royalties, commissions, or fees are payable by the Company to
any person by reason of the ownership or use of any intangible property. The
Company is the sole and exclusive owner of all of its assets, does not use any
of its assets by the consent of any other person and is not required to and does
not make any payments to others with respect thereto. Except as set forth in
Schedule 3.11, there are no material licenses, sub-licenses, or agreements
relating to the use of any intangible property now in effect, and the Company
and the Stockholder have no Knowledge that any intangible property is being
infringed by others. Except as listed in Schedule 3.04, no claim that would
have a Material Adverse Effect on the business of the Company is pending or, to
the Knowledge of the Company, threatened, or has been made since the Company's
inception to the effect that, nor does the Company have any Knowledge that the
operation of the Company's business or any method, process, part, or material
that the Company employs, conflicts in any material way with, or infringes in
any material way upon any rights of the type enumerated above, owned by others.
3.12. Properties. The Company has good and marketable title to all
properties and assets used in its business or owned by it (except such real and
other property and assets as are held pursuant to leases or licenses described
in Schedule 3.12), free and clear of all liens, mortgages, security interests,
pledges, charges, and encumbrances (except such as are disclosed in Schedule
3.12 or disclosed on the Company Last Balance Sheet of December 31, 1998).
3.12.01. Attached as Schedule 3.12 is a true and complete list of all
properties and assets owned, leased, or licensed by the Company
having an individual or aggregate value of $5,000 or more,
including with respect to such properties and assets leased or
licensed by the Company, a description of such lease or license.
All such properties and assets owned by the Company are reflected
on the Company Last Balance Sheet. All properties and assets
owned, leased, or licensed by the Company are in good and usable
condition (reasonable wear and tear, which is not such as to have
a Material Adverse Effect on the operation of the business of the
Company, excepted);
3.12.02. The properties and assets owned, leased, or licensed by the
Company constitute all such properties and assets which are
necessary to the business of the Company as presently conducted
or as it contemplates conducting;
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<PAGE>
3.12.03. No real property owned, leased or licensed by the Company lies in
an area which is, to the Knowledge of the Company or any
Stockholder, or will be subjected to zoning, use or building code
restrictions which would prohibit, and no stated facts relating
to the actions or inaction of another person or entity of his or
its ownership, licensing, leasing, or use of any real or personal
property exists or will exist which would prevent, the continued
effective ownership, leasing, licensing or use of such real
property in the business in which the Company is now engaged or
the business in which it contemplates engaging; and
3.12.04. All accounts and notes receivable reflected on the Company Last
Balance Sheet, and arising since the Last Balance Sheet Date,
have been collected, or are and will be good and collectible, in
each case at the aggregate recorded amounts thereof without right
of recourse, defense, deduction, return of goods, counterclaim,
offset, or setoff on the part of the obligor, and, if not
collected, can reasonably be anticipated to be paid within 90
days of the date incurred. Furthermore, Company specifically
represents and warrants account receivables of Company
representing Seven Hundred Fifty Thousand and no/100
($750,000.00) Dollars of said receivables are collectible within
180 days of the date of Closing. There has been no claim of
credit or offset relating to the receivables of the Company by
any debtor of Company. Ace shall have the right to offset an
amount payable due under the Long Term Note, after 180 days of
the date of Closing, and upon the written mutual consent of the
Parties, equal to the amount of Company receivables warranted in
this provision minus the amount of pre-Closing receivables
actually collected by Ace. Ace shall use its best faith effort
and customary and standard collection procedures in collecting
the Company receivables.
3.13. Hazardous Materials. Except as disclosed on Schedule 3.13, the
Company is not in the business of possession, transportation, or disposal of
hazardous materials. If and to the extent that the Company's business has
involved the possession, transportation, or disposal of hazardous materials, to
the best of the Company's and the Stockholder's Knowledge the Company has
complied with any and all applicable laws, ordinances, rules, and regulations
and has not and will not be the basis of any claim or proceeding against, or any
liability of, the Company with respect to the period prior to the Closing. To
the Knowledge of the Company and the Stockholder, no employee of the Company has
been exposed to hazardous materials such that exposure could cause damage to
such employee.
