exv4w2






Exhibit 4.2





STOCKHOLDERS AGREEMENT



          THIS STOCKHOLDERS AGREEMENT (this “Agreement”) is made and entered into as of __________, 2011, by and among Acadia Healthcare Company, Inc., a Delaware corporation (the
“Company”), each of the Persons listed on the Schedule of WCP Investors attached
hereto, and each of the Persons listed on the Schedule of Management Investors attached
hereto (collectively referred to herein as the “Management Investors” and each individually
as a “Management Investor”). The WCP Investors and the Management Investors are
collectively referred to herein as the “Stockholders” and each individually as a
“Stockholder.” The Company and the Stockholders are sometimes collectively referred to
herein as the “Parties” and each individually as a “Party.” Capitalized terms used
and not otherwise defined herein have the meanings set forth in Section 6.


          WHEREAS, the WCP Investors and the Management Investors collectively own all of the
outstanding equity securities of Acadia Healthcare Holdings, LLC, a Delaware limited liability
company and the sole stockholder of the Company as of the date hereof (“Holdings”);


          WHEREAS,
the Company is party to an Agreement and Plan of Merger, dated as of
May 23, 2011 (the “Merger Agreement”), pursuant to which, among other things, PHC, Inc., a
Massachusetts corporation, will merge with and into Acadia Merger Sub, LLC, a Delaware limited
liability company and wholly-owned subsidiary of the Company (“Merger Sub”), with Merger
Sub surviving as the surviving corporation in such merger (the “Merger”);


          WHEREAS, in connection with the transactions contemplated by the Merger Agreement, the WCP
Investors desire to cause the liquidation and dissolution of Holdings and the distribution of cash
and shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), to
the members of Holdings in accordance with the terms of the limited liability company agreement of
Holdings (the “Distribution”); and


          WHEREAS, in connection with the consummation of the transactions contemplated by the Merger
Agreement and the dissolution and liquidation of Holdings, each of the Company and the Management
Investors has agreed to enter into this Agreement for the benefit of the WCP Investors for the
purposes, among others, of (i) providing the WCP Investors with the right to designate the election
of certain members of the board of directors of the Company (the “Board”), (ii) setting
forth the agreement of the Management Investors with respect to the voting of their Stockholder
Shares, and (iii) limiting the manner and terms pursuant to which the Management Investors may
transfer certain of their Stockholder Shares.


          NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings
contained herein and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby agree as follows:



     Section 1. Board of Directors.


          1A. Board Composition. From and after the Effective Time (as defined in the Merger
Agreement) and until the provisions of this Section 1A cease to be effective in accordance
with Section 1D, each Stockholder shall vote or cause to be voted all of his, her or its
Stockholder Shares and any other voting securities of the Company over which such Stockholder has
voting control and shall take all other customary and reasonable actions within his, her or its
control (whether in such Stockholder’s capacity as a stockholder, director, member of a board
committee or officer of the Company or otherwise (unless, in the case of any action in such
Stockholder’s capacity as an officer, director or member of a board committee, such action would be
inconsistent with such Stockholder’s fiduciary duties under



 









 








applicable laws), and including attendance at meetings in person or by proxy for purposes of obtaining a
quorum and execution of written consents in lieu of meetings), and the Company shall take all
necessary or desirable actions within its control (including calling special board and stockholder
meetings, causing the designated individuals to be nominated for election to the Board, soliciting
proxies in favor thereof and recommending that stockholders of the Company elect to the Board each
such designee), so that:



          (i) except as otherwise contemplated by the Certificate of Incorporation, (a) the authorized
number of directors on the Board shall be established and maintained at twelve (12), (b) from and
after the effective time of the Merger, the Board shall be divided into three classes designated as
Class I, Class II and Class III, (c) the term of office of the initial Class I directors shall
expire at the first annual meeting of stockholders after the Merger, the term of office of the
initial Class II directors shall expire at the second succeeding annual meeting of stockholders
after the Merger and the term of office of the initial Class III directors shall expire at the
third succeeding annual meeting of the stockholders after the Merger, and (d) at each annual
meeting of stockholders after the Merger, directors elected to replace those of a Class whose terms
expire at such annual meeting shall be elected to hold office until the third succeeding annual
meeting after their election and until their respective successors shall have been duly elected and
qualified;


          (ii) the following persons shall be appointed to the Board as of immediately prior to the
effective time of the Merger and nominated for re-election and elected to the Board as set forth
below:




          (a) Joey A. Jacobs, as a Class III director and, after the expiration of his initial
term as a director, for so long as he serves as the chief executive officer of the Company
or any of its Subsidiaries;




          (b) Bruce A. Shear, as a Class III director and, after the expiration of his initial
term as a director, for one additional three-year term as a Class III director;




          (c) three (3) representatives who meet the applicable director independence
requirements of The Nasdaq National Market or any other securities exchange on which the
securities of the Company may be listed from time to time, one (1) of which shall be a Class
II director designated by Bruce A. Shear and two (2) of which shall be Class III directors
designated by the Board;




