-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qv4o1S9FAZ6DbXrbUXRc/oJ6QCrCo2bmon/UJf2NjQz0dB59yLHUB2zfVuBR/Q4J rUxKgyLZ2bv4Jnfox5PqLA== 0000950134-01-508454.txt : 20020410 0000950134-01-508454.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950134-01-508454 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEDISYS INC CENTRAL INDEX KEY: 0000896262 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 113131700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24260 FILM NUMBER: 1785687 BUSINESS ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 2252922031 MAIL ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 10-Q 1 d91219e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 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 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) 11100 Mead Road, Suite 300, Baton Rouge, LA 70816 ------------------------------------------------- (Address of principal executive offices including zip code) (225) 292-2031 -------------- (Registrant's telephone number, including area code) 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 September 30, 2001: 5,911,620 shares 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000....................... 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000...................................................................... 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000...... 5 Notes to Consolidated Financial Statements....................................................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS...................................... 14
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS................................................................................ 14 ITEM 2. CHANGES IN SECURITIES............................................................................ 14 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................................. 15 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................. 15 ITEM 5. OTHER INFORMATION................................................................................ 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................. 15
2 Amedisys, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS as of September 30, 2001 and December 31, 2000 (Dollar Amounts in 000's)
(Unaudited) September 30, 2001 December 31, 2000 ------------------ ----------------- CURRENT ASSETS: Cash and Cash Equivalents $ 3,345 $ 6,967 Accounts Receivable, Net of Allowance for Doubtful Accounts of $2,391 in September 2001 and $1,385 in December 2000 10,518 6,628 Prepaid Expenses 415 196 Inventory and Other Current Assets 929 414 Current Assets Held for Sale -- 715 ----------------- ----------------- Total Current Assets 15,207 14,920 Property and Equipment, net 5,334 2,935 Other Assets, net 22,769 20,426 Long-term Assets Held for Sale -- 689 ----------------- ----------------- Total Assets $ 43,310 $ 38,970 ================= ================= CURRENT LIABILITIES: Accounts Payable $ 1,997 $ 1,590 Accrued Expenses: Payroll and Payroll Taxes 6,047 6,203 Insurance 1,487 708 Income Taxes 492 638 Other 5,327 3,925 Notes Payable 9,455 2,952 Notes Payable to Related Parties 10 10 Current Portion of Long-term Debt 4,702 3,379 Current Portion of Obligations under Capital Leases 521 385 Deferred Revenue 2,119 2,119 Current Liabilities Held for Sale -- 480 ----------------- ----------------- Total Current Liabilities 32,157 22,389 Long-term Debt 5,002 9,343 Long-term Medicare Liabilities 1,775 6,053 Deferred Revenue 2,295 3,884 Obligations under Capital Leases 448 30 Other Long-term Liabilities 826 826 Long-term Liabilities Held for Sale -- 966 ----------------- ----------------- Total Liabilities 42,503 43,491 ----------------- ----------------- Minority Interest 78 -- ----------------- ----------------- STOCKHOLDERS' EQUITY (DEFICIT) Common Stock (5,911,620 Shares in September 2001 and 5,326,126 Shares in December 2000) 6 5 Preferred Stock (350,000 Shares in September 2001 and 390,000 Shares in December 2000) -- 1 Additional Paid-in Capital 16,126 14,096 Treasury Stock (4,667 Shares of Common Stock in September 2001 and December 2000) (25) (25) Retained Earnings (Deficit) (15,378) (18,598) ----------------- ----------------- Total Stockholders' Equity (Deficit) 729 (4,521) ----------------- ----------------- Total Liabilities and Stockholders' Equity $ 43,310 $ 38,970 ================= =================
The accompanying notes are an integral part of these consolidated statements. 3 Amedisys, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS for the three and nine months ended September 30, 2001 and 2000 (Unaudited, In 000's, except per share data)
Three months ended Nine months ended September 30, 2001 September 30, 2000 September 30, 2001 September 30, 2000 ------------------ ------------------ ------------------ ------------------ Income: Service revenue $ 29,672 $ 22,091 $ 79,042 $ 68,779 Cost of service revenue 13,053 10,366 34,977 32,580 ----------------- ----------------- ----------------- ----------------- Gross margin 16,619 11,725 44,065 36,199 General and administrative expenses: Salaries and benefits 7,749 7,462 21,951 23,288 Other 6,308 5,122 17,621 15,407 ----------------- ----------------- ----------------- ----------------- Total general and administrative expenses 14,057 12,584 39,572 38,695 Operating income (loss) 2,562 (859) 4,493 (2,496) Other income and expense: Interest income 49 88 303 175 Interest expense (704) (690) (2,214) (1,957) Other income, net 71 (8) 167 75 ----------------- ----------------- ----------------- ----------------- Total other expense, net (584) (610) (1,744) (1,707) Income (loss) before income taxes and discontinued operations 1,978 (1,469) 2,749 (4,203) Income tax expense 0 0 0 0 ----------------- ----------------- ----------------- ----------------- Income (loss) before discontinued operations 1,978 (1,469) 2,749 (4,203) (Loss) from discontinued operations, net of income taxes (456) (407) (585) (2,806) Gain on sale of discontinued operations net of income taxes 1,056 1,114 1,056 3,623 ----------------- ----------------- ----------------- ----------------- Total discontinued operations 600 707 471 817 Net income (loss) $ 2,578 $ (762) $ 3,220 $ (3,386) ================= ================= ================= ================= Basic weighted average common shares outstanding 5,873 4,955 5,716 4,006 Basic income (loss) per common share: Income (loss) before discontinued operations $ 0.34 $ (0.29) $ 0.47 $ (1.05) (Loss) from discontinued operations, net of income taxes (0.08) (0.08) (0.10) (0.69) Gain on sale of discontinued operations, net of income taxes 0.18 0.22 0.19 0.90 ----------------- ----------------- ----------------- ----------------- Net income (loss) $ 0.44 $ (0.15) $ 0.56 $ (0.84) ================= ================= ================= ================= Diluted weighted average common shares outstanding 7,934 4,955 7,812 4,006 Diluted income (loss) per common share: Income (loss) before discontinued operations $ 0.25 $ (0.29) $ 0.35 $ (1.05) (Loss) from discontinued operations, net of income taxes (0.06) (0.08) (0.07) (0.69) Gain on sale of discontinued operations, net of income taxes 0.13 0.22 0.14 0.90 ----------------- ----------------- ----------------- ----------------- Net income (loss) $ 0.32 $ (0.15) $ 0.42 $ (0.84) ================= ================= ================= =================
The accompanying notes are an integral part of these consolidated statements. 4 Amedisys, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended September 30, 2001 and 2000 (Unaudited, Dollar Amounts in 000's)
For the nine months ended September 30, 2001 September 30, 2000 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 3,220 $ (3,386) Adjustments to reconcile net income (loss) to net cash provided by (used in) by operating activities: Depreciation and amortization 2,220 2,101 Provision for bad debts 1,584 1,622 Compensation expense 70 -- (Gain) on sale of discontinued operations (1,738) (3,779) Impairment of goodwill -- 1,771 Minority interest 722 -- Deferred revenue (1,589) (1,589) Changes in assets and liabilities: Decrease in cash included in assets held for sale 20 261 (Increase) decrease in accounts receivable (5,464) 468 (Increase) decrease in inventory and other current assets (510) 331 (Increase) decrease in other assets (49) 96 Increase (decrease) in accounts payable 244 (727) Increase in accrued expenses 3,312 1,479 ------------------ ------------------ Net cash provided by (used in) operating activities 2,042 (1,352) ------------------ ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 12 114 Purchase of property, plant and equipment (3,202) (244) Proceeds from sale of Company operations 1,684 4,949 Cash used in purchase acquisitions (3,406) -- Minority interest investment in subsidiary 101 214 Partnership distributions (745) -- ------------------ ------------------ Net cash provided by (used in) investing activities (5,556) 5,033 ------------------ ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) on line of credit agreements 6,503 (3,856) Proceeds from issuance of notes payable and capital leases 624 1,000 Payments on notes payable and capital leases (3,196) (3,623) Increase (decrease) in long-term Medicare liabilities (4,278) 4,895 Capitalized interest expense -- 1,106 Proceeds from issuance of stock 239 -- ------------------ ------------------ Net cash (used in) financing activities (108) (478) ------------------ ------------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,622) 3,203 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,967 1,425 ------------------ ------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,345 $ 4,628 ================== ================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 2,273 $ 971 ================== ================== Income taxes $ 321 $ 56 ================== ==================
The accompanying notes are an integral part of these consolidated statements. 5 AMEDISYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Amedisys, Inc., a Delaware corporation ("Amedisys" or "the Company"), is a leading multi-state provider of home health care nursing services. The Company operates fifty-five home care nursing offices and one corporate office in the southern 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 Company's financial position at September 30, 2001, the results of operations for the three and nine months ended September 30, 2001 and 2000, and cash flows for the nine months ended September 30, 2001 and 2000. The results of operations for the interim periods are not necessarily indicative of 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. RESTATEMENT The Company has restated the Consolidated Financial Statements for the year ended December 31, 2000 and the quarter ended March 31, 2001 due to a net revenue overstatement for the fourth quarter of 2000 and the first quarter of 2001. The Medicare reimbursement changes effective October 1, 2000 required substantial changes to the Company's software applications, both from an operational and an accounting perspective, including the recording of revenue related to patients receiving therapy services. Under the changed reimbursement system, if a patient, upon initial assessment by the nurse, is expected to require ten or more therapy visits in an episode, the expected reimbursement for that episode is increased ("therapy add-on"). If, upon completion of the episode, the expected therapy utilization of ten or more visits was not met, the provider is not entitled to the therapy add-on. The Company's software did not detect differences between the initial nurse's assessment that called for ten or more visits and the therapist's subsequent evaluation which indicated that fewer than ten visits were necessary. The Company has modified its software and has changed certain processes to detect any discrepancies in assessed therapy need and to more closely monitor the patient's progress as it relates to scheduled therapy services. 3. REVENUE RECOGNITION Prior to the implementation of the Medicare Prospective Payment System ("PPS") on October 1, 2000, reimbursement for home health care services to patients covered by the Medicare program was based on reimbursement of allowable costs subject to certain limits. Final reimbursement was determined after submission of annual cost reports and audits thereof by the fiscal intermediaries. Under PPS, the Company is paid by Medicare based on episodes of care. An episode of care is defined as a length of care up to sixty days with multiple continuous episodes allowed. The standard episode payment beginning October 1, 2000 was established by the Medicare Program at $2,115 per episode, to be adjusted by a case mix adjuster consisting of eighty (80) home health resource groups ("HHRG") and the applicable geographic wage index. The standard episode payment may be subject to further individual adjustments due to low utilization, intervening events and other factors. The episode payment will be made to providers regardless of the cost to provide care. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit. Revenue is recognized for visits during the earnings period at the expected payment amount. Effective October 1, 2001, the standard episode payment was increased, through federal legislation, to $2,274 per episode. 6 4. EARNINGS PER SHARE Earnings per common share are based on the weighted average number of shares outstanding during the period. For the three and nine months ended September 30, 2000, there was no difference between basic and diluted weighted average common shares outstanding as the effect of stock options (605,086 and 580,108 weighted average outstanding for the three and nine months ended September 30, 2000, respectively), warrants (210,000 and 199,325 weighted average outstanding for the three and nine months ended September 30, 2000, respectively) and preferred shares (390,000 preferred shares convertible into 1,473,913 and 2,040,024 weighted average common shares for the three and nine months ended September 30, 2000, respectively) were anti-dilutive. The following table sets forth the computation of basic and diluted net income (loss) per common share for the three and nine month periods ended September 30, 2001 and 2000 including the results of discontinued operations.