3.14. Interest in Competitors. Except as set forth in Schedule 3.14 to
this Agreement, no shareholder, officer, director, or employee of the Company,
nor any spouse or child of any shareholder, officer, director, or any employee
with authority to enter into contracts on behalf of the Company, has any direct
or indirect interest in any competitor, supplier, or customer of the Company or
in any person from whom or to whom the Company leases any real or personal
property, or in any other person with whom the Company is doing business.
3.15. Tax and Other Liabilities. The Company does not have any present
liability of any nature, accrued or contingent, including, without limitation,
liabilities for federal, state, local, or foreign taxes and liabilities to
customers or suppliers, which could have a Material Adverse Effect upon the
Company, other than the following:
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<PAGE>
(i) Liabilities for which full provision has been made on the Company
Last Balance Sheet as of the Company Last Balance Sheet Date; and
(ii) Other liabilities arising since the Company Last Balance Sheet
Date and prior to the Closing in the ordinary course of business
which are not inconsistent with the representations and
warranties of the Company or any other provision of this
Agreement.
Without limiting the generality of the foregoing, the amounts set forth as
provisions for taxes on the Company Last Balance Sheet are sufficient for all
accrued and unpaid taxes of the Company, whether or not due and payable and
whether or not disputed, under tax laws, as in effect on the Company Last
Balance Sheet Date or now in effect, for the period ended on such date and for
all fiscal years prior thereto. All due tax liability is made and kept current
by the Company as of the Closing. The Company has filed all applicable tax
returns required to be filed by it or has obtained applicable extensions and are
not delinquent with respect to such extensions; have paid (or have established
on the Company Last Balance Sheet a reserve for) all taxes, assessments, and
other governmental charges payable or remittable by it or levied upon it or its
properties, assets, income, or franchises, which are due and payable and have
delivered to the Company a true and correct copy of any report as to adjustments
received by the Company from any taxing authority during the past five years and
a statement as to any litigation, governmental or other proceeding (formal or
informal), or investigation pending.
3.16. Changes or Events. Except as set forth in Schedule 3.16, since the
Company's Last Balance Sheet Date, none of the following has occurred:
3.16.01. Any material transaction by the Company not in the ordinary
course of business involving amounts in excess of $5,000;
3.16.02. Any material capital expenditure by the Company involving
amounts in excess of $5,000;
3.16.03. Other than in the ordinary course of business, any changes in
the condition (financial or otherwise), liabilities, assets, or business
or in any business relationships of the Company, including relationships
with suppliers or customers, that, when considered individually or in
the aggregate, might reasonably be expected to have a Material Adverse
Effect;
3.16.04. The destruction of, damage to, or loss of any asset of the
Company (regardless of whether covered by insurance) that, when
considered individually or in the aggregate, might reasonably be
expected to have a Material Adverse Effect;
3.16.05. Any labor disputes that, when considered individually or in
the aggregate, might reasonably be expected to have a Material Adverse
Effect;
3.16.06. Except as listed on Schedule 3.16., there have been no changes
in accounting methods or practices (including, without limitation, any
change in depreciation or amortization policies or rates) by the
Company, except for any such changes as were required by law;
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3.16.07. Other than in the ordinary course of business, any increase in
the salary or other compensation payable or to become payable by the
Company to any employee, or the declaration, payment, or commitment or
obligation of any kind for the payment by the Company of a bonus or
other additional salary or compensation to any such person;
3.16.08. The material amendment or termination of any material
contract, agreement, or license to which the Company is a party, except
in the ordinary course of business;
3.16.09. Any loan by the Company to any person or entity, or the
guaranteeing by the Company of any loan other than loans made in the
ordinary course of business;
3.16.10. Any mortgage, pledge, UCC financing statement or other
encumbrance of any asset of the Company except in the ordinary course of
business;
3.16.11. The waiver or release of any right or claim of the Company,
except in the ordinary course of business;
3.16.12. Any other events or conditions of any character within the
Knowledge of the Company and the Stockholder that, when considered
individually or in the aggregate, have or might reasonably be expected
to have a Material Adverse Effect;
3.16.13. Any loss or, to the Knowledge of the Company or the
Stockholder, any threatened loss of any permit, license, qualification,
special charter or certificate of authority held or enjoyed or formerly
held or enjoyed by the Company which loss has had or upon occurrence
might reasonably be expected to have a Material Adverse Effect;
3.16.14. To the Knowledge of the Company and the Stockholder, any
statute, regulation, order, ordinance or other law the adoption or
rescission of which might reasonably be expected to have a Material
Adverse Effect;
3.16.15. Any failure on the part of the Company to operate its business
in the ordinary course and consistent with past practices so as to
preserve its business organization intact, to retain the services of its
employees and to preserve its goodwill and relationships with
suppliers, creditors, customers, and others having business
relationships with it;
3.16.16. Any action taken or omitted to be taken by the Company which
would cause (after lapse of time, notice or both) the breach, default,
or acceleration of any right, contract, commitment, or other obligation
of the Company which would have a Material Adverse Effect; or
3.16.17. Any agreement by the Company to do any of the things described
in the preceding clauses 3.16.01 through 3.16.16.