          (d) (I) for so long as the WCP Investors retain voting control over at least 50% of the
outstanding voting securities of the Company, seven (7) representatives designated by the
WCP Investors, four (4) of which shall be Class I directors and three (3) of which shall be
Class II directors; and (II) from and after such time as the WCP Investors cease to have
voting control over at least 50% of the outstanding voting securities of the Company, such
number of directors that, when compared to the authorized number of directors on the Board,
is closest to but not less than proportional (which, for the avoidance of doubt, shall mean
that the number of representatives shall be rounded up to the next whole number in all
cases) to the total number of Stockholder Shares over which the WCP Investors retain voting
control relative to the total number of Stockholder Shares then issued and outstanding (it
being understand that no reduction in the number of Stockholder Shares over which the WCP
Investor retain voting control shall shorten the term of any incumbent director);


          (iii) if any director elected by virtue of being designated pursuant to Section 1A(ii)
for any reason ceases to serve as a member of the Board during his or her term of office, the
resulting vacancy on the Board shall be filled by a representative designated by the Person(s)
entitled to designate such director pursuant to Section 1A(ii); and



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          (iv) a director shall be removed from the Board only upon the request of the Person(s)
entitled to designate such director pursuant to Section 1A(ii), and not otherwise.


          1B. Controlled Company. For so long as the Company qualifies as a “controlled company”
under the applicable listing standards then in effect, the Company will elect to be a “controlled
company” for purposes of such applicable listing standards, and will disclose in its annual meeting
proxy statement that it is a “controlled company” and the basis for that determination. The
Company, the WCP Investors and the Management Investors acknowledge and agree that, as of the date
of this Agreement, the Company is a “controlled company.”


          1C. Reimbursement; Compensation. The Company shall pay the reasonable out-of-pocket
expenses (including travel expenses) incurred by each of the Company’s directors in connection with
attending the meetings of the Board and any committee thereof. The Company shall use its best
efforts to maintain in effect at all times directors and officers indemnity insurance coverage
reasonably satisfactory to the Majority WCP Investors, and the Certificate of Incorporation and
Bylaws shall at all times provide for indemnification, exculpation and advancement of expenses to
the fullest extent permitted under applicable law.


          1D. Termination. The provisions of Section 1A shall terminate automatically
and shall be of no further force and effect from and after such time as the WCP Investors cease to
hold at least 17.5% of the outstanding voting securities of the Company. The provisions of
Section 1C shall terminate automatically and shall be of no further force and effect from
and after such time as no person who is a current or former officer, employee, manager, director,
member, partner or co-investor of any WCP Investor shall serve as a member of the Board.



     Section 2. Voting Agreement; Irrevocable Proxy; Conflicting Agreements.


          2A. Voting Agreement. In the event that the approval of the Company’s stockholders is
required in connection with any election or removal of directors, merger, consolidation, business
combination, recapitalization, conversion, sale, lease or exchange of all or substantially all of
its property or assets, authorization or issuance of capital stock or other securities (including,
without limitation, the adoption of any incentive equity plan), executive compensation, stockholder
proposal, amendment to or restatement of the certificate of incorporation or bylaws, or
dissolution, liquidation or winding up, whether at a meeting or by written consent, whether
required by law or pursuant to the Certificate of Incorporation or Bylaws or pursuant to any
contractual agreement to which such Management Investor is a party or is bound, each Management
Investor shall vote all of his, her or its Stockholder Shares and any other voting securities of
the Company over which such holder has voting control, and shall take all other necessary or
desirable actions within his, her or its control (whether in his, her or its capacity as a
stockholder, director, member of a board committee or officer of the Company or otherwise (unless,
in the case of any action in such Management Investor’s capacity as an officer, director or member
of a board committee, such action would be inconsistent with such Management Investor’s fiduciary
duties under applicable laws), and including attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of meetings), so that all
such Stockholder Shares and other voting securities of the Company are voted as directed by the
Majority WCP Investors; provided that, in the case of any election or removal of directors,
such direction is consistent with the provisions of Section 1A.


          2B. Irrevocable Proxy. In order to secure the obligation to vote his, her or its
Stockholder Shares and other voting securities of the Company in accordance with the provisions of
Section 1A and Section 2A, each Management Investor hereby appoints Waud Capital
Partners II, L.P. (“WCP”) as such Management Investor’s true and lawful proxy and
attorney-in-fact, with full power of



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substitution, to vote all of such Management Investor’s Stockholder Shares and any other voting
securities of the Company over which such Management Investor has voting control for the election
and/or removal of directors and all such other matters as expressly provided for in Section
1A and Section 2A. WCP may exercise the irrevocable proxy granted to it hereunder at
any time a Management Investor fails to comply with the provisions of this Agreement. The proxies
and powers granted by each Management Investor pursuant to this Section 2B are coupled with
an interest and are given to secure the performance of his, her or its obligations under this
Agreement. Such proxies and powers will be irrevocable for the term of this Agreement and will
survive the death, incompetence or disability of such Management Investor.