In 000's, except per share data Three months Three months Nine months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2001 2000 2001 2000 ----------------- ----------------- ----------------- ----------------- Basic Net Income (Loss) per Share: Net Income (Loss) $ 2,578 $ (762) $ 3,220 $ (3,386) ================= ================= ================= ================= Weighted Average Number of Shares Outstanding 5,873 4,955 5,716 4,006 ================= ================= ================= ================= Net Income (Loss) per Common Share - Basic $ 0.44 $ (0.15) $ 0.56 $ (0.84) ================= ================= ================= ================= Diluted Net Income (Loss) per Share: Net Income (Loss) $ 2,578 $ (762) $ 3,220 $ (3,386) ================= ================= ================= ================= Weighted Average Number of Shares Outstanding 5,873 4,955 5,716 4,006 Effect of Dilutive Securities: Stock Options 635 -- 645 -- Warrants 260 -- 250 -- Convertible Preferred Shares (350,000 convertible into 1,166,666 Common Shares at September 30, 2001) 1,166 -- 1,201 -- ----------------- ----------------- ----------------- ----------------- Average Shares - Diluted 7,934 4,955 7,812 4,006 ================= ================= ================= ================= Net Income (Loss) per Common Share - Diluted $ 0.32 $ (0.15) $ 0.42 $ (0.84) ================= ================= ================= =================
5. MEDICARE REIMBURSEMENT AND REFORM The Company derived approximately 88% of its revenues from continuing operations from the Medicare system for the nine months ended September 30, 2001 and approximately 91% for the nine months ended September 30, 2000. On June 28, 2000, HCFA issued the final rules for PPS (as discussed in Note 3), which were effective for all Medicare-certified home health agencies on October 1, 2000. The final regulations establish payments based on episodes of care. An episode is defined as a length of care up to sixty days with multiple continuous episodes allowed under the rule. A standard episode payment has been established at $2,115 per episode for federal fiscal year 2001, to be adjusted by a case mix adjuster consisting of eighty (80) home health resource groups ("HHRG") and the applicable geographic wage index. The standard episode payment may be subject to further individual adjustments due to low utilization, intervening events and other factors. Providers are allowed to make a request for anticipated payment at the start of care equal to 60% of the expected payment for the initial episode and 50% for each subsequent episode. The remaining balance due to the provider is paid following the submission of the final claim at the end of the episode. In contrast to 7 the cost-based reimbursement system whereby providers' reimbursement was limited, among other things, to their actual costs, episode payments are made to providers regardless of the cost to provide care, except with regard to certain outlier provisions. As a result, home health agencies have the opportunity to be profitable under this system. In December 2000, Congress passed the Benefits Improvement and Protection Act ("BIPA"), which provides additional funding to health care providers. BIPA provided for the following: (i) a one-year delay in applying the budgeted 15% reduction on payment limits, (ii) the restoration of a full home health market basket update for episodes ended on or after April 1, 2001, and before October 1, 2001 resulting in an expected increase in revenues of 2.2%, (iii) a 10% increase, effective April 1, 2001 and extending for a period of twenty four months, for home health services provided in a rural area, and (iv) a one-time payment equal to two-months of periodic interim payments ("PIP") (See Note 10). Effective October 1, 2001, the standard episode payment for federal fiscal year 2002 has been increased to $2,274 per episode. 6. ACQUISITIONS Effective March 1, 2001, the Company acquired, through its wholly-owned subsidiary Amedisys Home Health, Inc. of Alabama, certain assets and liabilities of Seton Home Health Services, Inc. ("Seton") from Seton Health Corporation of North Alabama associated with their operations in Mobile and Fairhope, Alabama. The assets acquired consisted primarily of all furniture, fixtures, equipment (except computer equipment and printers) and leasehold improvements; supplies; inventory; lists of present and former patients and mailing lists; vendor lists; employee records; telephone numbers and listings; intangibles and other rights and privileges; leasehold interest in the locations; goodwill and going concern; rights under certain agreements; rights under all contracts including capital leases and non-competition agreements; licenses and permits relating to ownership, development and operations; and rights under Medicare Provider Agreements. The liabilities assumed consisted of accrued but unused vacation and obligations under capital and operating leases. In consideration for the acquired assets and liabilities, the Company paid $440,000 cash, which represents a purchase price of $475,000 less the value of accrued vacation obligations. In connection with this acquisition, the Company recorded $448,000 in goodwill (See Note 12). Effective April 6, 2001, the Company acquired, through its wholly-owned subsidiary Amedisys Home Health, Inc. of Alabama, certain additional assets and liabilities of Seton Home Health Services, Inc. ("Seton") from Seton Health Corporation of North Alabama associated with their operations in Birmingham, Tuscaloosa, Anniston, Greensboro, and Reform, Alabama. The assets acquired consisted primarily of all furniture, fixtures, equipment (except computer equipment and printers) and leasehold improvements; supplies; inventory; lists of present and former patients and mailing lists; vendor lists; employee records; telephone numbers and listings; intangibles and other rights and privileges; leasehold interest in four of the five locations; goodwill and going concern; rights under certain agreements; rights under all contracts including capital leases and non-competition agreements; licenses and permits relating to ownership, development and operations; and rights under Medicare Provider Agreements. The liabilities assumed consisted of estimated accrued but unused vacation and obligations under capital and operating leases. In consideration for the acquired assets and liabilities, the Company paid $2,216,000 cash, which represents a purchase price of $2,325,000 less the estimated value of accrued vacation obligations. In connection with this acquisition, the Company recorded $2,235,000 in goodwill (See Note 12). Effective June 11, 2001, the Company acquired from East Cooper Community Hospital, Inc. ("East Cooper") certain assets and liabilities of HealthCalls Professional Home Health Services. The assets consisted primarily of all furniture, fixtures, equipment, leasehold improvements and supplies; inventory; current patient lists of present or former patients, mailing lists, telephone numbers and intangibles and other rights and privileges; leasehold interest in the premises located at the business address; goodwill and going concern; benefits of all amounts previously paid by East Cooper for advertising, design fees, rent services, or interest relating to the business or assets to the extent they are to be performed after the closing; rights under certain agreements; licenses and permits relating to ownership, development and operations of the business, including the Medicare Provider Number, rights under the Medicare Provider Agreement, the Medicaid Provider Number and rights under the Medicaid Provider Agreement; technical outlines and records, and any and all know-how and software and other technology, including all contracts, licenses, authorizations and permits; trade secrets, inventions, patents, copyrights, trade names, business names, trademarks, and other intangible assets; copies of medical records of patients who received services from East Cooper to the extent reasonably necessary to transfer the care of such patients; and copies of business records related to the operation of the business. The liabilities assumed consisted of liabilities related to the operation of the business for services provided post-closing. In consideration for 8 the acquired assets and liabilities, the Company paid $750,000 cash. In connection with this acquisition, the Company recorded $726,000 in goodwill (See Note 12). 7. DISCONTINUED OPERATIONS During 1999, the Company changed its strategy from providing a variety of alternate site provider health care services to becoming a leader in home health care nursing services. Pursuant to this strategy, the Company launched a restructuring plan to divest its non-home health care nursing divisions. The Company sold its six surgery centers and sold or closed its four infusion locations with the final sale taking place (as described below) in September, 2001. Effective September 7, 2001, the Company, its wholly-owned subsidiary Amedisys Surgery Centers, L.C., its 56% owned subsidiary Hammond Surgical Care Center, L.C. d/b/a St. Luke's SurgiCenter ("St. Luke's"), and Surgery Center of Hammond, L.L.C. ("Surgery Center") entered into an agreement for the purchase and sale of the operations and assets of St. Luke's, an outpatient surgery center located in Hammond, Louisiana, to Surgery Center. The sales price of $2,850,000 was paid at closing and distributed in the following manner: $1,066,000 paid directly to debtors of St. Luke's relating to existing debt obligations, $1,684,000 paid to St. Luke's, and $100,000 in cash to be released upon the determination of the value of working capital transferred. Subsequent to the sale, St. Luke's made partnership distributions of $1,693,000 of which the Company received $948,000 and the physician investors received $745,000. The assets sold consisted primarily of patient accounts receivable; contracts, including the Medicare and Medicaid provider agreements; all machinery, equipment, fixtures, computers, computer hardware and software, tools, supplies, furniture, and other tangible personal property; leases; operating data and records including client lists; licenses and permits to the extent transferable; all rights and interest to the name "St. Luke's SurgiCenter"; telephone numbers; supplies, prepaid expenses, and inventory; and other assets. The liabilities assumed include trade accounts payable as of the closing and all obligations relating to the assumed assets arising on or after the effective date. The agreement stipulated a required level of working capital, defined as patient accounts receivable less trade accounts payable, of $430,000 to be conveyed at closing. Any amount in excess of $430,000 will be returned to St. Luke's, and any amount less than $430,000 will be payable by St. Luke's to Surgery Center. The Company and its affiliates had no material relationship with Surgery Center prior to this transaction. In the accompanying Consolidated Statements of Operations, the Company recorded a pre-tax gain of $1,738,000, offset by minority interest expense of $672,000, resulting in a net pre-tax gain of $1,066,000 in the quarter ended September 30, 2001. 9 Summarized financial information for the discontinued operations is as follows (in 000's):
For the three months For the nine months Ended September 30 ended September 30 ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Outpatient Surgery Division: Service Revenue $ 564 $ 815 $ 1,846 $ 2,396 (Loss) from Discontinued Operations before Provision for Income Taxes (456) (4) (535) 371 (Loss) from Discontinued Operations Net of Income Taxes (456) (4) (535) 371 Gain on Sale of Discontinued Operations Before Provision for Income Taxes 1,066 -- 1,066 2,675 Gain on Sale of Discontinued Operations Net of Income Taxes 1,056 -- 1,056 2,509 Infusion Therapy Division: Service Revenue $ -- $ 478 $ -- $ 4,485 (Loss) from Discontinued Operations before Provision for Income Taxes -- (404) (50) (3,178) (Loss) from Discontinued Operations Net of Income Taxes -- (404) (50) (3,178) Gain on Sale of Discontinued Operations Before Provision for Income Taxes -- 1,114 -- 1,114 Gain on Sale of Discontinued Operations Net of Income Taxes -- 1,114 -- 1,114 DME / Management Services Divisions: Service Revenue $ -- $ -- $ $ -- Income from Discontinued Operations before Provision for Income Taxes -- 1 -- 1 Income from Discontinued Operations Net of Income Taxes -- 1 -- 1 Total Discontinued Operations: Service Revenue $ 564 $ 1,293 $ 1,846 $ 6,881 Income (Loss) from Discontinued Operations before Provision for Income Taxes (456) (407) (585) (2,806) Income (Loss) from Discontinued Operations Net of Income Taxes (456) (407) (585) (2,806) Gain on Sale of Discontinued Operations Before Provision for Income Taxes 1,066 1,114 1,066 3,789 Gain on Sale of Discontinued Operations Net of Income Taxes 1,056 1,114 1,056 3,623
Included in the accompanying Consolidated Balance Sheet as of December 31, 2000 are the following assets and liabilities relating to the discontinued operations (in 000's):
December 31, 2000 ----------------- Cash $ 20 Accounts Receivable 510 Prepaid Expenses 13 Inventory and Other Current Assets 172 ---------------- Current Assets Held for Sale $ 715 ================ Property $ 681 Other Assets 8 ---------------- Long-term Assets Held for Sale $ 689 ================ Accounts Payable $ 190 Accrued Payroll 50 Accrued Other 34 Current Portion of Long-term Debt 192 Current Portion of Obligations under Capital Leases 14 ---------------- Current Liabilities Held for Sale $ 480 ================ Long-term Debt $ 966 ---------------- Long-term Liabilities Held for Sale $ 966 ================
10 8. NOTES PAYABLE Notes payable as of September 30, 2001 consists primarily of an asset-based line of credit with availability, depending on collateral, of up to $25 million with National Century Financial Enterprises, Inc. ("NCFE") and borrowings under a revolving bank line of credit of up to $2.5 million. The $25 million asset-based line of credit, which expires December, 2003, is collateralized by eligible accounts receivable and as of September 30, 2001 and December 31, 2000, had an outstanding balance of $9,280,000 and $2,952,000, respectively. There were no amounts available under this line as of September 30, 2001. Eligible receivables are defined as receivables, exclusive of workers' compensation and self-pay, that are aged less than 181 days. The effective interest rate on this line of credit was 11.91% and 15.29% for the nine months ended September 30, 2001 and the year ended December 31, 2000, respectively. The revolving bank line of credit of $2.5 million bears interest at the Bank One Prime Floating Rate, which was 6.0% and 9.5% at September 30, 2001 and December 31, 2000, respectively. At September 30, 2001, there was $175,000 drawn on the line of credit with $2,325,000 available. At December 31, 2000, there were no amounts drawn on the line of credit. 9. LONG-TERM DEBT Long-term debt consists primarily of a $7.9 million note payable to NPF Capital, a $744,000 note payable to CareSouth Home Health Services, Inc. ("CareSouth"), and a $724,000 note payable to Winter Haven Hospital. The $7.9 million note to NPF Capital is payable over a three year term, due in December, 2003, with interest only payments for a six month period ended June, 2001 and monthly payments of principal and interest of $387,000 for the remainder of the term. In connection with the sale of St. Luke's, the Company made a mandatory accelerated payment of $1 million on the NPF Capital note. The Company makes monthly principal and interest payments of $25,000 on the $744,000 note to CareSouth, which is due July, 2003 and monthly principal and interest payments of $30,000 on the $724,000 note to Winter Haven Hospital, which is due November, 2003. 10. AMOUNTS DUE TO AND DUE FROM MEDICARE Prior to the implementation of PPS, the Company recorded Medicare revenues at the lower of actual costs, the per visit cost limit, or a per beneficiary cost limit on an individual provider basis in accordance with established guidelines. As of September 30, 2001, the Company estimates an aggregate payable to Medicare of $16.5 million resulting from interim cash receipts in excess of expected reimbursement. In the accompanying Consolidated Balance Sheet as of September 30, 2001, the amounts due to Medicare within one year of $14.7 million are netted against accounts receivable. The amount payable to Medicare in excess of one year of $1.8 million is shown as Long-term Medicare Liabilities. Of the $14.7 million netted against accounts receivable, $7.4 million is attributed to a provision in BIPA whereby a lump-sum payment equal to two months of Periodic Interim Payments ("PIP") was issued to providers. Upon completion of the annual cost reports in March, 2002, the Company will request extended repayment plans for these payments. There can be no assurances, however, that the extended repayment plans will be accepted. Also included in the $14.7 million is a $3.2 million overpayment relating to Alliance Home Health, a wholly-owned subsidiary of the Company which filed for bankruptcy protection on September 29, 2000. The BIPA overpayment of $7.4 million and the Alliance debt of $3.2 million currently do not have repayment plans and no payments are currently being made. 11. CAPITAL STOCK In accordance with the terms of conversion of the Company's Series A Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement, eight preferred shareholders converted a total of 360,000 preferred shares into 1,200,000 common shares during 2000. During the first quarter of 2001, two additional preferred shareholders converted a total of 20,000 preferred shares into 66,667 common shares and during the second quarter of 2001, one additional preferred shareholder converted 20,000 preferred shares into 66,667 common shares. The conversion rate for the preferred shares was $3.33. 12. EFFECT OF NEW FINANCIAL ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standards Statement No. 141, Business Combinations ("SFAS 141") and Financial Accounting Standards Statement No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 eliminates the pooling-of-interests method of 11 accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. The purchase method of accounting is required to be used for all business combinations initiated after June 30, 2001. SFAS 141 also requires separate recognition of intangible assets that meet certain criteria. Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed for impairment annually, or more frequently if circumstances indicate potential impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. For goodwill and indefinite-lived intangible assets acquired prior to July 1, 2001, goodwill will continue to be amortized through the remainder of 2001 at which time amortization will cease and a transitional goodwill impairment test will be performed. Any impairment charges resulting from the initial application of the new rules will be classified as a cumulative effect of change in accounting principle. The Company will adopt SFAS 142 effective January 1, 2002. Management is currently evaluating the impact of the new accounting standards on existing goodwill and other intangible assets. Included in general and administrative expenses in the accompanying Consolidated Statements of Operations is goodwill amortization expense as follows (in 000's):
3 months ended 9 months ended September 30, September 30, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Goodwill Amortization Expense $ 320 $ 244 $ 914 $ 732