3.17. No Defaults. Except as set forth in Schedule 3.17, the
consummation of the transactions contemplated by this Agreement will not result
in or constitute any of the following: (i) a breach of any term or provision of
any other agreement of the Company that will not be waived or released at
Closing; (ii) a
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default or an event that will not be waived or released at Closing, and that,
with notice or lapse of time or both, would be a default, breach, or violation
of the Certificate of Incorporation or Bylaws of the Company or of any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, or other agreement, instrument, or arrangement to which
the Company is a party or by which the Company or its assets are bound; (iii) an
event that will not be waived or released at Closing and that would permit any
party to terminate any agreement or to accelerate the maturity of any
indebtedness or other obligation of the Company; (iv) the creation or imposition
of any lien, charge, or encumbrance on any of the Company's assets; or (v) a
violation of any law or any rule or regulation of any administrative agency or
governmental body unrelated to the business or profession of health care and any
profession related to health care, of any order, writ, injunction or decree of
any court, administrative agency or governmental body to which the Company is
subject.
3.18. No Prohibited Payments. Neither the Company nor any employee, or
agent of the Company, has made or authorized any payment of funds of the Company
or on behalf of the Company prohibited by law and no funds of the Company have
been set aside to be used for any payment prohibited by law.
3.19. Completeness of Disclosure. No representation or warranty and no
Schedule, Exhibit, or certificate prepared by the Company pursuant hereto and no
statement made or other document prepared by the Company and furnished to Ace by
the Company contains any untrue statement of a material fact or omits or will
omit any material fact necessary in order to make the statements contained
therein not misleading.
3.20. Excluded Liabilities. Ace shall not assume, nor in any event be
liable for, any Excluded Liability, a list of which is set forth in Schedule
3.20, or any undisclosed debt, claim or liability of which Company or
Stockholder had Knowledge prior to the Closing.
4. Representations and Warranties of Ace. Ace hereby agrees, represents,
and warrants to the Stockholder, on the date of this Agreement and on the
Closing Date, as follows:
4.01. Organization. Ace is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas and authorized to
carry on business in the State of Louisiana and in every other jurisdiction in
which its ownership, leasing, licensing, or use of property or assets or the
conduct of it business makes such qualification necessary, except where the
failure to do so would not have a Material Adverse Effect.
4.02. Due Authorization; Third Party Consents. Ace has the right, power,
legal capacity, and authority to enter into and perform its obligations under
this Agreement and, except as set forth on Schedule 4.02 to this Agreement, no
approval or consent of any person other than Ace is necessary in connection with
the execution, delivery, or performance of this Agreement. The execution,
delivery, and performance of this Agreement by Ace has been duly authorized by
its board of directors and no other corporate proceedings on the part of Ace are
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement constitutes a legal and binding obligation
of Ace, and is valid and enforceable against Ace in accordance with its terms
except that (i) the enforcement of certain rights and remedies created by this
Agreement is subject to bankruptcy, insolvency, reorganization, and similar laws
of general application affecting the rights and remedies of parties, (ii) the
enforceability of any particular provision of this Agreement under principles of
equity or the availability of equitable remedies, such as specific performance,
injunctive relief, waiver or other equitable remedies, is subject to the
discretion of courts of competent jurisdiction, and (iii) any court or
administrative body may refuse to enforce the choice
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of law provision of Section 9.11 of this Agreement.
