<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 26, 1997
APOGEE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-24224 13-3605119
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 992-7670
(Not Applicable)
(Former Name or Former Address, if Changed Since Last Report)
Index to Exhibits at Page 5
<PAGE> 2
Item 5. Other Events.
Apogee, Inc., a Delaware corporation (the "Company"), has
determined to divest and discontinue the Company's behavioral group practice
operations. In connection therewith, on December 26, 1997, the Company and
certain wholly owned subsidiaries of the Company (the "Subsidiaries"), entered
into an agreement (the "Purchase Agreement") with PsychPartners, L.L.C., an
Alabama limited liability company ("PsychPartners"), and its subsidiaries,
PsychPartners, Inc., a Delaware corporation, and PsychPartners MidAtlantic,
Inc., a Delaware corporation (collectively, "Purchasers"), to sell to the
Purchasers substantially all of the assets related to 92 behavioral health
centers (the "Centers") owned, managed or operated by the Company and the
Subsidiaries and all of the capital stock of one wholly owned subsidiary of the
Company for total consideration consisting of (a) $27,000,000 in cash, (b) a
warrant to purchase up to 400,000 common units of PsychPartners, at a purchase
price of $.05 per common unit (the "Warrant") and (c) the assumption of certain
liabilities and obligations of the Company and the Subsidiaries related to the
Centers (the "Transaction"). The Warrant is subject to certain adjustments
which could result in the reduction in the number of common units covered by
the Warrant based on the future financial performance of selected Centers for
the one year period subsequent to the date of closing of the Transaction. The
Transaction is subject to the approval of the holders of a majority of the
shares of the Company's common stock, $.01 par value per share ("Company Common
Stock"). Certain officers and directors of the Company and
<PAGE> 3
their affiliates, representing approximately 40.1% of the issued and outstanding
shares of Company Common Stock, have agreed to vote in favor of the Transaction.
Subject to satisfaction of this condition and certain other conditions set forth
in the Purchase Agreement, the Transaction is expected to close during the first
quarter of 1998. The amount of the consideration was arrived at through
arms-length negotiations between the parties.
The Company engages in the business of providing behavioral
health services and managed care behavioral health services. After the
Transaction, the Company will continue to operate its Integra business which
provides a full array of managed care behavioral health services.
For additional information regarding the Transaction, reference is
made to the Purchase Agreement, which is included in Exhibit 2 to this Current
Report on Form 8-K.
On December 30, 1997, the Company announced plans to divest or
discontinue the operations of its remaining 18 outpatient behavioral health
centers (the "Remaining Centers") not included in the Transaction. The Remaining
Centers are located in the states of California, Washington, Arizona and Nevada.
<PAGE> 4
Item 7. Financial Statements and Exhibits
(c) Exhibits:
The exhibits required to be filed as part of this Current
Report on Form 8-K are listed in the attached Index to Exhibits.
<PAGE> 5
SIGNATURE
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.
APOGEE, INC.
By /S/ Mark Gibson
--------------------
Name: Mark Gibson
Title: Corporate Controller
and Chief Accounting
Officer
Dated: January 9, 1998
<PAGE> 6
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Location
------ ----------- -------------
<S> <C> <C>
2. Agreement of Purchase and Sale (the
"Purchase Agreement") dated as of
December 26, 1997 by and among
PsychPartners, Inc., a Delaware
corporation, PsychPartners
MidAtlantic, Inc., a Delaware
corporation, and PsychPartners,
L.L.C., an Alabama limited
liability company; and Apogee of
Pennsylvania, Inc., a Delaware
corporation, Apogee of Tennessee,
Inc., a Tennessee corporation,
Winston Clinics, Inc., a Wisconsin
corporation, DOC Systems, Inc., a
District of Columbia corporation,
Family Social and Psychotherapy
Services, Inc., a Wisconsin
corporation, Apogee Services, Inc.,
a Delaware corporation, Apogee of
Maryland, Inc., a Maryland
corporation, Associated Mental
Health Services. Ltd., an Illinois
corporation, Psychiatric
Associates, Inc., a Florida
corporation, Psychogeriatric
Consultants, Inc., a Maryland
corporation, Naperville
Psychiatric, Inc., an Illinois
corporation, Apogee of Northern
Florida, Inc., a Florida
corporation, Family Social and
Psychological Services, L.L.C., a
Wisconsin limited liability
company, AHS of Rhode Island, Inc.,
a Rhode Island corporation,
Woodmont Psychiatric Associates,
Inc., a Maryland corporation, AGP
Acquisition, Inc., a Delaware
corporation, and Apogee, Inc., a
Delaware corporation. The exhibits
and schedules to the Purchase
Agreement are not filed as a part of
this Current Report on Form 8-K. The
Registrant undertakes to furnish
supplementally a copy of any
omitted exhibit or schedule to the
Commission upon request.
99. Press release dated December 30,
1997.
</TABLE>
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Exhibit 2
AGREEMENT OF PURCHASE AND SALE
AMONG
PSYCHPARTNERS, L.L.C., PSYCHPARTNERS MIDATLANTIC, INC.
AND PSYCHPARTNERS, INC.
AND
APOGEE, INC.
APOGEE OF TENNESSEE, INC.
APOGEE OF PENNSYLVANIA, INC.
APOGEE SERVICES, INC.
APOGEE OF MARYLAND, INC.
APOGEE OF TENNESSEE, INC.
AGP ACQUISITION, INC.
WINSTON CLINICS, INC.
DOC SYSTEMS, INC.
FAMILY SOCIAL AND PSYCHOTHERAPY SERVICES, INC.
ASSOCIATED MENTAL HEALTH SERVICES, LTD.
PSYCHIATRIC ASSOCIATES, INC.
PSYCHOGERIATRIC CONSULTANTS, INC.
NAPERVILLE PSYCHIATRIC, INC.
APOGEE OF NORTHERN FLORIDA, INC.
FAMILY SOCIAL AND PSYCHOLOGICAL SERVICES, L.L.C.
WOODMONT PSYCHIATRIC ASSOCIATES, INC.
AHS OF RHODE ISLAND, INC.
Effective as of December 26, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I
PURCHASE AND SALE OF ASSETS AND STOCK.................................................................. 2
SECTION 1.1 CONVEYANCE AND TRANSFER OF STOCK..................................................... 2
SECTION 1.2 CONVEYANCE AND TRANSFER OF ASSETS.................................................... 3
SECTION 1.3 EXCLUDED ASSETS...................................................................... 5
SECTION 1.4 ASSUMED LIABILITIES.................................................................. 6
SECTION 1.5 RETAINED LIABILITIES................................................................. 7
SECTION 1.6 PURCHASE PRICE....................................................................... 7
SECTION 1.7 POST-CLOSING ADJUSTMENTS............................................................. 8
SECTION 1.8 PAYMENT OF PURCHASE PRICE............................................................ 14
SECTION 1.9 ALLOCATION OF PURCHASE PRICE......................................................... 15
ARTICLE II
THE CLOSING............................................................................................ 15
SECTION 2.1 DATE AND PLACE....................................................................... 15
SECTION 2.2 DELIVERY OF DOCUMENTS................................................................ 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................. 16
SECTION 3.1 CORPORATE ORGANIZATION............................................................... 17
SECTION 3.2 CORPORATE AUTHORITY; AUTHORIZATION OF
AGREEMENT............................................................................ 18
SECTION 3.3 CAPITAL STOCK........................................................................ 18
SECTION 3.4 SUBSIDIARIES......................................................................... 19
SECTION 3.5 TITLE TO STOCK AND POWER TO CONVEY................................................... 19
SECTION 3.6 NO VIOLATION......................................................................... 19
SECTION 3.7 FINANCIAL STATEMENTS................................................................. 20
SECTION 3.8 NO UNDISCLOSED LIABILITIES........................................................... 22
SECTION 3.9 ABSENCE OF CHANGES................................................................... 23
SECTION 3.10 LIMITATION ON SALES.................................................................. 24
SECTION 3.11 TITLE TO PROPERTIES; ENCUMBRANCES.................................................... 24
SECTION 3.12 TITLE CONVEYED....................................................................... 25
SECTION 3.13 REAL PROPERTY........................................................................ 26
SECTION 3.14 LEASES............................................................................... 26
SECTION 3.15 ACCOUNTS RECEIVABLE.................................................................. 27
SECTION 3.16 ACCOUNTS PAYABLE..................................................................... 28
SECTION 3.17 INTELLECTUAL PROPERTY MATTERS........................................................ 28
SECTION 3.18 CONTRACTS AND COMMITMENTS............................................................ 28
SECTION 3.19 AGREEMENTS IN FULL FORCE AND EFFECT.................................................. 29
SECTION 3.20 INSURANCE............................................................................ 29
SECTION 3.21 COMPLIANCE WITH LAWS................................................................. 30
SECTION 3.22 EMPLOYMENT MATTERS................................................................... 31
SECTION 3.23 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS.............................................. 32
SECTION 3.24 LITIGATION........................................................................... 32
SECTION 3.25 COMPLIANCE WITH FRAUD AND ABUSE STATUTES............................................. 33
SECTION 3.26 GOVERNMENTAL CONSENTS................................................................ 33
SECTION 3.27 OTHER CONSENTS....................................................................... 34
SECTION 3.28 ENVIRONMENTAL MATTERS................................................................ 34
SECTION 3.29 INVENTORY............................................................................ 35
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TABLE OF CONTENTS (continued)
<TABLE>
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SECTION 3.30. CUSTOMERS, SUPPLIERS AND SALES
REPRESENTATIVES...................................................................... 35
SECTION 3.31 BROKERS OR FINDERS................................................................... 35
SECTION 3.32 TAXES................................................................................ 36
SECTION 3.33 TAX RETURNS.......................................................................... 36
SECTION 3.34 OSHA AND ADA AND CLEAN AIR ACT....................................................... 36
SECTION 3.35 FULL DISCLOSURE...................................................................... 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PURCHASERS AND PSYCHPARTNERS........................................................................... 37
SECTION 4.1 ORGANIZATION......................................................................... 37
SECTION 4.2 AUTHORIZATION........................................................................ 38
SECTION 4.3 NO VIOLATION......................................................................... 38
SECTION 4.4 LITIGATION........................................................................... 39
SECTION 4.5 GOVERNMENTAL CONSENTS................................................................ 39
SECTION 4.6 OTHER CONSENTS....................................................................... 39
SECTION 4.7 NO BROKERS........................................................................... 40
SECTION 4.8 SHARES TO BE FULLY PAID; RESERVATION OF
STOCK................................................................................ 40
SECTION 4.9 CAPITAL STRUCTURE OF PSYCHPARTNERS AND
PURCHASERS........................................................................... 41
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS.................................................................... 42
SECTION 5.1 OPERATIONS PENDING CLOSING; FILING OF TAX
RETURNS.............................................................................. 42
SECTION 5.2 SHAREHOLDERS MEETING................................................................. 43
SECTION 5.3 PROXIES.............................................................................. 44
SECTION 5.4 PAYMENT OF TAXES AND CERTAIN EXPENSES................................................ 45
SECTION 5.5 EARNOUT LIABILITIES.................................................................. 46
SECTION 5.6 BEST EFFORTS......................................................................... 46
SECTION 5.7 CONSENTS; DUTIES OF SELLERS.......................................................... 47
SECTION 5.8 ADDITIONAL INSURANCE COVERAGE........................................................ 48
SECTION 5.9 TRANSITION ASSISTANCE................................................................ 48
SECTION 5.10 ACCESS TO, AND INFORMATION CONCERNING,
PROPERTIES AND RECORDS............................................................... 48
SECTION 5.11 NONCOMPETITION; NONSOLICITATION;
NONDISCLOSURE........................................................................ 49
SECTION 5.12 EXCLUSIVE AGREEMENT.................................................................. 52
SECTION 5.13 EMPLOYEE BENEFIT PLANS............................................................... 53
SECTION 5.14 MAIL RECEIVED AFTER CLOSING.......................................................... 53
SECTION 5.15 COBRA................................................................................ 54
SECTION 5.16 COMPANY NAME......................................................................... 54
SECTION 5.17 COOPERATION AND RECORDS RETENTION.................................................... 55
SECTION 5.18 OFFERS OF EMPLOYMENT................................................................. 55
SECTION 5.19 ASSIGNMENT AND ASSUMPTION OF CONTRACTS............................................... 56
SECTION 5.20 FURTHER ASSURANCES................................................................... 56
SECTION 5.21 PUBLICITY............................................................................ 56
SECTION 5.22 LEASE RENEWALS....................................................................... 57
</TABLE>
ii
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TABLE OF CONTENTS (continued)
<TABLE>
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PURCHASERS............................................................ 57
SECTION 6.1 REPRESENTATIONS AND WARRANTIES TRUE.................................................. 57
SECTION 6.2 COMPLIANCE WITH THIS AGREEMENT....................................................... 57
SECTION 6.3 DOCUMENTS TO BE DELIVERED............................................................ 57
SECTION 6.4 SHAREHOLDER APPROVAL................................................................. 58
SECTION 6.5 NO INJUNCTIONS....................................................................... 58
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLERS............................................................... 59
SECTION 7.1 REPRESENTATIONS AND WARRANTIES TRUE.................................................. 59
SECTION 7.2 COMPLIANCE WITH THIS AGREEMENT....................................................... 59
SECTION 7.3 DOCUMENTS TO BE DELIVERED............................................................ 59
SECTION 7.4 NO INJUNCTION........................................................................ 60
SECTION 7.5 ASSUMPTION OF ASSUMED LIABILITIES.................................................... 60
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............................................ 60
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................................... 60
SECTION 8.2 INDEMNIFICATION BY SELLERS........................................................... 60
SECTION 8.3 INDEMNIFICATION BY PURCHASERS........................................................ 61
SECTION 8.4 NOTICE OF CLAIMS..................................................................... 62
SECTION 8.5 LIMITS ON INDEMNIFICATION............................................................ 64
SECTION 8.6 TAX BENEFIT AND INSURANCE PROCEEDS................................................... 64
SECTION 8.7 SOLE AND EXCLUSIVE REMEDY............................................................ 65
SECTION 8.8 SATISFACTION OF INDEMNIFICATION CLAIM................................................ 65
ARTICLE IX
TERMINATION............................................................................................ 66
SECTION 9.1 TERMINATION.......................................................................... 66
SECTION 9.2 OBLIGATIONS UPON TERMINATION......................................................... 67
ARTICLE X
MISCELLANEOUS PROVISIONS............................................................................... 68
SECTION 10.1 AMENDMENT............................................................................ 68
SECTION 10.2 WAIVER OF COMPLIANCE................................................................. 68
SECTION 10.3 NOTICES.............................................................................. 68
SECTION 10.4 SPECIFIC PERFORMANCE................................................................. 69
SECTION 10.5 EXPENSES............................................................................. 69
SECTION 10.6 SEVERABILITY......................................................................... 70
SECTION 10.7 ASSIGNMENT........................................................................... 70
SECTION 10.8 GOVERNING LAW........................................................................ 70
</TABLE>
iii
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TABLE OF CONTENTS (continued)
<TABLE>
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SECTION 10.9 COUNTERPARTS......................................................................... 70
SECTION 10.10 HEADINGS............................................................................. 70
SECTION 10.11 ENTIRE AGREEMENT..................................................................... 71
SECTION 10.12 THIRD PARTIES........................................................................ 71
SECTION 10.13 PERFORMANCE FOLLOWING CLOSING........................................................ 71
</TABLE>
iv
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TABLE OF CONTENTS (continued)
LIST OF SCHEDULES
Schedule 1.2 Transferred Assets
Schedule 1.2(i) Management Agreements
Schedule 1.2(ii) Managed Care Contracts
Schedule 1.2(iv) Trademarks, Tradenames, etc.