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires recording the fair value of a liability for an asset retirement obligation in the period incurred. The standard is effective for fiscal years beginning after June 15, 2002, with earlier application permitted. Upon adoption of the standard, the Company will be required to use a cumulative effect approach to recognize transition amounts for any existing retirement obligation liabilities, asset retirement costs and accumulated depreciation. The Company has not determined the transition amounts. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This new statement also supersedes certain aspects of APB 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", with regard to reporting the effects of a disposal of a segment of a business and will require expected future operating losses from discontinued operations to be reported in discontinued operations in the period incurred rather than as of the measurement date as presently required by APB 40. Additionally, certain dispositions may now qualify for discounted operations treatment. The provisions of this statement are required to be applied for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company has not yet determined what effect this statement will have on its financial statements. 13. SUBSEQUENT EVENT Effective October 1, 2001, the Company terminated its management agreement with CareSouth Home Health Services, Inc. ("CareSouth"). This management agreement, which the Company entered into on November 2, 1998 and amended on September 1, 1999, was for the provision of payroll processing, billing services, and collection services. In connection with this termination, the Company entered into a Software License Agreement ("License Agreement") with CareSouth for the use of a home health care billing and collections software system. The License Agreement, which expires May 1, 2004, provided for a $2,000,000 cash payment at signing, monthly payments beginning October 1, 2000 of $178,226 through May, 2004, and a $1,000,000 cash payment due on or before February 28, 2002. At the expiration of the License Agreement, the Company has the option to acquire the software system for $1.00, and consequently, the Company intends to account for this lease as a capital lease obligation. 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 and Notes thereto (the "Notes") appearing in Item 1 and the Consolidated Financial Statements for 2000, Notes, and the related Management's Discussion and Analysis as amended and restated in Form 10-K/A. GENERAL Amedisys is a leading multi-regional provider of home health care nursing services. The Company operates fifty-five home care nursing offices and one corporate office in the southern and southeastern United States. During 1999, the Company changed its strategy from providing a variety of alternate site provider health care services to becoming a leader in home health care nursing services. Pursuant to this strategy, the Company launched a restructuring plan to divest its non-home health care nursing divisions. The Company subsequently sold its six surgery centers and sold or closed its four infusion locations. The Company has systematically reduced its operating costs since 1998 in preparation for PPS. Significant cost reduction measures undertaken by the Company included the consolidation/closure of offices which overlapped service areas, converting its method of nurse pay to a variable or per visit rate rather than a fixed or salary system, utilizing economies of scale, and reducing corporate overhead when possible. Business functions that are not considered part of the core business have been outsourced and management levels have been streamlined. The Company has positioned its operations to be successful under PPS. The Company has implemented Disease 12 State Management programs and clinical protocols as well as supporting technology to monitor and report outcome data, to standardize care, and to ensure quality outcomes. Using clinical managers to assess and track patient progress and highly skilled nurses to deliver care are also important components of the overall strategy. RESULTS OF OPERATIONS The Company has restated the Consolidated Financial Statements for the three months ended March 31, 2001 due to a net revenue overstatement for the first quarter of 2001 as discussed in Note 2 of the Consolidated Financial Statements. The results of operations for the nine months ended September 30, 2001 include the effect of the restatement as discussed in Note 2. Service Revenues. Net revenues increased $7,581,000 or 34% and $10,263,000 or 15% for the three and nine months ended September 30, 2001, respectively, as compared to the same periods in 2000. This increase was attributed to an increase in patient admissions, the change in the Medicare reimbursement effective October 1, 2000, the price increase effective April 1, 2001 as a result of BIPA (as discussed in Note 5), and the price increase for patients on service at the end of the third quarter effective October 1, 2001. Patient admissions increased 3,230 or 52% from 6,230 for the three months ended September 30, 2000 to 9,460 for the three months ended September 30, 2001 and increased 7,747 or 40% from 19,233 for the nine months ended September 30, 2000 to 26,980 for the nine months ended September 30, 2001. The increase in patient admissions is attributable to both internal growth and agencies acquired in the fourth quarter of 2000 and the first six months of 2001. Cost of Revenues. Cost of revenues increased 26% for the three months ended September 30, 2001 and 7% for the nine months ended September 30, 2001 as compared to the same periods in 2000. These increases are attributed to increased salaries for the clinical manager positions of $1,253,000 and $4,785,000 for the three and nine months ended September 30, 2001. The clinical manager position was implemented company-wide in the latter part of 2000 to provide a greater level of patient care oversight and coordination. General and Administrative Expenses ("G&A"). G&A increased $1,473,000, or 12%, for the three months ended September 30, 2001 and $877,000, or 2%, for the nine months ended September 30, 2001 as compared to the same periods in 2000. The increase is primarily attributed to an increased bad debt provision of $433,000 for the three months ended September 30, 2001 and $862,000 for the nine months ended September 30, 2001 as compared to the prior year amounts. FINANCIAL CONDITION The Company recorded operating losses and had negative cash flow for the year ended December 31, 1999 and the first three quarters of 2000, during which time its operations were primarily funded by the divestiture of certain non-core assets. The significant losses and negative cash flow from operations were largely attributable to the prior Medicare reimbursement system which was effective January 1, 1998 for the Company. In the fourth quarter of 2000 and the first quarter of 2001, the Company reported positive cash flow and a decrease in operating losses primarily as a result of the implementation of PPS on October 1, 2000. In the second and third quarters of 2001, the Company reported profitability and positive cash flow due, in part, to a price increase effective April 1, 2001 as a result of BIPA. The Company expects positive cash flow from operations will continue and the Company will be able to fund operations primarily from this source. As of September 30, 2001, the Company had a working capital deficit of $17.0 million. Included in the components of this deficit are the following significant items that do not currently impact cash flow:
September 30, 2001 ------------------ Short-term Medicare Liabilities (See Note 10) $ 10,600,000 Deferred Revenue (Current portion) 2,119,000 ------------ Total $ 12,719,000 ============
The short-term Medicare liability amount presented above, which is netted against accounts receivable in the accompanying Consolidated Balance Sheet, consists of two components. The first is an overpayment as a result of BIPA of approximately $7.4 million, and the second is a $3.2 million liability for a bankrupt subsidiary. The $7.4 million overpayment relates to fiscal year 2000, prior to the implementation of PPS. Cost reports for this period are due March 10, 2002; therefore, no payments are expected until that time. The Company plans to request a 36 month payment plan for this overpayment. If approved, the long-term portion of this debt will be reflected as Long-Term Medicare Liabilities on the balance sheet. The $3.2 million overpayment relates to fiscal year 1998 and is listed as a debt to be discharged during the final liquidation of the bankrupt subsidiary. The deferred revenue of $2.1 million is the current portion of the deferred gain resulting from the sale of the Company's software system in 1998. Due to the Company's continuing involvement with the software system, the gain on the sale of the system was deferred and is being amortized over a five-year period. The Company also has certain contingencies recorded as current liabilities in the accompanying Consolidated Balance Sheet (in accordance with SFAS No. 5) that management does not believe will currently impact cash flow. Also, as discussed in Note 8, the Company has available $2.3 million under the bank line of credit which would be available to fund working capital needs. For a description of Notes Payable and Long-term Debt, see Notes 8 and 9. For a discussion of Amounts Due Medicare, see Note 10. The Company's operating activities provided $2.0 million in cash during the nine months ended September 30, 2001, whereas such activities used $1.4 million in cash during the nine months ended September 30, 2000. Cash provided by operating activities in 2001 is primarily attributable to net income of $3.2 million and net non-cash items 13 such as depreciation and amortization of $2.2 million offset by changes in assets and liabilities of $2.5 million. Investing activities used $5.6 million for the nine months ended September 30, 2001, whereas such activities provided $5.0 million for the nine months ended September 30, 2000. Cash used by investing activities in 2001 is primarily attributed to the purchase of property, plant and equipment of $3.2 million, cash used for acquisitions of $3.4 million, and partnership distributions of $745,000, offset by proceeds from the sale of Company operations of $1.7 million. Financing activities used cash during the nine months ended September 30, 2001 of $108,000, whereas such activities used $478,000 during the same period in 2000. Cash used by financing activities in 2001 is primarily attributed to borrowings on line of credit agreements of $6.5 million, proceeds from the issuance of notes payable and capital leases of $624,000, and proceeds from the issuance of stock of $239,000, offset by payments on notes payable and capital leases of $3.2 million and a decrease in long-term Medicare liabilities of $4.3 million. As discussed in the Company's Annual Report of Form 10-K, the Company began, in the first quarter of 2001, the installation of a company-wide computer network infrastructure to connect all of its regional offices. This wide area network ("WAN") will allow more immediate access to information by all company personnel including senior management, which will increase operational efficiencies. The original expected project cost was $1.5 million, however, the commitment has subsequently been revised to approximately $2.5 million due to the incremental cost for acquired agencies and requested design enhancements. Capital expenditures through September 30, 2001 relating to this project approximated $1.8 million and are included in purchase of property, plant, and equipment in the Consolidated Statements of Cash Flows. The Company does not believe that inflation has had a material effect on its results of operations for the three and nine month periods ended September 30, 2001. 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 service 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. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company does not engage in derivative financial instruments, other financial instruments, or derivative commodity instruments for speculative or trading/non-trading purposes. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 23 and October 4, 2001, two suits were filed against the Company and three of its executive officers in the United States District Court for the Middle District of Louisiana by two individuals purportedly as class actions on behalf of all purchasers of Amedisys stock between March 1, 2001 and June 13, 2001. The suits seek damages based on the decline in Amedisys' stock price following an announced restatement of earnings for the fourth quarter of 2000 and first quarter of 2001, claiming that the defendants knew or were reckless in not knowing the facts giving rise to the restatement. The Company intends to seek dismissal of both claims. ITEM 2. CHANGES IN SECURITIES In accordance with the terms of conversion of the Company's Series A Preferred Stock as stated in the Series A Preferred Stock Conversion Agreement, during the first quarter of 2001, two preferred shareholders converted a total of 20,000 preferred shares into 66,667 common shares. During the second quarter of 2001, one preferred shareholder converted 20,000 preferred shares into 66,667 common shares. The conversion was exempt under Section 3(a)(9) of the Securities Act of 1933. 14 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Identification of Exhibit - ------- ------------------------- 2.1(6) - Asset Purchase Agreement by and between Surgery Center of Hammond, L.L.C. and Hammond Surgical Care Center, L.C. and Amedisys, Inc. and Amedisys Surgery Centers, L.C. 3.1(1) - Certificate of Incorporation 3.2(5) - Bylaws 4.1(1) - Certificate of Designation for the Series A Preferred Stock 4.2(2) - Common Stock Specimen 4.3(2) - Preferred Stock Specimen 4.4(2) - Form of Placement Agent's Warrant Agreement 4.5(3) - Series A Preferred Stock Conversion Agreement Specimen 4.6(3) - Certificate of Amendment of Certificate of Designation Specimen 4.7(4) - Shareholder Rights Agreement 10.1(6) - Modification Agreement by and between CareSouth Home Health Services, Inc. and Amedisys, Inc. 10.2(6) - Software License Agreement by and between CareSouth Home Health Services, Inc. and Amedisys, Inc. 21.1(2) - List of Subsidiaries - ---------- (1) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the year ended December 31, 1994. (2) Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 11, 1998. (3) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for the period ended June 30, 1999. (4) Previously filed as an exhibit to the Current Report on Form 8-K dated June 16, 2000 and the Registration Statement on Form 8-A dated June 16, 2000. (5) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2001. (6) Filed herewith. ---------- (b) Report on Form 8-K On July 17, 2001, the Company filed a Current Report on Form 8-K with the SEC attaching a press release quantifying a net revenue overstatement previously announced. On July 19, 2001, the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing expected second quarter earnings. On August 21, 2001, the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing quarter ended June 30, 2001 operating results and that the Company would host a conference call at 4:15 EDT that same day. On September 18, 2001, the Company filed a Current Report on Form 8-K with the SEC attaching a press release that announced that it had sold its last remaining outpatient surgery center, Hammond Surgical Care Center, L.C., 15 d/b/a St. Luke's SurgiCenter, to Surgery Center of Hammond, L.L.C., an affiliate of Universal Health Services, Inc. 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. By: /s/ John M. Joffrion --------------------------------------- John M. Joffrion Senior Vice President of Finance Principal Accounting and Financial Officer DATE: November 13, 2001 16 EX-2.1 3 d91219ex2-1.txt ASSET PURCHASE AGREEMENT EXHIBIT 2.1 ASSET PURCHASE AGREEMENT BY AND BETWEEN SURGERY CENTER OF HAMMOND, L.L.C. AND HAMMOND SURGICAL CARE CENTER, L.C. AND AMEDISYS, INC. AND AMEDISYS SURGERY CENTERS, L.C. DATED AS OF SEPTEMBER 7, 2001 -i- ASSET PURCHASE AGREEMENT AGREEMENT, made as of the 7th day of September, 2001, by and between Surgery Center of Hammond, L.L.C. (the "Purchaser"), Hammond Surgical Care Center, L.C. (the "Seller"), Amedisys Surgery Centers, L.C. ("ASC") and Amedisys, Inc. ("Amedisys"). WITNESSETH: WHEREAS, the Seller is the operator of an ambulatory surgery facility (the "Center") located in Hammond, Louisiana which provides treatment for ambulatory surgical patients and subleases the real property on which the Center is located (the "Real Property"); and WHEREAS, ASC is the lessee of the Real Property and is a party to this Agreement to assign its leasehold interest in the Real Property to the Purchaser, and WHEREAS, Purchaser desires to purchase and the Seller desires to sell certain assets of the Seller, upon the terms and subject to the conditions set forth in this Agreement, and WHEREAS, Amedisys or its affiliates is the owner of certain equipment utilized by the Seller at the Center (the "Merrill Lynch Equipment") and such equipment is encumbered by indebtedness owed to Merrill Lynch, pursuant to that certain financing agreement by and between Amedisys and its affiliates and Merrill Lynch (the "Merrill Lynch Indebtedness"), and WHEREAS, the Merrill Lynch Indebtedness shall be repaid out of the proceeds received from this transaction and Amedisys shall convey, transfer, and assigns its rights and interest in the Merrill Lynch Equipment to the Purchaser, and WHEREAS, as a material inducement to Purchaser entering into and consummating this transaction, Amedisys has agreed to guarantee the obligations of the Seller as set forth in Section 15 herein. NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter contained, the parties hereto agree as follows: 1. Purchase and Sale of Assets. 1.1 Assets Conveyed. At the closing of the transactions contemplated hereby (the "Closing") on the Closing Date (as hereinafter defined), and upon the basis of the representations, warranties, covenants and agreements contained herein, the Seller, ASC and Amedisys shall sell, transfer, assign, convey and deliver to the Purchaser, and the Purchaser shall purchase on the terms set forth herein, all of the their respective rights, title and interest in and to the Assets. The "Assets" shall mean those personal, tangible and intangible properties of the Seller, ASC and Amedisys as set forth below and as more particularly described in the Schedules to this Section 1.1: (a) Accounts Receivables: all patient accounts receivables of the Seller existing on the Closing Date, including without limitation the receivables set forth on Schedule 1.1(a) which shall be a true and accurate listing of all patient accounts receivables. (b) Contractual Rights: all rights and benefits of the Seller under all contracts set forth on Schedule 1.1(b) hereto (which also recites those contracts, the assignment of which by their terms requires third party consent), which shall include the Seller's Medicare and Medicaid provider agreements; (c) Equipment: all machinery, equipment, fixtures, computers, computer hardware and software, tools, supplies, furniture, and other tangible personal property and assets of the Seller and all of the Merrill Lynch Equipment owned by Amedisys, as specifically described in Schedule 1.1(c) hereto; (d) Leases: all the interest of and the rights and benefits accruing to the Seller as lessee/sublessee and ASC as lessee under (i) all leases of Real Property used by the Seller in the operation of the Center, and all leasehold improvements and fixtures relating thereto, including without limitation those described in Schedule 1.1(d) hereto and (ii) those leases or rental agreements covering machinery, equipment, computers, computer hardware and software, tools, supplies, furniture and fixtures, vehicles and other tangible personal property and assets used in the operation of the Center, as specifically described in Schedule 1.1(d) hereto. (e) Records: all operating data and records of the Seller relating to the Center, including without limitation, client lists and records (including treatment records), referral sources, research and development reports and records, production reports and records, equipment logs, operating guides and manuals (other than business and policy manuals), projections, copies of financial, accounting and personnel records, correspondence and other similar documents and records; and (f) Licenses and Permits to the extent legally transferable, all licenses, authorizations, permits and hospital tax exemptions held or used by the Seller in connection with the ownership of the Assets and the conduct of the operations of the Center, as specifically described in Schedule 1.1 (f) hereto. (g) Names: all rights and interest to the name "St. Luke's Surgicenter" and the telephone numbers of the Center. (h) Supplies, Prepaid Expenses and Inventory. all supplies and inventory of the Center including but not limited to all medical supplies and all prepaid items and expense. (i) Other Assets: all other personal properties and assets of every kind and nature, tangible or intangible (including warranties and performance guaranties with respect to such assets) owned by the Seller, including, without limitation, any fixtures, installations, machinery, equipment, vehicles, furniture, tools, spare parts, supplies, office and laboratory equipment, research facilities, materials, fuel or other personal property. 