          2C. Representations and Warranties; Conflicting Agreements. Each Stockholder represents
that (i) this Agreement has been duly authorized, executed and delivered by such Stockholder and
constitutes the valid and binding obligation of such Stockholder, enforceable in accordance with
its terms, and (ii) such Stockholder has not granted and is not a party to any proxy, voting trust
or other agreement which is inconsistent with or conflicts with the provisions of this Agreement.
No Management Investor shall grant any proxy or become party to any voting trust or other agreement
which is inconsistent with or conflicts with the provisions of this Agreement.


          2D. Termination. The provisions of Section 2A and Section 2B shall
terminate automatically and shall be of no further force and effect from and after such time as the
WCP Investors cease to hold at least 17.5% of the outstanding voting securities of the Company.



     Section 3. Transfers of Restricted Common Stock.


          3A. Required Consent. No Management Investor shall Transfer any interest in any
Restricted Shares without first obtaining the prior written consent of the Majority WCP Investors,
which consent may be withheld in the Majority WCP Investors’ sole discretion (the “Required
Consent”), except that the Management Investors may Transfer Restricted Shares to their
respective Permitted Transferees, provided that such Management Investor retains voting control of
such Restricted Shares (such transfers, the “Exempt Transfers”). If any Person acquires
Restricted Shares in an Exempt Transfer by virtue of such Person’s qualification as a Permitted
Transferee of a transferor, and such Person shall, at any time, cease to be a Permitted Transferee
of such transferor, then such Person shall be required to Transfer such Person’s Restricted Shares
to a Person that does qualify at the time of such required transfer as a Permitted Transferee of
the original transferor.


          3B. Additional Restrictions on Transfer.


          (i) Execution of Counterpart. Each Transferee of Restricted Shares (including any
Permitted Transferee in connection with an Exempt Transfer) shall, as a condition precedent to such
Transfer, agree to be bound by the provisions of this Agreement applicable to Management Investors.
Notwithstanding the foregoing, any Person who acquires in any manner whatsoever any Restricted
Shares, irrespective of whether such Person has agreed to the terms and provisions of this
Agreement, shall be deemed by the acceptance of the benefits of the acquisition thereof to have
agreed to be subject to and bound by all of the terms and conditions of this Agreement that any
predecessor in such Restricted Shares of such Person was subject to or by which such predecessor
was bound.


          (ii) Notice. In connection with any Transfer or potential Transfer of any Restricted
Shares, the holder of such Restricted Shares will deliver written notice to the Company and the WCP
Investors describing in reasonable detail the Transfer or proposed Transfer.



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          (iii) Legal Opinion. No Transfer of Restricted Shares may be made unless such Transfer
would not violate any federal securities laws applicable to the Company, the Transferor or the
Restricted Shares to be Transferred. Upon reasonable request of the Company or the Majority WCP
Investors, the proposing Transferor shall deliver to the Company and the WCP Investors prior to the
date of the Transfer an opinion of counsel reasonably acceptable to the Company as to the
foregoing.


          (iv) No Avoidance of Provisions. No holder of Restricted Shares shall directly or
indirectly (i) permit the Transfer of all or any portion of the direct or indirect equity or
beneficial interest in such holder or (ii) otherwise seek to avoid the provisions of this Agreement
by issuing, or permitting the issuance of, any direct or indirect equity or beneficial interest in
such holder, in any such case in a manner which would fail to comply with this Section 3 if
such holder had Transferred Restricted Shares directly.


          3C. Legend. Each certificate evidencing Restricted Shares and each certificate issued in
exchange for or upon the Transfer of any Restricted Shares (if such shares remain Restricted Shares
as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:



“THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN A
STOCKHOLDERS AGREEMENT, DATED AS OF __________, 2011, BY AND
AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND
CERTAIN OF ITS STOCKHOLDERS (THE “STOCKHOLDERS
AGREEMENT”). A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.”



The Company shall imprint such legend on certificates evidencing Restricted Shares outstanding
prior to the date hereof. The legend set forth above shall be removed from the certificates
evidencing any shares which cease to be Restricted Shares.



          3D. Transfer Fees and Expenses. The Transferor and Transferee of any Restricted Shares or
other interest in the Company shall be jointly and severally obligated to reimburse the Company and
the WCP Investors for all reasonable expenses (including attorneys’ fees and expenses) incurred by
the Company or the WCP Investors, as applicable, in connection with any Transfer or proposed
Transfer, whether or not consummated.


          3E. Void Transfers. Any Transfer of any Restricted Shares in contravention of this
Agreement (including, without limitation, the failure of the Transferee to agree to be bound by the
provisions of this Agreement applicable to Management Investors) shall be void and ineffectual and
shall not bind or be recognized by the Company or any other Person.



     Section 4. