FORM OF NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement"), dated as of
October 24, 1997, among Magellan Health Services, Inc., a Delaware corporation
(the "Parent"), Merit Behavioral Care Corporation, a Delaware corporation (the
"Company"), and ___________ (the "Shareholder"),
W I T N E S S E T H:
WHEREAS, the Parent and the Company are parties to that
certain Agreement and Plan of Merger dated October 24, 1997 (the "Merger
Agreement") pursuant to which the Parent, by virtue of the merger contemplated
thereby, will acquire from the shareholders of the Company all of the issued and
outstanding shares of capital stock of the Company (the "Shares") upon the terms
and subject to the conditions set forth herein;
WHEREAS, in order to induce the Parent to consummate the
transactions contemplated by the Merger Agreement, the Shareholder has agreed to
enter into this Agreement for and in favor of the Parent and the Company;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. DEFINITIONS.
Section 1.1 Definitions. Unless the context otherwise
requires, as used in this Agreement, the following terms shall have the
following meanings (terms defined in the singular to have the same meanings when
used in the plural and vice versa):
(a) "Affiliate" shall have the meaning set forth in the Merger Agreement.
(b) "Agreement" shall have the meaning set forth in the introductory paragraph
hereto.
(c) "Behavioral Health Services" shall mean integrated and managed behavioral
health care services or providing behavioral health care services, including
integrated and managed mental health programs and substance abuse programs,
employee assistance programs, and utilization management, care management and
network management concerning behavioral health care services.
(d) "Business" shall mean the business of providing or administering (or owning,
operating, administering or managing a company or facility which provides or
administers) Behavioral Health Services, as conducted by the Company and the
Company Subsidiaries, for and on behalf of a health care plan (including
self-insured plans) for a fee (or any other financial benefit).
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(e) "Closing" shall have the meaning set forth in the Merger Agreement.
(f) "Closing Date" shall have the meaning set forth in the Merger Agreement.
(g) "Code" shall have the meaning set forth in the Merger Agreement.
(h) "Company" shall have the meaning set forth in the introductory paragraph
hereto.
(i) "Company Subsidiary" shall have the meaning set forth in the Merger
Agreement.
(j) "Confidential Information" shall mean information that is not generally
known to the public and that is used, developed or obtained by the Company or
Company Subsidiaries in connection with its business, including but not limed to
(i) products or services, (ii) fees, costs and pricing structures, (iii)
designs, (iv) computer software, including operating systems, applications and
program listings, (v) flow charts, manuals and documentation, (vi) data bases,
(vii) accounting and business methods, (viii) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (ix) customers and clients and customer or
client lists, (x) other copyrightable works, (xi) all technology and trade
secrets, and (xii) all similar and related information in whatever form.
Confidential Information will not include any information that has been
published in a form generally available to the public prior to the date the
Shareholder proposes to disclose or use such information.
(k) "Parent" shall have the meaning set forth in the introductory paragraph
hereto.
(l) "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Authority.
(m) "Shareholder" shall have the meaning set forth in the introductory paragraph
hereto.
(n) "Territory" shall mean the United States of America, its territories and
possessions (including, without limitation, Puerto Rico).
Section 1.2 Principles of Construction. Definitions used in
this Agreement shall apply equally to both the singular and plural forms of the
terms defined. Whenever used in this Agreement, the words "include," "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation." Unless the context otherwise requires, all references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
articles and sections of, and schedules to this Agreement. All pronouns used
herein shall be deemed to refer to the masculine, feminine or
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neuter gender as the context requires. Unless the context otherwise requires,
the term "party" when used in this agreement means a party to this agreement,
and references to a party or other Person shall be deemed to include successors
and permitted assigns of such party. All references herein to any agreement or
document shall be deemed to include such agreement or document (unless specific
reference is made to that agreement or document as in effect on a specific
date), as the same may be amended, supplemented or otherwise modified from time
to time. The parties acknowledge and agree that they have been represented by
counsel and that each of the parties has participated in the drafting of this
Agreement. Accordingly, it is the intention and agreement of the parties that
the language, terms and conditions of this Agreement are not to be construed in
any way against or in favor of any party hereto by reason of the
responsibilities in connection with the preparation of this Agreement.
SECTION 2. COVENANTS; CONSIDERATION.
Section 2.1 Covenant Not to Compete.
(a) The Shareholder covenants and agrees that, for a period
commencing on the Closing Date and ending on the third anniversary of the
Closing Date, without the written consent of the Parent, the Shareholder shall
not, directly or indirectly, engage in or have any interest in any Person that
is engaged in (whether as an owner, proprietor, shareholder, partner, joint
venturer, investor, operator, manager, officer, director, employee, contractor,
consultant, licensor of technology, agent, broker, lender, guarantor, advisor or
otherwise) the Business anywhere in the Territory.
(b) Notwithstanding anything to the contrary set forth herein,
the restrictions set forth in this Section 2.1 shall not apply to the ownership
by the Shareholder of an aggregate of not more than 5% of the outstanding
capital stock of any public corporation that provides Behavioral Health
Services.
Section 2.2 Non-Solicitation of Customers. The Shareholder
covenants and agrees that, except as required in the performance of his duties
to the Company or any Affiliate of the Company, for a period commencing on the
Closing Date and ending on the third anniversary of the Closing Date, without
the written consent of the Parent, it will refrain from, directly or indirectly,
soliciting or accepting, or attempting to solicit or provide, itself or by
assisting others, any business from any of the Company's of Company Subsidiary's
customers, including actively sought prospective customers, for purposes of
providing products or services that are competitive with those provided by the
Company or any Company Subsidiary. In addition, the Shareholder covenants and
agrees that, for a period commencing on the Closing Date and ending on the third
anniversary of the Closing Date, that it will not advise any customer or
prospective customer of the Company or any Company Subsidiary to stop doing
business, either in whole or in part with the Company or any Company Subsidiary.
Section 2.3 Non-Solicitation of Contractors and Employees.
The Shareholder agrees for a period commencing on the Closing Date and ending
on the third anniversary of the
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Closing Date, not, directly or indirectly, for itself or in the service of
another, to make, offer, solicit or induce to enter into, any written or oral
arrangement, agreement or understanding regarding employment or retention as a
consultant or independent contractor with any Person who is at the time of such
solicitation an employee of the Company or any Company Subsidiary, without the
written consent of the Parent.
Section 2.4 Restriction on Use and Disclosure. For a period
commencing on the Closing Date and ending on the third anniversary of the
Closing Date, the Shareholder will not disclose or use at any time any
Confidential Information of which the Shareholder is or becomes aware, whether
or not such information is developed by him, except to the extent that such
disclosure or use is directly related to and required by the Shareholder's
performance of duties, if any, assigned to the Shareholder by the Parent or the
Company, or such Confidential Information becomes public other than through
action of the Shareholder or is compelled by legal process. The Shareholder
hereby acknowledges and agrees that the prohibitions against disclosure of
Confidential Information recited herein are in addition to, and not in lieu of,
any rights or remedies which the Parent or the Company may have available
pursuant to the laws of any jurisdiction or at common law to prevent the
disclosure of trade secrets and other confidential proprietary data, and the
enforcement by the Parent or the Company of its rights and remedies pursuant to
this Agreement shall not be construed as a waiver of any other rights or
available remedies which it may possess in law or equity absent this Agreement.
Section 2.5 Consideration; Cancellation of Prior Agreements.
(a) The Shareholder acknowledges and agrees that the covenants
set forth in this Agreement are ancillary to the sale of the Shareholder's
shares of stock in the Company pursuant to the Merger Agreement. As additional
consideration for the covenants and agreements of the Shareholder set forth in
this Agreement, the Company agrees to pay the Shareholder the aggregate amount
of $________ payable in two (2) equal installments of $_________ each as
follows: the first installment shall be due and payable on the Closing Date and
the second installment shall be due and payable on the first anniversary of the
Closing Date. The amounts payable to the Shareholder pursuant to this Section
2.5(a) shall be subject to all applicable withholding obligations for federal,
state and local taxes.
(b) The Shareholder acknowledges and agrees that the payment
described in Section 2.5(a) shall be in full satisfaction and in lieu of (i) the
payment to which the Shareholder otherwise would be entitled pursuant to any and
all severance agreements between the Shareholder and the Company or any
Affiliate of the Company, including without limitation, pursuant to Section 2 of
that certain Severance Agreement dated October 6, 1995 to which the Shareholder
and Medco Behavioral Care Corporation are parties (the "Severance Agreement"),
and (ii) any other payment in the nature of severance from the Company or an
Affiliate of the Company under any employment, consulting or other agreement or
otherwise including, without, limitation, under Section 2(y) of the Severance
Agreement. The Shareholder acknowledges and agrees that any and all severance
and/or consulting agreements between the Shareholder and the Company or any
Affiliate of the Company
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shall terminate and be of no further force or effect as of the Closing Date.
Nothing set forth in this Section shall apply to or affect that certain Amended
and Restated Employment Agreement (the "Employment Agreement") dated August 17,
1992 between American Biodyne, Inc. ("ABI") and the Shareholder which shall
continue in full force and effect in accordance with its terms except as
modified by that certain letter dated October 24, 1997 pursuant to which the
Shareholder notified ABI of his election to change his status to that of
Chairman Emeritus and except that Section 4.4 of the Employment Agreement shall
be of no further force or effect.
(c) The payment of the consideration set forth in this
Agreement shall be contingent upon and subject to the receipt of the approval of
the shareholders of the Company pursuant to the provisions of Section 280G(b)(5)
of the Code.
(d) The Shareholder shall be eligible for health care coverage
with the health care plan of the Company, as the same may be amended from time
to time, at no cost to the Shareholder, which coverage shall be continued for
the period commencing on the later of (i) the Closing Date or (ii) the date the
Shareholder's eligibility for such coverage under the Company's health care plan
otherwise lapses and the date the Shareholder attains age sixty-five (65);
provided, that eligibility for health care coverage shall cease in the event the
Shareholder becomes eligible for health care coverage under either an individual
health care policy or a group health plan.
(e) The Parent and the Shareholder covenant and agree to enter
into a consulting agreement for a term of three (3) years commencing on the
Closing Date; upon the mutual consent of the Parent and the Shareholder, the
term of the agreement may be extended for a two (2) year renewal period after
the expiration of the initial term. The terms and conditions of the
Shareholder's consulting responsibilities shall be negotiated between the
parties and set forth in the consulting agreement. The Shareholder shall be
entitled under the consulting agreement to an annual consulting fee of $______,
which shall be payable under terms and conditions set forth in the consulting
agreement.
Section 2.6 Shareholder's Acknowledgments.
(a) The Shareholder acknowledges and agrees that it has
received adequate consideration for the execution, delivery and performance of
this Agreement. The Shareholder acknowledges and agrees further that the
execution and delivery of this Agreement is a mandatory condition to the Parent
entering into the Merger Agreement, without which the Parent would not enter
into the Merger Agreement.
(b) The Shareholder acknowledges and agrees that the
restrictions set forth in this Agreement, including the scope of the
restrictions in time, geography and activities in this Agreement is reasonable
and necessary to protect the legitimate business interests of the Parent
including the goodwill of the Company being acquired by the Parent pursuant to
the Merger Agreement and the substantial relationships (as reflected, in part,
in the contracts of the Company) with payors and other
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medical providers and patients that are enuring to the benefit of the Parent as
contemplated by the Merger Agreement.
SECTION 3. REMEDIES. The Shareholder acknowledges and agrees
that the rights of the Parent under this Agreement are of a specialized and
unique character, that a monetary remedy for a breach of the agreements set
forth in this Agreement will be inadequate and impracticable and that immediate
and irreparable damage will result to Parent and the Company if the Shareholder
fails to or refuse to perform its obligations under this Agreement.
Notwithstanding any election by any Person to claim damages from the Shareholder
as a result of any such failure or refusal, the Parent may, in addition to any
other remedies and damages available, seek temporary and permanent injunctive
relief (without the necessity of proving actual damages and without the posting
of a bond or other security) in a court of competent jurisdiction to restrain
any such failure or refusal and the Shareholder, for itself and its Affiliates
waives any defense that the aggrieved party has an adequate remedy at law. The
Shareholder agrees that, in addition to all other remedies available at law or
in equity, the Parent shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions
as a court of competent jurisdiction shall determine.
SECTION 4. MISCELLANEOUS.
Section 4.1 Successors and Assigns; Restrictions on
Assignment. Except as otherwise provided in this Agreement, no party hereto
shall assign this Agreement or any rights or obligations hereunder without the
prior written consent of the other party hereto and any such attempted
assignment without such prior written consent shall be void and of no force and
effect, provided, that the Parent may assign its rights hereunder to any of its
Affiliates and any Person succeeding to the business and operations of the
Parent or the Company including, without limitation, any Person with which the
Parent or the Company may be merged, by which it may be acquired or to which it
sells substantially all of its assets or transfers its business. The Parent may
assign its rights to damages hereunder to the lender or lenders providing
financing to the Parent. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective successors, permitted
assigns, heirs, beneficiaries, estates, executors and personal representatives.
Section 4.2 Governing Law, Jurisdiction. This Agreement shall
be construed, performed and enforced in accordance with, and governed by, the
laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.
Section 4.3 Severability; Independence of Covenants. In the
event that any provision of this Agreement or any word, phrase, clause, sentence
or other portion thereof should be held to be unenforceable or invalid for any
reason, such provision or portion thereof shall be modified or deleted in such a
manner so as to make this Agreement, as modified, legal and enforceable to the
fullest extent permitted under applicable laws. The Shareholder, the Parent and
the Company hereby expressly authorize any court of competent jurisdiction to
enforce any such provision or portion thereof or to modify any such provision or
portion thereof in order that any such provision or portion thereof shall be
enforced by such court to the fullest extent permitted by applicable laws. In
the event
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that any part of this Agreement is declared by any court or other judicial or
administrative body to be null, void or unenforceable, said provision shall
survive to the extent it is not so declared, and all of the other provisions of
this Agreement shall remain in full force and effect.
Section 4.4 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier;
or (iv) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
If to the Shareholder:
===============
===============
If to the Parent or Company:
Magellan Health Services, Inc.
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Attention: Vice President-Mergers and Acquisitions
Copy to:
Magellan Health Services, Inc.
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Attention: General Counsel
Any party may change its address for the purpose of this
Section by giving the other party written notice of its new address in the
manner set forth above.
Section 4.5 Amendments; Waivers. This Agreement may be amended
or modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
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Section 4.6 Entire Agreement. This Agreement contains the
entire understanding between the parties hereto with respect to the transactions
contemplated hereby and supersedes and replaces all prior and contemporaneous
agreements and understandings, oral or written, with regard to such
transactions.
Section 4.7 Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 4.8 Headings. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for reference and
are not a part of this Agreement.
Section 4.9 Counterparts. This Agreement may be executed in
multiple counterpart copies, each of which will be considered an original and
all of which will constitute one and the same instrument, binding on all parties
hereto, even though all the parties are not signatory to the same counterpart.
Any counterpart of this Agreement which has attached to it separate signature
pages, which taken together contain the signature of all parties hereto, shall
for all purposes be deemed a fully executed original.
Section 4.10 Effectiveness; Termination. This Agreement shall
become effective as of the Closing Date. If the Merger Agreement is terminated
prior to the Closing Date, this Agreement shall be null and void and without any
legal effect.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed either in an individual capacity or by their respective
officers thereunto duly authorized, as the case may be, as of the date first
above written.
SHAREHOLDER:
---------------------------------------
PARENT:
MAGELLAN HEALTH SERVICES, INC.
By:
Name:
Title:
COMPANY:
MERIT BEHAVIORAL CARE CORPORATION
By:
Name:
Title:
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