1.2 Excluded Assets. Notwithstanding anything to the contrary the Assets do not include any (i) cash, or cash equivalents, or (ii) all rights and interest that the Seller and its members have in and to the Seller's current litigation with North Oaks Hospital (collectively, the "Excluded Assets"). 2. Payment of the Purchase Price and Assumption of Liabilities. 2.1 Purchase Price. 2.1.1 Payment at Closing The purchase price for the Assets shall be Two Million, Eight Hundred and Fifty Thousand Dollars ($2,850,000) (the "Purchase Price") payable as follows: (i) Two Million Seven Hundred and Fifty Thousand Dollars ($2,750,000) in cash or otherwise immediate available funds at Closing (the "Closing Payment"), and (ii) $100,000 in cash upon the determination of the Closing Payment Adjustment (the "Working Capital Withhold"), provided that if the Closing Payment Adjustment as determined pursuant to Section 2.1.2, requires the Seller to pay monies to the Purchaser and the Seller fails to pay such monies to the Purchaser as required pursuant to Section 2.1.2, the Purchaser shall be permitted to offset the Working Capital Withhold against any monies owed by Seller as a Closing Payment Adjustment. The offset rights set forth herein are in addition to any other remedy the Purchaser may have against the Seller. In the event any portion of the Working Capital Withhold is repaid by Purchaser to the Seller, such repayment will include accrued interest at 15% compounded annually and such repayment shall be made within ten (10) business days of the Final Working Capital Calculation, as defined herein. 2.1.2 Working Capital Adjustment. Within sixty (60) days after the Closing Date, the Purchaser and Seller shall reconcile and determine the amount of Working Capital (as defined below) transferred to the Purchaser on the Closing Date. As promptly as practicable, but no later than 90 days after the Closing Date, Purchaser shall prepare and deliver to Seller a calculation which shall set forth Purchaser's good faith determination of the Working Capital actually transferred to the Purchaser by the Seller, such calculation shall be consistent with the Interim Financial Statements (the "Working Capital Calculation"). In the event the Seller disagrees with the Working Capital Calculation, the parties shall make a good faith effort to resolve the dispute and reach an agreement regarding the Working Capital Calculation. If after thirty (30) days the parties have not reached an agreement regarding the Working Capital Calculation, either party may require the dispute to be resolved by a mutually acceptable independent, third party certified public accounting firm (the "Accounting Firm"), which has been designated in writing by the parties. The Accounting Firm shall perform such computations and verifications in accordance with the provisions of this Agreement and otherwise where applicable with GAAP. The foregoing provisions for the Accounting Firm review shall be specifically enforceable by the parties, and the parties agree to be bound by the determination of the Accounting Firm (the agreed upon Working Capital Calculation or a final determination by the Accounting Firm shall be referred to as the "Final Working Capital Calculation") in resolving this issue. There shall be no right of appeal from such decision, and the cost of such Accounting Firm's determination shall be borne by both parties equally. The Purchase Price shall be reduced to the extent that the Final Working Capital Calculation is less than $430,000. The Purchase Price shall be increased to the extent that the Final Working Capital Calculation exceeds $430,000 (each a "Closing Payment Adjustment"). The Closing Payment Adjustment shall be made by Purchaser or Seller, as appropriate, to the other party within ten (10) business days of the Final Working Capital Calculation. "Working Capital" shall mean net accounts receivables less trade accounts payable. 2.2 Prorations. Within sixty (60) days after the Closing Date (as hereinafter defined) and to the extent such prorated amounts have not been assumed by the Purchaser pursuant to Section 2.3, the Seller and Purchaser shall prorate as of such Closing Date, any amounts which become due and payable after such Closing Date with respect to (i) the contracts and agreements set forth on Schedules 1.1(b) hereto, (ii) property taxes on the Assets, (iii) ad valorem taxes, if any, on the Assets, (iv) all utilities servicing any of the Assets including without limitation water, sewer, telephone, electricity and gas service, and (v) all other charges and fees customarily prorated and adjusted in similar transactions (collectively the "Prorations"). Seller shall be liable for the prorated amounts accruing or related to the period through the Closing Date, including any ad valorem, sales or use taxes related to this transaction, and Purchaser shall be liable for the prorated amounts accruing and related to the period after the Closing Date. 2.3 Liabilities Assumed by Purchaser. On and as of the Closing Date, Purchaser shall assume and agree to pay, perform and discharge: (i) those obligations of the Seller relating to the Assets (other than those excluded in Section 1.2) accruing from and after the Closing Date under those contracts and agreements set forth on Schedules 1.1(b) and 1.1(d) hereto and (ii) those trade account payables as set forth in Schedule 2.3 (the "Assumed Liabilities"). 2.4 Liabilities Retained by the Seller. The Purchaser shall not assume any liability other than the "Assumed Liabilities, and therefore the Seller shall remain liable for all other debts and obligations of the Seller and hold Purchaser harmless from such debts and obligations including but not limited to: (i) any and all obligations for the payment of any long term indebtedness of the Seller, (ii) any current liabilities of the Seller, including, without limitation, accrued employee vacation, sick and holiday pay and paid time off and associated payroll taxes; (iii) any and all liabilities of the Seller relating to acts or omissions, including medical malpractice; (iv) any and all claims of the United States Government under the Medicare program, the State of Louisiana under Medicaid programs, or any other third party payors; (v) federal and state income taxes, if any, payable with respect to any activities of the Seller; (vi) sales and other taxes (including, without limitation, use taxes) payable with respect to the business or operations of the Seller; (vii) any other debt, obligation or liability of the Seller (other than the Assumed Liabilities) whether or not such debt, obligation or liability is disclosed on the financial statements as hereinafter defined; (viii) any liability or obligation to any employee or former employee of the Seller or to any third party, under any pension, insurance, bonus, profit-sharing or other employee benefit plan or arrangement or any obligation relating to salaries, bonuses, vacation or severance pay, or any obligation under ERISA as hereinafter defined; and (ix) the Seller's obligations and liabilities arising under this Agreement. 2.5 Instruments of Conveyance and Transfer of Books and Records. At the Closing, the Seller shall deliver to the Purchaser such deeds, bills of sale, endorsements, assignments and other instruments of sale, conveyance, transfer and assignment, reasonably satisfactory in form and substance to the Purchaser and its counsel as may be reasonably requested by the Purchaser in order to convey to the Purchaser good title to the Assets, which the Seller is hereby conveying free and clear of all claims, charges, liens (including tax liens other than liens for city, county and state ad valorem taxes and assessments not yet due and payable), security interests and encumbrances. The Seller shall also deliver at the Closing copies of all records to be transferred to the Purchaser. 3. Representations and Warranties of the Seller. In order to induce the Purchaser to enter into and perform this Agreement, the Seller represents, warrants and agree as follows (ASC and Amedisys shall make certain representations and warranties as specifically set forth herein): 3.1 Organization, Capitalization, Authorization, Etc. 3.1.1 Organization. The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of Louisiana with all the requisite power and authority to execute, deliver and perform this Agreement and to hold the properties, rights and assets and to carry on the businesses now conducted by it. 3.1.2 Governing Documents. Copies of the Articles of Organization and the Operating Agreement of the Seller have heretofore been delivered to the Purchaser and are true, complete and correct. 3.2 Ownership of Assets. The Seller has good and marketable title to the Assets described in Section 1.1 hereto and Amedisys has good and marketable title to the Merrill Lynch Equipment, free and clear of any claims, charges, liens (including tax liens), security interests and encumbrances whatsoever, and the Seller has the right, power and authority to sell, transfer, assign, convey and deliver all of the Assets to Purchaser, free and clear of any claims, charges, equities, liens (including tax liens), security interests and encumbrances whatsoever. 3.3 The Seller's Authority and No Conflict. The Seller, Amedisys and ASC have the right, power and authority to execute, deliver and carry out their obligations under this Agreement and all documents and agreements contemplated hereby, and this Agreement has been duly authorized, executed and delivered by the Seller, Amedisys and ASC. Except as disclosed on Schedule 3.3, (i) Seller is not in default under, and no event has occurred which, with the lapse of time or action by a third party, would result in a material default under, any outstanding mortgage, contract or agreement to which Seller is a party; (ii) neither the execution and delivery by Seller of this Agreement nor the performance by Seller of its obligations hereunder nor Seller's consummation of the transactions contemplated hereby will (a) violate any provision of the organizational documents of Seller; (b) violate, be in conflict with, constitute a default under or permit the termination of any contract to which Seller is a party, or cause the acceleration of the maturity of any debt or obligation of Seller; (c) require the consent of any other party to, or result in the creation or imposition of any lien upon any of the Assets, any agreement or commitment to which Seller is a party; or (d) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Seller is subject. 3.4 Compliance with Laws. In connection with the conduct of the operation of the Center and the conduct of its business and ownership of the Assets, except as set forth on Schedule 3.4, to the best of Seller's knowledge, Seller is in compliance with all requirements of law, federal, state and local, and all requirements of all governmental bodies or agencies having jurisdiction over Seller, the conduct of its business, the use of its properties and assets, and all premises occupied by it (including without limitation, any that relate to the ownership and operation of the Center, consumer protection, health and safety, products and services, proprietary rights, anti-competitive practices, labor, equal opportunity and improper payments). Seller has all required licenses, permits, certificates, and authorizations needed for the current conduct of its business and the use of its properties and the premises occupied by it. Seller: (a) has not received any notice, not previously complied with, from any federal, state or other governmental authority or agency having jurisdiction over its properties or activities, or any insurance or inspection body, that its operations or any of its properties, facilities, equipment, or business procedures or practices fail to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public or quasi-public authority or body; (b) is in compliance with all material terms, conditions and provisions of contracts with payors with whom it has contracts. (c) and its respective, employees, officers and directors acting in such capacity of the Seller, are not engaging in any of the following activities: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment from Medicare, Medicaid, or other State of Louisiana healthcare programs on behalf of the Seller; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment from Medicare, Medicaid, or other State of Louisiana healthcare programs on behalf of the Seller; (iii) presenting or causing to be presented a claim for reimbursement for services under Medicare, Medicaid, or other State of Louisiana healthcare programs that is for an item or service that is known or should be known to be (a) not provided as claimed, or (b) false or fraudulent; (iv) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment from Medicare, Medicaid, or other State of Louisiana healthcare programs; (v) knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind (a) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or other State of Louisiana healthcare program or (b) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part by Medicare or Medicaid or other State of Louisiana healthcare program; (vi) knowingly making a payment, directly or indirectly, to a physician as an inducement to reduce or limit services to individuals who are under the direct care of the physician and who are entitled to benefits under Medicare, Medicaid, or other State of Louisiana healthcare programs; (vii) providing to any person information that is known or should be known to be false or misleading that could reasonably be expected to influence the decision regarding the treatment of a patient; (viii) knowingly and willfully making or causing to be made or inducing or seeking to induce the making of any false statement or representation (or omitting to state a fact required to be stated therein or necessary to make the statements contained therein not misleading) of a material fact with respect to (a) the conditions or operations of the Center in order that the Center may qualify for Medicare, Medicaid or other State of Louisiana healthcare program certification, or (b) information required to be provided under Section 1124A of the Social Security Act (42 U.S.C. Section 1320a-3); and (ix) knowingly and willfully other than co-payments or deductibles, (a) charging for any Medicaid service money or other consideration at a rate in excess of the rates established by the State of Louisiana, or (b) charging, soliciting, accepting or receiving, in addition to amounts paid by Medicaid, any gift money, donation or other consideration (other than a charitable, religious or other philanthropic contribution from an organization or from a person unrelated to the patient) as a precondition of admitting the patient. 3.5 Financial Statements, Books and Records, and Change in Condition. 3.5.1 Financial Statements Provided. Copies of the financial statements of the Seller for years ended December 31, 1998 and December 31, 1999, December 31, 2000 (the "Annual Financial Statements") and the unaudited financial statements for the period of January 1, 2001 through July 31, 2001 (the "Interim Financial Statements") have been delivered to the Purchaser. The Annual Financial Statements and the Interim Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently followed by the Seller throughout the periods indicated, and fairly present its financial position as at the respective dates of the balance sheets included in the financial statements and the results of its operations for the respective periods indicated. 3.5.2 Absence of Changes. Except as disclosed on Schedule 3.5.2 hereto, since December 31, 2000, there has not been any (a) transaction by the Seller except in the ordinary course of business as conducted during the twelve-month period ending on that date; (b) capital expenditure exceeding $4,000; (c) material adverse change in the condition (financial or otherwise), business, liabilities or Assets of the Seller; (d) destruction, damage to, or loss of the Assets owned, leased or used by the Seller (whether or not covered by insurance) that materially and adversely affects the assets; condition, financial or otherwise, or business of the Seller; (e) labor trouble or other event or condition relating to employment or labor matters of any character materially and adversely affecting the condition, financial or otherwise, or assets, of the Seller; (f) change in accounting methods or practices (including, without limitation, changes in depreciation or amortization policies or rates) by the Seller; (g) revaluation of the Assets; (h) sale or transfer of the Assets except in the ordinary course of business; (i) amendment or termination of any material contract, agreement, or license to which the Seller is a party, except in the ordinary course of business; (j) loan by the Seller to any person or entity, or guaranty of any loan; (k) mortgage, pledge, or other encumbrance of the Assets; (l) any change in the capitalization of the Seller; or (m) any material obligation or liability (absolute or contingent) incurred by the Seller or to which it has become subject except current liabilities incurred in the ordinary course of business and obligations under contracts entered into in the ordinary course of business. 3.6 Absence of Undisclosed Liabilities. The Seller does not have any debt, liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, which is not reflected or reserved against in the Annual Financial Statements or the Interim Financial Statement of the Seller except for (a) those which are not required by generally accepted accounting principles to be so reflected, and (b) those which were incurred in the ordinary course of business and are usual and normal in amount both individually and in the aggregate. 3.7 Real Property. 3.7.1 Real Property Schedule. Schedule 3.7.1 contains a complete and accurate description of the real estate leased by the Seller and ASC (the "Real Property"). 