Schedule 1.2(ix) Automobiles and Vehicles
Schedule 1.2(vi) Computers and Related Materials
Schedule 1.2(xii) Other Contracts
Schedule 1.3 Excluded Assets
Schedule 1.4(a)(iii) Earnout Contingent Liabilities
Schedule 1.4(a)(v) Lease Obligations
Schedule 1.4(b) Retained Liabilities
Schedule 1.9 Allocation of Purchase Price
Schedule 3.1 Jurisdictions and Licenses
Schedule 3.4 Subsidiaries of AGP/Other Investments of AGP
Schedule 3.5 Ownership of AGP Stock
Schedule 3.7(b) Balance Sheet of the Business as of
September 30, 1997
Schedule 3.8 Undisclosed Liabilities
Schedule 3.9 Change Since December 31, 1996
Schedule 3.11 Title to Properties; Encumbrances
Schedule 3.12 Title Conveyed
Schedule 3.14 Leases and Subleases
Schedule 3.15 Accounts Receivable
Schedule 3.16 Accounts Payable
Schedule 3.17 Intellectual Property Matters
Schedule 3.18 Material Contracts of Sellers
Schedule 3.20 Insurance
Schedule 3.21 Compliance with Laws
Schedule 3.22(a) Employment Law Compliance
Schedule 3.22(b) Employees
Schedule 3.23 Employee Benefit Plans
Schedule 3.24 Litigation
Schedule 3.26 Governmental Consents--Sellers
Schedule 3.27 Other Consents--Sellers
Schedule 3.28 Environmental Matters
Schedule 3.30 Customers, Suppliers and Sales Representatives
Schedule 4.4 Litigation
Schedule 4.5 Governmental Consents--Purchasers
Schedule 4.6 Other Consents--Purchasers
Schedule 4.9 Capital Structure of PsychPartners
Schedule 5.3 Individuals Executing Proxies
Schedule 5.5(a) Individuals/Entities Entitled to
Estimated Earnout Payments
Schedule 5.16 Company Names
Schedule 5.18 Offers of Employment
v
<PAGE> 7
TABLE OF CONTENTS (continued)
LIST OF EXHIBITS
Exhibit A Designated Practice Locations
Exhibit B Form of Warrant
Exhibit C Form of Escrow Agreement
Exhibit D Form of Voting Agreement and Irrevocable Proxy
Exhibit E Form ofInterim Services Agreement
Exhibit F Form of Opinion of Haythe & Curley
Exhibit G Form of Bill of Sale
Exhibit H Form of Assignment and Assumption Agreement
Exhibit I Form of Opinion of Balch & Bingham LLP
vi
<PAGE> 8
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made and
entered into as of December 26, 1997, by and among PsychPartners, Inc., a
Delaware corporation ("PsychPartners, Inc."), and PsychPartners MidAtlantic,
Inc., a Delaware corporation (collectively, "Purchasers"), and PsychPartners,
L.L.C., an Alabama limited liability company ("PsychPartners"); and Apogee of
Pennsylvania, Inc., a Delaware corporation, Apogee of Tennessee, Inc., a
Tennessee corporation, Winston Clinics, Inc., a Wisconsin corporation, DOC
Systems, Inc., a District of Columbia corporation, Family Social and
Psychotherapy Services, Inc., a Wisconsin corporation, Apogee Services, Inc., a
Delaware corporation, Apogee of Maryland, Inc., a Maryland corporation,
Associated Mental Health Services, Ltd., an Illinois corporation, Psychiatric
Associates, Inc., a Florida corporation, Psychogeriatric Consultants, Inc., a
Maryland corporation, Naperville Psychiatric, Inc., an Illinois corporation,
Apogee of Northern Florida, Inc., a Florida corporation, Family Social and
Psychological Services, L.L.C., a Wisconsin limited liability company, AHS of
Rhode Island, Inc., a Rhode Island corporation, and Woodmont Psychiatric
Associates, Inc., a Maryland corporation (collectively, the "Subsidiaries"), AGP
Acquisition, Inc., a Delaware corporation ("AGP") (collectively with the
Subsidiaries, the "Companies") and Apogee, Inc., a Delaware corporation
("Apogee") (collectively with the Companies, the "Sellers").
<PAGE> 9
WITNESSETH:
WHEREAS, the Companies, each of which are direct or indirect wholly
owned subsidiaries of Apogee, own, manage or operate the 22 behavioral health
practices (the "Practices") set forth on Exhibit A hereto (such practices,
owned, managed or operated by the Companies, the "Business");
WHEREAS, Apogee and the Subsidiaries desire to sell to Purchasers, each
of which are direct or indirect wholly owned subsidiaries of PsychPartners, the
Transferred Assets (as defined in Section 1.2 hereof) and to assign to
Purchasers the Assumed Liabilities (as defined in Section 1.4 hereof) relating
to the operations of the Business, and Purchasers desire to purchase from Apogee
and Sellers the Transferred Assets and to assume the Assumed Liabilities, upon
the terms and subject to the conditions hereinafter set forth;
WHEREAS, Apogee owns all of the issued and outstanding shares of
capital stock, $.01 par value of AGP (the "AGP Stock") and desires to sell the
AGP Stock to Purchasers for the consideration and upon the terms and conditions
set forth in this Agreement, and Purchasers desire to purchase the AGP Stock
from Apogee in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
2
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ARTICLE I
PURCHASE AND SALE OF ASSETS AND STOCK
SECTION 1.1 CONVEYANCE AND TRANSFER OF STOCK. Upon the terms and
subject to all of the conditions contained herein and the performance by each of
the parties hereto of their respective obligations hereunder, Purchasers hereby
agree to purchase from Apogee, and Apogee hereby agrees to sell, deliver,
transfer and convey to Purchasers at the Closing (as hereinafter defined), all
of the AGP Stock.
SECTION 1.2 CONVEYANCE AND TRANSFER OF ASSETS. Upon the terms and
subject to all of the conditions contained herein and the performance by each of
the parties hereto of their respective obligations hereunder, Purchasers hereby
agree to purchase from Apogee and the Subsidiaries, and Apogee and the
Subsidiaries hereby agree to sell, deliver, transfer and convey to Purchasers at
the Closing (as hereinafter defined), all of the assets of Apogee and the
Subsidiaries owned, held or used in the operation or management of the Business,
of every kind and description which are located at the real property leased by
Sellers pursuant to the leases set forth on Schedule 3.14 (the "Clinic
Locations"), other than the Excluded Assets (as defined in Section 1.3 hereof);
real, personal, or mixed; tangible or intangible; including all assets and
property reflected on the balance sheets of the Business as of the date of the
Closing (collectively, "Transferred Assets"), such assets to be transferred free
and clear of all liens, encumbrances or restrictions of any type whatsoever,
other
3
<PAGE> 11
than Permitted Encumbrances (as defined in Section 3.11 hereof) and the Assumed
Liabilities (as defined in Section 1.3 hereof); provided, however, that unless
and until any required consents and approvals have been obtained, the
Transferred Assets shall not include any contracts or agreements which by their
terms prohibit or restrict the transfer or assignment of Sellers' rights
thereunder, or the delegation of Sellers' duties thereunder, without the consent
or approval of other parties to such contracts or agreement (collectively,
unless and until any required consents and approvals have been obtained, the
"Non-Transferable Contracts"). Upon the receipt of the required consents and
approvals for any Non-Transferable contracts, such contracts or agreement shall
become Transferred Assets. Purchasers and Sellers shall identify the initial
Non-Transferable Contracts in writing at or before the Closing. The Transferred
Assets shall include, but shall not be limited to, all right, title and interest
of Sellers (other than AGP) in, to and under the following (except to the extent
the following would include any Non-Transferable Contract prior to the obtaining
of requisite consents or approvals of other parties):
(i) Sellers' rights under management
agreements with professional corporations or
similar organizations related to the Business and
set forth on Schedule 1.2(i) hereto;
(ii) Sellers' rights under contracts with
managed care organizations and corporations
related to the Business and set forth on Schedule
1.2(ii) hereto;
4
<PAGE> 12
(iii) all of the Sellers' inventories of materials
and supplies related to the Business at the Clinic Locations;
(iv) the trademarks, trade names, service marks,
logos, inventions, patents, patent rights, applications for
patents and similar rights, trade secrets, know-how and
designs of the Sellers related to or used in the Business and
set forth on Schedule 1.2(iv);
(v) all marketing studies, customer lists, files,
supplier files, credit files, credit data, appraisals,
valuations, and consulting studies and all other records and
reports relating to the Business or the Transferred Assets,
all clinical and administrative policy and procedure manuals
and all catalogues relating to the Business at the Clinic
Locations;
(vi) the computer programs, computer software,
computer manuals, flowcharts, printouts, data files, program
documentation and related materials and copies thereof
relating to the Business or the Transferred Assets and set
forth on Schedule 1.2(vi);
(vii) subject to applicable laws and regulations, all
transferable licenses and other regulatory approvals necessary
for or incident to the operation of the Business;
(viii) all deposits and the expenses and deferred
charges relating to the Business that have been prepaid or
paid in advance by Sellers prior to the Closing, as set forth
on Schedule 1.2(viii) hereto;
(ix) the automobiles and vehicles owned by the
Sellers, relating to the Business and set forth on Schedule
1.2(ix) hereto;
(x) the furniture, computers, accessories and other
personal property owned by the Sellers and used in the
Business at the Clinic Locations;
(xi) all machinery and equipment owned by the Sellers
and used in the Business at the Clinic Locations;
(xii) all accounts receivable of the Sellers relating
to the Business and all cash and cash equivalents of the
Sellers relating to the Business, whether on hand or in cash
accounts of the Business;
5
<PAGE> 13
(xiii) all of Sellers' rights under all other
contracts and agreements of the Sellers relating to the
Business, as set forth on Schedule 1.2(xiii) hereto;
(xiv) all indebtedness and other amounts relating to
the Business and owed to any of Sellers in the ordinary course
of business, except for those items listed on Schedule 1.3
hereto;
(xv) all patient and billing files, records and
documentation necessary to effectuate the transfer of the
Transferred Assets and to operate the Business (including
ledger books and any books of account of the Sellers relating
to the Business and located at the Clinic Locations);
(xvi) all of Sellers' rights under express and
implied warranties of third parties that continue in effect
with respect to any of the assets described in paragraphs (i)
through (vii) above; and
(xvii) all other assets and rights of every kind and
nature (whether or not of a kind or nature referred to in
items (i) through (xvi) above) owned or held by the Sellers on
the date of the Closing (hereinafter defined) and relating to
or used in the Business at the Clinic Locations, whether or
not specifically referred to in clauses (i) through (xvi) of
this Section 1.2 or in the Schedules hereto, except for the
Excluded Assets (as defined in Section 1.3 hereof) and any
Non-Transferable Contracts.
SECTION 1.3 EXCLUDED ASSETS. The assets of Sellers which are not to be
transferred pursuant to this Agreement are the assets of the Sellers not located
at the Clinic Locations or described in Section 1.2(i) through 1.2(xvii) hereto
(the "Excluded Assets") and:
(i) The stock, corporate minute books, stock ledgers
and stock transfer records of the Subsidiaries; and
(ii) Those assets listed on Schedule 1.3 hereto.
SECTION 1.4 ASSUMED LIABILITIES. Except to the extent prohibited or
restricted by any Non-Transferable
6
<PAGE> 14
Contracts prior to the obtaining of requisite consents or approvals of other
parties, Purchasers agree to assume at the Closing the following obligations
(the "Assumed Liabilities"):
(i) all liabilities and obligations arising after the
Closing with respect to clinic lease obligations of Sellers
related to the Business, as set forth on Schedule 3.11 hereto;
(ii) all liabilities and obligations as of the
Closing with respect to accounts payable, accrued payroll
taxes and other accrued expenses of Sellers related to the
Business, such accrued expenses to include accrued clinician
compensation and accrued patient facility costs related to the
Business, as set forth on the Closing Financial Statements (as
hereinafter defined), plus any obligations in the nature of
accounts payable, accrued payroll taxes and other accrued
expenses of Sellers, not to exceed $50,000, that do not appear
on the Closing Financial Statements;
(iii) all liabilities and obligations arising after
the Closing with respect to earnout contingent liabilities
(including any contingent promissory notes) ("Earnout
Liabilities") of Sellers associated with Sellers' prior
acquisitions of certain of the Transferred Assets related to
the Business, as set forth on Schedule 1.4(a)(iii) hereto,
except for the Earnout Liabilities for which Sellers are
responsible pursuant to Section 5.5(a) hereof;
(iv) all liabilities and obligations with respect to
the contracts and obligations, including employment agreements
of Sellers related to the Business, as set forth on Schedule
1.4(a)(iv) hereto;
(v) any obligations under the leases (other
than clinic leases) related to the Business to
which any of Sellers are a party as set forth on
Schedule 1.4(a)(v) hereto; and
(vi) all liabilities and obligations arising from the
conduct of the Business after the Closing of the nature of the
liabilities set forth in Section 1.4(ii).
SECTION 1.5 RETAINED LIABILITIES. Except for the Assumed Liabilities,
Purchasers shall not assume or
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otherwise agree to pay, discharge or perform any other liabilities or
obligations of Sellers, whether or not in respect of the Business, (whether
accrued, absolute, contingent or otherwise, whether or not disputed, or whether
or not disclosed to Purchasers) (all such liabilities and obligations, the
"Retained Liabilities"). The Retained Liabilities shall include any severance
payments that may be due either prior to or following the Closing to James
Dorsey, M.D. or AHRC, Inc. pursuant to Article X of that certain Management
Agreement dated as of February 18, 1997 among AHRC, Inc., a Florida corporation,
AGP Acquisition Corp., a Delaware corporation, and Apogee, Inc., a Delaware
corporation, to the Manager (as defined therein), but only to the extent that
such payments are due as a result of the transactions contemplated by this
Agreement. In addition, PsychPartners may, at its sole discretion, elect not to
assume the lease with CMD Realty Investment Fund relating to the Southeast
Regional Office (the "Divisional Lease"), and shall so notify Sellers as soon as
reasonably practicable following the Closing of such election. Should
PsychPartners so elect pursuant to this Section 1.5, the Retained Liabilities
shall include the Divisional Lease.
SECTION 1.6 PURCHASE PRICE. Subject to any adjustments required by
Section 1.7(a) hereof, the purchase price for the Transferred Assets (the
"Purchase Price"), payable in accordance with Section 1.8 herein, is as follows:
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(a) Twenty-Seven Million and No/100 Dollars
($27,000,000.00); plus
(b) A warrant to purchase 400,000 Common Units
(as defined in the Second Amended and
Restated Operating Agreement of
PsychPartners, L.L.C. dated as of July 17,
1997) (the "Operating Agreement") of
PsychPartners at a price of $.05 per Common
Unit, exercisable by Apogee for a period of
five (5) years from the date of Closing (the
"Warrant") in substantially the form attached
hereto as Exhibit B.
SECTION 1.7 POST-CLOSING ADJUSTMENTS.
