Exhibit 2(h)
Execution copy
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (the "Agreement"), dated as of March 3, 1998, is
entered into by and between Crescent Operating, Inc. ("Crescent Operating") and
Magellan Health Services, Inc. ("Magellan").
WHEREAS, Crescent Operating has entered into that certain Equity
Purchase Agreement, dated of even date herewith, pursuant to which Crescent
Operating agreed to purchase and Charter Behavioral Health System, Inc.
("Charter Inc.") agreed to sell 100% of Charter Inc.'s membership interest in
Charter Behavioral Health Systems, LLC ("CBHS");
WHEREAS, CBHS, Magellan and certain direct and indirect subsidiaries of
Magellan, excluding CBHS (Magellan, together with such subsidiaries, the
"Sellers"), have entered into that certain Purchase Agreement, dated of even
date herewith (the "Purchase Agreement"), pursuant to which CBHS agreed to
purchase and the Sellers agreed to sell certain equity interests in certain
entities (the "Subsidiaries") and the assets of certain staff model clinics;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.
ARTICLE 1
REPRESENTATIONS OF CRESCENT OPERATING
Crescent Operating hereby represents and warrants to CBHS and Magellan
as follows:
1.1 Corporate Organization. Crescent Operating is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to conduct its
business as now conducted. There are no dissolution, liquidation or revocation
proceedings pending with respect to Crescent Operating.
1.2 Authorization. Crescent Operating has the corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Executive Committee of the Board of Directors of
Crescent Operating has approved this Agreement and the transactions contemplated
hereby and has authorized the execution and delivery of this Agreement. No other
corporate or stockholder proceedings on the part of Crescent Operating are
necessary to consummate the transactions contemplated hereby and perform
Crescent Operating's obligations hereunder. This Agreement has been duly and
validly executed and delivered by Crescent Operating and, assuming the Agreement
constitutes the legal, valid and binding obligation of CBHS and Magellan,
constitutes a legal, valid and binding obligation of Crescent Operating,
enforceable against Crescent Operating in accordance with its terms, except
that: (a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights; and (b) the remedies of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses.
1.3 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) violate
any provisions of the Certificate of Incorporation or By-Laws of Crescent
Operating; (b) violate or constitute a default under any agreement to which
Crescent Operating is a party, or by which Crescent Operating is bound; or (c)
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental agency or body to which Crescent Operating is subject,
except, in the case of clause (b) or (c), any such violations or defaults as
would not, individually or in the aggregate, materially impair the ability of
Crescent Operating to perform its obligations hereunder or prevent the
consummation of the transactions contemplated hereby.
1.4 Consents. Except (a) as set forth in Schedule 1.4 hereto and (b) as
may be necessary as a result of any facts or circumstances related solely to
CBHS or Magellan, no consent, approval, authorization or order of, or
registration or filing with, any court or governmental agency or body or other
third party is required to be obtained by Crescent Operating in connection with
the execution, delivery or performance by Crescent Operating of this Agreement.
ARTICLE II
REPRESENTATIONS OF MAGELLAN
Magellan hereby represents and warrants to Crescent Operating as
follows:
2.1 Corporate Organization.
(a) Each Seller is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
requisite corporate or other power and authority to conduct its business as now
conducted. Each of the Subsidiaries is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has the requisite corporate power and authority to conduct its business as now
conducted.
(b) Each of the Subsidiaries is duly qualified or licensed to
do business as a foreign corporation or limited liability company, as the case
may be, and is in good standing in each of the jurisdictions in which it is
required to be so qualified or licensed, except jurisdictions in which the
failure to qualify to do business would not have a material effect on the
business or operations of such Subsidiary.
(c) There are no dissolution, liquidation or revocation proceedings
pending with respect to any of the Sellers or Subsidiaries.
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2.2 Authorization. Magellan has the corporate power and authority to
enter into this Agreement and, assuming approval of the Board of Directors of
Magellan, to carry out the transactions contemplated hereby. The Board of
Directors of Magellan has preliminarily approved the transactions contemplated
herein and shall meet within seven (7) days of the execution of this Agreement
to consider final approval of such transactions. No other corporate or
stockholder proceedings on the part of Magellan are necessary to consummate the
transactions contemplated hereby and perform Magellan's obligations hereunder.
This Agreement has been duly and validly executed and delivered by Magellan and,
assuming the Agreement is approved by the Board of Directors of Magellan as
provided above, and assuming it constitutes the legal, valid and binding
obligation of Crescent Operating, constitutes a legal, valid and binding
obligation of Magellan, enforceable against Magellan in accordance with its
terms, except that: (a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights; and (b) the remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses.
2.3 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will: (a) violate
any provisions of the Certificate of Incorporation or By-Laws of Magellan; (b)
violate or constitute a default under any agreement to which Magellan is a
party, or by which Magellan is bound or to which any of the assets or property
of Magellan is subject; or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental agency or body to
which Magellan is subject or to which any of the assets or property of Magellan
is subject, except, in the case of clause (b) or (c), any such violations or
defaults as would not, individually or in the aggregate, materially impair the
ability of Magellan to perform its obligations hereunder or prevent the
consummation of the transactions contemplated hereby.
ARTICLE III
COVENANTS AND AGREEMENTS
3.1 Financing. Crescent Operating hereby agrees as soon as practicable
after execution of this Agreement to cooperate with CBHS and provide assistance
to CBHS in the preparation of any offering documents or other material required
in connection with CBHS's efforts to obtain financing for CBHS's payment
obligations under the Purchase Agreement. Crescent Operating shall use its
commercially reasonable best efforts to assist CBHS in obtaining such financing,
upon terms acceptable to CBHS and Crescent Operating in their sole judgment,
within 120 days after the date of this Agreement; it being understood by the
parties that certain extensions to the 120-day period may be necessary to
complete all actions necessary to obtain such financing. All expenses incurred
in connection with obtaining such financing, including accounting costs, legal
fees, investment banking fees, printing costs and SEC filing fees, shall be
reimbursed by Crescent Operating. Magellan agrees to cooperate with CBHS in
providing any information needed in connection with obtaining the financing
referenced herein. Crescent Operating further agrees that, in the event an
offering is to be consummated and, at the time the pricing of the offering is to
occur, the offering proceeds to
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be received in such offering, based on the proposed pricing, would be less than
$280,000,000 plus any and all Advances, then Crescent Operating shall purchase,
on the closing date of such offering, the amount of CBHS securities offered in
such offering necessary to cause the offering proceeds to be received in such
offering to equal $280,000,000 plus any and all Advances, but in no event shall
Crescent Operating be obligated to purchase CBHS securities having an aggregate
purchase price in excess of $25,000,000. Crescent Operating agrees, in any
public equity financing proposed to be undertaken by CBHS, to sell a sufficient
percentage of the ownership interests of CBHS, based on advice of the managing
underwriter(s) for any such offering, to raise $280,000,000 plus an amount equal
to the amount of the Advances. "Advances" shall having the meaning ascribed to
such term in Section 4.10 of the Purchase Agreement.
3.2 Termination Fee. In the event that, as a result of the failure by
CBHS to obtain sufficient financing in accordance with Section 3.1 above, (i)
the transactions contemplated by the Purchase Agreement are not consummated
within the time period specified in the Purchase Agreement or (ii) the Purchase
Agreement is terminated, then Crescent Operating shall promptly pay to Magellan
cash in the amount of $2,500,000 and shall issue Magellan a number of shares of
Crescent Operating common stock, par value $0.01 per share, equal to the number
obtained by dividing $2,500,000 by the average "closing price" of a share of
Crescent Operating common stock for the five "trading days" prior to the date of
termination of the Purchase Agreement and for the five "trading days" after the
date of termination of the Purchase Agreement (collectively, the "Termination
Fee"). The "closing price" for each such trading day means the last reported
sales price, regular way, on such day, or if no such sale takes place on that
day, the average of the reported closing bid and asked prices on that day,
regular way, in either case as reported on the Nasdaq National Market. A
"trading day" is any day on which the Nasdaq National Market is open for the
transaction of business. Both parties hereto acknowledge that the Termination
Fee is not intended as a penalty, but rather is intended as a reasonable
estimate of Magellan's costs and expenses incurred in connection with the
transactions contemplated by the Purchase Agreement and the Equity Purchase
Agreement, as well as consideration for other opportunities it did not pursue in
anticipation of the consummation of the such transactions. Notwithstanding
anything to the contrary contained in this Agreement, Crescent Operating shall
have no obligation under this Section 3.2 until the later of (i) 30 days after
the date hereof or (ii) the date on which Magellan shall have delivered to CBHS
Schedules 3.4(a) and 3.4(c) to the Services Purchase Agreement, which schedules
shall be in a form and of a substance satisfactory to CBHS and Magellan;
provided, however, that Crescent Operating shall have the right to terminate
this Agreement or the Equity Purchase Agreement for any reason within 30 days
after the date hereof, in which event the Termination Fee shall not be payable
under any circumstances. In the event that Crescent Operating is required to pay
Magellan the Termination Fee pursuant to this Section 3.2, payment of the
Termination Fee shall be Magellan's sole remedy for the termination of this
Agreement.