3.7.2 Compliance With Environmental Laws. Except as set forth in Schedule 3.7.2. (a) Seller and ASC are currently in material compliance with all Environmental Laws. (b) Neither the Seller nor ASC has stored, disposed of or arranged for disposal of any Materials of Environmental Concern, except in material compliance with the Environmental Laws; (c) To the best of Seller's and ASC's knowledge, there have been no actions, activities, circumstances, conditions, events or incidents, including, without limitation, the generation, transportation, treatment, storage, release, emission, discharge, presence or disposal of any Materials of Environmental Concern on or at the Real Property. As used herein, the following terms have the following meanings: Environmental Claim. The term "Environmental Claim" means any claim, action or cause of action, alleging liability (including, without limitation, liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from, in part or in whole, (a) the presence, or release into the environment, of any Materials of Environmental Concern, or (b) circumstances forming the basis of any violation, or alleged violation, of the Environmental Laws. Environmental Laws. The term "Environmental Laws" means the federal, state, and local environmental laws, regulations and rules relating to the generation, treatment, storage, transportation, disposal, emissions, discharges or releases of Materials of Environmental Concern, or otherwise relating to protection of the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), as the same may be amended or modified until the date of closing, including, without limitation, the following statutes: Federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901, et seq.; Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. 9601, et seq.; Federal Clean Air Act, 42 U.S.C. 7401, et seq.; Federal Water Pollution Control Act, Federal Clean Water Act of 1977, 33 U.S.C. 1251, et seq.; Federal Insecticide, Fungicide, and Rodenticide Act, Federal Pesticide Act of 1978, 7 U.S.C. 136, et seq.; Federal Hazardous Materials Transportation Act, 48 U.S.C. 1801, et seq.; Federal Toxic Substances Control Act, 15 U.S.C. 2601, et seq.; Federal Safe Drinking Water Act, 42 U.S.C. 300f, et seq. Materials of Environmental Concern. The term "Environmental Concern" means any toxic or hazardous waste, pollutants or substances, including, without limitations, asbestos, PCBs, petroleum products and byproducts, substances defined or listed as "hazardous substances", "hazardous waste", "toxic substances", "toxic pollutant", or similarly identified substances or mixtures, in or pursuant to the Environmental Laws. 3.7.3 Compliance with Building Codes, Zoning Laws, Etc. To the best of Seller's and ASC's knowledge, the Seller and ASC are in compliance with all Legal Requirements materially and adversely affecting the Real Property or any construction, use or occupancy of the improvements to the Real Property, other than as shown on Schedule 3.7.3 hereto. As used herein, the term "Legal Requirements" means all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of any Federal, state or local governmental authority, ordinary or extraordinary, which now are applicable to the Real Property or any part thereof, or any of the adjoining sidewalks, or any use or condition of the Real Property or any part thereof. 3.8 Insurance Policies. Schedule 3.8 contains a description of all insurance policies held by the Seller and ASC concerning its business and the Real Property. All such policies have the respective limits set forth in Schedule 3.8. The Seller represents and warrants that there have not been any awards under any insurance policies since December 31, 2000, except as disclosed on Schedule 3.8. 3.9 Litigation. Except as disclosed in Schedule 3.9, there is no suit, action, arbitration, or legal, administrative, or other proceeding, or governmental investigation pending or to the best of Seller's knowledge threatened against or affecting the Seller, any of the, Assets, or any of the transactions contemplated by this Agreement. The Seller is not in default of any order, writ, injunction or decree of any federal, state, local, or foreign court, department, agency or instrumentality. 3.10 Contracts, Obligations and Commitments. Except as set forth on Schedule 3.10 hereto, the Seller is not a party to any existing material contract, obligation or commitment (written or oral) of any nature, including, without limitation, the following: (a) any loan or other agreements, notes, indentures, or instruments relating to or evidencing indebtedness for borrowed money or mortgaging, pledging or granting or creating a lien or security interest or other encumbrance on any of its assets or any agreement or instrument evidencing any guaranty by the Seller of payment or performance by any other person; (b) any contract or series of contracts with the same person for the furnishing or purchase of equipment, goods or services; (c) any joint venture contract or arrangement or other agreement involving a sharing of profits or expenses to which it is a party or by which it is bound; (d) any agreement which will limit the freedom of Purchaser to compete in any line of business or in any geographic area or with any person; or (e) any agreement providing for disposition of the Assets or agreements of merger or consolidation to which it is a party or by which it is bound. The Seller has complied in all material respects with all the provisions of its contracts and commitments listed on Schedule 3.10 hereto, and is not in default under any thereof except as set forth on Schedule 3.10. 3.11 No Broker. Except as set forth on Schedule 3.11, the Seller represents and warrants it has not dealt with any broker or finder in connection with any of the transactions contemplated by this Agreement and, insofar as it knows, no other broker or other person is entitled to any commission or finder's fee in connection with any of such transactions. 3.12 Compliance with Applicable Law Relating to Benefit Plans. The Seller has complied with all applicable provisions of ERISA and all applicable federal, state and local laws relating to the employment of labor, including but not limited to the provisions thereof relative to wage, hours, collective bargaining, contributions to pension or benefit plans, and payment of Social Security Taxes, and the Seller is not liable for any arrears of wages, contributions or any taxes or penalties for failure to comply with any of the foregoing except where the failure to comply would not have a material adverse effect on the Assets. 3.13 Managed Care Contracts: Schedule 3.13 lists all contracts, arrangements or agreements with managed care or preferred provider entities. The Seller has not received any written notice of (i) a material dispute under any of its contracts, arrangements or agreements with managed care or preferred provider entities; (ii) the intent of any party to any such agreement to materially decrease the level of service subscribed for under any agreement or to substantially modify the terms of any such agreement; or (iii) the intent of any party to any such agreement to terminate such agreement, and, to the knowledge of the Seller, no such written notice has been threatened or is pending. 3.14 Taxes: For purposes of this Agreement, "Taxes" shall include all U.S Federal, State of Louisiana, state, local and foreign income, profit, franchise, unincorporated business, capital, general corporate, sales, use, occupation, personal and real property, excise tax imposed by Subtitle B of the Code, municipal license or gross receipt tax and any and all other taxes. Within the times and in the manner prescribed by law, the Seller has filed all returns and reports of Taxes and has paid all taxes, assessments, and penalties due and payable. There are no present disputes as to Taxes of any nature payable by the Seller. The Seller has not received notice of, nor is it otherwise aware of, an audit or examination; nor is it a party to any action or proceeding by any governmental authority for assessment or collection of Taxes, charges, penalties or interest; nor has any claim for assessment and collection been asserted against it, except as set forth on Schedule 3.14 hereto. The Seller has accrued or paid or will have caused to be paid on or prior to the Closing Date, all applicable Taxes, except for Taxes which are not yet due and subject to a proration in accordance with Section 2.2 hereof. 3.15 Warranties and Representations True and Correct. No representation or warranty by the Seller in this Agreement nor any certificate, schedule, statement, exhibit, document or instrument furnished or to be furnished to Purchaser at Closing pursuant hereto or in connection with the negotiation, execution or performance of this Agreement, contains any untrue statement of a material fact or omits or shall omit material facts to be stated herein or therein or necessary to make any statement herein or therein not misleading. 4. Representations and Warranties of the Purchaser. In order to induce the Seller to enter into and perform this Agreement, the Purchaser represents and warrants as follows: 4.1.1 Organization. The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. The Purchaser is duly qualified to transact business as a foreign corporation in each state in which the nature of the business conducted by it or its ownership or leasing of property make such qualification necessary. 4.1.2 Governing Documents. Copies of the Articles of Organization and the Operating Agreement of the Purchaser have heretofore been made available to the Seller and are true, complete and correct. 4.2 Authority and No Conflict. The Purchaser has the full power and authority to execute, deliver and carry out its obligations under this Agreement and all documents and agreements necessary to give effect to the provisions of this Agreement. This Agreement has been duly authorized, executed and delivered by the Purchaser, and the execution of this Agreement and the consummation of the transactions contemplated hereby will not result in any conflict, breach or violation of, or default under, any statute, judgment, order, decree, mortgage, agreement, deed of trust, indenture or other instrument to which the Purchaser is a party or by which it is bound. All action and other authorizations prerequisite to the execution of this Agreement and the consummation of the transactions contemplated by this Agreement have been taken or prior to the Closing Date will have been obtained by the Purchaser. This Agreement is a valid and binding obligation of the Purchaser enforceable in accordance with its terms. 4.3 Defaults, Consents, Etc. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in a material violation by the Purchaser of, or constitute a default by the Purchaser under, any contractual obligation of the Purchaser or any legal requirement applicable to the Purchaser. No approval, consent, authorization or other order of, and no declaration, filing, registration, qualification or recording with, any governmental authority or any other person, including, without limitation, any party to any contractual obligation of the Purchaser, is required to be made by or on behalf of the Purchaser for the execution, delivery or performance of this Agreement by the Purchaser except for those contemplated hereby or which have been or will be obtained or for which waivers will be obtained prior to the Closing. 4.4 No Broker. Except as set forth on Schedule 4.4, the Purchaser represents and warrants that it has dealt with no broker or finder in connection with any of the transactions contemplated by this Agreement and, insofar as it knows, no broker or other person is entitled to any commission or finder's fee in connection with any of such transactions. 4.5 Warranties and Representations True and Correct. No representation or warranty by the Purchaser in this Agreement nor any certificate, schedule, statement, exhibit, document or instrument furnished or to be furnished to Seller pursuant hereto or in connection with the negotiation, execution or performance of this Agreement, contains any untrue statement of a material fact or omits or shall omit material facts to be stated herein or therein or necessary to make any statement herein or therein not misleading. 5. Conditions Precedent to the Purchaser's Performance. The obligations of the Purchaser under this Agreement is subject to the satisfaction, at or before the Closing, of all the conditions set out below. The Purchaser may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by the Purchaser of any of the Purchaser's other rights or remedies, at law or in equity, if the Seller is in default of any of the representations, warranties, or covenants contained in this Agreement, except to the extent that such defaults are expressly waived. 5.1 Accuracy of Representations and Warranties. Except as otherwise permitted by this Agreement, all representations and warranties by the Sellers in this Agreement or in any agreement or in any written statement that is delivered to the Purchaser pursuant to this Agreement will be true in all material respects on and as of the Closing Date as though made on that date. 5.2 Performance. The Seller will have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. 5.3 No Material Adverse Change. There shall have been no change since the date hereof in the Assets, or Real Property, which in the aggregate have a material adverse effect on the Seller. 5.4 Certification by the Seller. The Purchaser will have received certificates, dated the Closing Date, signed by the president or vice president and secretary or assistant secretary of the Seller, respectively, certifying, in such detail as the Purchaser and its counsel may reasonably request, that the conditions specified in Sections 5.1, 5.2 and 5.3 hereof have been fulfilled, including, but not limited to, certified copies of all resolutions of the Seller pertaining to corporate authorization of the execution, delivery and performance of this Agreement. 5.5 Opinion of the Seller's Counsel. The Purchaser shall have received from counsel to the Seller its favorable opinion dated the Closing Date in substantially the form of Exhibit A. 5.6 Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority, pertaining to the transactions contemplated by this Agreement or to their consummation, will have been instituted or threatened on or before the Closing Date. 5.7 Legal Prohibition. On the Closing Date, no injunction or order shall be in effect prohibiting consummation of the transactions contemplated hereby or which would make the consummation of such transactions unlawful and no action or proceeding shall have been instituted and remain pending before a court, governmental body or regulatory authority to restrain or prohibit the transactions contemplated by this Agreement and no adverse decision shall have been made by any such court, governmental body or regulatory authority which could materially decrease the value of the revenues expected to be generated by the Center or materially increase the liabilities of the Center. No federal, state or local statute, rule or regulation shall have been enacted the effect of which would be to prohibit, restrict, impair or delay the consummation of the transactions contemplated hereby or restrict or impair the ability of Purchaser to own or conduct the Center. 5.8 Consents, Approvals, Permits, Licenses, etc. All authorizations, consents, waivers, approvals, orders, registrations, qualifications, designations, declarations, filings or other action required with or from any federal, state or local governmental or other regulatory authority or third party (including without limitation all parties to each of the assumed contracts) in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly obtained and shall be reasonably satisfactory to Purchaser and its counsel, and copies thereof shall be delivered to the Purchaser no later than three (3) days prior to the Closing. No such consent or approval (a) shall be conditioned on the modification, cancellation or termination of any assumed contract, or (b) shall impose on Purchaser any material condition or provision or requirement with respect to the Center or its operation that is more restrictive than or different from the conditions imposed upon such operation prior to Closing, unless Purchaser gives its prior written approval. With respect to any assumed contract, the assignment of which by its terms requires prior consent of the parties thereto, if such consent is not obtained prior to the Closing Date, and, if Purchaser waives, in its sole discretion, the requirement that such consent be obtained prior to the Closing Date, Seller shall deliver to Purchaser written documentation setting forth arrangements for the transfer of the economic benefits of such assumed contracts to Purchaser as of the Closing Date under terms and conditions acceptable to Purchaser. 5.9 Real Property Lease Agreement. The Purchaser and the Seller shall have entered into an assignment of the lease of the Real Property consented to by the owner of the Real Property. The terms of the lease shall be in substantially the form attached hereto as Exhibit B. 5.10 Non-Competition Agreements. The Seller and each shareholder/owner of the Seller shall have executed and delivered to the Purchaser a Non-Competition Agreement, substantially in the form of Exhibit C. hereto. 5.11 Licensure. Consents (if any) in form and substance reasonably satisfactory to the Purchaser and its counsel to the assignment and transfer of any licenses and permits related to the ownership of the Assets or the operation of the Center shall have been obtained by the Purchaser. 5.12 Tail Insurance. Seller shall purchase "tail insurance" in a minimum amount of $3,000,000 in the aggregate, covering the Seller for any professional liability claims which relate to the activities, or the services provided by the Seller prior to the Closing Date. The tail period shall be no less than four-years after the Closing Date. 5.13. Bulk Sales Law: Purchaser hereby waives compliance by Seller with all applicable bulk sales laws; provided, however, that this waiver shall not relieve the Seller of its indemnification obligations to Purchaser as a result of the Seller's non-compliance with any applicable bulk sales or similar laws 5.14 Release Payment. The Release Payment (as hereinafter defined) shall have been paid by Amedisys as required by Section 16 herein. 6. Conditions Precedent to the Seller's Performance. The obligations of the Seller under this Agreement are subject to the satisfaction, at or before the Closing, of all the following conditions. The Seller may waive any or all of these conditions in whole of in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver of any of the Seller's other rights or remedies, at law or in equity, if the Purchaser is in default of any of the representations, warranties or covenants contained in this Agreement, except to the extent that such defaults are expressly waived. 6.1 Accuracy of the Purchaser's Representations and Warranties. All representations and warranties by the Purchaser contained in this Agreement or in any written statement delivered by the Purchaser under this Agreement will be true in all material respects on and as of the Closing Date as though such representations and warranties were made on and as of that date. 6.2 Performance; The Purchaser will have performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date. 6.3 Certificates. The Seller will have received certificates, dated the Closing Date, signed by the president or vice president and secretary or assistant secretary of the Managing Member of the Purchaser certifying, in such detail as the Seller may reasonably request, that the conditions specified in Sections 6.1 and 6.2 hereof have been fulfilled, including, but not limited to, certified copies of all resolutions of the Purchaser pertaining to authorization of the execution, delivery and performance of this Agreement by the Purchaser. 