STOCKHOLDER SUPPORT AGREEMENT
THIS STOCKHOLDER SUPPORT AGREEMENT dated as of October 24,
1997 (this "Agreement"), is entered into by MBC Associates, L.P., a Delaware
limited partnership ("MBC Associates"), KKR Partners II, L.P., a Delaware
limited partnership ("KKR Partners"), 38 Newbury Ventures/MBC Limited
Partnership, a Massachusetts limited partnership ("Newbury"), Xxxxxx X. Xxxxxx,
the Xxxxxx X. Xxxxxx Family Charitable Remainder Unitrust (the "Waxman Trust"),
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx to and for the benefit
of Magellan Health Services, Inc., a Delaware corporation ("Parent"). Each of
MBC Associates, KKR Partners, Newbury, Xxxxxx X. Xxxxxx, the Waxman Trust,
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx are referred to herein
as a "Stockholder" and collectively as the "Stockholders." Capitalized terms
used and not otherwise defined herein shall have the respective meanings
assigned to them in the Merger Agreement referred to below.
WHEREAS, as of the date hereof, MBC Associates and KKR
Partners own of record and beneficially 20,678,600 shares and 321,400 shares,
respectively (such aggregate 21,000,000 shares being referred to herein
collectively as the "KKR Shares"), of common stock, par value $.01 per share
("Common Stock"), of Merit Behavioral Care Corporation, a Delaware corporation
(the "Company");
WHEREAS, as of the date hereof, Newbury owns of record and
beneficially 600,000 shares (the "Newbury Shares") of Common Stock;
WHEREAS, as of the date hereof, Xxxxxx X. Xxxxxx and the
Waxman Trust own of record and beneficially 1,055,100 and 1,000,000 shares,
respectively (such aggregate 2,055,100 shares being referred to collectively as
the "Waxman Shares"), of Common Stock;
WHEREAS, as of the date hereof Xxxxxx X. Xxxxxx owns of record
and beneficially 100,000 shares of Common Stock (the "Xxxxxx Shares");
WHEREAS, as of the date hereof Xxxxxxx X. Xxxxxxx owns of
record and beneficially 100,000 shares of Common Stock (the "Xxxxxxx Shares");
WHEREAS, as of the date hereof Xxxx X. Xxxxxxx owns of record
and beneficially 50,000 shares of Common Stock (the "Xxxxxxx Shares," and
collectively with the KKR Shares, Newbury Shares, Waxman Shares, Xxxxxx Shares
and Xxxxxxx Shares, together with any other voting or equity securities of the
Company hereafter acquired by any Stockholders beneficially or of record, prior
to the termination of this Agreement, the "Shares");
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WHEREAS, concurrently with the execution of this Agreement,
Parent, the Company and MBC Merger Corporation, a Delaware corporation ("Merger
Sub"), are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), pursuant to which, upon the terms and subject
to the conditions thereof, Merger Sub will be merged with and into the Company
(the "Merger") such that the Company will become a wholly-owned subsidiary of
Parent; and
WHEREAS, as a condition to the willingness of Parent to enter
into the Merger Agreement, Parent has requested the Stockholders agree, and in
order to induce Parent to enter into the Merger Agreement, the Stockholders are
willing to consent to the adoption of the Merger Agreement and the approval of
the Merger and to agree, severally but not jointly, to certain other matters,
all upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. Consent; Voting of Shares. Each Stockholder hereby
(a) agrees that, at any meeting of the stockholders of the Company, however
called, and in any action by consent of the stockholders of the Company in lieu
of a meeting, such Stockholder will vote all of its respective Shares in favor
of the adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement and hereby irrevocably
consents to the adoption of the Merger Agreement and the approval of the Merger
and the other transactions contemplated by the Merger Agreement, (b) agrees
that, at any meeting of the stockholders of the Company, however called, and in
any action by consent of the stockholders of the Company in lieu of a meeting,
such Stockholder will vote all of the Shares against any action or agreement
that would result in a breach of any representation, warranty, covenant,
agreement or other obligation of the Company under the Merger Agreement or which
could result in any of the conditions to the Company's obligations under the
Merger Agreement not being fulfilled, and (c) agrees that until the termination
of this Agreement in accordance with the terms hereof at any meeting of the
stockholders of the Company, however called, and , in any action by written
consent of the stockholders of the Company, such Stockholder will vote all of
its respective Shares in favor of any other matter necessary to the consummation
of the transactions contemplated by the Merger Agreement. In addition, each
Stockholder agrees that it will, upon request by Parent, furnish written
confirmation, in form and substance reasonably satisfactory to Parent, of such
Stockholder's support for the Merger Agreement and the Merger. Each Stockholder
acknowledges receipt and review of a copy of the Merger
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Agreement.
Section 2. Transfer of Shares. Except as contemplated hereby
or by the Merger Agreement, each Stockholder agrees not to (a) offer to sell,
sell, assign, transfer (including by merger or otherwise by operation of law),
pledge, encumber or otherwise dispose of any of its respective Shares, (b)
deposit any of its respective Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any such Shares or grant any proxy or
power of attorney with respect thereto or (c) enter into any contract, option or
other arrangement or undertaking with respect to the direct or indirect sale,
assignment, transfer (including by merger or otherwise by operation of law) or
other disposition of or transfer of any interest in or the voting of any of its
respective Shares or any other securities of the Company.