4.03. No Violation. The consummation of the transactions contemplated by
this Agreement will not result in or constitute any of the following: (i) a
breach of any term or provision of any other agreement of Ace that will not be
waived or released at Closing; (ii) a default or an event that will not be
waived or released at Closing and that, with notice or lapse of time or both,
would be a default, breach, or violation of the Certificate of Incorporation or
Bylaws of Ace or of any lease, license, promissory note, conditional sales
contract, commitment, indenture, mortgage, deed of trust, or other agreement,
instrument, or arrangement to which Ace is a party or by which Ace or the
property of Ace is bound; or (iii) a violation of any law or any rule or
regulation of any administrative agency or governmental body or any order, writ,
injunction, or decree of any court, administrative agency or governmental body
to which Ace is subject.
4.04. Completeness of Disclosure. No representation or warranty and no
Schedule, Exhibit, or certificate prepared by Ace pursuant hereto and no
statement made or other document prepared by Ace and furnished to the Company
by Ace contains any untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements contained therein
not misleading.
5. Conditions to Obligations of Ace. The obligations of Ace under this
Agreement are subject, at the option of Ace, to the following conditions:
5.01. Accuracy of Representations and Compliance With Conditions. All
representations and warranties of Company or the Stockholder contained in this
Agreement shall be accurate when made and, in addition, shall be accurate as of
the Closing as though such representations and warranties were then made by
Company or such Stockholder on the part of Company or any Stockholder. As of
the Closing, the Company and the Stockholder shall have performed and complied
with all covenants and agreements and satisfied all conditions required to be
performed and complied with by any of them at or before such time by this
Agreement and Ace shall have received certificates signed by the Stockholder
dated the date of the Closing to that effect, substantially in the form of
Schedule 5.01. The representations and warranties made by the Company or the
Stockholder herein shall survive the Closing. Any breach of any representation
or warranty made herein shall give rise to a right of offset upon the mutual
written consent of both parties.
5.02. Other Closing Documents. Company and the Stockholder shall have
delivered to Ace at or prior to the Closing such other documents as Ace may
reasonably request in order to enable Ace to determine whether the conditions to
their obligations under this Agreement have been met and otherwise to carry out
the provisions of this Agreement.
5.03. Review of Proceedings. All actions, proceedings, instruments, and
documents required to carry out this Agreement, or any agreement incidental
thereto and all other related legal matters shall be subject to the reasonable
approval of counsel to Ace, and the Company shall have furnished such counsel
for Ace such documents for the purpose of enabling them to pass upon such
matters.
5.04. Legal Action. There shall not have been instituted or threatened any
legal proceeding relating to, or seeking to prohibit or otherwise challenging
the consummation of, the transactions contemplated by this Agreement or related
agreements or to obtain substantial damages with respect thereto, except as
listed in Schedule 3.04.
5.05. No Governmental Action. There shall not have been any notice given or
any action taken,
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or any law, rule, regulation, order, or decree proposed, promulgated, enacted,
entered, enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
injunction, which, Ace determines that:
5.05.01. Makes any of the transactions contemplated by this Agreement
illegal;
5.05.02. Results in a delay which affects the ability of Ace to consummate
any of the transactions contemplated by this Agreement;
5.05.03. Requires the divestiture by Ace of a material portion of the
business of either Ace taken as a whole, or of the Company taken
as a whole; and
5.05.04. Otherwise prohibits, restricts, or delays consummation of any of
the transactions contemplated by this Agreement or impairs the
contemplated benefits to Ace of the transactions contemplated by
this Agreement.
5.06. Contractual Consents Needed. The parties to this Agreement shall have
obtained at or prior to the Closing all consents required for the consummation
of the transactions contemplated by this Agreement from any party to any
contract, agreement, instrument, lease, license, arrangement, or understanding
to which any of them or any subsidiary is a party, or to which any of their
respective businesses, properties, or assets are subject, except where the
failure would not have a Material Adverse Effect.
5.07. Other Agreements. Agreements set forth as exhibits or schedules to
this Agreement shall have been duly authorized, executed, and delivered by the
parties thereto at or prior to the Closing, shall be in full force and effect,
valid and binding upon the parties thereto, and enforceable by them in
accordance with their terms at the Closing, and no party thereto at any time
from the execution thereof until immediately after the Closing shall have been
in violation of or in default in complying with any material provision thereof.