6.4 Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority pertaining to the transactions contemplated by this Agreement or to their consummation, will have been instituted or threatened on or before the Closing Date. 6.5 Consents. All agreements, authorizations, consents, waivers, approvals, orders, registrations, qualifications, designations, declarations, filings or other actions required with or from any Federal, State or local governmental or other regulators or third party necessary to permit the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been obtained by the Seller, and the Purchaser, respectively, and delivered to the Seller, and the Purchaser, respectively. No Federal, state or other authority having jurisdiction over the transactions contemplated hereby shall have taken any action to enjoin or prevent the consummation of such transactions. As to any assumed contract the assignment of which by its terms requires prior consent of the parties thereto, if such consent is not obtained prior to or on the Closing Date, the Seller shall deliver to Purchaser written documentation setting forth arrangements for the transfer of the economic benefit of such assumed contracts to Purchaser as of the Closing Date under terms and conditions acceptable to all the parties hereto. 6.6 Delivery of Documents. The Purchaser shall have delivered to the Seller the Purchase Price and such other documents and instruments as may be reasonably deemed necessary or appropriate by the Seller. 6.7 Opinion of the Purchaser's Counsel. The Seller shall have received from counsel to the Purchaser its favorable opinion dated the Closing Date in substantially the form of Exhibit D. 6.8 Assignment of Lease ASC shall have received the consent of the owner of the Real Property to assign the Center's Real Property lease to the Purchaser. Such assignment shall (i) release the Seller of all prospective obligations under the lease and (ii) release Amedisys from its guaranty of the prospective obligations under the lease as set forth that certain guaranty agreement dated __________ (the "Guaranty Agreement"). 7. Joint Covenants. 7.1 Access to Books and Records. (a) Access. Following the Closing, the Purchaser shall permit the Seller and its affiliates and representatives and representatives of Medicare and taxing authorities, (including, without limitation, their counsel and auditors), during normal business hours, to have reasonable access to, and examine and make copies of, all books and records of the Center, including all medical records and medical charts of any patient admitted to the Center, which related to events occurring prior to the Closing or events required in order to audit cost reports or maintain or defend positions in connection with any investigation, liquidation or proceeding. For a period of seven years after the Closing, the Purchaser agrees that, prior to the destruction or disposition of any such books or records, the Purchaser shall provide not less than forty-five (45) days', nor more than ninety (90) days', prior written notice to the Seller of such proposed destruction or disposal. If the Seller desires to obtain any of such documents, it may do so by notifying the Purchaser in writing at any time prior to the date scheduled for such destruction or disposal. In such event, the Purchaser shall not destroy such documents and the parties shall then promptly arrange for the delivery of such documents to the Seller, its successors or assigns. All out-of-pocket costs associated with the delivery of the requested documents shall be paid by the Seller. The Purchaser shall cooperate with the Seller in the defense of any litigation related to the Center including the provisions of witnesses and records in a timely manner as reasonably requested by the Seller. (b) Confidentiality. The Seller and the Purchaser shall hold, and shall cause their respective affiliates, employees, auditors, attorneys, representatives and other advisors and agents to hold, in strict confidence, unless compelled to disclose by judicial or administrative process, or, in the opinion of their respective counsel, by other requirements of law, Post-Closing Information (as defined below) concerning the other party and shall not release or disclose such information to any other person, except to their respective employees, auditors, attorneys, representatives and other advisors and agents, provided such person shall have first been advised of, and agreed to be bound by, the confidentiality provision of this Section 7.1(b). For purposes hereof, "Post-Closing Information" shall mean all information concerning the Seller, the Purchaser or their respective affiliates, wherever obtained except information (i) generally available to the public other than as a result of a disclosure in violation of this Section 7.1(b); (ii) available to the party receiving such information on a non-confidential basis prior to disclosure; or (iii) available to the party receiving such information on a non-confidential basis from a source other than the Seller, the Purchaser or their respective affiliates or representatives, as the case may be, provided that such source is not known, and by reasonable effort could not be known, to be bound by a confidentiality agreement with the Seller or the Purchaser, as the case may be, or otherwise prohibited from transmitting the information by a contractual, legal or fiduciary obligation. 7.2 Allocation of Purchase Price. The Purchase Price shall be allocated in its entirety among the Assets in accordance with Schedule 7.2 hereto and as required by Section 1060 of the Code and Treasury Regulations promulgated thereunder. The Seller and Purchaser shall file all information and tax returns (and any amendments thereto) in a manner consistent with this Section 7.2 and comply with the applicable information reporting requirements of Section 1060 of the Code and Treasury Regulations promulgated thereunder. If, contrary to the intent of the parties hereto as expressed in this Section 7.2, any taxing authority makes or proposes an allocation different from that contained in this Section 7.2, the Seller and Purchaser shall cooperate with each other in good faith to contest such taxing authority's allocation (or proposed allocation), provided, however, that, after consultation with the party adversely affected by such allocation (or proposed allocation), the other party hereto may file such protective claims or returns as may reasonably be required to protect its interests. 8. The Closing. Assuming the satisfaction or the waiver of satisfaction of the conditions contained herein, the Closing will take place at the offices of Amedisys, Inc. at 11100 Mead Rd., Suite 300, Baton Rouge, LA on September 7, 2001 (the "Closing Date"), at such other time and place as the parties hereto may mutually agree but in no event later than September 7, 2001. 9. Survival of Representations; Indemnification. 9.1 Survival of Representations, Etc. The several representations, warranties, covenants, and agreements of the parties contained in this Agreement (or in any document delivered in connection herewith) shall be deemed to have been made on the Closing Date, shall be deemed to be material and to have been relied upon by the Purchaser and the Seller, as the case may be, notwithstanding any investigation made by the Purchaser or the Seller, shall survive the Closing Date for a period of two (2) years. 9.2 Indemnification by the Seller, ASC and Amedisys. The Seller, ASC and Amedisys shall defend and indemnify the Purchaser and hold the Purchaser wholly harmless from and against any and all losses, liabilities, damages, costs (including, without limitation, court costs and costs of appeal) and expenses (including, without limitation, reasonable attorneys' fees) that the Purchaser incurs as a result of, or with respect to: (a) any inaccuracy in or breach of any representation or warranty of the Seller, ASC or Amedisys contained in this Agreement to the extent Purchaser suffers damage by reason of such breach; (b) any claim, cause of action, liability or obligation (actual or alleged), of any nature whatsoever of the Purchaser arising out of or relating to the operation of the business of the Seller through to the Closing Date, or any act or omission of the Seller, or any of their agents, employees, or officers, occurring prior to the Closing Date, including, without limitation, any claim or cause of action arising out of or relating to any act of medical malpractice or battery, occurring prior to or on the Closing Date. (c) the indemnity obligation of ASC shall be limited to those representations, warranties and covenants made by ASC related to the Real Property and the lease and any liabilities related to the Real Property through the Closing Date. The indemnity obligation of Amedisys shall be limited to those representations, warranties and covenants made by Amedisys related to the Merrill Lynch Equipment. Nothing set forth herein related to the indemnity obligation of Amedisys shall in any way limit, alter, amend or reduce the guaranty obligation of Amedisys as set forth in Section 15 herein. 9.3 Indemnification by the Purchaser. The Purchaser shall defend, indemnify and hold harmless the Sellers, their respective controlling persons and each employee or agent thereof and their respective estates, successors and assignee from and against any and all losses, liabilities, damages, costs (including, without limitation, court costs and cost of appeal) and expenses (including, without limitation, reasonable attorneys' fees) that the Seller reasonably incurs as a result of, or with respect to: (a) any inaccuracy in or breach of any representation, warranty, covenant or agreement of the Purchaser contained in this Agreement to the extent the Seller suffers damage by reason of such breach; or (b) any claim, cause of action, liability or obligation (actual or alleged), of any nature whatsoever of the Seller arising out of or relating to the operation of the business of the Purchaser after the Closing Date, or any act or omission of the Purchaser, or any of its agents, employees, or officers, occurring after the Closing Date, including, without limitation, any claim or cause of action arising out of or relating to any act of medical malpractice or battery, occurring after the Closing Date. 9.4 Procedure for Indemnification. The following procedure shall apply with respect to any claims or proceedings covered by the foregoing agreements to indemnify and hold harmless: (i) The party who is seeking indemnification (the "Claimant") shall give written notice to the party from whom indemnification is sought (the "Indemnitor") promptly after the Claimant learns of the claim or proceeding; provided that the failure to give such notice shall not relieve the Indemnitor of its obligations hereunder if the Claimant uses its best efforts to mitigate Claimant's damages, except to the extent it is actually damaged thereby. (ii) With respect to any third-party claims or proceedings as to which the Claimant is entitled to indemnification, the Indemnitor shall have the right to select and employ counsel of its own choosing to defend against any such claim or proceeding, to assume control of the defense of such claim or proceeding, and to compromise, settle or otherwise dispose of the same, if the Indemnitor deems it advisable to do so, all at the expense of the Indemnitor; provided, however that the Claimant may employ counsel, of its own choosing, at its sole expense. The parties will fully cooperate in any such action, and shall make available to each other any books or records useful for the defense of any such claim or proceeding. The Claimant may elect to participate in the defense of any such third party claim, and may, at its sole expense, retain separate counsel in connection therewith. Subject to the foregoing the Claimant shall not settle or compromise any such third party claim without the prior consent of the Indemnitor, which consent shall not be unreasonably withheld. 9.5 Payment. All indemnification shall be effected by payment of cash or delivery of a certified or official bank check in the amount of the indemnification liability. 9.6 Limitation. Notwithstanding any provisions of this Agreement to the contrary, any and all claims for indemnification or otherwise relating to or arising in connection with the matters referred to in 9.2 (a) or 9.3 (a) must be brought on or before the expiration of two (2) years after the Closing Date. Indemnification shall be due only to the extent of the loss or damage actually suffered (i.e., reduced by any offsetting or related asset or service received and by any recovery from any third party, such as an insurer). 10. Entire Agreement; Modification, Waiver. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No supplement, modification, or amendment of this Agreement will be binding unless executed in writing by all of the parties. No waiver of any of the provisions of this Agreement will be deemed, or will constitute, a waiver of any other provisions, whether or not similar, nor will any waiver constitute a continuing waiver. No waiver will be binding unless executed in writing by the party making the waiver. 11. Further Assurances. The parties from time to time will execute and deliver such additional documents and instruments and take such additional actions as may be necessary to carry out the transactions contemplated by the Agreement. 12. Successors and Assigns; Assignment. This Agreement will be binding on, and inure to the benefit of, the parties hereto and their respective heirs, legal representatives, successors and assigns. 13. Notices. All notices, requests, demands and other communications required or permitted to be given or made under this Agreement will be in writing and will be delivered personally or will be sent postage prepaid by United States registered or certified mail, return receipt requested or by overnight courier service as follows: (a) To Seller at: Hammond Surgical Care Center, L.C. 11100 Mead Road, Suite 300 Baton Rouge, LA 70816 Attn: John Joffrion (b) To Purchaser at: Surgery Center of Hammond, L.L.C. c/o Universal Surgery Centers 2800 South Hulen, Suite 215 Fort Worth, TX 76109 Attn: Michael Urbach Senior V.P., USC Division with a copy to: Universal Health Services, Inc. 367 South Gulph Road P.O. Box 61558 King of Prussia PA 19406-0958 Attn: General Counsel 14. Governing Law. This Agreement will be construed in accordance with, and governed by, the laws of the State of Louisiana. 15. Guarantee. Amedisys agrees to unconditionally guaranty the obligations of the Seller as set forth in this Agreement, including but not limited to, the indemnity obligation as set forth in Section 9. Amedisys agrees that Purchaser shall be entitled to pursue all rights directly against Amedisys without first exhausting its rights against the Sellers. This guaranty obligation shall not be extinguished, modified or reduced, for any reason including Seller's dissolution, liquidation, insolvency or bankruptcy. Notwithstanding any other provision of this Agreement, the maximum amount that Amedisys shall be required to pay pursuant to the guaranty obligation set forth in this Section 15 is $1,500,000. 16. Release Payment. On the Closing Date, Amedisys shall pay to Universal Health Services, Inc. (the parent company of the Managing Member of the Purchaser) a one time fee of $100,000 as payment for the assumption of the Real Property lease guaranty (the "Release Payment"). Amedisys acknowledges that the assumption of the guaranty obligation was the sole reason the owner of the Real Property agreed to release Amedisys from the obligations set forth in the Guaranty Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of September 7, 2001. SURGERY CENTER OF HAMMOND, L.L.C., BY ITS MANAGING MEMBER, ASC OF HAMMOND, INC. /s/ Alan C. Hale 9/7/01 ------------------------------------ Signature Date Name: Alan C. Hale Title: Vice President HAMMOND SURGICAL CARE CENTER, L. C., BY ITS MANAGING MEMBER, Amedisys Surgery Centers, L.C. /s/ John M. Joffrion 9/7/01 ------------------------------------ Signature Date Name: John M. Joffrion Title: CFO AMEDISYS, INC. /s/ John M. Joffrion 9/7/01 ------------------------------------ Signature Date Name: John M. Joffrion Title: Senior Vice-President - Finance AMEDISYS SURGERY CENTERS, L. C., BY ITS MANAGING MEMBER, Amedisys, Inc. /s/ John M. Joffrion 9/7/01 ------------------------------------ Signature Date Name: John M. Joffrion Title: Senior Vice-President - Finance EXHIBITS A - Opinion of Seller's Counsel B - Form of Lease C - Form of Non-Competition Agreement D - Opinion of Purchaser's Counsel SCHEDULES EX-10.1 4 d91219ex10-1.txt MODIFICATION AGREEMENT EXHIBIT 10.1 MODIFICATION AGREEMENT THIS MODIFICATION AGREEMENT, dated effective as of October 1, 2001 (the "Agreement"), is made by and between CARESOUTH HOME HEALTH SERVICES, INC., a Georgia corporation ("CareSouth") and AMEDISYS, INC., a Delaware corporation ("Amedisys"). RECITALS Amedisys and CareSouth are parties to that certain $1,234,034.85 Promissory Note, dated September 10, 1999, made by Amedisys and payable to the order of CareSouth (as amended, modified, supplemented, extended, renewed or replaced through the date hereof, the "Note"). Amedisys and CareSouth are also parties to the First Amended and Restated Master Corporate Guaranty of Service Agreement, dated as of September 1, 1999 (and as further amended, modified or supplemented from time to time, the "MCGS Agreement"). Capitalized terms defined in the Note or the MCGS Agreement shall have the same defined meanings when such terms are used and undefined in this Agreement. Pursuant to a proposal letter, dated September 14, 2001 (the "Proposal"), CareSouth and Amedisys have agreed to modify the obligations of Amedisys to CareSouth under the Note, subject to the terms of this Agreement. Accordingly, for valuable consideration, the receipt and sufficiency of which are acknowledged, CareSouth and Amedisys agree as follows: AGREEMENT 1. Termination of Existing Agreements. On the date on which the conditions to effectiveness of this Agreement are satisfied (the "Closing Date"), the MCGS Agreement and each ASA shall be terminated and CareSouth, Amedisys and the Affiliates shall have no further obligations to each other thereunder. 2. Amended License Agreement. On the Closing Date, CareSouth and Amedisys shall enter into the Software License Agreement attached as Exhibit A to this Agreement (as amended, modified or supplemented from time to time, the "Amended License Agreement"). Each reference in any Loan Document (as defined in the Note) to (a) the MCGS Agreement or any ASA shall be deemed to be a reference to the Amended License Agreement and (b) the Loan Documents shall be deemed to include a reference to the Amended License Agreement. 3. Acknowledgments. The Borrower acknowledges and agrees that the unpaid balance of the Note is $742,520.66, and, except as modified hereby, Amedisys ratifies and affirms its obligations thereunder. 4. Modification of Note. (a) Paragraph 4 of the Note is deleted in its entirety, and amended to read as follows: "All payments received hereunder shall be applied first to the payment of any expenses or charges payable hereunder or under any other Loan Document, then to interest due and payable, and then to the principal balance, or in such other order as the Lender shall determine at its option. The Payment Schedule shall be as follows: THIRTY-TWO (32) MONTHLY installments inclusive of a Final Single Principal and Interest Payment. Monthly installments in the amount of $25,000.00 (in immediately available funds) shall be paid to the Lender commencing on October 31, 2001, and continuing on the last business day of each succeeding calendar month, through and including April 30, 2004 (or the last business day of such calendar month), and on May 1, 2004, provided that on such date there shall be a payment of all unpaid interest and all remaining principal. As used herein, "business day" shall mean days other than Saturday, Sunday or Federal holidays. The parties hereto hereby further agree that failure to make payments due hereunder shall not constitute an Event of Default (as herein defined) provided that Borrower pays such amounts within 24 hours after notice of such failure given by the Lender to Borrower." (b) Section 5 of the Note shall be amended to include the following language immediately after the word "Lender" and immediately preceding the phrase "(the "Loan Documents")": ", including, without limitation, the Amended License Agreement, and any notes, instruments or other documents evidencing, governing, or executed in connection with, any obligation of Borrower to any subsidiary or affiliate of Lender." (c) The first sentence of paragraph 10 of the Note, entitled "Remedies upon Default", is deleted in its entirety and replaced with the following: "Whenever there occurs a default or event of default under this Note (a) the entire balance outstanding hereunder and under other obligations of any Obligor, or any subsidiary or Affiliate of any Obligor, to Lender, or any Affiliate or subsidiary of Lender, become immediately due and payable and any obligation of Lender to permit further borrowing under this Note shall immediately cease and terminate, (b) to the extent permitted by law, the Rate of Interest on the unpaid principal shall be increased at the Lender's discretion up to the maximum rate allowed by law, or if none, 20% per annum (the "Default Rate") and (c) within 90 days after the date Lender gives notice to Borrower of the occurrence of an event of default hereunder, and provided that written demand has been made by Lender, Borrower shall validly authorize, and immediately thereafter validly issue, in one or more tranches, to one or more third party institutional investors, for the benefit and account of the Lender, that number of duly authorized, fully paid and nonassessable shares of the Series A Convertible Preferred Stock of the Borrower, par value $.001 per share (the "Series A Preferred Stock") that shall have a value, in the aggregate, equal to the total amount payable upon acceleration under clause (a) hereof, with cash amounts received by Borrower (net of selling expenses, underwriting discounts and related costs) from such investors to be paid to Lender and applied by Lender to the satisfaction of all obligations due to Lender or its affiliates and subsidiaries from Borrower and its subsidiaries and affiliates. Such application shall be deemed satisfaction of such obligations to Lender and its affiliates and subsidiaries only to the extent of such value received and so applied. If such amounts paid to Lender by Borrower exceed the total obligations due from Borrower and its affiliates and subsidiaries to Lender and its affiliates and subsidiaries, then Lender shall return the excess to Borrower within ten (10) days after Lender receives notice of such overpayment from Borrower. To the extent that Borrower fails to issue Series A Preferred Stock as of the end of such 90 day period in accordance with the foregoing terms, or otherwise satisfy its obligations to Lender and its affiliates and subsidiaries, then, on the last day of such period, Borrower shall validly authorize, and immediately thereafter begin to validly issue, to Lender or its designee, in one or more tranches, that number of duly authorized, fully paid and nonassessable shares of the Series A Preferred Stock that shall have a value, in the aggregate, equal to the total amount payable upon acceleration under clause (a) hereof and a per share value equal to the price per share of the Common Stock on the date that such Series A Preferred Stock is issued to Lender, less 25% of such per share price, in accordance with the terms of the Certificate of Designations and the Registration Rights Agreement, each of which shall be in the form attached hereto as Exhibits B and C, respectively. Lender agrees that within 90 days after such issuance, it shall give Borrower notice of its election to either (1) sell its shares of Series A Preferred Stock (or the shares of Common Stock into which such shares of Series A Preferred Stock are convertible) or (2) retain the shares of Series A Preferred Stock or the Common Stock into which such Series A Preferred Stock is convertible. Cash amounts received upon transfer or sale by the Lender (net of selling expenses, underwriting discounts and related costs) of such Series A Preferred Stock (or the Common Stock into which it is convertible), or the value (on an as-converted to Common Stock basis) of any shares retained as provided in clause (2) above, shall be applied by the Lender against amounts due hereunder. Such application shall be deemed satisfaction of such obligations to Lender and its affiliates and subsidiaries only to the extent of such value received and so applied. Notwithstanding the length of any period specified herein, and regardless of the election made by Lender hereunder, Borrower agrees to continue to issue, and Lender retains its right to require such additional issuances of, Series A Preferred Stock, until such time as the aggregate amount of cash received by Lender, or the value of such issued shares of Series A Preferred Stock, as applicable in clause (2) above, equals the value of all obligations due to Lender and its affiliates and subsidiaries from Borrower and its affiliates and subsidiaries, all in accordance with the terms hereof (such terms to include, but not be limited to, the 25% discount with respect to per share pricing). If the value received by Lender exceeds the total obligations due from Borrower and its affiliates and subsidiaries to Lender and its affiliates and subsidiaries, then Lender shall return the excess to Borrower within ten (10) days after Lender receives notice of such overpayment from Borrower. Borrower further agrees that it (a) shall appropriately and timely file the Certificate of Designations with the Secretary of State of the State of Delaware, and shall file such certificates of amendment to same as Lender deems necessary in the exercise of its reasonable discretion; (b) shall obtain all requisite approvals from its shareholders, including, without limitation, the holders of the Series A Preferred Stock; (c) shall at all times reserve and keep available out of its authorized shares of Common Stock (as defined in the certificate of incorporation of the Borrower), solely for the purpose of issue or delivery upon conversion of the Series A Preferred Stock, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion, and shall issue such shares of Common Stock in accordance with the terms of its certificate of incorporation and the Registration Rights Agreement; and (d) obtain and provide to Lender an opinion of counsel (who shall be satisfactory to Lender) to the effect that the shares of Series A Preferred Stock shall be duly authorized and validly issued, fully paid and nonassessable." (d) Paragraph 16 of the Note, entitled "Arbitration," shall be deleted in its entirety and replaced with the following: "16. Collection Costs and Expenses. In the event that either party resorts to legal action to enforce the terms and provisions of this Note, the prevailing party shall be entitled to recover the actual and demonstrable costs of such action so incurred, including, without limitation, reasonable attorney's fees." (e) Each reference in any Loan Document to (a) the MCGS Agreement and each ASA shall be deemed to be a reference to the Amended License Agreement, (b) the Note shall be deemed a reference to the Note as modified hereby and (c) to the Loan Documents shall be deemed to include a reference to this Agreement. 5. Modification of Loan Documents. Each reference in any Loan Document to any Loan Document shall be deemed a reference to such Loan Document as modified hereby. 6. Representations and Warranties. Each party hereby represents and warrants that: (a) Such party (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation; (b) has the power and authority to own its assets and to transact the business in which it is now engaged or in which it is proposed to be engaged; and (c) is duly qualified as a foreign corporation or limited liability corporation and in good standing under the laws of each other jurisdiction in which such qualification is required. (b) Such party's execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate actions and do not and will not (a) require any consent or approval of, or filing or registration with, any governmental agency or authority or such party's stockholders; (b) contravene its certificate of incorporation or bylaws; (c) result in a breach of or constitute a default under any agreement or instrument to which such party is a party or by which it or its properties may be bound or affected; or (d) cause such party to be in default under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to it. (c) This Agreement is such party's legal, valid and binding obligation, enforceable against such party in accordance with its terms. (d) All factual and financial information, if any, (taken as a whole) previously furnished to the other party in connection with this Agreement by such party and each of such party's Affiliate is true and accurate in all material respects on the date on which such information is dated, certified or furnished, and is not, and will not be, incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. 7. Conditions Precedent. Amedisys shall deliver to CareSouth or CareSouth shall have received, not later than October 9, 2001, the following, each in form and substance satisfactory to CareSouth, as conditions precedent to the effectiveness of this Agreement, the termination of the MCGS Agreement and each ASA, and to the obligation of CareSouth to enter into the Amended License Agreement: (a) This Agreement, executed by Amedisys; (b) Payments of all amounts due on the Closing Date, including, without limitation, any amounts in arrears under the terms of any Loan Document (including, without limitation, the MCGS Agreement) as set forth on Schedule A attached hereto and made a part hereof; (c) To the extent required, resolutions of the Board of Directors of Amedisys authorizing the execution of this Agreement and the Amended License Agreement, provided, however, that CareSouth shall also be required to provide Amedisys with any such resolutions, as required; (d) Certificates of good standing for the states of formation or incorporation of Amedisys and each Affiliate, together with certificates of qualification for each jurisdiction in which such certificate is required as to Amedisys and each Affiliate, provided that the same need not be provided within 10 days after the Closing Date; and (e) Opinion(s) of counsel to Amedisys and each of its Affiliate in form and substance satisfactory to counsel for CareSouth (provided that such opinion need not be presented to CareSouth until the issuance of the Series A Preferred Stock as provided herein). 8. Fees and Expenses. Each party shall bear its own attorneys' fees and other expenses incurred in connection with the execution and delivery of this Agreement. 9. Waiver. In consideration of the parties entering into this Agreement, each party hereto and each of its subsidiaries and Affiliates agrees that it has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against the other party or any subsidiary or Affiliate of such other party or any past, present or future agent, attorney, legal representative, predecessor-in-interest, Affiliate, successor, assign, employee, director or officer of such other party or any subsidiary or Affiliate of the other party, directly or indirectly, arising out of, based upon, or in any manner connected with, any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or began prior to the execution of this Agreement and accrued, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of the terms or conditions of the MCGS Agreement or any ASA, or which directly or indirectly relate to or arise out of or in any manner are connected with the MCGS Agreement or any ASA. TO THE EXTENT ANY SUCH DEFENSES, AFFIRMATIVE OR OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT, CLAIMS, COUNTERCLAIMS, ACTIONS OR CAUSES OF ACTION EXIST OR EXTEND, SUCH DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS, ACTIONS AND CAUSES OF ACTION ARE HEREBY FOREVER WAIVED, DISCHARGED AND RELEASED BY EACH PARTY AND EACH OF ITS SUBSIDIARIES AND AFFILIATES. The foregoing waiver shall have effect provided that no Event of Default shall occur with respect to the obligations of the Borrower hereunder prior to March 1, 2002; upon the occurrence of such Event of Default with respect to the obligations of the Borrower hereunder prior to March 1, 2002, the Lender shall not be deemed to have made the waiver set forth in this Section 13. 10. Counterparts. This Agreement may be executed by the parties in any combination, in one or more counterparts, all of which together shall constitute but one and the same instrument. 11. Notices. Notwithstanding anything to the contrary contained in the Note or any other Loan Document, facsimile is an acceptable form of notice, provided that any such facsimile received before 5 PM Eastern Standard Time on a given day shall be deemed to be received on that business day, while if received after such time, such facsimile shall be deemed to be received on the next succeeding business day. Notwithstanding anything to the contrary contained in the Note or the other Loan Documents, notices shall be provided as follows: If to CareSouth, to: CareSouth Home Health Services, Inc. Augusta Corporate Centre 2743 Perimeter Parkway Building 200, Suite 200 Augusta, Georgia 30909 Attention: Rick W. Griffin Chief Executive Officer Fax: (888) 968-4907 with a copy to: T.J. Jubeir Managing Partner Capitol Partners 1000 Wilson Boulevard Suite 2700 Arlington, Virginia 22209 Fax: (703) 248-9611 If to Amedisys, to: Amedisys, Inc. 11100 Mead Road Suite 300 Baton Rouge, Louisiana 70816 Attention: William F. Borne Chairman of the Board and CEO Fax: (225) 292-8163 with a copy to: Amedisys, Inc. 11100 Mead Road Suite 300 Baton Rouge, Louisiana 70816 Attention: John Joffrion Fax: (___) ____-______ 12. Time of the Essence. Time is of the essence with respect to all obligations of Amedisys to CareSouth in this Agreement, under the Note and under all other Loan Documents. 13. Governing Law. This Agreement shall be governed by the laws of the State of Delaware, without reference to conflict of laws principles. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives on the day and year first written above. AMEDISYS: AMEDISYS, INC., a Delaware corporation By: /s/ WILLIAM F. BORNE --------------------------------- Name: William F. Borne --------------------------------- Title: CEO -------------------------------- CARESOUTH: CARESOUTH HOME HEALTH SERVICES, INC., a Georgia corporation By: /s/ RICK W. GRIFFIN ---------------------------------- Name: Rick W. Griffin -------------------------------- Title: CEO ------------------------------- EX-10.2 5 d91219ex10-2.txt SOFTWARE LICENSE AGREEMENT EXHIBIT 10.2 SOFTWARE LICENSE AGREEMENT This SOFTWARE LICENSE AGREEMENT (as referred to herein, the "Agreement", and as referred to in other instruments or documents by and between the parties hereto and/or their respective subsidiaries or affiliates, the "Amended License Agreement"), by and between CareSouth Home Health Services, Inc. ("Licensor"), and Amedisys, Inc. ("Amedisys"), effective as of this 1st day of October, 2001 (the "Effective Date"). RECITALS WHEREAS, Licensee currently owns and operates, and in the future may own and operate additional, Medicare-certified home health agencies (hereinafter, individually, an "Agency" and collectively, the "Agencies"); and WHEREAS, Licensor owns rights in DOS-based and windows-based computer programs (the "Software") designed to, among other things, provide billing, payroll and collections services for the Agencies; and WHEREAS, Licensee desires to obtain a non-exclusive, non-transferable license to use the Software in its Agencies, and limited rights (1) to sublicense the Software to third parties and (2) to transfer such license to, or use such license rights in connection with, a joint venture in which Licensee participates, all subject to the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the mutual promises set forth herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Licensor and Licensee agree as follows: AGREEMENT I. DEFINITIONS 1.1 "Agencies" means each of the agencies identified in Schedule A hereto. 1.2 "Agreement" means this Agreement and the Schedules and Exhibits attached hereto. 1.3 "Documentation" means the user and system documentation set forth in Schedule B for use with the Software. 1.4 "Error" means a material failure of the Software to function in conformity with its specifications. 1.5 "Licensee" means Amedisys and each of its Agencies, whether now or hereafter owned and operated. 1 1.6 "License Fees" means the fees Licensee shall pay as specified in Schedule C hereto. 1.7 "Location" means each of the Agency Locations specified in Schedule A hereto (as such Schedule shall be amended or modified from time to time to reflect the addition or deletion of Agency Locations). 1.8 "Software" means Licensor's Software and related programs and utilities specified in Schedule B and all versions, copies, upgrades, improvements, modifications, new versions and/or maintenance releases made by Licensor or Licensee. 1.9 "Specifications" means any current product specifications published by Licensor or Licensee with respect to the Software. II. LICENSE 2.1 In accordance with the terms herein, Licensor grants to Licensee, and Licensee accepts from Licensor, a non-exclusive, non-transferable license to: (1) use Licensor's Software and Documentation solely for its internal operations at each Location specified in Schedule A; and (2) copy the Software for archival and backup purposes only, provided that all titles, trademarks, copyrights, proprietary and restricted rights and notices shall be reproduced in all such copies, and that all such copies shall be subject to the terms of this Agreement. A description of the Software and related Documentation is attached as Schedule B hereto. 2.2 Licensee shall not: (1) make available or distribute all or any part of the Software or Documentation to any third party by assignment, sub-license, or by any other means; or (2) copy, adapt, reverse engineer, decompile, disassemble, or modify, in whole or in part, any of the Software or Documentation; or (3) allow a third party access to the Software. 2.3 Notwithstanding the provisions of the foregoing Sections 2.1 and 2.2, Licensor acknowledges and agrees that, provided no event of default (as herein defined) has occurred hereunder, (a) Licensee may upgrade, improve or modify the Software or the Documentation, subject to Licensor's rights as provided in Section 4.1 hereof, (b) Licensee may sublicense the Software to a third party, provided, however, that Licensee shall not be permitted to conduct billing and collection functions, or to interfere with the conduct of the same by Licensor, with respect to such sublicense(s) for a period of twelve (12) months from the date of execution hereof and (c) Licensee may transfer its license to, or use its license rights in connection with, a joint venture in which Licensee participates, and shall be permitted to conduct billing and collection functions in connection with same, provided, however, that the Licensee must at all times be the legal and beneficial owner of not less than 30% of the equity ownership of such joint venture. III. LICENSE FEES AND PAYMENT 3.1 Licensee shall pay the License Fees in accordance with the payment schedule set forth in Schedule C, in immediately available funds. Payment of the License Fees shall be made by Licensee to Licensor in full on each applicable payment date without any right of set-off or deduction. 2 3.2 Licensee shall be responsible for any applicable sales or use taxes or any value added or similar taxes payable with respect to the licensing of the Software, or arising out of or in connection with this Agreement, other than taxes levied or imposed based upon Licensor's income. In the event that Licensor pays any such taxes on behalf of Licensee, Licensor shall invoice Licensee for such taxes and Licensee agrees to pay such taxes in accordance with this Agreement. 3.3 In addition to the remedies set forth in Section 6.5 hereof, the failure by Licensee to pay any amounts due under this Agreement in full in accordance with this Agreement shall make Licensee liable to pay Licensor interest at the rate of two percent (2%) per month on any License Fees due hereunder, or at the highest amount permitted by applicable law, such interest to accrue on a daily basis after as well as before any judgment relating to collection of the amount(s) due. IV. PROPRIETARY RIGHTS AND CONFIDENTIALITY 4.1 Licensor represents and warrants that it owns the Software, Documentation and Specifications, and has the right to license the same to Licensee. Licensee acknowledges and agrees that all copyright, patent, trade secret, trademark, and all other intellectual property rights of whatever nature in the Software, Documentation, and Specifications are and shall remain the property of Licensor, and nothing in this Agreement should be construed as transferring any aspects of such rights to Licensee or any third party. Any upgrades, improvements or modifications to, or new versions of, the Software shall become a part of the Software, and, as such, are subject to the terms and conditions of this Agreement, whether such upgrades, improvements, modifications or new versions are made by Licensor or Licensee. Additionally, Licensor shall own all proprietary rights associated with such upgrades, improvements, modifications or new versions. Licensee hereby agrees that the foregoing provisions apply similarly to upgrades, improvements or modifications to, or new versions of, the Software made by Licensee prior to the execution of this Agreement. 4.2 "Confidential Information" shall mean the Software, Documentation, and Specifications. Licensee acknowledges the confidential and proprietary nature of the Confidential Information and agrees that it shall not reveal or disclose any Confidential Information for any purpose to any other person, firm, corporation or other entity, other than Licensee's employees with the need to know such Confidential Information to perform employment responsibilities consistent with Licensee's rights under this Agreement. Licensee shall safeguard and protect the Confidential Information from theft, piracy, or unauthorized access in a manner at least consistent with the protections Licensee uses to protect its most confidential information. Licensee shall inform its employees of its obligations under this Agreement, and shall take such steps as may be reasonable in the circumstances, or as may be reasonably requested by Licensor, to prevent any unauthorized disclosure, copying, or use of the Confidential Information. Licensee acknowledges and agrees that in the event of Licensee's breach of this provision, Licensor will suffer irreparable injuries not compensated by monetary damages and therefore shall not have an adequate remedy at law. Accordingly, Licensor shall be entitled to a preliminary and final injunction without the necessity of posting bond. This remedy is separate and apart from any other remedy Licensor may have. 3 4.3 Licensee shall notify Licensor immediately upon discovery of any prohibited use or disclosure of the Confidential Information or any other breach of these confidentiality obligations by Licensee, and shall fully cooperate with Licensor to help Licensor regain possession of the Confidential Information and prevent the further prohibited use or disclosure of the Confidential Information. V. WARRANTY DISCLAIMERS 5.1 As of the date hereof, Licensee acknowledges that it has had an opportunity to inspect, use and assess the Software and that, as of such date, the Software meets all of Licensee's requirements and expectations and operates without Errors. 5.2 LICENSOR EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTIBILITY AND FITNESS FOR A PARTICULAR PURPOSE. LICENSOR DOES NOT WARRANT THAT THE SOFTWARE WILL MEET LICENSEE'S REQUIREMENTS, OR THAT THE OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE. THE ENTIRE RISK OF THE SOFTWARE'S QUALITY AND PERFORMANCE IS WITH LICENSEE. 5.3 LICENSOR SHALL HAVE NO LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE LIABILITY OF LICENSOR TO LICENSEE FOR ANY REASON AND UPON ANY CAUSE OF ACTION SHALL BE LIMITED TO THE AMOUNT PAID TO LICENSOR BY LICENSEE UNDER THIS AGREEMENT. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING, WITHOUT LIMITATION, TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS. VI. TERM, TERMINATION AND DEFAULT 6.1 The License granted herein shall remain in effect from the Effective Date until May 1, 2004 (the "Termination Date"), unless earlier terminated as provided for herein. 6.2 The following shall constitute "events of default" (and each, individually, an "event of default") hereunder: (1) any breach by Licensee of any provision of this Agreement; (2) failure of the Licensee to provide Licensor with a current version of the Software immediately following the release of any new version of, or the making of any upgrades, improvements or modifications to, the Software, as provided in Section 8.8 hereof; (3) any breach by Licensee of, or any occurrence of a default or event of default under, the $1,234,034.85 Promissory Note, dated September 10, 1999, made by Licensee and payable to the order of Licensor, as amended by the Modification Agreement, of even date herewith (as amended, modified, supplemented, extended, renewed or replaced through the date hereof, the "Note"), or any occurrence of a default or event of default or a failure to pay amounts due in connection with the Promissory Note, of even date herewith, made by Licensee and payable to the order of CareSouth Indemnity Services, LLC (as amended, modified, supplemented, extended, renewed or replaced through the date hereof, the 4 "Indemnity Note"); (4) any failure by Licensee to pay the License Fees when due, provided that such failure shall not constitute an event of default hereunder in the event that Licensee pays such amounts within 24 hours after notice of such failure given by Licensor to Licensee; and (5) Licensee's making an assignment for the benefit of its creditors, the filing of any voluntary or involuntary bankruptcy, Licensee's insolvency, or the appointment of a trustee or a receiver for Licensee or its property. 6.3 Licensor may terminate this Agreement, the License, or both, immediately and without further obligation to Licensee upon the occurrence of an event of default. Termination shall not relieve Licensee of its obligation to pay all amounts due and payable to Licensor as of the date of termination, including, without limitation, all amounts accelerated pursuant to Section 6.5 hereof. 6.4 Upon an event of default under this Agreement, termination of the License or termination of this Agreement, Licensee shall immediately cease using the Software and Documentation and shall promptly return all copies of the Software, Documentation, Specifications and all other Confidential Information in its possession or control. Licensee shall delete all copies of such materials residing in computer memory, and destroy all copies of such materials that incorporate Licensor's Confidential Information. 6.5 In addition to any other remedies the Licensor may have, upon an event of default under this Agreement: (a) the aggregate of the License Fees due and payable to Licensor for the entire remainder of the term of this Agreement (together with any License Fees that may be past due hereunder) shall become immediately due and payable; (b) all other indebtedness and obligations of Licensee to Licensor or any subsidiary or affiliate of Licensor, now existing or hereafter arising, shall become immediately due and payable at the option of Licensor or such subsidiary or affiliate of Licensor, as applicable; and (c) within 90 days after the date Licensor gives notice to Licensee of the occurrence of an event of default hereunder, and provided that written demand has been made by Licensor, Licensee shall validly authorize, and immediately thereafter validly issue, in one or more tranches, to one or more third party institutional investors, for the benefit and account of the Licensor, that number of duly authorized, fully paid and nonassessable shares of the Series A Convertible Preferred Stock of the Licensee, par value $.001 per share (the "Series A Preferred Stock") that shall have a value, in the aggregate, equal to the total amount payable upon acceleration under paragraphs (a) and (b) of this Section 6.5, with cash amounts received by Licensee (net of selling expenses, underwriting discounts and related costs) from such investors to be paid to Licensor and applied by Licensor to the satisfaction of all obligations due to Licensor or its affiliates and subsidiaries from Licensee and its subsidiaries and affiliates. Such application shall be deemed satisfaction of such obligations to Licensor and its affiliates and subsidiaries only to the extent of such value received and so applied. If such amounts paid to Licensor by Licensee exceed the total obligations due from Licensee and its affiliates and subsidiaries to Licensor and its affiliates and subsidiaries, then Licensor shall return the excess to Licensee. To the extent that Licensee fails to issue Series A Preferred Stock as of the end of such 90 day period in accordance with the foregoing terms, or otherwise satisfy its obligations to 5 Licensor and its affiliates and subsidiaries, then, on the last day of such period, Licensee shall validly authorize, and immediately thereafter begin to validly issue, to Licensor or its designee, in one or more tranches, that number of duly authorized, fully paid and nonassessable shares of the Series A Preferred Stock that shall have a value, in the aggregate, equal to the total amount payable upon acceleration under paragraphs (a) and (b) of this Section 6.5, and a per share value equal to the price per share of the Common Stock on the date that such Series A Preferred Stock is issued to Licensor, less 25% of such per share price, in accordance with the terms of the Certificate of Designations and the Registration Rights Agreement, each of which shall be in the form attached hereto as Exhibits B and C, respectively. Licensor agrees that within 90 days after such issuance, it shall give Licensee notice of its election to either (1) sell its shares of Series A Preferred Stock (or the shares of Common Stock into which such shares of Series A Preferred Stock are convertible) or (2) retain the shares of Series A Preferred Stock or the Common Stock into which such Series A Preferred Stock is convertible. Cash amounts received upon transfer or sale by the Licensor (net of selling expenses, underwriting discounts and related costs) of such Series A Preferred Stock (or the Common Stock into which it is convertible), or the value (on an as-converted to Common Stock basis) of any shares retained as provided in clause (2) above, shall be applied by the Licensor against amounts due hereunder. Such application shall be deemed satisfaction of such obligations to Licensor and its affiliates and subsidiaries only to the extent of such value received and so applied. Notwithstanding the length of any period specified herein, and regardless of the election made by Licensor hereunder, Licensee agrees to continue to issue, and Licensor retains its right to require such additional issuances of, Series A Preferred Stock, until such time as the aggregate amount of cash received by Licensor, or the value of such issued shares of Series A Preferred Stock, as applicable in clause (2) above, equals the value of all obligations due to Licensor and its affiliates and subsidiaries from Licensee and its affiliates and subsidiaries, all in accordance with the terms hereof (such terms to include, but not be limited to, the 25% discount with respect to per share pricing). If the value received by Licensor exceeds the total obligations due from Licensee and its affiliates and subsidiaries to Licensor and its affiliates and subsidiaries, then Licensor shall return the excess to Licensee within ten (10) days after Licensor receives notice of such overpayment from Licensee. Licensee further agrees that it (a) shall appropriately and timely file the Certificate of Designations with the Secretary of State of the State of Delaware, and shall file such certificates of amendment to same as Licensor deems necessary in the exercise of its reasonable discretion; (b) shall obtain all requisite approvals from its shareholders, including, without limitation, the holders of the Series A Preferred Stock; (c) shall at all times reserve and keep available out of its authorized shares of Common Stock (as defined in the certificate of incorporation of the Licensee), solely for the purpose of issue or delivery upon conversion of the Series A Preferred Stock, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion, and shall issue such shares of Common Stock in accordance with the terms of its certificate of incorporation and the Registration Rights Agreement; and (d) obtain and provide to Licensor an opinion of counsel (who shall be satisfactory to Licensor) to the effect that the shares of Series A Preferred Stock shall be duly authorized and validly issued, fully paid and nonassessable. The rights and remedies of the Licensor contained in this Agreement are cumulative and not exclusive of any rights or remedies otherwise provided by law. 6 VII. TRANSFER OF LICENSE 7.1 Notwithstanding anything to the contrary contained herein, as of the Termination Date or such earlier date as all of Licensee's indebtedness and obligations to Licensor and each affiliate or subsidiary of Licensor shall have been satisfied, provided that Licensee shall have paid to Licensor all License Fees due hereunder and that no event of default hereunder shall have occurred and be continuing, Licensee shall have the right to acquire from the Licensor, the Software and the Documentation from the Licensor by paying to the Licensor the amount of $1 on the Termination Date. Upon the transfer by the Licensor of the license pursuant to this Section VII, no upgrades, improvements, modifications or new versions of the Software or Documentation shall be subject to the provisions of Section 4.1 hereof, and Licensee shall thereafter possess all proprietary rights thereto. Licensee further agrees that any other licensees of the Software or the Documentation shall be entitled to all existing license rights in accordance with the terms of any license agreements or other documents governing such rights, and such other license agreements and other documents shall remain in effect for a period of 12 months after the transfer of the pursuant to this Section VII, provided that such license agreements contain the terms and conditions customarily employed by Licensor in similar agreements. Licensee shall be entitled to the fees otherwise payable to Licensor pursuant to such license agreements and other documents. Licensor hereby agrees that it shall not sell, transfer or assign the Software or the Documentation or its rights thereto, except as provided in this Section VII, and shall not grant a security interest or otherwise encumber the Software or Documentation in such a way as would inhibit or impair the right of Licensor to transfer such Software or Documentation to Licensee in accordance with the terms of this Section VII. VIII. MISCELLANEOUS 8.1 If any section of this Agreement is held to be illegal or unenforceable, the validity or enforceability of the remainder of this Agreement shall not be affected. 8.2 Licensee may not assign its rights or obligations under this Agreement without the prior written consent of Licensor, which consent shall not be unreasonably withheld by Licensor. 8.3 Failure by either party to exercise any right or remedy under this Agreement does not signify acceptance of the event giving rise to such right or remedy. 8.4 This Agreement will be governed by and construed in accordance with the laws of the State of Delaware. 8.5 Any notice required or permitted to be given or delivered under this Agreement shall be sent by facsimile (provided that any such facsimile received before 5 PM Eastern Standard Time on a given day shall be deemed to be received on that business day, while if received after such time, such facsimile shall be deemed to be received on the next succeeding business day) or delivered to the address set forth in this Agreement, and addressed to the attention of: 7 If to Licensor: CareSouth Home Health Services, Inc. Augusta Corporate Centre 2743 Perimeter Parkway Building 200, Suite 200 Augusta, Georgia 30909 Attention: Rick W. Griffin Chief Executive Officer Fax: (888) 968-4907 with a copy to: Capitol Partners 1000 Wilson Boulevard Suite 2700 Arlington, Virginia 22209 Attention: T.J. Jubeir Managing Partner Fax: (703) 248-9611 If to Licensee: Amedisys, Inc. 11100 Mead Road Suite 300 Baton Rouge, LA 70816 Attention: William F. Borne Chairman of the Board and CEO Fax: (225) 292-8163 with a copy to: Amedisys, Inc. 11100 Mead Road Suite 300 Baton Rouge, Louisiana 70816 Attention: John Joffrion Fax: (___) ____-______ Notice shall be deemed to have been received by any party, and shall be effective on the third day after which such notice is deposited, if mailed by certified, first-class, postage prepaid, return receipt requested mail. 8.6 Sections 4, 5, and 8 shall survive the termination of this Agreement. 8.7 This Agreement and its Schedules and Exhibits comprise the entire agreement between the parties regarding the subject matter hereof and supercedes and merges all prior proposals, understandings, and all other agreements, oral or written, between the parties relating to the Agreement. 8.8 To induce Licensor to enter into this Agreement, Licensee agrees to provide Licensor with a complete copy of the current version of the Software as it exists on the Effective Date; Licensee also agrees, during the term of this Agreement, to provide Licensor with a current 8 version of the Software following the release of any new version of, or the making of any upgrades, improvements or modifications to, the Software, when and as the payment of License Fees is required hereunder. 8.9 In the event that either party resorts to legal action to enforce the terms and provisions of this Agreement, the prevailing party shall be entitled to recover the actual and demonstrable costs of such action so incurred, including, without limitation, reasonable attorney's fees. [SIGNATURES ON FOLLOWING PAGE] 9 LICENSOR: LICENSEE: CARESOUTH HOME HEALTH AMEDISYS, INC. SERVICES, INC. By: /s/ RICK W. GRIFFIN By: /s/ WILLIAM F. BORNE ------------------------------ ----------------------------- Name: Rick W. Griffin Name: William F. Borne ------------------------------ ----------------------------- Title: CEO Title: CEO ------------------------------ ----------------------------- Date: effective 10/1/01 Date: 10/8/01 ------------------------------ ----------------------------- 10 -----END PRIVACY-ENHANCED MESSAGE-----