3.3 Guarantees. Crescent Operating acknowledges that CBHS has agreed to
use its commercially reasonable best efforts to secure the full and complete
release, prior to the
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closing under the Purchase Agreement (and continuously thereafter if not
released prior to such closing), of any and all guarantees (the "Magellan
Guarantees") by the Sellers or any of their affiliates of any indebtedness or
obligations of CBHS or its affiliates (other than CBHS) or any of the
Subsidiaries or their subsidiaries (or under any contract assigned to CBHS
pursuant to the Purchase Agreement) and to secure full and complete release,
prior to the closing under the Purchase Agreement (and continuously thereafter
if not released prior to such closing), of any and all obligations (the
"Magellan Obligations") (i) of the Sellers or any of their affiliates (other
than the Subsidiaries) under any agreement which was assigned to CBHS or its
subsidiaries pursuant to the Contribution Agreement, dated as of June 16, 1997,
by and among Magellan, Crescent Operating and CBHS, and under which the Sellers
or any of their affiliates (other than the Subsidiaries) remain obligors or
indemnitors in any manner and (ii) under any agreement of any of the
Subsidiaries or their subsidiaries (or under any contract assigned to CBHS
pursuant to the Purchase Agreement) and under which the Sellers or any of their
affiliates (other than the Subsidiaries) will remain obligors or indemnitors in
any manner after the closing under the Purchase Agreement. Set forth on Schedule
4.11 to the Purchase Agreement, to the knowledge, after reasonable inquiry, of
those persons specified on Schedule 2.04(b) to the Purchase Agreement, is a list
of all Magellan Guarantees and Magellan Obligations. To the extent, after the
date hereof, the Sellers discover there are other Magellan Guarantees or
Magellan Obligations not identified on Schedule 4.11 to the Purchase Agreement
("Unlisted Obligations"), the Sellers may request Crescent Operating to add any
such Unlisted Obligation to such Schedule 4.11. If Crescent Operating agrees to
add an Unlisted Obligation, such Schedule 4.11 shall be automatically amended to
include the Unlisted Obligation, which shall be treated as if it had appeared on
such Schedule 4.11 at the time of execution of this Agreement. Should Crescent
Operating object to the addition of an Unlisted Obligation, Magellan may
terminate any such Unlisted Obligation (and the related underlying obligations,
if any); provided that such termination is permitted under the applicable
contractual agreement; provided, further, that CBHS or its affiliates shall
agree to such termination if permitted under such agreement or permitted by any
third party to such agreement. Crescent Operating agrees that, to the extent any
Magellan Guarantee (listed on Schedule 4.11 to the Purchase Agreement) of any
such indebtedness or obligation or any Magellan Obligation (listed on Schedule
4.11 to the Purchase Agreement) is not fully and completely released on or
before the closing under the Purchase Agreement, Crescent Operating will
indemnify and hold harmless the Sellers and their respective affiliates and
their successors and assigns from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and other
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to the Magellan Guarantees and Magellan Obligations. Notwithstanding
anything to the contrary contained in this Agreement, Crescent Operating shall
have no obligation under this Section 3.3 unless and until the conditions set
forth in the Purchase Agreement shall have been fulfilled or waived, and all
transactions contemplated by the Purchase Agreement shall have been consummated.