(a) At the Closing, Sellers shall deliver to Purchasers true
and complete copies of the balance sheet of the Business and the monthly profit
and loss statements of the Practices as of and for the month ending on November
30, 1997 (the "November Statements"), which have been prepared in accordance
with the Companies' historic internal accounting practices on a basis consistent
with prior periods. Included in the November Statements shall be the balance
sheet of the Business as of November 30, 1997, including a computation of the
liabilities as of November 30, 1997 assumed by Purchasers pursuant to Section
1.4(a)(ii) (the "November Payables and Expenses") and an estimate as of November
30, 1997 of the earnout contingent liabilities assumed by Purchasers pursuant to
Section 1.4(a)(iii) (collectively, the "November Liabilities") and the (x) cash
and cash equivalents and (y) deposits and the expenses and deferred charges
relating to the Business which had been prepaid or paid in advance by Sellers
prior to November 30, 1997 included in the Transferred Assets and the accounts
receivable of the Business as of November 30, 1997
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(collectively, the "November Assets"). At the Closing, Purchasers shall deliver
the amount by which the November Liabilities exceed the November Assets (the
"Balance Sheet Adjustment Escrow Amount") to the Escrow Agent, to be held
pursuant to the terms of an Escrow Agreement, in substantially the form of
Exhibit C attached hereto (the "Escrow Agreement"). The parties anticipate as of
the date hereof that the Balance Sheet Adjustment Escrow Amount will be
approximately $600,000, but recognize that the final Balance Sheet Adjustment
Escrow Amount is subject to the calculation to be performed pursuant to the
preceding sentence. As soon as reasonably practicable following the Closing
Date, and in no event more than ninety (90) calendar days after the Closing
Date, Sellers shall deliver to Purchasers financial statements of the Business,
as of and for the period ending on Closing Date (the "Closing Financial
Statements") which have been prepared in accordance with the Companies' historic
internal accounting practices on a basis consistent with prior periods. Included
in such financial statements shall be the balance sheet of the Business as of
the Closing Date, including a computation of the liabilities assumed by
Purchasers pursuant to Section 1.4(a)(ii) (the "Closing Payables and Expenses")
and an estimate of the earnout contingent liabilities assumed by Purchasers
pursuant to Section 1.4(a)(iii) (collectively, the "Closing Liabilities") and
the (x) cash and cash equivalents and (y) deposits and the expenses and deferred
charges relating to the Business which
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had been prepaid or paid in advance by Sellers prior to the Closing included in
the Transferred Assets and the accounts receivable of the Business as of the
Closing Date (collectively, the "Closing Assets"). If, as indicated in the
Closing Financial Statements, the Closing Liabilities exceed the Closing Assets,
Sellers shall pay from the escrow account described hereinafter to Purchasers an
amount equal to such difference within ten days after such amount is determined,
including any resolution of any Disagreement (as defined hereinafter) relating
thereto pursuant to Section 1.7(c) hereof. As soon as practicable following the
delivery of the Closing Financial Statements and the resolution of any
Disagreement (as defined hereinafter) relating thereto, the Escrow Agent shall
deliver such amounts of the Balance Sheet Adjustment Escrow Amount to Purchasers
as are required by the Escrow Agreement, and shall deliver any remaining amounts
to Sellers.
(b) As soon as reasonably practicable following the first
anniversary of the Closing Date (the "Adjustment Date") and in no event more
than ninety (90) days subsequent thereto, Purchasers shall deliver to Sellers
financial statements of each of the 22 behavioral practices which constitute the
Business (the "Operating Profit Statements"), which statements shall calculate
the Operating Profit as defined below, for each such practice for the period
from the Closing Date through the Adjustment Date (the "Adjustment Period"). For
purposes of this Section 1.7(b), "Operating Profit" shall mean the earnings
before income
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taxes of each such practice (or, in the event that all or substantially all the
assets and business of such practice shall have been transferred to another
entity or entities, the allocable portion of the pre-tax earnings of such other
entity or entities) for the Adjustment Period as determined in accordance with
the Companies' historic internal accounting practices on a basis consistent with
prior periods. For purposes of calculating Operating Profit, all revenues
associated with the operation of such practice will be recognized during the
period in which they are earned. Such operating revenues will include all
charges directly related to the daily operations of the Business as determined
in accordance with the Companies' historic internal accounting practices on a
basis consistent with prior periods, including, but not limited to, gross
revenues less contractual allowances, contract revenue and other income. For
purposes of calculating Operating Profit, all expenses associated with the
operation of such practice will be recognized during the period in which they
are incurred. Such operating expenses will include all charges directly related
to the daily operations of the Business, determined in accordance with the
Companies' historic internal accounting practices on a basis consistent with
prior periods, including, but not limited to:
(i) Clinical salaries and benefits, related contract labor (including
Medical Directors);
(ii) Administrative salaries and benefits and related contract labor;
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(iii) Amounts paid to independent contractors;
(iv) Expenses for office supplies consumed, printing, postage and
delivery;
(v) Telephone, cellular phone expenses and utilities;
(vi) Insurance costs directly related to the worker's compensation,
professional and general liability or property insurance
associated with the Business;
(vii) Therapy/testing supplies consumed by the Business;
(viii) Travel and entertainment expenses incurred, except for those
expenses required to attend any of the Purchaser's corporate
or regional meetings;
(ix) Expenses for the lease or rental of any equipment
used in the office or directly by employees or
independent contractors, including repairs and
maintenance;
(x) Rents, including storage, and other charges for
facilities used in the operation of the Business,
including repairs and maintenance;
(xi) Charges incurred for the processing of payroll for
MPG only;
(xii) Advertising expenses in local newspapers and
publications and costs of marketing materials
and supplies;
(xiii) Amounts related to the write-off or reserving of bad debts;
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(xiv) Expenses related to the collection of bad
debts and the income therefrom;
(xv) Expenses relating to clinical supervision;
(xvi) Employee development;
(xvii) Professional/outside meetings;
(xviii) Cost of outside services, such as janitorial, transcription
and answering service;
(xix) Dues, books and subscriptions;
(xx) Taxes and licenses, except for income taxes;
(xxi) Recruitment and relocation to support existing business; and
(xxii) Miscellaneous other expenses specifically related to a
facility.
For purposes of calculating Operating Profit, operating expenses will
not include the following charges:
(i) corporate and divisional overhead allocations
including interest obligations on any inter-
company debt and expenses of any corporate or
divisional employees;
(ii) interest and amortization expense;
(iii) depreciation costs related to assets used in
connection with the operation of any of the
practices;
(iv) acquisition-related interest expense;
(v) legal and accounting fees; and
(vi) expenses incurred in connection with the
transactions contemplated hereby.
The Purchase Price shall be adjusted based on such Operating Profit, as
follows:
(i) If the Metropolitan Psychiatric Group ("MPG") has
an Operating Profit for the Adjustment Period that is less
than $630,000, then Sellers shall forfeit a portion of the
Warrant (valued at
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$5 per underlying Common Unit) with a value equal to 4.5 times
the dollar amount by which such Operating Profit is less than
$630,000; provided, however, that the maximum value of Warrant
forfeited pursuant to this Section 1.7(b)(i) shall not exceed
$1,350,000.
(ii) If the Rainbow Practice Group ("RPG") has an
Operating Profit for the Adjustment Period that is less than
$1,150,000, then Sellers shall forfeit a portion of the
Warrant (valued at $5 per underlying Common Unit) with a value
equal to 4.5 times the dollar amount by which such Operating
Profit is less than $1,150,000; provided, however, that the
maximum value of Warrant forfeited pursuant to this Section
1.7(b)(ii) shall not exceed $650,000.
(iii) Notwithstanding the foregoing subsections (i)
or (ii), Sellers shall not forfeit any portion of the Warrant
pursuant to this Section 1.7(b) if the Operating Profit of all
22 behavioral health Practices comprising the Business exceeds
$6,265,000 in the aggregate for the Adjustment Period.
Notwithstanding anything above to the contrary, no portion of the Warrant shall
be forfeited by Sellers pursuant to Section 1.7(b)(i) or (ii) above in the event
that (x) during the first six (6) months of the Adjustment Period, the
Purchasers terminate any of the divisional vice presidents or practice directors
of MPG or RPG employed by Sellers at the time of Closing and set forth on
Schedule 1.7(b) hereto for any reason other than for cause or (y) during the
first six (6) months of the Adjustment Period the Purchasers initiate a material
strategic decision (including, but not limited to, consolidation of offices
(except for the current ongoing consolidation efforts involving Psychogeriatric
Consultants and the Frenkel practice group); combination with current practices
or future practices acquired by the Purchasers or their affiliates; or the
elimination or
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addition of major clinical programs) which materially adversely affects the
Operating Profit of MPG or RPG.
(c) Within ninety (90) calendar days after Sellers' delivery
of the Closing Balance Sheets or Purchasers' delivery of the Operating Profit
Statements, respectively (collectively, the "Adjustment Statements"), the party
receiving the Adjustment Statements may dispute the Adjustments Statements as a
whole by giving written notice to the other party setting forth in reasonable
detail the basis for any such dispute (each such dispute a "Disagreement"), and
Purchasers and Sellers shall promptly commence good faith negotiations to
resolve any such Disagreement. If the receiving party does not give notice of
any Disagreement within ninety (90) calendar days after the Adjustment
Statements have been delivered, the receiving party shall be deemed to have
irrevocably accepted the Adjustment Statements. If Purchasers and Sellers do not
resolve (evidenced by a written agreement between Purchasers and Sellers) any
such Disagreement within forty-five (45) business days following the delivery of
a notice of such Disagreement, such Disagreement shall be referred to a national
accounting firm, which has not previously represented Sellers or Purchasers (an
"Independent Accounting Firm") mutually agreed upon by Purchasers and Sellers
within five (5) business days after the end of such forty-five (45) business day
period. At the request of either Purchasers or Sellers, the Independent
Accounting Firm shall review the entire Adjustment Statements and the
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basis for all comparison and calculation reflected therein and not only those
items relating to the Disagreement. If Purchasers and Sellers are unable to
agree upon an Independent Accounting Firm, Purchasers and Sellers shall each
have the right to request that the American Arbitration Association appoint an
Independent Accounting Firm, which appointment shall be binding on Purchasers
and Sellers. Purchasers and Sellers agree to execute, if requested by the
Independent Accounting Firm, a reasonable engagement letter. The fees and
expenses of the Independent Accounting Firm retained pursuant to this Section
1.7(c) shall be borne equally by the parties. Each party hereto shall cooperate
with such Independent Accounting Firm and provide such firm with reasonable
access to its books and records relating to the Business and such other
information as such firm may reasonably require in order to render its
determinations. All such determinations shall be made by the Independent
Accounting Firm within sixty (60) calendar days of its selection, shall be set
forth in a written statement delivered to Purchasers and Sellers, and shall be
final, binding and conclusive.
SECTION 1.8 PAYMENT OF PURCHASE PRICE.
(a) At Closing the sum of Twenty-Seven Million and No/100
Dollars ($27,000,000.00) shall be payable in cash or immediately available funds
(the "Cash Purchase Price"). The Cash Purchase Price shall be paid (i) to the
Escrow Agent to the extent required by Section 1.7(c) hereof, and (ii) otherwise
by wire transfer to such account and pursuant
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to such wire transfer instructions as are provided by Apogee to the Purchasers
in writing prior to Closing.
(b) At Closing, PsychPartners shall issue the Warrant, which
shall be delivered to the Escrow Agent and held pursuant to the Escrow
Agreement. The Escrow Agent shall deliver the Warrant to Apogee, subject to any
adjustments made pursuant to Section 1.7(b) hereof, as soon as practicable after
the Adjustment Date.
SECTION 1.9 ALLOCATION OF PURCHASE PRICE. The parties agree that the
Purchase Price shall be allocated among the Transferred Assets as set forth in
Schedule 1.9 hereto and in accordance with Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations thereunder. Within
ninety (90) days following the Closing, Purchasers and Sellers shall prepare and
submit Internal Revenue Form 8594 prepared in accordance with the mutually
agreed upon allocation and this Section 1.9, and Sellers and Purchasers shall
file all tax returns consistent with Schedule 1.9 and the Form 8594, and
Purchasers and Sellers shall report all other matters in a manner consistent
with that reported by the other party and shall not take any position
inconsistent with this Section 1.9.
ARTICLE II
THE CLOSING
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SECTION 2.1 DATE AND PLACE. The parties contemplate that the closing of
the transactions contemplated hereby (the "Closing") shall take place on
February 28, 1998, or as soon thereafter as practicable following the vote of
the shareholders of Apogee in favor of the transactions contemplated by this
Agreement. The Closing shall take place at the offices of Balch & Bingham LLP in
Birmingham, Alabama, or such other location upon which the parties may mutually
agree. The transactions contemplated by this Agreement shall be deemed to be
effective for all purposes as of 12:01 a.m. on the Closing Date.
SECTION 2.2 DELIVERY OF DOCUMENTS.
(a) At Closing, Sellers shall execute and deliver to
Purchasers the Bill of Sale and Assignment Agreement (as both are defined
herein) and any other instruments of transfer necessary to convey to Purchasers
all of Sellers' right, title and interest in and to the Transferred Assets.
(b) At Closing, Apogee shall execute and deliver to Purchasers
certificates for the AGP Stock, duly endorsed or accompanied by stock powers
duly endorsed in blank, in proper form for transfer.
(c) At Closing, Sellers shall deliver to Purchasers the items
specified in Section 6.3 and Purchasers shall deliver to Sellers the items
specified in Section 7.3.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, jointly and severally, hereby represents, warrants and
covenants to PsychPartners and Purchasers as of the date hereof that:
SECTION 3.1 CORPORATE ORGANIZATION. Each of Sellers (other than Family
Social & Psychological Services, L.L.C.) is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
formation. Family Social & Psychological Services, L.L.C. is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization. Each of Sellers has the requisite corporate or
limited liability company (as applicable) power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns; and each of Sellers is duly licensed and qualified to do business in
each state where the nature of the business conducted by it or the character and
location of any properties and assets owned or leased by it make such
qualification necessary (each of which are set forth in Schedule 3.1), except
where the failure to so qualify would not have a Material Adverse Effect (as
hereinafter defined) on the Business or the Transferred Assets. The copies of
the Articles of Incorporation, Articles of Organization, Bylaws or Operating
Agreement, as applicable, of each of Sellers made available to Purchasers are
true, complete and accurate copies of such instruments as presently in effect.
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For purposes of this Agreement, "Material Adverse Effect," when used in
connection with any of the Sellers, shall mean any condition, change or effect
that, individually or when taken together with all other such conditions,
changes or effects that existed or occurred prior to the date of determination
of the existence or occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of the
Business, taken as a whole (other than any change relating to the United States
economy in general).
SECTION 3.2 CORPORATE AUTHORITY; AUTHORIZATION OF AGREEMENT. Each of
Sellers has the requisite corporate or limited liability company (as applicable)
power and authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereby, and to perform all the terms and conditions
hereof to be performed by it, subject only to obtaining the approval of the
shareholders of Apogee of this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance of all the
terms and conditions hereof to be performed by Sellers and the consummation of
the transactions contemplated hereby have been duly authorized and approved by
the Board of Directors, Board of Managers or Members, as applicable, of each of
Sellers. This Agreement has been duly executed and delivered by each of Sellers
and constitutes the valid and binding obligation of Sellers enforceable against
each of
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Sellers in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights generally and except that equitable remedies may not in all cases be
available (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
SECTION 3.3 CAPITAL STOCK. The authorized capital stock of AGP consists
solely of 1,000 shares of common stock, par value $.01 per share, all of which
are validly issued and outstanding, fully paid and non-assessable. Such validly
issued and outstanding, fully paid and non-assessable shares constitute the AGP
Stock. Except for the AGP Stock, there are no issued and outstanding shares of
capital stock of AGP and there are no outstanding options, warrants or other
rights to subscribe for or purchase any such shares.
SECTION 3.4 SUBSIDIARIES. Attached hereto as Schedule 3.4 is a complete
list of all of the subsidiaries of AGP and of all corporations, partnerships or
other entities in which AGP has an interest.
SECTION 3.5 TITLE TO STOCK AND POWER TO CONVEY. Except as set forth on
Schedule 3.5 hereto, Apogee is the sole record and beneficial owner of, and has
good title to, all of the issued and outstanding shares of capital stock, $.01
par value, of AGP, which shares constitute the AGP Stock proposed to be sold by
Apogee hereunder. Except as
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set forth on Schedule 3.5 hereto, Apogee has full right and capacity to sell and
deliver the AGP Stock to be delivered by it as contemplated by this Agreement.
Upon endorsement and delivery of certificates evidencing the AGP Stock to
Purchasers at the Closing, Purchasers shall have acquired from Apogee good,
legal and equitable title to the AGP Stock free and clear of all pledges, liens,
security interests, claims, charges, restrictions, options or encumbrances of
any nature whatsoever. Except as set forth on Schedule 3.5 hereto, all other
previously issued shares of capital stock of AGP have been properly redeemed and
cancelled. Except as set forth on Schedule 3.5 hereto, there are no rights to
any shares of capital stock of AGP existing in any person other than Apogee
pursuant to inheritance, devise, descent or distribution.
SECTION 3.6 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will: (a)
conflict with or violate any provision of the Articles of Incorporation,
Articles of Organization, Bylaws or Operating Agreement, as applicable, of any
Seller; (b) except as set forth on Schedule 3.26 or 3.27 hereto, violate,
conflict with, constitute a default (or an event which, with or without notice,
lapse of time or both, or the occurrence of any other event, would constitute a
default) under, result in the termination of, accelerate the performance
required by, cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or
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imposition of any security interest, lien or other encumbrance upon any property
or assets of any Seller related to the Business under any agreement or
commitment related to the Business to which any Seller is a party or by which
any Seller is bound, or to which the property of any Seller related to the
Business is subject, except for conflicts, violations, defaults, breaches or
other matters which would not have a Material Adverse Effect; or (c) violate any
federal, state or local law, except for violations which would not have a
Material Adverse Effect, or any judgment, decree, order, regulation or rule of
any court or governmental authority to which any of Sellers are a party or have
knowledge.
SECTION 3.7 FINANCIAL STATEMENTS.
(a) Apogee has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports, registration statements, proxy statements and other
documents (collectively, the "Apogee Reports") required to be filed by Apogee
under the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Securities Laws"), except failures to file which,
individually or collectively, would not have a Material Adverse Effect. As of
their respective dates, or, in the case of registration statements, as of the
effective dates, all of the Apogee Reports, including all exhibits and schedules
thereto and all documents incorporated by reference therein, (i) complied as to
form in all material
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respects with the requirements of the Securities Laws applicable thereto and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements,
in light of the circumstances under which they were made, not misleading. Apogee
has filed with the SEC all documents and agreements which were required to be
filed as exhibits to the Apogee Reports, except failures to file, if any, which
individually or collectively, would not have a Material Adverse Effect. The
audited consolidated financial statements and unaudited interim consolidated
financial statements of Apogee included or incorporated by reference in the
Apogee Reports (collectively, the "Apogee Financial Statements") have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis and fairly present the financial position of
Apogee as of and at the dates thereof and the results of operations and cash
flows for the periods then ended, subject in the case of the unaudited interim
financial statements, to normal, recurring year-end adjustments and any other
adjustments described therein, which were not and are not expected to be
material in amount or effect.
(b) Sellers have delivered to Purchasers true and complete copies of
(i) the balance sheet of the Business as of September 30, 1997, a copy of which
is attached hereto as Schedule 3.7(b) (the "Business Balance Sheet"); and (ii)
monthly profit and loss statements (the "Monthly Statements") of each of the
Practices identified on Exhibit
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A, for the time period of January 1996 through September 1997. The Business
Balance Sheet, the Monthly Statements and the November Statements are
hereinafter collectively referred to as the "Business Financial Statements").
The Business Financial Statements have been prepared in accordance with the
Companies' historic internal accounting practices on a basis consistent with
prior periods, the Business Balance Sheet presents fairly, in all material
respects, the assets (other than cash, deferred taxes and goodwill and other
intangible assets) and liabilities (whether accrued, absolute, contingent or
otherwise) (other than Earnout Liabilities, promissory notes payable, deferred
taxes payable and stockholders' equity) of the Business at the dates indicated
and, subject to normal, recurring year-end adjustments, the Monthly Statements
present fairly, in all material respects, the operating profits during the
periods indicated of the individual practices comprising the Business.
SECTION 3.8 NO UNDISCLOSED LIABILITIES. Except as set forth or
reflected in the consolidated balance sheet of Apogee in the Apogee Reports and
in the Business Financial Statements as of September 30, 1997, and except for
Earnout Liabilities, promissory notes payable and deferred taxes payable,
neither Apogee, the Companies, nor any of the Practices comprising the Business
has any liabilities or obligations of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due) relating to the
Business or the Transferred Assets which
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would be required to be reflected or reserved against in such consolidated
balance sheet of Apogee or in the notes thereto, prepared in accordance with
GAAP, consistently applied, or in the Business Balance Sheet, except liabilities
or obligations (i) described or otherwise disclosed on, or which may arise out
of with respect to the matters or agreements described or otherwise disclosed
on, the Schedules to this Agreement, or those which may arise out of or with
respect to matters or agreements that would be required to be disclosed on such
Schedules but for the limitations on such disclosure contained in the
representations and warranties relating to such Schedules, (ii) arising in the
ordinary course of business or (iii) which, individually or collectively, would
not have a Material Adverse Effect.
SECTION 3.9 ABSENCE OF CHANGES. Except as set forth
on Schedule 3.9 hereto, since September 30, 1997 there has
been no:
(i) transaction related to the Business by any Seller
except in the ordinary course of business;
(ii) event or occurrence which has had a Material
Adverse Effect;
(iii) destruction of, damage to, or loss of any of
the assets of any Seller used in the Business (whether or not
covered by insurance) having a Material Adverse Effect;
(iv) sale or transfer of any material asset used in
the Business and located at the Clinic Locations, except in
the ordinary course of business;
(v) amendment or termination of any material
contract, agreement or license to which any Seller
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is a party and related to the Business, except in
the ordinary course of business;
(vi) waiver of any right of material value related to
the Business;
(vii) mortgage, pledge or other encumbrance of any
material asset of any Seller related to the Business;
(viii) waiver or release of any material asset
related to the Business of any Seller, except in the ordinary
course of business;
(ix) any capital expenditure by any Seller (or series
of related capital expenditures) related to the Business and
involving more than $20,000;
(x) creation, incurrence, assumption, or guarantee,
except in the ordinary course of business, by any Seller of
any indebtedness related to the Business other than its trade
payables;
(xi) delay or postponement by any Seller, beyond its
normal practice, of the payment of accounts payable and other
liabilities related to the Business, and no Seller has
instituted any unusual or accelerated collection efforts with
respect to its accounts receivable;
(xii) loan related to the Business made by any Seller
to, or any other transaction with, any of such Seller's
directors, officers, and employees which could give rise to
any claim or right on the part of such Seller against any such
person, or on the part of any such person against such Seller,
which exceeds $50,000, other than as reflected on the Apogee
Financial Statements or the Company Financial Statements; or
(xiii) any other change in the compensation terms in
any employment contracts, written or oral, of Sellers (other
than increases not exceeding 5% of such employee's salary
previously in effect).
SECTION 3.10 LIMITATION ON SALES. Sellers acknowledge that the Warrant
and the Common Units of PsychPartners (the "Common Units") which may be issued
upon the exercise of the Warrant have not been registered under
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the Securities Act of 1933, as amended (the "Act"), and Sellers represent that
they will acquire such Warrant and Common Units for investment purposes only,
and not with a view towards distribution in violation of the Act. Sellers agree
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of the Warrant or any Common Units issued upon exercise of the Warrant in the
absence of (a) an effective registration statement under the Act as to such
Warrant or such Common Units and registration or qualification of the Warrant or
such Common Units under any applicable Blue Sky or state securities law then in
effect, or (b) an opinion of counsel reasonably satisfactory to Purchasers that
such registration and qualification are not required. Each certificate or other
instrument for the Warrant and for the Common Units issued upon the exercise of
the Warrant shall bear a legend substantially to the foregoing effect.
SECTION 3.11 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
Schedule 3.11 hereto, each Seller has good and valid title to the Transferred
Assets owned by such Seller. Except as set forth on Schedule 3.11 hereto, all of
the Transferred Assets are free and clear of all title defects or objections,
liens, claims, charges, security interests or other encumbrances of any nature
whatsoever including, without limitation, leases, chattel mortgages, pledges,
conditional sales contracts, collateral security arrangements and other title or
interest retention arrangements (collectively, "Liens") except for Permitted
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Encumbrances (as hereinafter defined). For purposes of this Agreement,
"Permitted Encumbrances" means (a) statutory Liens for current taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which adequate reserves have been established, (b) mechanics', carriers',
workers', repairers', and other similar liens imposed by law arising or incurred
in the ordinary course of business for obligations, (c) Liens on leases of real
property arising from the provisions of such leases, including, in relation to
leased real property, any agreements and/or conditions imposed on the issuance
of land use permits, zoning, business licenses, use permits, or other
entitlements of various types issued by any governmental entity, necessary or
beneficial to the continued use and occupancy of the Sellers' assets related to
the Business or the continuation of the operation of the Business, (d) those
Liens set forth on Schedule 3.11 hereto and marked with an asterisk, (e) Liens
securing leases of vehicles and other personal property, as set forth in
Schedule 1.4(v) which do not, individually or in the aggregate, materially
impair the operation of the Business at the location at which such leased
equipment or other personal property is located, or (f) other Liens securing
Assumed Liabilities incidental to the operation of the Business or the ownership
of the Transferred Assets which do not materially impair the value of the
Business.
Liabilities.
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SECTION 3.12 TITLE CONVEYED. Except as set forth on Schedule 3.12
hereto and except for the Excluded Assets, the Transferred Assets include all
assets, properties and rights currently being used by Sellers in the operation
of the Business, and all assets, properties and rights necessary to permit
Purchasers to conduct the Business in all material respects in the same manner
as Sellers have conducted the Business to date. Except as set forth on Schedule
3.12 hereto, Sellers have the power and authority and the right to sell,
transfer, convey, assign, and deliver to Purchasers, and upon consummation of
the transactions contemplated by this Agreement, Purchasers will acquire title
to, all the Transferred Assets, free and clear of all title defects or
objections, liens, claims, charges, security interests or other encumbrances,
including, without limitation, leases, chattel mortgages, pledges, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements, except for Permitted Encumbrances. The bills of sale,
deeds, assignments and other instruments to be executed and delivered to
Purchasers by Sellers at the Closing will be valid and binding obligations of
Sellers enforceable in accordance with their terms, except as such
unenforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws relating to or affecting
the enforcement of creditors' rights generally and except that equitable
remedies may not in all cases be available (regardless of whether such
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enforceability is considered in a proceeding in equity or at law), and will vest
in Purchasers title to all the Transferred Assets.
SECTION 3.13 REAL PROPERTY. None of Sellers owns any real property
used in or related to the Business.
SECTION 3.14 LEASES. Schedule 3.14 hereto contains an accurate and
complete list of all leases and subleases pursuant to which Sellers lease real
or personal property used in or relating to the Business, each of which is to be
assumed by Purchasers as part of the transactions contemplated hereby. Except as
set forth on Schedule 3.14 hereto, all such leases to be assumed by Purchasers
are valid, binding and enforceable against each Seller which is a party thereto
in accordance with its terms, except to the extent that such enforcement may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to creditors' rights and remedies
generally, and are in full force and effect; there are no existing defaults by
any Seller thereunder and no event of default by such Seller, or to such
Seller's knowledge, any other party thereto has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would have a Material Adverse Effect. No Seller is a party to any written or
oral commitment or agreement for any leasehold improvement in excess of $20,000
relating to the Business.
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SECTION 3.15 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.15
hereto, each of the accounts receivable of Sellers included in the Transferred
Assets arose in the ordinary course of business of Sellers and was created in
compliance in all material respects with applicable law. Unless paid prior to
Closing, such accounts receivable are or will be as of Closing, current and
collectible net of the reserves shown on the Apogee Financial Statements or the
Business Financial Statements. Sellers and their respective collection agents
have complied with all laws, rules and regulations with respect to the
receivables, except where such noncompliance, individually or in the aggregate,
would not have a Material Adverse Effect. Sellers or the professional
corporations managed by Sellers are the sole beneficial and legal owners of all
receivables. The Transferred Assets include sufficient records with respect to
the receivables to determine the status of collection efforts and to enforce
collection thereof. Except for liabilities included in the Assumed Liabilities,
and any collection costs associated with the collection of such receivables, any
liabilities arising in connection with the creation by Sellers of the
receivables or the collection by Sellers or their respective agents of the
receivables shall remain the liability of Sellers.
SECTION 3.16 ACCOUNTS PAYABLE. Except as set forth on Schedule 3.16
hereto, each of the accounts payable of Sellers related to the Transferred
Assets or the Business arose in the ordinary course of business was incurred in
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connection with the operation of the Business, is materially current in
repayment status and Sellers are not otherwise in default in payment of any of
such obligations.
SECTION 3.17 INTELLECTUAL PROPERTY MATTERS. Except as set forth on
Schedule 3.17 hereto, Sellers do not own or use any patents, trademarks, trade
names, service marks, copyrights and trade secrets in connection with the
Business. Except as set forth on Schedule 3.17 hereto, to the Seller's
knowledge, Sellers do not infringe upon or unlawfully or wrongfully use any
patent, trademark, trade name, service mark, copyright, or trade secret owned or
claimed by another, except where such infringement would not have a Material
Adverse Effect.
SECTION 3.18 CONTRACTS AND COMMITMENTS. Schedule 3.18 hereto lists all
of the written or oral provider, payor, managed care, employee, stipend and
clinical services agreements related to the Business and material to the
operations or prospects of the Business, other than the leases identified on
Schedule 3.14 hereto. For purposes of this section, a "material" agreement shall
mean any agreement where the aggregate annual payments by Sellers exceed
$75,000. Except as set forth on Schedule 3.18 hereto:
(i) No Seller is in breach or default under or in
violation of any contract, agreement or commitment relating to
the Business, except where such breach or default,
individually or in the aggregate, would not have a Material
Adverse Effect;
(ii) No Seller is a party to any written or oral
agreement, contract or commitment with any present or former
employee or consultant or for
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the employment of any person, including any consultant, who is
engaged in the conduct of the Business;
(iii) No Seller is a party to any written or oral
commitment or agreement for any capital expenditure in excess
of $20,000 relating to the Business; and
(iv) No Seller is a party to any written or oral
agreement, contract or commitment limiting or restraining any
Seller, the Business or any successor thereto from engaging or
competing in any manner or in any business, nor, to such
Seller's knowledge, is any employee of any Seller engaged in
the conduct of the Business subject to any such agreement,
contract or commitment.
SECTION 3.19 AGREEMENTS IN FULL FORCE AND EFFECT. All contracts,
agreements, benefit plans (as defined in Section 3.23 hereof), leases, licenses
and other instruments set forth in the Schedules hereto are valid and in full
force and effect, and true copies of all written documents thereof have been
heretofore made available to Purchasers. Sellers have performed all obligations
required to be performed by them under, and are not in default in any respect
under, in conflict in any respect with, or in violation in any respect of, any
agreement, benefit plan, lease, policy, mortgage, note, bond, indenture, license
or other document or undertaking, oral or written, to which any Seller in
connection with the Business is a party or by which any Seller in connection
with the Business is bound and which affects Sellers in connection with the
Business or the Business except where such nonperformance, default, conflict or
violation would not have a Material Adverse Effect.
SECTION 3.20 INSURANCE.
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(a) Schedule 3.20 hereto contains (i) an accurate and complete
list of all policies of insurance providing coverage for Sellers with respect to
the Transferred Assets or the Business, and (ii) a schedule setting forth the
aggregate claims and all individual claims made under each such policy (or any
predecessor policy) during the last two years.
(b) No written or, to the knowledge of Sellers, oral notice of
cancellation, termination or reduction in coverage has been received with
respect to any policy listed on Schedule 3.20 hereto. No Seller has been refused
any insurance with respect to its assets or operations, nor has its coverage
been limited, by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last two years.
SECTION 3.21 COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.21
hereto:
(i) Each Seller has conducted the Business in
accordance in all material respects with all applicable laws,
rules, regulations, judgments, orders and other requirements
of all courts, administrative agencies, or governmental
authorities having jurisdiction over Sellers, including,
without limitation, applicable laws, rules, regulations and
requirements relating to antitrust, consumer protection, equal
opportunity, occupational safety and health, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
employment, labor, wage and hour, pension, welfare and
securities matters;
(ii) No Seller has received within the last two years
any written or, to the knowledge of Sellers, oral notification
of any asserted present or past failure by any Seller to
comply with such laws, rules or regulations that relates in
any way to the Business except for notices with respect to
failures to comply which would not have a Material Adverse
Effect;
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(iii) Each Seller has all licenses, certificates of
occupancy, permits and other governmental authorizations or
approvals (collectively, "Licenses") required for the
operation of the Business and the current use of the
properties of the Business, except where the failure to have a
License would not have a Material Adverse Effect and all such
Licenses are valid and in effect;
(iv) No Seller is in violation of any License, and
the consummation of the transactions contemplated by this
Agreement will not result in a violation or termination of any
License except for such violations which would not have a
Material Adverse Effect; and
(v) Each Seller has complied with all Medicare and
Medicaid rules and regulations, all federal, state and local
licensing requirements and health laws and requirements and
other similar statutes, except for such noncompliance which
would not have a Material Adverse Effect, and no written or,
to the knowledge of Sellers, oral notice of any pending
inspection or violation of any such act or statute has been
received by Sellers in connection with the Business.
SECTION 3.22 EMPLOYMENT MATTERS.
(a) Each Seller is in compliance with all federal, state and
local laws, ordinances and regulations respecting employment practices, terms
and conditions of employment and wages and hours, except where noncompliance
would not have a Material Adverse Effect, and is not and has not engaged in any
unfair labor practice in respect of the operations of the Business. Except as
set forth on Schedule 3.22(a) hereto, there is no unfair practice complaint
against any Seller pending or, to Sellers' knowledge, threatened, in respect of
the operations of the Business.
(b) Schedule 3.22(b) hereto contains a list of all employees
of Sellers in connection with the Business, including their wages and other
remuneration of every kind.
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Such employees, except for employees as to which an employment agreement is set
forth on Schedule 3.18, are terminable at will by Sellers at no cost to Sellers,
except for such costs as result from the application of Seller's severance
policies to such employee termination.
(c) No Seller is a party to any collective bargaining
agreement with any labor union or other association of employees and, to the
best of Sellers' knowledge, no attempt has been made to organize or certify the
employees of any Seller as a bargaining unit.
(d) To the knowledge of Sellers, no Seller has been the
subject of any inspection or investigation relating to its compliance with or
violation of the Immigration Reform and Control Act of 1986, and the rules and
regulations promulgated thereunder (the "Immigration Laws"). No Seller has been
fined or otherwise penalized by reason of any failure to comply with the
Immigration Laws, nor is any such proceeding pending or, to the knowledge of
Sellers, threatened all in respect of the Business.
(e) Each Seller has complied with the requirements of ERISA
except where the failure to comply would not have a Material Adverse Effect.
SECTION 3.23 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 3.23
hereto contains a complete list of all employee benefit plans, whether or not
set forth in writing, and whether covering one person or more than one person,
sponsored or maintained by any of Sellers relating to the Business. For the
purposes hereof, the term "benefit plan"
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includes all plans, funds, programs, policies, arrangements, practices, customs
and understandings for providing benefits of economic value to any employee,
former employee, or present or former beneficiary, dependent or assignee of any
such employee or former employee other than regular salary, wages or commissions
paid substantially concurrently with the performance of the services for which
paid. Without limitation, the term "benefit plan" includes all employee welfare
benefit plans within the meaning of section 3(1) of ERISA and all employee
pension benefit plans within the meaning of section 3(2) of ERISA.
SECTION 3.24 LITIGATION. Except as set forth on Schedule 3.24 hereto,
there is no action, suit, claim, inquiry, proceeding or investigation pending
against any Seller which affects the Business or the Transferred Assets or, to
the knowledge of any Seller, involving or threatened against any Seller which
affects the Business or the Transferred Assets or which questions or challenges
the validity of this Agreement or any action taken or to be taken pursuant to
this Agreement or in connection with the transactions contemplated hereby, and
Sellers have no knowledge or reasonable grounds for believing that there is any
basis for any such action, suit, claim, inquiry, proceeding or investigation. No
Seller is subject to any judgment, order or decree entered in any proceeding or
investigation.
SECTION 3.25 COMPLIANCE WITH FRAUD AND ABUSE STATUTES. Sellers and all
persons and entities providing
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professional services for the Business have not, to the knowledge of Sellers,
engaged in any activities with respect to the Business which are prohibited
under 42 U.S.C. Section 1320a-7b or the regulations promulgated thereunder, or
related state or local statutes or regulations, or which are prohibited by rules
of professional conduct, including, but not limited to, the following: (a)
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;
(b) 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; (c) any failure by a claimant to disclose knowledge 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 the intent to
fraudulently secure such benefit or payment; and (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) 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 (ii) in return for purchasing, leasing or ordering or arranging
for, or recommending, purchasing, lease or ordering any good, facility, service
or
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item for which payment may be made in whole or in part by Medicare or Medicaid.
SECTION 3.26 GOVERNMENTAL CONSENTS. Except as set forth on Schedule
3.26 hereto, no consent, approval or authorization of, notice to, or
declaration, filing or registration with, any governmental or regulatory
authority, domestic or foreign, is required in connection with the execution,
delivery and performance of this Agreement by Sellers or the consummation of the
transactions contemplated hereby.
SECTION 3.27 OTHER CONSENTS. Except as set forth on Schedule 3.27
hereto, no consent, approval or authorization of, or notice to, any other person
or entity, including, without limitation, parties to loans, contracts, leases or
other agreements, is required in connection with the execution, delivery and
performance of this Agreement by Sellers or the consummation by it of the
transactions contemplated hereby.
SECTION 3.28 ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 3.28 hereto:
(i) Sellers have obtained all permits, licenses and
other authorizations which are required in connection with the
conduct of the Business under regulations relating to
pollution or protection of the environment, including
regulations relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the
environment (including without limitation ambient air, surface
water, groundwater, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes ("Environmental
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Law"), each of which are set forth on Schedule 3.28, except
where the failure to have obtained any such permit, license or
authorization would not have a Material Adverse Effect;
(ii) Sellers are in material compliance with the
terms and conditions of all Sellers' permits, licenses and
other authorizations obtained in connection with the conduct
of the Business and required under any Environmental Law,
except where any non-compliance would not have a Material
Adverse Effect;
(iii) No Seller has received written or, to the
actual knowledge of such Seller, oral notice of any past or
present events, conditions, circumstances, activities,
practices, incidents, actions or plans in connection with the
Business that could reasonably be expected to interfere with
or prevent continued material compliance with the permits,
licenses and other authorizations referred to above or with
any Environmental Law;
(iv) To Sellers' actual knowledge, no asbestos or
equipment containing polychlorinated biphenyls or leaking
underground or above-ground storage tanks is contained in or
located at any facility leased by any Seller in connection
with the Business that would give rise to any liability of
such Seller under any Environmental Law that would have a
Material Adverse Effect;
(v) Each Seller is in compliance with all
Environmental Laws, and has fully disclosed all past (to the
extent not cured) and present noncompliance actually known by
Sellers with such Environmental Laws in connection with the
conduct of the Business except, in each case, where any
noncompliance by any such Seller with such Environmental Law
would not have a Material Adverse Effect, and all known past
"releases" by any Seller of a "reportable quantity" of any
"hazardous substance", or releases by any Seller of oil, that
would form the basis of any claim, action, suit, proceeding,
hearing or investigation regarding any Seller under any
Environmental Law that would have a Material Adverse Effect;
and
(vi) No Seller has received written or, to the actual
knowledge of Sellers, oral notice of any past or present
events, conditions, circumstances, activities, practices,
incidents, actions or plans that have resulted in (to the
extent not resolved) or threaten to result in any common law
or legal liability, of any Seller, or otherwise form basis of
any claim, action, suit,
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proceeding, hearing or investigation in respect of any Seller
under any Environmental Law that would give rise to any
liability of such Seller under such Environmental Law and
would have a Material Adverse Effect.
SECTION 3.29 INVENTORY. The inventory included in the Transferred
Assets has not been substantially written down in value on the books of Sellers,
and is of a quality and quantity reasonably expected to be useable and saleable
in the ordinary course of the business.
SECTION 3.30. CUSTOMERS, SUPPLIERS AND SALES REPRESENTATIVES. Sellers
have provided Purchasers a list of the 10 largest customers or clients of the
Business in terms of gross revenue during the year ended December 31, 1996, and
the nine-month period ended September 30, 1997. Except as set forth on Schedule
3.30 hereto, no Seller has received notice from any such customer or client of
termination or an intention to terminate its relationship with the Business.
SECTION 3.31 BROKERS OR FINDERS. Sellers agree to indemnify and hold
Purchasers harmless from any claim by any person or entity retained by Sellers,
or any of them, for a commission or fee arising out of or as a result of the
transactions contemplated hereby for payment out of any broker's or finder's
arrangement.
SECTION 3.32 TAXES. Sellers have paid (or have made provision for the
payment of) all special charges or levies, taxes, unemployment compensation
contributions, penalties and interest that would form a charge or encumbrance on
the Transferred Assets or the Business or that would become payable by
Purchasers as a result of or in connection with
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any event relating to the Business or Sellers occurring before the date of
Closing. Without limiting the generality of the foregoing, all federal, state,
county and local taxes, including, without limitation, income, corporate
franchise, stamp, transfer, sales and use, employee withholding and ad valorem
taxes due and payable by any Seller on or before the date hereof have been paid
or provided for, and Sellers have filed all tax returns and reports required to
be filed by Sellers pursuant to the operation of the Business with all
applicable taxing authorities, except where the failure to do so would not have
a Material Adverse Effect. The Company has no outstanding or unsatisfied
deficiency assessments with respect to any taxes, and to Sellers' knowledge
there are no current audits or investigations by or disputes with any authority
with respect to any taxes that may affect the Business or form a lien or charge
on the Transferred Assets.
SECTION 3.33 TAX RETURNS. Sellers have delivered to Purchasers copies
of all corporate income tax returns filed by Apogee in connection with the
Business for the 1996 fiscal year.
SECTION 3.34 OSHA AND ADA AND CLEAN AIR ACT. Sellers, in the conduct of
the Business, are in compliance with all requirements of the Occupational Safety
and Health Act ("OSHA"), to the extent applicable, the Americans with
Disabilities Act ("ADA"), and the Clean Air Act pertaining to the facilities and
operations used in the Business,
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except for noncompliance which would not have a Material Adverse Effect.
SECTION 3.35 FULL DISCLOSURE. The representations and warranties of
Sellers in this Agreement and in the Schedules hereto are true, complete and
correct in all material respects, and no such representation or warranty
contains any untrue statement of material fact or omits to state any material
fact necessary to make the statements made not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PURCHASERS AND PSYCHPARTNERS
Each of Purchasers and PsychPartners, jointly and severally, hereby
represents, warrants, covenants and acknowledges to Sellers as of the date
hereof as follows:
SECTION 4.1 ORGANIZATION. PsychPartners is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Alabama. Purchasers are each corporations duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
PsychPartners and Purchasers has the requisite corporate power and authority to
carry on its business as it is now being conducted and to own the properties and
assets it now owns; and each of PsychPartners and Purchasers is duly licensed
and qualified to do business in each state where the nature of the business
conducted by it or the character and location of any properties and assets owned
or leased by it make such qualification
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necessary, except where the failure to so qualify would not reasonably be
expected to have a material adverse effect on their respective businesses. The
copies of the Articles of Incorporation, Articles of Organization, Bylaws or
Operating Agreement, as applicable, of each of Purchasers delivered to Sellers
are true, complete and accurate copies of such instruments as presently in
effect.
SECTION 4.2 AUTHORIZATION. PsychPartners has the limited liability
company power and authority, and each of Purchasers has the requisite corporate
or limited liability company (as applicable) power and authority, to enter into
this Agreement, to carry out the transactions contemplated hereby, and to
perform all the terms and conditions hereof to be performed by it. The execution
and delivery of this Agreement, the performance of all the terms and conditions
hereof to be performed by PsychPartners and Purchasers, and the consummation of
the transactions contemplated hereby, have been duly authorized and approved by
the Board of Directors or Board of Managers, as applicable, of each of
PsychPartners and Purchasers. This Agreement has been duly executed and
delivered by each of Purchasers and PsychPartners, and constitutes the valid and
binding obligation of PsychPartners and Purchasers enforceable against each of
them in accordance with its terms, except to the extent that such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
remedies generally.
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SECTION 4.3 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the Articles of Incorporation, Articles of
Organization, Bylaws or Operating Agreement, as applicable, of any of
PsychPartners or Purchasers; (b) violate, conflict with, constitute a default
(or an event which, with or without notice, lapse of time or both, or the
occurrence of any other event, would constitute a default) under, result in the
termination of, accelerate the performance required by, cause the acceleration
of the maturity of any debt or obligation pursuant to any agreement or
commitment to which either PsychPartners or Purchasers is a party or by which
either PsychPartners or Purchasers is bound, or to which the property of either
PsychPartners or Purchasers is subject, or (c) violate any federal, state or
local statute or law or any judgment, decree, order, regulation or rule of any
court or governmental authority.
SECTION 4.4 LITIGATION. Except as set forth on Schedule 4.4 hereto,
there is no action, suit, claim, inquiry, proceeding or investigation pending
against any of PsychPartners or Purchasers, or to the knowledge of PsychPartners
or Purchasers, involving or threatening any of PsychPartners or Purchasers,
which questions or challenges the validity of this Agreement or any action taken
or to be taken pursuant to this Agreement or in connection with the transactions
contemplated hereby, and PsychPartners and Purchasers have no knowledge or
reasonable grounds for
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believing that there is any basis for any such action, suit, claim, inquiry,
proceeding or investigation. Neither of PsychPartners or Purchasers is subject
to any judgment, order or decree entered in any proceeding or investigation.
SECTION 4.5 GOVERNMENTAL CONSENTS. Except as set forth on Schedule 4.5
hereto, no consent, approval or authorization of, notice to, or declaration,
filing or registration with, any governmental or regulatory authority, domestic
or foreign, is required in connection with the execution, delivery and
performance of this Agreement by PsychPartners and Purchasers or the
consummation of the transactions contemplated hereby by PsychPartners and
Purchasers.
SECTION 4.6 OTHER CONSENTS. Except as set forth on Schedule 4.6 hereto,
no consent, approval or authorization of, or notice to, any other person or
entity, including, without limitation, parties to loans, contracts, leases or
other agreements, is required in connection with the execution, delivery and
performance of this Agreement by PsychPartners and Purchasers or the
consummation by PsychPartners and Purchasers of the transactions contemplated
hereby.
SECTION 4.7 NO BROKERS. PsychPartners and Purchasers hereby, jointly
and severally, agree to indemnify and hold Sellers harmless from any claim by
any person or entity retained by Purchasers or PsychPartners, or any of them,
for a commission or fee arising out of or as a result
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of the transactions contemplated hereby for payment out of any broker's or
finder's arrangement.
SECTION 4.8 SHARES TO BE FULLY PAID; RESERVATION OF STOCK.
PsychPartners represents that all shares of PsychPartners Common Units which may
be issued upon the exercise of the Warrant to be issued in connection with the
transactions contemplated by this Agreement will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable. PsychPartners
covenants and agrees that, during the period within which the rights represented
by the Warrant may be exercised, it will at all times have authorized and
reserved, for the purpose of issuance or transfer upon exercise of the Warrant,
a sufficient number of shares of authorized but unissued Common Units, when and
as required to provide for the exercise of the rights represented by the
Warrant. PsychPartners will take all such action as may be necessary to assure
that such shares of Common Units may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
domestic securities exchange upon which the Common Units may be listed;
provided, however, that PsychPartners shall not be obligated to effect a
registration under any Federal or state securities laws in connection with such
exercise.
SECTION 4.9 CAPITAL STRUCTURE OF PSYCHPARTNERS AND PURCHASERS.
PsychPartners has issued 4,766,411 Common Units. Each of the Common Units of
PsychPartners entitles the holder of such units to one vote. PsychPartners has
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issued 666,667 Preferred Units (as defined in the Operating Agreement). Each of
the Preferred Units entitles the holder of such Units to a number of votes equal
to the number of Common Units into which such Preferred Units are convertible
pursuant to the Operating Agreement. Each Preferred Unit is currently
convertible into one Common Unit upon the occurrence of a Triggering Event (as
defined in the Operating Agreement). The parties recognize that, prior to
Closing, PsychPartners will significantly increase the number of outstanding
Common Units and/or Preferred Units in connection with the financing of the
transactions contemplated by this Agreement and PsychPartners will notify
Sellers in writing of such increase or other modification, including the amount
of such increase or other modification. PsychPartners is managed by a Board of
Managers, currently comprised of the individuals set forth on Schedule 4.9
hereto. All of the issued and outstanding Common Units and Preferred Units of
PsychPartners have been validly issued and are fully paid and non-assessable. A
description of the outstanding subscriptions, warrants, options, calls,
commitments or other rights or agreements to which PsychPartners is bound
relating to the issuance, sale or repurchase of any type of membership interest
in PsychPartners is set forth on Schedule 4.9 hereto. PsychPartners owns all of
the issued and outstanding shares of the capital stock of each of Purchasers. As
of the date hereof, no cash distributions have been made to any of the holders
of Common Units or Preferred Units.
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ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1 OPERATIONS PENDING CLOSING; FILING OF TAX RETURNS.
(a) Each of the Companies agrees that without the consent of
PsychPartners and Purchasers, which consent shall not be unreasonably withheld
or delayed, from the date hereof through the Closing Date, it will not: (i) in
any manner that would have a material adverse effect on the transactions
contemplated by this Agreement, (A) amend its Articles of Incorporation (except
to change its name as herein provided) or Bylaws, (B) issue, sell or purchase,
or enter into any contract or other agreement to issue, sell or purchase, any
share of its capital stock, any options or rights to subscribe for any share of
its capital stock or any bonds, notes, debentures or other evidences of
indebtedness, in each case, insofar as they relate to the Business, (C) incur
any indebtedness for borrowed money, or incur or assume any other liability
outside of the ordinary course of business, in each case insofar as it relates
to the Business (except as such increased indebtedness may result from
utilization of funds available from Seller's revolving line of credit with PNC
Bank), or (D) declare or pay any dividend or declare or make any other
distributions of any kind (other than distributions by the Companies to Apogee
consistent with past practices; or (ii) make any
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change in its accounting methods or practices or make any change in depreciation
or amortization policies related to the Business, except as required by law or
generally accepted accounting or statutory accounting principles; (iii) enter
into any employment agreements with, increase the rate of compensation of, or
pay or agree to pay any bonus to any of its directors, officers or employees
related to the Business (provided, however, that it may grant reasonable annual
merit increases and pay bonuses to some or all employees in the ordinary course
of its business); (iv) implement any new or modify any existing employee benefit
plan related to the Business; (v) materially amend any existing employee benefit
plan or arrangement related to the Business, except as required by law; (vi)
enter into, amend in any respect or terminate any material contract related to
the Business; (vii) make any material change in the nature of its business or
operations related to the Business; or (viii) make or commit to make any capital
expenditures related to the Business in excess of $20,000 in the aggregate or as
may otherwise be reasonably required for the continued efficient operation of
the Business.
(b) Unless Purchasers consent in writing to the contrary, each
Seller covenants and agrees that, through the Closing Date, it shall not, as it
relates to the Business, (i) change its methods or payment practices in
connection with any Accounts Payable which become due prior to the Closing; or
(ii) take or fail to take any other action which, if taken or not taken, as the
case may be, on or
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prior to the date of this Agreement, would result in a violation of any of the
representations and warranties made under Article III of this Agreement. From
the date hereof through the Closing, each Seller shall file all tax returns in a
timely manner (subject to extensions permitted by law) and shall provide copies
of such tax returns to Purchasers within ten business days after filing.
SECTION 5.2 SHAREHOLDERS MEETING. Unless the Agreement is terminated in
accordance with Article IX prior to the date thereof, Apogee, acting through its
Board of Directors, shall, in accordance with applicable law:
(a) duly call, give notice of, convene and hold a meeting or
solicit consents (the "Shareholders Meeting") of its shareholders as soon as
practicable for the purpose of approving and adopting this Agreement and the
transactions contemplated herein;
(b) require no greater than the minimum vote required by
applicable law of each class of the shares of Apogee Common Stock (as
hereinafter defined) entitled to vote or consent in order to approve this
Agreement and the transactions contemplated herein;
(c) include in the Proxy Statement (defined in paragraph (d)
below) the unanimous recommendation of its Board of Directors that the
shareholders of the Company vote in favor of or consent to the approval and
adoption of this Agreement and the consummation of the transactions contemplated
herein; and
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(d) use its reasonable best efforts (i) to cause the Proxy
Statement to be mailed to its shareholders at the earliest possible time
following the date of this Agreement, and (ii) to obtain the approval and
adoption of this Agreement and the transactions contemplated by shareholders
holding at least the minimum number of shares of each class of the shares
entitled to vote at the Shareholders Meeting under applicable law. The letters
to shareholders, notice of meeting, proxy statements and form of proxy to be
distributed to shareholders in connection with the transactions contemplated
herein shall be in form and substance reasonably satisfactory to Purchasers, and
are collectively referred to herein as the "Proxy Statement."
SECTION 5.3 PROXIES. Sellers will provide to Purchasers, as soon as
practicable following the execution of this Agreement, agreements executed by
the persons set forth on Schedule 5.3 hereto, who in the aggregate hold at least
40% of the common stock, $.01 par value of Apogee (the "Apogee Common Stock"),
that such persons will vote the shares of Apogee Common Stock owned by them (the
"Shares") in favor of this Agreement and the transactions contemplated hereby or
consent in writing thereto, and that they will retain the right to vote such
Shares or execute a consent during the term of this Agreement. Each of such
persons has given Purchasers a proxy to vote such Shares in favor of the
purchase by Purchasers of the Transferred Assets if they should fail to do so,
in substantially the form of the
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Voting Agreement and Irrevocable Proxy attached hereto as Exhibit D.
SECTION 5.4 PAYMENT OF TAXES AND CERTAIN EXPENSES.
(a) Purchasers shall pay any recording costs or fees payable
in connection with the conveyance of the Transferred Assets contemplated by this
Agreement.
(b) If any state or local governmental authority requires, or
subsequently determines, the payment of any sales, use or similar tax upon the
sale, acquisition, use or disposition of any portion of the Transferred Assets
(whether under statute, regulation or rule), Sellers assume all responsibility
for and shall pay the same, directly to said authority, and shall hold
PsychPartners and Purchasers harmless from such tax(es) and any interest or
penalty thereon. Sellers shall cooperate with Purchasers in the prosecution of
any claim for refund, rebate or abatement of said tax(es).
(c) Except as otherwise explicitly provided herein, whether or
not the transactions contemplated by this Agreement are consummated, each of the
parties hereto shall pay its own expenses and costs, including legal and
accounting fees, incurred by it in connection with the negotiation, execution
and performance of this Agreement and the transactions contemplated herein.
SECTION 5.5 EARNOUT LIABILITIES.
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(a) Approximately fifteen (15) days prior to the Closing,
Sellers will use their reasonable best efforts to calculate the amounts that
will be payable through the date of Closing to the individuals or entities set
forth on Schedule 5.5(a) which are entitled to earnout compensation based on the
operation of certain portions of the Business (the "Estimated Earnouts"), and
Sellers shall use their best efforts to gain the consent of such individuals or
entities to payment of the Estimated Earnouts by Sellers on or prior to the date
of Closing. Sellers shall, on or prior to the Closing, pay the Estimated
Earnouts to each individual or entity from which Seller obtains such a consent.
In the event Sellers are unable to obtain such consents, Sellers shall deposit
all unpaid portions of the Estimated Earnouts with the Escrow Agent, to be held
pursuant to the terms of the Escrow Agreement.
(b) The parties recognize that certain earnout obligations
included in the Assumed Liabilities which will be payable by Purchasers after
the Closing may require payments in the form of Apogee Common Stock, and Sellers
agree to use their reasonable best efforts to reach agreements with the
individuals entitled to such earnout payments that such individuals will accept
cash or PsychPartners Common Units in lieu of Apogee Common Stock for payment of
such earnout obligations.
SECTION 5.6 BEST EFFORTS. Each of PsychPartners, Purchasers and Sellers
agrees, in good faith and in a timely manner, to (i) cooperate with each other
in satisfying the
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conditions in this Agreement, (ii) assist each other in obtaining as promptly as
possible all consents, approvals, authorizations, and rulings, corporate or
otherwise, as are necessary for PsychPartners, Purchasers and Sellers (or any of
them) to carry out the transactions contemplated by this Agreement, including
all consents, approvals and authorizations required by any agreement of
understanding existing at the Closing between the Sellers and any governmental
agency or third party, (iii) furnish information concerning each other not
previously provided the other, required for inclusion in any filings or
applications that may be necessary in that regard (including in connection with
preparation of the Proxy Statement), and (iv) perform all acts and execute and
deliver all documents necessary to cause the transactions contemplated by this
Agreement to be consummated at the earliest possible date. Sellers agree to use
their reasonable best efforts to cause UCC-3 Termination Statements to be filed
with respect to all encumbrances set forth on Schedule 3.11 as to which Sellers
have indicated that the underlying debt has been paid in full. Each of
PsychPartners and Purchasers agrees to pay the Assumed Liabilities as they
become due and to use its reasonable best efforts to collect in a timely manner
the accounts receivable included in the Transferred Assets. Each of
PsychPartners and Purchasers agrees to use its reasonable best efforts to obtain
Medicare and Medicaid Provider Numbers and any other commercial provider numbers
as expeditiously as possible following the date hereof.
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SECTION 5.7 CONSENTS; DUTIES OF SELLERS. Sellers will use their
reasonable best efforts to obtain the consents of the parties to the contracts
set forth on Schedule 3.27 hereto. In the event that any of the Sellers is
unable to obtain the necessary consents set forth on Schedule 3.27 hereto prior
to Closing, such contract shall be deemed to be a Non-Transferable Contract and
each of the Sellers agrees to use its reasonable best efforts subsequent to
Closing to obtain such consents. Sellers agree that until such time as such
consents are obtained, or in the event Sellers are unable to obtain all required
consents or approvals under any Non-Transferable Contracts, Sellers shall, to
the extent practicable without causing a default under or breach of such
contracts, pass through to Purchasers the benefits and the obligations arising
under such agreements as if such agreements had been assigned to Purchasers
pursuant to this Agreement. Purchasers agree to perform fully the obligations
under such Non-Transferable Contracts to the extent Purchasers receive the
benefits therefrom. Purchasers shall indemnify and hold harmless Sellers from
any and all costs, expenses, liabilities and obligations incurred by Sellers
subsequent to Closing for actions taken by Purchasers or Sellers at the request
of Purchasers pursuant to this Section 5.7; provided, however, that Purchasers
shall not reimburse Sellers for the internal costs incurred by Sellers as a
result of Seller's compliance with this Section 5.7. In the event that any
NonTransferable Contract cannot be administered in the manner
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described above without causing a breach or default thereunder, Purchasers and
Sellers shall each bear one-half of any costs, expenses, liabilities or
obligations (exclusive of Purchasers' or Sellers' internal costs) incurred by
Sellers or Purchasers in connection with the termination or cancellation of such
Non-Transferable Contract, and Purchasers and Sellers agree to cooperate to
minimize any such costs, expenses, liabilities or obligations.
SECTION 5.8 ADDITIONAL INSURANCE COVERAGE. At or prior to the Closing,
Sellers shall purchase paid up tail insurance policies for coverage of the
Transferred Assets and the operations of the Business for all periods prior to
the Closing Date.
SECTION 5.9 TRANSITION ASSISTANCE. Purchasers and Sellers shall execute
the Interim Services Agreement in substantially the form attached hereto as
Exhibit F.
SECTION 5.10 ACCESS TO, AND INFORMATION CONCERNING, PROPERTIES AND
RECORDS. During the pendency of the transactions contemplated hereby, Sellers
shall, to the extent permitted by law, give Purchasers, their legal counsel,
accountants and other representatives full access, during normal business hours,
throughout the period prior to the Closing, to all of the Companies' properties,
books, contracts, commitments and records related to the Business, permit
Purchasers to make such inspections of the operations of the Business
(including, without limitation, physical inspection of the surface and
subsurface of any property
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thereof and any structure thereon, subject to the consent of the landlord and
owners of such properties and structures) as they may reasonably require and
furnish to Purchasers during such period all such information concerning Sellers
and their affairs related to the Business as Purchasers may reasonably request,
so long as such access does not materially disrupt the Sellers' operation of the
Business. All information disclosed by Sellers to Purchasers which is
confidential and which is not in the public domain shall be held confidential by
Purchasers and its representatives, except to the extent counsel to Purchasers
have advised in writing that such information is required to or should be
disclosed on a nonconfidential basis in filings with regulatory agencies or
governmental authorities or in proxy materials delivered to shareholders of the
Sellers. In the event this Agreement is terminated pursuant to the provisions of
Article VIII, upon written request of the Sellers, Purchasers agree to destroy
or return to the Sellers all copies of such confidential information.
SECTION 5.11 NONCOMPETITION; NONSOLICITATION;
NONDISCLOSURE.
(a) Each Seller agrees that for a period of five (5) years
after the date of Closing, it will not, and it will cause each of such Seller's
affiliates over which such Seller holds, either directly or indirectly, more
than 50% of the outstanding equity interest not to, directly or indirectly, (i)
own, manage, operate, join, control or participate in the ownership, management,
operation or
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control of, or render service to, any business, whether in corporate,
proprietorship or partnership form or otherwise, which is competitive with the
behavioral health group practice business, residential treatment centers,
outpatient chemical dependency programs, outpatient partial programs, inpatient
unit management and prison provider aspects of the Business as currently
conducted, within a thirty-five (35) mile radius of any location of the Business
as of the Closing; (ii) either for its own benefit or for the benefit or
purposes of any other person or entity, solicit, call on, interfere with,
attempt to divert, entice away or accept any competitive business from any
person or entity which is a customer of the Business or which was a customer
within the one (1) year preceding the date of Closing; or (iii) take any action
that would reasonably be expected to cause Purchasers to lose any of their
officers, employees, agents, customers or suppliers or any of its existing
business relationships or those business relationships obtained as a result of
the transactions contemplated by this Agreement.
(b) From and after the date of Closing, no Seller will,
directly or indirectly, disclose to any other party or in any way utilize for
itself or any other party any information, data, proprietary information,
intellectual property, trade secrets, customer lists, subscriber lists, pricing
information or any other proprietary information purchased pursuant to this
Agreement, used in the operation of the Business, or otherwise relating to the
Business, except (a) to the extent necessary to carry out the terms of
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or to exercise such Seller's rights under this Agreement or any document
executed concurrently herewith; (b) to governmental agencies, including taxing
authorities, having a legal right to the Information; (c) as required by law;
(d) pursuant to a valid subpoena or court order; provided, however, that prior
to any disclosure pursuant to court order or subpoena, such Seller shall provide
prompt notice to Purchasers of the receipt of any subpoena or court order
requiring the disclosure of the Information; or (e) to the extent necessary to
exercise such Seller's rights in connection with Excluded Assets or otherwise in
connection with the business of Sellers not transferred hereunder. The term
"Information" shall not include information which is or becomes published or
otherwise available in the public domain without violation of this Section 5.11
by Sellers. This Section 5.11 shall survive the Closing.
(c) Notwithstanding anything contained herein to the contrary,
the operation by any of Sellers of the INTEGRA Business (as hereinafter defined)
pursuant to this Section 5.11(c) shall not be a violation of Section 5.11
hereof. For purposes of this Agreement, the "INTEGRA Business" shall mean
Apogee's managed behavioral health care contracting business conducted through
its employee assistance programs and managed behavioral health and substance
abuse management programs, using full and shared risk contracts with managed
care provider organizations and administrative services agreements to case
manage behavioral health claims. Currently, approximately 92% of INTEGRA's
contracts are handled through network providers. Apogee will use its reasonable
best efforts to credential, panel and otherwise facilitate the use of the
behavioral health providers of PsychPartners and
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Purchasers, where appropriate, in the clinical delivery aspects of its INTEGRA
contracts, as such contracts currently exist and as such contracts may be
implemented following the Closing. Notwithstanding the foregoing, Apogee shall
not manage the practice of any behavioral health care professional, clinic or
entity that operates in a group practice setting or similar manner.