5.08. Board and Shareholder Approval. The Board of Directors of the
Company shall have approved the transactions contemplated herein.
5.09. Legal Opinion. Ace shall have received the opinion of Benckenstein &
Oxford, L.L.P., dated the date of the Closing, in the form of Schedule 5.09
attached hereto.
6. Conditions to Obligations of The Company. The obligations of the
Company under this Agreement are subject, at the option of the Company, to the
following conditions:
6.01. Accuracy of Representations and Compliance With Conditions. All
representations and warranties of Ace contained in this Agreement shall be
accurate when made and, in addition, shall be materially accurate as of the
Closing as though such representations and warranties were then made by Ace on
the part of Ace. As of the Closing, Ace shall have performed and complied with
all covenants and agreements and satisfied all conditions required to be
performed and complied with at or before such time by this Agreement and the
Company shall have received certificates signed by the officers of Ace dated the
date of the Closing to that effect, substantially in the form of Schedule 6.01.
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6.02. Other Closing Documents. Ace shall have delivered to the Company, at
or prior to the Closing, such other documents as the Company may reasonably
request in order to enable the Company to determine whether the conditions to
its obligations under this Agreement have been met and otherwise to carry out
the provisions of this Agreement.
6.03. Review of Proceedings. All actions, proceedings, instruments, and
documents required to carry out this Agreement, or any agreement incidental
thereto and all other related legal matters shall be subject to the reasonable
approval of counsel to the Company and Ace shall have furnished such counsel
such documents as such counsel may have reasonably requested for the purpose of
enabling them to pass upon such matters.
6.04. Legal Action. There shall not have been instituted or threatened any
legal proceeding relating to, or seeking to prohibit or otherwise challenging
the consummation of, the transactions contemplated by this Agreement or related
agreements set forth as an exhibit hereto, or to obtain substantial damages with
respect thereto.
6.05. No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, or decree proposed, promulgated, enacted,
entered, enforced, or deemed applicable to the transactions contemplated by this
Agreement by any federal, state, local, or other governmental authority or by
any court or other tribunal, including the entry of a preliminary or permanent
injunction, which, in the reasonable judgment of the Company:
6.05.01. Makes any of the transactions contemplated by this Agreement
illegal;
6.05.02. Results in a delay which affects the ability of the Company to
consummate any of the transactions contemplated by this
Agreement;
6.05.03. Otherwise prohibits, restricts, or delays consummation of any of
the transactions contemplated by this Agreement or impairs the
contemplated benefits to the Company or the Stockholder of the
transactions contemplated by this Agreement.
6.06. Contractual Consents Needed. The Parties to this Agreement shall have
obtained at or prior to the Closing all consents required for the consummation
of the transactions contemplated by this Agreement from any party to any
contract, agreement, instrument, lease, license, arrangement, or understanding
to which any of them or any subsidiary is a party, or to which any of their
respective businesses, properties, or assets are subject, except where the
failure would not have a Material Adverse Effect.
6.07. Other Agreements. Agreements set forth as exhibits or schedules to
this Agreement shall have been duly authorized, executed, and delivered by the
Parties thereto at or prior to the Closing, shall be in full force, valid and
binding upon the Parties thereto, and enforceable by them in accordance with
their terms at the Closing, and no party thereto at any time from the execution
thereof until immediately after the Closing shall have been in violation of or
in default in complying with any material provision thereof.
6.08. Board Approval. The Board of Directors of Ace shall have approved the
transactions contemplated herein.
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6.09. Legal Opinion. Company shall have received the opinion of Caire,
Gregorie & Whitehead, dated the date of the Closing, in the form of Schedule
6.09 attached hereto.
7. Covenants and Agreements of the Company. The Company covenants and
agrees as follows:
7.01. Public Statements. Before the Company shall release any information
concerning this Agreement or the transactions contemplated by this Agreement
which is intended for or may result in public dissemination thereof, the Company
shall cooperate with Ace, shall furnish drafts of all documents or proposed oral
statements to Ace for comment, and shall not release any such information
without the written consent of Ace. Nothing contained herein shall prevent the
Company from furnishing any information to any governmental authority if
required to do so by law, with the exception of consents more fully described in
7.06 of this Agreement.
7.02. Consents Without any Condition. The Company shall not make any
agreement or understanding with a third party not in the ordinary course of
business without approval in writing by Ace.
7.03. Access. The Company will afford the officers, counsel, agents,
investment bankers, accountants, and other representatives of Ace, free and full
access to the plans, properties, books, and records of the Company; will permit
them to make extracts from and copies of such books and records; and will from
time to time furnish Ace with such additional financial and operating data and
other information as to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company as
Ace from time to time may request. The Company will also cause the public
accountants of the Company to make available to Ace and its public accountants
the work papers relating to the audits of the Company.
7.04. Conduct of Business. The Company will use its best efforts to conduct
its affairs so that at the Closing, no representation or warranty of the Company
will be inaccurate, no covenant or agreement of the Company will be breached,
and no condition in this Agreement will remain unfulfilled by reason of the
actions or omissions of the Company.
7.05. Notice of Changes. Until the Closing or the earlier rightful
termination of this Agreement, the Company will immediately advise Ace in a
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which any of them obtains knowledge and which (if existing and
known at the date of the execution of this Agreement) would have been required
to be set forth or disclosed in or pursuant to this Agreement or an exhibit or
schedule hereto, which (if existing and known at any time prior to or at the
Closing) would make the performance by any party of a covenant contained in this
Agreement impossible or make such performance materially more difficult than in
the absence of such fact or occurrence, or which (if existing and known at the
time of the Closing) would cause a condition to any party's obligations under
this Agreement not to be fully satisfied.
8. Covenants and Agreements of Ace. Ace covenants and agrees as
follows:
8.01. Public Statements. Before Ace shall release any information
concerning this Agreement or the transactions contemplated by this Agreement
which is intended for or may result in public dissemination thereof, Ace shall
cooperate with the Company, shall furnish drafts of all documents or proposed
oral statements to the Company for comments, and shall not release any such
information without the written consent of the Company. Nothing contained
herein shall prevent Ace from furnishing any information to
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any governmental authority if required to do so by law. In the event Ace and the
Company have not completed the terms of this Agreement, both Ace and the Company
shall not disclose any information concerning this Agreement to any third party,
except as more fully described in Section 8.01 of this Agreement.
8.02. Conduct of Business. Ace will conduct its affairs so that at the
Closing no representation or warranty of Ace will be inaccurate, no covenant or
agreement of Ace will be breached, and no condition in this Agreement will
remain unfulfilled by reason of the actions or omissions of Ace.
8.03. Notice of Changes. Until the Closing or the earlier rightful
termination of this Agreement, Ace will immediately advise the Company in a
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which it obtains knowledge and which (if existing and known at the
date of the execution of this Agreement) would have been required to be set
forth or disclosed in or pursuant to this Agreement or an exhibit or schedule
hereto, which (if existing and known at any time prior to or at the Closing)
would make the performance by any party of a covenant contained in this
Agreement impossible or make such performance materially more difficult than in
the absence of such fact or occurrence, or which (if existing and known at the
time of the Closing) would cause a condition to any party's obligations under
this Agreement not to be fully satisfied.
9. Miscellaneous.
9.01. Brokerage and Other Fees. The parties agree that there are no
brokerage arrangements or fee obligations, in writing or otherwise, with respect
to the transactions set forth in this Agreement. Each party shall be
responsible for the fees of their respective professionals (including, without
limitation, legal and accounting fees) engaged to assist in the preparation,
negotiation and counseling with respect, and relating, to this Agreement and
consummation of the transactions contemplated herein, as well as their
respective out-of-pocket expenses except Ace agrees to pay for the preparation
of the necessary transfer documents to accomplish the transactions herein.
9.02. Further Actions. At any time and from time to time, the parties
agree, at their expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
9.03. Availability of Equitable Remedies. Since a breach of the provisions
of this Agreement could not adequately be compensated by money damages, the
parties shall be entitled before, and only before, Closing, in addition to any
other right or remedy available to them, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this Agreement; and in either case, no bond or other security shall be
required in connection therewith, and the parties hereby consent to the issuance
of such an injunction and to the ordering of specific performance.
9.04. Modification. The Agreement and the schedules and exhibits hereto set
forth the entire understanding of the parties with respect to the subject matter
hereof supersede all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by the
Parties.
9.05. Notices. Any notice or other communication required or permitted to be
given hereunder
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shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by delivery in person, by courier services, by
telecopy (confirmed by telephone within twenty-four (24) hours following receipt
thereof), or by registered or certified mail, (postage prepaid, return receipt
requested) to the respective parties at the following address (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section11.06):
(a) If to Ace:
Ace Drug Medical Equipment, Inc.
800 West 34/th/ Street, Suite 100
Austin, Texas 78705
Attention: Terry Huckabee
with copy to:
Benckenstein & Oxford, L.L.P.
Two Post Oak Central
1980 Post Oak Boulevard, Suite 1600
Houston, Texas 77056
Attention: Dale Jefferson
(b) If to Terry Huckabee
Terry Huckabee
800 West 34/th/ Street, Suite 100
Austin, Texas 78705
with copy to:
Benckenstein & Oxford, L.L.P.
Two Post Oak Central
1980 Post Oak Boulevard, Suite 1600
Houston, Texas 77056
Attention: Dale Jefferson
(c) If to Stockholder
Amedisys, Inc.
3029 S. Sherwood Forest Blvd.
Suite 300
Baton Rouge, Louisiana 70816
Attention: Larry Graham
with copy to:
Amedisys, Inc.
3029 S. Sherwood Forest Blvd.
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<PAGE>
Suite 300
Baton Rouge, Louisiana 70816
Attention: Michael D. Lutgring, Esq.
9.06. Waiver. Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing
and, in the case of a corporate party, be authorized by a resolution of the
Board of Directors or by an officer of the waiving party.
9.07. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of each party's respective successors, assigns,
heirs, and personal representatives.
9.08. No Third-Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
9.09. Severability. If any provision of this Agreement is invalid, illegal,
or unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
9.10. Headings. The headings of this Agreement are solely for convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement.
9.11. Counterparts, Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of Louisiana
without giving effect to conflict of laws.
9.12. Indemnification by the Stockholder. The Stockholder shall indemnify,
defend and hold harmless Ace and each of its officers, directors, agents and
affiliates from and against any damage, loss, claim, liability (including
without limitation, the Excluded Liabilities), cost or expense, including fees
and disbursements of counsel, accountants, experts and other consultants
(collectively, "Damages"), resulting from, arising out of, based upon or
occasioned by the operation of the Company prior to the Closing, any
misstatement or omission from any representation by, or any breach of warranty,
covenant or agreement of, the Company or the Stockholder contained herein
("Other Liabilities") in excess of the aggregate sum of $5,000.
9.13. Indemnification Procedures. Promptly after receipt by Ace (the
"Indemnitee"), of notice of any action, suit, proceeding, audit, claim or
potential claim (any of which is hereinafter individually referred to as a
"Circumstance"), which could give rise to a right to indemnification for damages
pursuant to Section 9.13, the Indemnitee shall give the party who may become
obligated to provide indemnification hereunder (the "Indemnitor") written notice
describing the Circumstance in reasonable detail; provided, that failure of an
Indemnitee to give such notice to the Indemnitor shall not relieve the
Indemnitor from any of its indemnification obligations hereunder unless (and
then only to the extent) that the failure to give such notice prejudices the
defense of the Circumstance by the Indemnitee. Such Indemnitor shall have the
right,
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at its option and upon its acknowledgment to the Indemnitee of Indemnitor's
liability to indemnify Indemnitee in respect of such asserted liability, to
compromise or defend, at its own expense and by its own counsel, any such matter
involving the asserted liability of the Indemnitee; provided, that any such
compromise (i) shall include as an unconditional term thereof, the giving by the
claimant or the plaintiff to such Indemnitee of a release from all liability in
respect of such claim and (ii) shall not result in the imposition on the
Indemnitee of any remedy other than monetary damages to be paid in full by the
Indemnitor pursuant to this Section 9.14. If any indemnitor shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
Indemnitee of its intention to do so, and the Indemnitee agrees to, and to cause
its own independent counsel to, cooperate fully with the Indemnitor and its
counsel in the compromise of, or defense against, any such asserted liability.
All reasonable out-of-pocket costs and expenses incurred by the Indemnitee in
connection with such cooperation (including, without limitation, the reasonable
fees and expenses of the Indemnitee's own independent counsel) shall be borne by
the Indemnitor. In any event, the Indemnitee shall have the right to participate
with its own counsel (the reasonable fees and expenses of which will be borne by
Indemnitor) in the defense of such asserted liability; provided that if with
respect to a Circumstance, Indemnitor shall have acknowledged Indemnitor's
liability to indemnify Indemnitee if and to the extent of any loss arising out
of such Circumstance and Indemnitor shall be diligently defending such matter,
Indemnitor shall not be obligated to indemnify Indemnitee for the cost of
Indemnitee's participation in such defense, including Indemnitee's attorney's
fees. Under no circumstances shall the Indemnitee compromise any such asserted
liability without the written consent of the Indemnitor (which consent shall not
be unreasonably withheld), unless the Indemnitor shall have failed or refused to
undertake the defense of any such asserted liability after a reasonable period
of time has elapsed following the notice of a Circumstance received by such
Indemnitor pursuant to this Section 9.14.
9.14. Other Indemnification Provisions. The foregoing indemnification
provisions under this Section 9 are in addition to, and not in derogation of,
any statutory, equitable or common law remedy any party may have for breach of
representation, warranty or covenant.
9.15 Opportunity to Cure: Upon the occurrence of a Default hereunder, the
defaulting Party shall be entitled to a period of twenty (20) days from the
receipt of notice (pursuant to Section 9.05) from the non-defaulting Party, of
said Default, in which to cure said Default. The notice shall set forth
specifically the nature of the Default.
IN WITNESS WHEREOF, the parties have duly executed this Agreement effective
as of the date written in the preamble of this Agreement.
ACE DRUG MEDICAL EQUIPMENT, INC.
By:
-------------------------------------
Terry Huckabee, President
Guarantor
----------------------------------------
TERRY HUCKABEE
-18-
<PAGE>
AMEDISYS DURABLE MEDICAL EQUIPMENT, INC.
By:
--------------------------------------
Larry Graham, Vice President
AMEDISYS, INC.
By:
---------------------------------------
Larry Graham, Senior Vice President -
Operations
-19-
<PAGE>
LIST OF SCHEDULES
Schedule No. Schedule Description
- ------------ --------------------
2.01 Stock Power
2.02(ii) Form of Long Term Note
2.02(iii) Form of Short Term Note
3.01 Organization and Qualification
3.03 Authorizations and Third Party Consents
3.04 Litigation
3.05 Employees and Compensation
3.06 Violations of Employee Contracts
3.07 Insurance
3.08 Contracts, Agreements and Instruments
3.11 Permits and Licenses
3.12 Properties
3.13 Hazardous Materials
3.14 Interest in Competitors
3.16 Changes or Events
3.17 Defaults
3.20 Excluded Liabilities
4.02 Authorizations and Third Party Consents
5.01 Amedisys, Inc. Closing Certificate
5.09 Legal Opinion of Benckenstein & Oxford, L.L.P.
6.01 Ace Drug Medical Equipment, Inc. Closing Certificate
6.09 Legal Opinion of Michael D. Lutgring
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,768,000
<SECURITIES> 0
<RECEIVABLES> 14,570,000
<ALLOWANCES> 2,397,000
<INVENTORY> 1,304,000
<CURRENT-ASSETS> 170,000
<PP&E> 11,540,000
<DEPRECIATION> (3,624,000)
<TOTAL-ASSETS> 50,630,000
<CURRENT-LIABILITIES> 41,815,000
<BONDS> 5,756,000
0
1,000
<COMMON> 3,000
<OTHER-SE> (14,041,000)
<TOTAL-LIABILITY-AND-EQUITY> 50,630,000
<SALES> 29,005,000
<TOTAL-REVENUES> 29,005,000
<CGS> 14,289,000
<TOTAL-COSTS> 14,289,000
<OTHER-EXPENSES> 16,641,000
<LOSS-PROVISION> 527,000
<INTEREST-EXPENSE> 580,000
<INCOME-PRETAX> (2,498,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,498,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,498,000)
<EPS-PRIMARY> (0.81)
<EPS-DILUTED> (0.81)
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