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3.4 Conditions to Obligations of Crescent Operating. Notwithstanding
anything to the contrary contained in this Agreement, Crescent Operating shall
have no obligation under Sections 3.1 or 3.2 above unless and until:
(a) Magellan shall have delivered, and shall have caused each
of the Sellers to deliver, a certificate stating that: (i) the representations
and warranties made by Magellan or the Sellers, as the case may be, in this
Agreement and the Purchase Agreement were true and correct in all material
respects at the time of execution of the Purchase Agreement and, if applicable,
as of the date on which the offering commenced and as of the date on which the
offering closed, and (ii) the covenants required to be performed by Magellan or
the Sellers, as the case may be, on or before the date on which Crescent
Operating's obligations arose had been performed as of such date; provided,
however, that the failure of Magellan to deliver (or to cause each of the
Sellers to deliver) such certificate shall not relieve Crescent Operating of any
such obligation unless Crescent Operating reasonably demonstrates (including,
but not limited to, by receipt of advice provided to Crescent Operating and
Magellan by the managing underwriter(s) in any such financing) that the fact
that a contributing factor to the inability of CBHS to complete the financing
described in Section 3.1 above was the fact that (A) such representations and
warranties were not true or correct in all material respects as of the
applicable date or (B) one or more of the covenants required to be performed was
not performed by the applicable date, and
(b) the following conditions regarding interim final rule to
be recommended by the United States Department of Health and Human Services
Negotiated Rulemaking Committee (the "Rulemaking Committee") on the Shared Risk
Exception relating to the existing statutory shared risk safe harbor, 42 U.S.C.
SECTION 1320a-7b(b)(3)(F) (the "Shared Risk Exception"), shall have been
satisfied: (i) the Shared Risk Exception shall have become effective, as stated
in the notice of publication, and (ii) the Services Purchase Agreement to be
entered into by and between Magellan and CBHS (the "Services Purchase
Agreement") either (A) shall have been executed in the form agreed to by the
parties as of the date hereof if the Shared Risk Exception is the same as the
text, other than nonsubstantive changes, of the statement issued on January 22,
1998, by the Rulemaking Committee, or (B) shall have been executed in a form
that complies with the Shared Risk Exception and that would not result in any
material loss of the proposed benefits to be provided to Crescent Operating or
CBHS thereunder if the Shared Risk Exception is not the same as the text, other
than nonsubstantive changes, of the statement issued on January 22, 1998, by the
Rulemaking Committee.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. All notices, requests, instructions or documents hereunder
shall be in writing and delivered personally or by Federal Express, or sent by
telecopy, or sent by United States registered or certified mail, postage prepaid
as follows:
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(i) if to Crescent Operating:
Jeffrey L. Stevens
Executive Vice President and Chief Operating
Officer
Crescent Operating
307 West 7th Street
Suite 1025
Fort Worth, Texas 76102
Facsimile: (817) 339-1001
with a copy to:
Sylvia M. Mahaffey, Esq.
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Facsimile: (202) 663-8007
(ii) if to any of the Sellers:
David Hansen, Esq.
General Counsel
Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Facsimile: (404) 869-5660
with a copy to:
J. Eric Dahlgren, Esq.
Dow, Lohnes & Albertson
One Ravinia Drive
Suite 1600
Atlanta, Georgia 30346
Facsimile: (770) 901-8874
or such other address as any party may designated by written notice to the other
parties. Any notice, request, demand, waiver or other communication required or
permitted to be given under this Agreement will be deemed to have been duly
given only if delivered in person or by first class, prepaid, registered or
certified mail, or sent by courier or, if receipt is confirmed, by telecopier.
4.2 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transaction contemplated herein,
and no modification hereof
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shall be effective unless in writing and signed by the party against which it is
sought to be enforced. This Agreement supersedes all prior understandings,
negotiations and agreements relating to the transactions contemplated herein.
4.3 Successors and Assigns. The terms, covenants and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns; provided, however, that neither
party may assign its rights and obligations under this Agreement without the
prior written consent of the other party, except that Magellan may assign its
rights under this Agreement to one or more of its subsidiaries.
4.4 Expenses. Each of Magellan and Crescent Operating shall bear its
own costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that Crescent Operating
shall reimburse Magellan for reasonable attorneys' fees incurred by Magellan in
connection with Magellan's enforcement of the obligations of Crescent Operating
hereunder upon the failure of Crescent Operating to perform such obligations.
4.5 Severability. If any provision of this Agreement shall be
determined by arbitration in accordance with Section 4.6 to be void and of no
effect, the provisions of this Agreement shall be deemed amended to delete or
modify, as necessary, the offending provision, and this Agreement as so amended
or modified shall not be rendered unenforceable or impaired but shall remain in
force to the fullest extent possible in keeping with the intention of the
parties hereto.
4.6 Arbitration. The parties agree to resolve any dispute, controversy
or claim arising out of or relating to this Agreement, its interpretation or
performance (a "Controversy") in accordance with this Section 4.6.
(a) The parties agree to negotiate in good faith for up to 45
days after written notice by one party to the other party or parties to the
Controversy, in order to attempt to resolve such Controversy. In this regard,
each party agrees to involve its respective senior management in these
discussions if necessary.
(b) In the event that such Controversy is not resolved through
mutual discussions within such 45-day period of time, such dispute or
controversy may be submitted by any such party to, and if so submitted shall be
finally settled by, arbitration in accordance with the Commercial Arbitration
Rules (the "Rules") of the American Arbitration Association, and judgment upon
the award may be entered in any court where the arbitration takes place or any
court having jurisdiction. Any such arbitration shall take place in Atlanta,
Georgia, and there shall be one arbitrator. The parties shall attempt to agree
on the selection of the arbitrator within 60 days after receipt of the written
notice referred to in clause (a) above; if the parties agree, the agreed-upon
person shall be the arbitrator; if the parties cannot so agree, the arbitrator
shall be selected by the American Arbitration Association in
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accordance with the Rules. The arbitrator may order specific performance or
other equitable relief or remedies, to the extent he or she deems it
appropriate, in any situation in which a court could so order. All costs of such
arbitration, including the compensation of the arbitrator (but not including the
parties' attorneys', accountants' and other professionals' fees, as to which
each party shall pay its own, except as otherwise provided in Section 4.4) shall
be allocated 50% to Crescent Operating and 50% to Magellan. The decision of the
arbitrator shall be final and binding upon the parties, their successors and
assigns, and they shall comply with such decision in good faith, and each party
hereby submits itself to the jurisdiction of the courts of the place where the
arbitration is held, but only for the entry of judgment with respect to and to
enforce the decision of the arbitrator hereunder.
4.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, applicable in the case of
agreements made and to be performed entirely within such State, without regard
to such State's conflicts of laws rules.
4.8 Headings. The headings in this Agreement are included herein for
convenience of reference only, and shall not constitute a part of this Agreement
for any other purpose.
4.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and same instrument.
4.10 Waiver. Any of the terms or conditions of this Agreement which may
be lawfully waived may be waived in writing at any time by the party which is
entitled to the benefits thereof. Any waiver of any of the provisions of this
Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
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4.11 Variations of Pronouns; Definitions; Number; Gender. All pronouns
and all variations thereof shall be deemed to refer to the masculine, feminine
or neuter, singular or plural, as the identity of the person or persons may
require. Whenever used herein the singular number shall include the plural, the
plural shall include the singular, and the use of any gender shall include all
genders. "Person" shall mean an individual, firm, trust, association,
corporation, limited liability company, partnership, government (whether
federal, state, local or other political subdivision, or an agency or bureau of
any of them) or other entity.
IN WITNESS WHEREOF, this Support Agreement has been duly executed by
the parties hereto as of the date first above written.
MAGELLAN HEALTH SERVICES, INC.
By:/s/ CRAIG L. MCKNIGHT
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Craig L. McKnight
Its: Executive Vice President and
Chief Executive Officer
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CRESCENT OPERATING, INC.
By: /s/ JEFFREY L. STEVENS
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Its: Executive Vice President and
Chief Operating Officer
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Schedule 1.4
Consent of the shareholders of Crescent Operating for issuance of
common stock under Section 3.2, if required by Rule 4460(i) of the Rules of the
Nasdaq Stock Market