(d) The parties hereto specifically acknowledge and agree that
the remedy at law for any breach of the foregoing will be inadequate and that
Purchasers, in addition to any other relief available to them, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damage. In the event that the provisions of this Section 5.11 should ever
be deemed to exceed the limitation provided by applicable law, then the parties
hereto agree that such provisions shall be reformed to set forth the maximum
limitations permitted by law.
SECTION 5.12 EXCLUSIVE AGREEMENT. Sellers will not, and their
respective directors, officers and agents (for purposes of this Section 5.12
only, being referred to as "affiliates") will not, directly or indirectly,
solicit or take any other action to facilitate any inquiries or proposals with
respect to, engage or participate in negotiations concerning, provide any
nonpublic information or data to or have any discussions with any person other
than a party hereto or its affiliates relating to any purchase of all or any
significant portion of the Transferred Assets, or any similar transaction, other
than the Asset Purchase (such proposals, announcements, or transactions being
referred to as "Acquisition Proposals"). Notwithstanding the preceding sentence,
to the extent the Board of Directors of any Seller determines it is required to
do so in the exercise of its fiduciary duties under applicable law as so advised
in writing by counsel, Sellers and their affiliates may engage and participate
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in negotiations concerning, provide nonpublic information or data to and have
discussions with any persons or their affiliates relating to a written
Acquisition Proposal. Sellers will promptly notify Purchasers orally or in
writing if any such Acquisition Proposal is received. Unless this Agreement has
been terminated pursuant to Article IX hereof, in the event Sellers, or any of
them, prior to April 10, 1998, reach an agreement in principle to sell the
Transferred Assets, or any substantial portion thereof, to a prospective buyer
other than Purchasers, Sellers agree to pay to Purchasers, in cash or
immediately available funds, all of the expenses of PsychPartners and Purchasers
incurred in connection with their due diligence investigation of Sellers, their
negotiation of the Agreement and all other expenses related to the transactions
contemplated hereby; provided, however, that the expense reimbursement paid
pursuant to this Section 5.12 shall not exceed $300,000.
SECTION 5.13 EMPLOYEE BENEFIT PLANS. Purchasers presently intend that,
after the Closing, they will not make additional contributions to the employee
benefit plans that were sponsored by Sellers immediately prior to the Closing.
Purchasers agree that the employees of Sellers who, immediately after the
Closing Date, accept employment with Purchasers, will be entitled to participate
as newly hired employees in the employee benefit plans and programs maintained
for employees of Purchasers, in accordance with the respective terms of such
plans and programs, and Purchasers shall take all actions necessary or
appropriate to facilitate coverage of such employees of the Business in such
plans and programs from and after the Closing. Purchasers agree that such
employees shall receive credit for time employed by Sellers for purposes of
determining the status of such employees within such employee benefit plans of
Purchasers; provided, however, that nothing in this Section 5.13 shall
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obligate Purchasers to institute any new employee benefit plans or modify their
existing employee benefit plans.
SECTION 5.14 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Purchasers may receive and open all mail or other communications addressed to
any Seller and deal with the contents thereof in its discretion only to the
extent that such mail relates to the Business; provided that (a) Purchasers
shall have no right to open or deal with the contents of any other such material
which do not relate solely to the Business, and (b) Purchasers shall promptly
notify any Seller as to the receipt of any such materials and make appropriate
arrangements to deliver such materials promptly to such Seller.
SECTION 5.15 COBRA. Each Seller shall have the sole responsibility and
obligation for complying with the requirements of COBRA applicable to any
termination of employment or any other qualifying event within the meaning of
COBRA which occurred before the date of Closing with respect to any employees of
such Seller. Purchasers shall have the sole responsibility and obligation for
complying with the requirements of COBRA applicable to any termination of
employment or any other qualifying event within the meaning of COBRA which
occurs on or after the date of Closing with respect to any individuals who were
employees of any Seller prior to the date of Closing.
SECTION 5.16 COMPANY NAME. Sellers specifically acknowledge and agree
that, after the Closing Date, Purchasers may continue to use the names of the
individual practices comprising the Business (except Apogee or any variants
thereof) set forth on Schedule 5.16(a) hereto, and Sellers specifically agree
that they will not, either directly or indirectly, use or permit any other
person to use any of such names
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or any name which is confusingly similar thereto in connection with any business
similar to the Business on the date hereof. Sellers agree that the Companies set
forth on Schedule 5.16(b) hereto will amend their Articles of Incorporation as
of the date of Closing, if necessary, to change their names to names that do not
include the words currently comprising such names or words of confusingly
similar import, and will file as promptly as practicable after the Closing, in
all jurisdictions in which such Companies are qualified to do business, any
documents necessary to reflect such changes in their corporate names. In
connection with enabling Purchasers or an affiliate of Purchasers, at or as soon
as practicable after the Closing, to use the names set forth on Schedule 5.16(a)
hereto, Sellers will, at or prior to the Closing, execute and deliver to
Purchasers all consents related to such change of name as Purchasers may
reasonably request, and will otherwise reasonably cooperate with Purchasers.
SECTION 5.17 COOPERATION AND RECORDS RETENTION.
Purchasers and Sellers shall in a timely manner (i) provide
the other with such assistance as may reasonably be requested by any of them in
connection with the preparation of any return, audit or other examination by any
taxing authority or judicial or administrative proceeding relating to liability
for taxes, (ii) retain and provide the other any records or other information
that may be relevant to such return, audit or examination, proceeding, or
determination, and (iii) provide the other with any final determination of any
such audit or examination proceeding, or determination that affects any amount
required to be shown on any return of the other for any period. Without limiting
the generality of the foregoing, Sellers and Purchasers shall retain, until the
applicable statutes of limitations (including any extensions) have expired, but
in no event later than the seventh anniversary of the
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date of Closing, copies of all returns, supporting work schedules, and other
records or information that may be relevant to such returns for all tax periods
or portions thereof ending before or including the date of Closing and shall not
destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same.
SECTION 5.18 OFFERS OF EMPLOYMENT. After the Closing, Purchasers shall
offer employment to each of the employees of Sellers set forth on Schedule
3.22(b) hereto (other than the individuals set forth on Schedule 5.18 hereto) at
a rate of cash compensation and with such initial responsibilities as are
comparable to the rate of cash compensation and responsibilities each such
employee had with Sellers, and with such benefits as are offered to comparable
employees of PsychPartners.
SECTION 5.19 ASSIGNMENT AND ASSUMPTION OF CONTRACTS. Sellers and
Purchasers agree that, as of the Closing, Sellers will assign to Purchasers and
Purchasers will assume from Sellers (i) all leases set forth on Schedule 3.14
and Schedule 1.4(a)(v) hereto, (ii) the contracts set forth on Schedule 3.18
hereto, together with any and all rights and obligations thereunder, and (iii)
the other Assumed Liabilities, except, in each case, with respect to any
Non-Transferable Contracts.
SECTION 5.20 FURTHER ASSURANCES. From time to time, as requested by
Purchasers or its successors and assigns, and without further cost or expense to
Purchasers, Sellers will execute, acknowledge and deliver such other instruments
of conveyance and transfer, and take such other actions as Purchasers may
reasonably request, to implement the transactions contemplated hereby and to
vest in Purchasers good and valid title to the Transferred Assets (including,
without limitation, assistance
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in the collection or reduction to possession of any of such Transferred Assets,
other than accounts receivable). From time to time, as requested by Sellers or
their successors and assigns, and without further cost or expense to Sellers,
Purchasers will execute, acknowledge and deliver such other documents and take
such other actions as Sellers may reasonably request to implement the
transactions contemplated hereby.
SECTION 5.21 PUBLICITY. Purchasers and Sellers will consult with each
other before issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law.
SECTION 5.22 LEASE RENEWALS. Purchasers covenant and agree not to renew
or extend any of the leases set forth on Schedule 3.14 hereto without the
consent of any Seller party to or having any obligations under such leases after
such renewal or extension; provided, however, that Sellers shall not be released
from any liabilities or obligations arising under such leases relating to time
periods prior to the Closing.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF PURCHASERS
All obligations of Purchasers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
SECTION 6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Sellers contained in this Agreement and the Schedules hereto
shall be true and accurate in all material respects on and as of the time of
Closing with the
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same effect as though such representations and warranties had been made or given
on and as of the time of Closing.
SECTION 6.2 COMPLIANCE WITH THIS AGREEMENT. Sellers shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing.
SECTION 6.3 DOCUMENTS TO BE DELIVERED.
(a) At or prior to Closing, Purchasers shall have received
from Sellers:
(i) A certificate of each of the Sellers, dated as of
the date of Closing, certifying in such detail as Purchasers
may reasonably request that the conditions specified in
Sections 6.1 and 6.2 hereof have been fulfilled with respect
to each Seller;
(ii) the certificate or certificates evidencing the
AGP Stock, properly executed (endorsed) for transfer to
Purchaser, with all required documentation relating thereto;
(iii) A written opinion of Haythe & Curley, counsel
for Sellers, dated as of the date of Closing, substantially in
the form attached hereto as Exhibit F;
(iv) The bill of sale ("Bill of Sale") and assignment
and assumption agreement ("Assignment and Assumption
Agreement"), substantially in the form attached hereto as
Exhibits G and H;
(v) Except with respect to the Assumed Liabilities
and Permitted Encumbrances, to the extent any of the
Transferred Assets are encumbered, the Sellers shall have
obtained releases of such encumbrances, which releases shall
be in form and substance acceptable to Purchasers and their
counsel;
(vi) The Interim Services Agreement; and
(vii) The Escrow Agreement.
SECTION 6.4 SHAREHOLDER APPROVAL. The Agreement and the transactions
contemplated hereby shall have been approved by a majority of Apogee's
shareholders
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at the Shareholders Meeting or by written consent (the "Apogee Shareholder
Consent").
SECTION 6.5 NO INJUNCTIONS. There shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction prohibiting or imposing any condition on the
consummation of any of the transactions contemplated hereby.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLERS
All obligations of Sellers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
SECTION 7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Purchasers contained in this Agreement shall be true and
accurate in all material respects as of the date of Closing.
SECTION 7.2 COMPLIANCE WITH THIS AGREEMENT. Purchasers shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing.
SECTION 7.3 DOCUMENTS TO BE DELIVERED. At or prior to Closing, Sellers
shall have received from Purchasers:
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(i) a certificate of Purchasers, dated as of the date
of Closing, certifying in such detail as Sellers may
reasonably request that the conditions specified in Sections
7.1 and 7.2 hereof have been fulfilled with respect to each
Purchaser and certifying that Purchasers have obtained all
consents and approvals required with respect to the
transactions contemplated hereby which are listed on Schedules
4.4 and 4.5 hereof;
(ii) a written opinion of Balch & Bingham LLP,
counsel to Purchasers, dated as of the date of Closing,
substantially in the form attached hereto as Exhibit I;
(iii) the Purchase Price, in cash or immediately
available funds;
(iv) the Warrant;
(v) the Interim Services Agreement;
(vi) the Escrow Agreement; and
(vii) the Assignment and Assumption Agreement.
SECTION 7.4 NO INJUNCTION. There shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction prohibiting or imposing any condition on the
consummation of any of the transactions contemplated hereby.
SECTION 7.5 ASSUMPTION OF ASSUMED LIABILITIES. Purchasers shall have
assumed at the Closing all of the Assumed Liabilities.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the parties in this Agreement or in any
certificate, schedule, statement, document or instrument furnished hereunder or
in connection with the negotiation, execution and performance of this Agreement
shall
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survive the Closing for a period of the lesser of (i) 18 months, or (ii) three
months following Purchasers' receipt of the report of Purchasers' independent
public accountant regarding the financial statements of the Purchasers for the
year ending December 31, 1998, except that any representation or warranty
relating to fraud, title to the Transferred Assets, or taxes shall extend until
the expiration of the applicable statute of limitations. Notwithstanding any
investigation or audit conducted before or after the date of Closing or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations and warranties set forth herein and therein.
SECTION 8.2 INDEMNIFICATION BY SELLERS. From and after the Closing,
Sellers shall, jointly and severally, reimburse, indemnify and hold harmless
PsychPartners and Purchasers and their respective, employees, shareholders,
members, officers, agents, directors, successors and assigns against and in
respect of:
(i) any and all damages, losses, deficiencies,
liabilities, costs and expenses, including, without
limitation, reasonable legal fees and expenses (collectively,
"Damages") incurred or suffered by Purchasers or their
successors or assigns that result from, relate to or arise out
of:
(A) the failure of Seller fully to pay or
satisfy, or the failure of Seller to cause to be paid
or satisfied, the Retained Liabilities;
(B) any and all actions, suits, claims, or
legal, administrative, arbitration, governmental or
other proceedings or investigations against
Purchasers or any affiliate of Purchasers that relate
to any of the Sellers or the Business in which the
event giving rise thereto occurred prior to the date
of Closing or which result from or arise out of any
action or inaction prior to the date of Closing of
Sellers or any director, officer, employee, agent,
representative or subcontractor of Sellers, including
those matters set forth on Schedule 3.24, but not
including any Assumed Liabilities; or
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(C) any misrepresentations, breach of
warranty or nonfulfillment of any agreement or
covenant on the part of Sellers under this Agreement,
or from any misrepresentation in or omission from any
certificate or schedule furnished to Purchasers
pursuant hereto; and
(ii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including, without
limitation, reasonable legal fees and expenses) incident to
any of the foregoing or to the enforcement of this Section
8.2.
SECTION 8.3 INDEMNIFICATION BY PURCHASERS. From and after the Closing,
PsychPartners and Purchasers shall, jointly and severally, reimburse, indemnify
and hold harmless Sellers and their respective employees, shareholders, members,
officers, agents, directors, successors or assigns against and in respect of:
(i) any and all Damages incurred or suffered by Sellers or
their successors or assigns that result from, relate to or arise out
of:
(A) the Assumed Liabilities;
(B) any and all actions, suits, claims, or
legal, administrative, arbitration, governmental or
other proceedings or investigations against Sellers
or any affiliates of Sellers that relate to any of
PsychPartners or Purchasers or the Business in which
the event giving rise thereto occurred on or after
the date of Closing or which result from or arise out
of any action or inaction on or after the date of
Closing of PsychPartners or Purchasers or any
director, officer, employee, agent, representative or
subcontractor of PsychPartners or Purchasers, but not
including any Retained Liabilities; or
(C) any misrepresentation, breach of
warranty or nonfulfillment of any agreement or
covenant on the part of PsychPartners or Purchasers
under this Agreement, or from any misrepresentation
in or omission from any certificate or schedule
furnished to Sellers pursuant hereto; and
(ii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 8.3.
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SECTION 8.4 NOTICE OF CLAIMS.