Section 3. No Solicitation. From the date hereof until the
Effective Time, each Stockholder hereby covenants and agrees not to (a) solicit,
encourage or entertain inquiries or proposals or initiate, enter into or
continue any discussions, negotiations or agreements relating to the sale or
other disposition of the Company (whether through a merger, reorganization,
stock purchase of otherwise) or a material portion of it assets, properties,
businesses or operations (a "Proposed Acquisition") to or with any person or
entity other than Parent or Merger Sub, (b) provide any assistance or any
information to any person or entity other than Parent or Merger Sub relating to
any Proposed Acquisition, or (c) take any action inconsistent with the purposes
and provisions of this Agreement. Each Stockholder agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties (other than Parent or Merger Sub)
heretofore conducted, or the provision of any information to any party (other
than Parent or Merger Sub) to which information heretofore has been provided,
with respect to any Proposed Acquisition. If, after the date hereof, any
Stockholder receives any such inquiry or proposal or request for information, or
offer to discuss or negotiate any Proposed Acquisition, such Stockholder will
immediately provide notice thereof to Parent.
Section 4. Termination. This Agreement shall terminate upon
the earlier to occur of (i) the Effective Time or (ii) any termination of the
Merger Agreement in accordance with the terms thereof; provided that the
provisions of Section 8 shall survive any termination of this Agreement, and
provided further that no such termination shall relieve any party of liability
for a breach hereof prior to termination.
Section 5. Representations. Each Stockholder
represents and warrants to Merger Sub and Parent as follows:
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(a) Such Stockholder is the sole record and beneficial owner
of, and has good title to, all of the Shares it owns as specified in the
Recitals hereof, and there exist no restrictions on transfer, options, proxies,
voting agreements, voting trusts or liens affecting said Shares, except as
imposed by law or as contained in the respective agreements to which such
Stockholder is a party disclosed in Section 3.03 of the Company Disclosure
Schedule (collectively with respect to all Stockholders, the "Stockholder
Agreements").
(b) The execution and delivery of this Agreement by such
Stockholder does not, and the performance by such Stockholder of its obligations
hereunder will not, constitute a violation of, conflict with, result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, or result in the creation of any lien on any of its Shares
under, (i) any contract commitment, agreement, understanding, arrangement or
restriction of any kind to which such Stockholder is a party or by which such
Stockholder or its Shares are bound (other than the Stockholder Agreements
applicable to such Stockholder), (ii) any judgment, writ, decree, order or
ruling affecting such Stockholder or its Shares, or (iii) the organizational
documents of such Stockholder to the extent such Stockholder is not an
individual.
(c) Such Stockholder has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized by such
Stockholder, and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized and no other actions on the part of such Stockholder are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Stockholder and, assuming due authorization, execution and
delivery by the Parent and Merger Sub, constitutes a valid and binding agreement
of such Stockholder, enforceable against such Stockholder in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditor's rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
Section 6. Appraisal Rights. Until the termination of this
Agreement in accordance with the terms hereof, each Stockholder agrees that it
will not exercise any rights to dissent from the Merger or request appraisal of
its respective Shares pursuant to Section 262 of the DGCL or any other similar
provisions of Law.
Section 7. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement were not performed in accordance with the
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terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or in equity.
Section 8. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect
thereto. This Agreement may not be amended, modified or rescinded except by an
instrument in writing signed by each of the parties hereto.
(b) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in a mutually acceptable manner in order that the terms of this
Agreement remain as originally contemplated to the fullest extent possible.
(c) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to the principles of conflicts of
law thereof.
(d) Notwithstanding anything herein to the contrary, the covenants and
agreements set forth herein shall not prevent any of the Stockholders'
designees, partners or affiliates serving on the Board of Directors of the
Company from taking any action, subject to the applicable provisions of the
Merger Agreement, while acting in such capacity as a director of the Company.
(e) Notwithstanding any provisions hereof, none of the obligations of any
Stockholder under or contemplated by this Agreement shall be an obligation of
(i) any officer, director, stockholder, limited partner, general partner or
owner of such Stockholder, or any of their respective officers, directors,
stockholders, limited partners, general partners or owners, or successors or
assigns or (ii) any other Stockholder. Each Stockholder shall be the only person
or entity liable with respect to its obligations. Any monetary liability of a
Stockholder under this Agreement shall be satisfied solely out of the assets of
such Stockholder. Each Stockholder hereby irrevocably waives any right it may
have against any such officer, director, stockholder, limited partner, general
partner, owner, successor or assign identified above as a result of the
performance of the provisions under or
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contemplated by this Agreement. Nothing in this Section 8(e) shall prevent
Parent from obtaining specific enforcement of the obligations of any Stockholder
under this Agreement. (f) This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
signed by their respective duly authorized officers as of the date first written
above.
MBC ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its: General Partner
/s/ XXXXX X. XXXXXX, XX.
By: Xxxxx X. Xxxxxx, Xx.
Its: General Partner
KKR PARTNERS II, L.P.
By: KKR Associates, L.P.
Its: General Partner
/s/ XXXXX X. XXXXXX, XX.
By: Xxxxx X. Xxxxxx, Xx.
Its: General Partner
38 NEWBURY VENTURES/MBC LIMITED PARTNERSHIP
By: Xxxxxx X. Xxxx Xx.
Its: General Partner
/s/ XXXXXX X. XXXX XX.
By:
Its:
XXXXXX X. XXXXXX
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
THE XXXXXX X. XXXXXX FAMILY
CHARITABLE REMAINDER UNITRUST
/s/ XXXXXX X. XXXXXX
By: Xxxxxx X. Xxxxxx
Its: Trustee
XXXXXX X. XXXXXX
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
XXXXXXX X. XXXXXXX
/s/ XXXXXXX X. XXXXXXX
Xxxxxxx X. Xxxxxxx
XXXX X. XXXXXXX
/s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Agreed and Acknowledged:
MAGELLAN HEALTH SERVICES, INC.
/s/ XXXXX XXXXXXXX
By: Xxxxx XxXxxxxx
Its: Executive Vice President/Chief Financial Officer
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