(a) Claims by Third Parties. Promptly after receipt by an
indemnified party of written notice of the commencement of any investigation,
claim, proceeding or other action in respect of which indemnity may be sought
from the indemnitor under either Section 8.2 or 8.3 (each, an "Action"), such
indemnified party shall notify the indemnitor in writing of the commencement of
such Action; but the omission to so notify the indemnitor shall not relieve it
from any liability that it may otherwise have to such indemnified party, except
to the extent that the indemnitor is materially prejudiced or forfeits
substantive rights or defenses as a result of such failure. In connection with
any Action in which the indemnitor and any indemnified party are parties, the
indemnitor shall be entitled to participate therein, and may assume the defense
thereof. Notwithstanding the assumption of the defense of any such Action by the
indemnitor, each indemnified party shall have the right to employ separate
counsel and to participate in the defense of such Action, and the indemnitor
shall bear the reasonable fees, costs and expenses of such separate counsel to
such indemnified party if: (i) the indemnitor shall have agreed to the retention
of such separate counsel, or (ii) the defendants in, or target of, any such
Action include more than one indemnified party or both an indemnified party and
the indemnitor, and the indemnified party shall have concluded that
representation of such indemnified party by the same counsel would be
inappropriate due to actual or, as reasonably determined by such indemnified
party's counsel, potential material differing interests between them in the
conduct of the defense of such Action, or if there may be material legal
defenses available to such indemnified party that are different from or
additional to those available to the other indemnified party or to the
indemnitor, or
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(iii) the indemnitor shall have failed to employ counsel reasonably satisfactory
to such indemnified party within a reasonable period of time after notice to
indemnitor of the institution of such Action and failure to employ such counsel
would materially adversely affect the position of such indemnified party. If
such indemnified party retains separate counsel in cases other than as described
in clauses (i), (ii), or (iii) above, such counsel shall be retained at the sole
expense of such indemnified party. It is hereby agreed and understood that the
indemnitor shall not, in connection with any Action in the same jurisdiction, be
liable for the fees and expenses of more than one counsel for all such
indemnified parties (together with appropriate local counsel). The party from
whom indemnification is sought shall not, without the written consent of the
party seeking indemnification (which consent shall not be unreasonably
withheld), settle or compromise any claim or consent to entry of any judgment
that does not include an unconditional release of the party seeking
indemnification from all liabilities with respect to such claim.
(b) Other Claims. In the event one party hereunder should have
a claim for indemnification that does not involve a claim or demand being
asserted by a third party, the party seeking indemnification shall promptly send
notice of such claim to the party from whom indemnification is sought.
SECTION 8.5 LIMITS ON INDEMNIFICATION. No indemnified party shall be
entitled to indemnification under Sections 8.2(i)(C) or 8.3(i)(C) hereof unless
and until the aggregate amount of Purchasers' damages under Section 8.2(i)(C)
hereof or Sellers' Damages under Section 8.3(i)(C) hereof, as the case may be,
with respect to which Purchasers or Sellers, as the case may be, are entitled to
indemnification under this Article 8 exceeds an amount equal to $50,000, and
then only for such excess
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amount, if any. Notwithstanding anything contained herein to the contrary, the
aggregate liability of Sellers for Purchasers' Damages under Section 8.2(i)(C)
hereof shall be limited to $14,500,000, and the aggregate liability of
Purchasers for Sellers' Damages under Section 8.3(i)(C) hereof shall be limited
to $14,500,000.
SECTION 8.6 TAX BENEFIT AND INSURANCE PROCEEDS. Damages payable to an
indemnified party shall be reduced by (i) any Tax Benefit (as hereinafter
defined) actually received by any indemnified party on account of such
indemnification and (ii) any insurance proceeds actually received by any
indemnified party on account of such indemnification at the time the
indemnification payment occurs, it being understood that in no event shall any
indemnification payment be delayed in anticipation of the receipt of any Tax
Benefit or insurance proceeds. If an indemnified party receives a Tax Benefit
after an indemnification payment is made, such indemnified party shall pay to
the indemnitor the aggregate amount of such Tax Benefit at such time or times as
and to the extent that such Tax Benefit is received. If, upon audit by the
relevant tax authority, part or all of such Tax Benefit shall be disallowed, the
indemnitor, upon written notice to that effect from such indemnified party,
shall promptly reimburse such indemnified party for the full amount so
disallowed up to the amount of the Tax Benefit credited to the indemnitor. For
purposes hereof, "Tax Benefit" shall mean any refund of tax or reduction in the
amount of taxes which would otherwise be payable. The parties hereto shall seek
full recovery under all insurance policies covering any indemnification payment
in the ordinary course of business to the same extent as they would if such
claim were not subject to an indemnification payment hereunder. In the event
that an insurance recovery is made by an indemnified party, with respect to any
indemnification payment for which an
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indemnification claim has been made, such indemnified party shall pay to the
indemnitor the amount of the insurance recovery, but not more than the amount of
such indemnification payment.
SECTION 8.7 SOLE AND EXCLUSIVE REMEDY. The sole remedy for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant to be performed prior to the Closing (it being understood and agreed
that this limitation shall not apply to covenants or agreements to be performed
subsequent to the Closing) hereunder on the part of any party shall be governed
by and limited to the provisions of this Article VIII.
SECTION 8.8 SATISFACTION OF INDEMNIFICATION CLAIM. In the event any
Seller shall have any liability for indemnification to any Purchaser under this
Article 8, such Seller may satisfy such liability, at its option, either by
delivering to such Purchaser cash in the aggregate dollar amount of such
liability or the number of Warrants determined by dividing (i) the aggregate
dollar amount of such liability by (ii) $5.00, as adjusted as appropriate to
reflect any membership interest split, reverse split, membership dividend,
recapitalization or other similar transaction effected by PsychPartners between
the Closing and the date such liability is satisfied. Notwithstanding the
foregoing, should Sellers' liability for indemnification exceed the amount of
the Warrants delivered to Purchasers, Sellers shall then deliver cash to
PsychPartners or Purchasers in satisfaction of any liability for
indemnification.
ARTICLE IX
TERMINATION
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SECTION 9.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby abandoned, prior to the Closing as follows:
(a) By written consent of Purchasers and Sellers;
(b) At the election of either Purchasers or Sellers, if the
Closing Date shall not have occurred on or before April 30, 1998, provided that
no party shall be entitled to terminate this Agreement pursuant to this Section
9.1(b) if such party's failure to fulfill any obligation under this Agreement
has been the primary cause of, or has resulted in, the failure of the Closing to
occur on or before such date;
(c) By either Purchasers or Sellers if a court of competent
jurisdiction shall have issued an order, decree or ruling (which order, decree
or ruling the parties shall use commercially reasonable efforts to lift)
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) by Sellers if Sellers reach an agreement in principle to
sell all of the Transferred Assets to a prospective buyer other than Purchasers;
provided, however, that Sellers may only terminate this Agreement pursuant to
this clause if (i) such agreement in principle to sell the Transferred Assets
occurs due to the Board of Directors of any Seller determining it is required to
take such action in the exercise of its fiduciary duties under applicable law
following written advice by legal counsel that the Board of Directors of such
Seller must entertain or investigate an offer from such prospective buyer; and
(ii) simultaneously with such termination Sellers pay to Purchasers such amounts
as are provided for in Section 5.12 hereof;
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(e) By either Purchasers or Sellers, if the party desiring to
terminate is not in material breach of the Agreement and there has been a breach
by the other party of any representation or warranty contained in the Agreement
which would have, in the event of a breach by any Seller, a Material Adverse
Effect or, in the event of a breach by any Purchaser, a material adverse effect
on Purchasers; or
(f) By Purchasers, in the event of a Material Adverse Effect.
SECTION 9.2 OBLIGATIONS UPON TERMINATION. In the event that this
Agreement shall be terminated pursuant to Section 9.1, all obligations of the
parties hereto under this Agreement shall terminate, except for the obligations
set forth in Section 5.4(c), 10.5, 10.8, this Section 9.2 and the liability of
Sellers to pay such amounts as are provided for in Section 5.12 hereof in the
event the Agreement is terminated pursuant to Section 9.1(d), and there shall be
no liability of any party hereto to any other party except that nothing herein
will relieve any party from liability for any breach of this Agreement (other
than liability for lost profits, business interruption or any other form of
consequential loss or damage).
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 AMENDMENT. This Agreement may be amended only by a
written agreement signed by the parties.
SECTION 10.2 WAIVER OF COMPLIANCE. Any waiver of any failure to comply
with any obligation, covenant, agreement or condition under this Agreement must
be in writing and signed by the parties. Any waiver or failure to insist upon
strict
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compliance with any obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
SECTION 10.3 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be provided in writing and
shall be deemed to have been duly given if delivered by hand or sent by
telefacsimile (with confirmation by telefacsimile answerback) or five business
days after mailing if delivered by certified or registered mail, with postage
prepaid:
(i) If to Sellers, to:
Mr. Lawrence M. Davies
Apogee, Inc.
1018 West Ninth Avenue
Suite 202
King of Prussia, PA 19406
FAX: (610) 992-9830
with a copy to:
Robert A. Ouimette, Esq.
Haythe & Curley
237 Park Avenue
New York, NY 10017
Fax: (212) 682-0200
or to such other person or address as Sellers shall furnish to Purchasers in
writing.
(ii) If to Purchasers, to:
Mr. Kerry G. Teel
PsychPartners, L.L.C.
1900 International Park Drive
Suite 220
Birmingham, AL 35243
FAX: (205) 967-3756
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with a copy to:
James F. Hughey, Jr., Esq.
Balch & Bingham LLP
1901 Sixth Avenue North
Suite 2600
Birmingham, Alabama 35203
FAX: (205) 226-8799
or to such other person or address as a party shall notify all other parties in
writing.
SECTION 10.4 SPECIFIC PERFORMANCE. Each of the parties acknowledges
that money damages would not be a sufficient remedy for any breach of this
Agreement and that irreparable harm would result if this Agreement were not
specifically enforced. Therefore, the rights and obligations of the parties
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. A party's right to
specific performance shall be in addition to all other legal or equitable
remedies available to such party.
SECTION 10.5 EXPENSES. Except as otherwise expressly provided herein,
whether or not the transactions contemplated by this Agreement shall be
consummated, all fees and expenses (including all fees of counsel and
accountants) incurred by any party in connection with the negotiation and
execution of this Agreement shall be borne by such party.
SECTION 10.6 SEVERABILITY. If any one or more provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
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SECTION 10.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties, except Sellers can
assign to Apogee or any of its subsidiaries any of its rights and obligations;
provided, however, that such assignment shall not release the assignor from any
such obligations. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
SECTION 10.8 GOVERNING LAW. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to provisions thereof
relating to conflict of laws.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.10 HEADINGS. The headings of the Articles and Sections of
this Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
SECTION 10.11 ENTIRE AGREEMENT. This Agreement, including the Schedules
hereto, as well as the other documents and certificates delivered pursuant
hereto set forth the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof, and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
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SECTION 10.12 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing expressed or implied herein is intended or shall be
construed to confer upon or give to any person or entity other than the parties
hereto, and their successors or permitted assigns, any rights or remedies under
or by reason of this Agreement.
SECTION 10.13 PERFORMANCE FOLLOWING CLOSING. Nothing in this Agreement
shall be construed to limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Closing.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the day and year first above written.
SELLERS:
WITNESS APOGEE, INC.
By:_________________________ By:_________________________
Secretary Lawrence M. Davies
Its: President &
Chief Operating Officer
WITNESS APOGEE OF PENNSYLVANIA, INC.
_________________________________ By:_________________________
Secretary
Its:_______________
WITNESS APOGEE OF TENNESSEE, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS AGP ACQUISITION, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS WINSTON CLINICS, INC.
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_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS DOC SYSTEMS, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS FAMILY SOCIAL AND
PSYCHOTHERAPY SERVICES, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS APOGEE SERVICES, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS APOGEE OF MARYLAND, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS ASSOCIATED MENTAL
HEALTH
SERVICES, LTD.
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<PAGE> 93
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS PSYCHIATRIC ASSOCIATES, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS PSYCHOGERIATRIC
CONSULTANTS,
INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS NAPERVILLE PSYCHIATRIC, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS APOGEE OF NORTHERN FLORIDA, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS FAMILY SOCIAL AND
PSYCHOLOGICAL SERVICES, L.L.C.
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_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS WOODMONT PSYCHIATRIC
ASSOCIATES, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
WITNESS AHS OF RHODE ISLAND, INC.
_________________________________ By:_________________________
Secretary _________________________
Its:_______________
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PURCHASERS:
WITNESS: PSYCHPARTNERS, L.L.C.
By: __________________________ By: ___________________________
Its: ___________________________
Its: _________________
WITNESS: PSYCHPARTNERS, INC.
By: __________________________ By: ___________________________
Its: ___________________________
Its: _________________
WITNESS: PSYCHPARTNERS MIDATLANTIC, INC.
By: __________________________ By: ___________________________
Its: ___________________________
Its: _________________
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EXHIBIT 99
[APOGEE LOGO]
FOR IMMEDIATE RELEASE
Contact: Lawrence M. Davies, President and COO
Stanley Szczygiel, Vice President of Finance
Apogee, Inc.
(610) 992-7670
Noonan/Russo Communications
(212) 696-4455
John O'Leary, ext. 232 (Investor)
Heather Hennessy, ext. 274 (Media)
email: [email protected]
APOGEE TO SELL AND DISCONTINUE GROUP PRACTICE OPERATIONS
- COMPANY TO FOCUS ON MANAGED CARE PRODUCT LINE -
King of Prussia, PA, December 30, 1997--Apogee, Inc. (AMEX: APG) announced
today it will sell and discontinue the Company's behavioral health group
practice operations and shift its focus to the managed care segment of
behavioral health, an industry that generates close to $4 billion annually.
Apogee has signed a definitive agreement of sale for substantially all of its
group practice operations to PsychPartners, a behavioral health practice
management company based in Birmingham, Alabama. Completion of the sale is
subject to regulatory and shareholder approval.
Under the terms of the agreement, which has been approved by the Board of
Directors of both companies, PsychPartners will pay $27 million in cash for
most of Apogee's behavioral health group practice operations. In addition,
PsychPartners will assume certain liabilities and issue warrants to acquire up
to 400,000 common units of PsychPartners' stock at a purchase price of $0.05
per unit. These operations consist of 92 behavioral health centers. The
transaction is expected to close in the first quarter of 1998.
In addition to this sale, Apogee will divest or discontinue its remaining group
practice operations that are not part of the PsychPartners transaction. These
practices located primarily in California, Washington and Nevada consist of 18
behavioral health centers.
-more-
[Apogee Letterhead]
<PAGE> 2
This announcement marks a major shift in the Company's focus to the managed
care segment of behavioral health. "The completion of this transaction will
effectively reposition Apogee as a behavioral health managed care company,"
said Lawrence M. Davies, President and Chief Operating Officer of Apogee. "We
believe the managed care segment of behavioral health has the opportunity for
fast growth and high margins. This will ultimately make Apogee a stronger
company and provide greater long-term shareholder value. The proceeds from the
sale of the group practices will primarily be used to reduce debt, invest in
the future growth of Integra and for other general corporate purposes."
Mr. Davies continued, "Our Integra operation has experienced over 35% in
annualized revenue and profit growth over the past three years. In addition, we
have diversified the Integra business from a company which primarily serviced
Employee Assistance Programs to an operation which now provides a full array of
managed behavioral health services. We believe Integra, which currently has
annual net revenues of approximately $10 million, is an excellent platform for
the future success of Apogee." Upon completion of this transaction, the Company
expects to be profitable and generate strong positive cash flow.
The Company also announced it will record a pre-tax charge of $55 million to
$60 million in the fourth quarter of 1997, primarily related to this sale of
the group health operations, as well as to the divestiture and discontinuation
of certain of its smaller operations.
Apogee, based in King of Prussia, Pennsylvania, is one of the leading providers
of outpatient behavioral health services in the United States and provides
services to over 1 million members under managed care capitation arrangements.
CAUTIONARY STATEMENT
Matters discussed above contain forward-looking statements that are based on
management's estimates, assumptions and projections. Major factors that could
cause results to differ materially from those expected by management include:
the successful consummation of the sale of the group practice operations to
PsychPartners, the timing and nature of reimbursement changes, the nature of
changes in laws and regulations that govern various aspects of the Company's
business, new criteria adopted to determine medical necessity for behavioral
health service, the outcome of a Department of Justice review, successful
re-negotiation of the Company's credit facility, changes in procedures by
third-party payors, pricing of managed care and other third party contracts,
retention and productivity of clinicians, the direction and success of
competitors, management retention and unanticipated market changes. The above
should be read in conjunction with the Company's consolidated Financial
Statements and notes thereto for the year ended December 31, 1996 included in
its Form 10-K as well as the Company's 1997 Form 10-Q reports. The Company does
not undertake any obligation to update the information contained herein, which
speaks only as of this date.
###
Editor's note: This release is available on the World Wide Web:
http://www.noonanrusso.com
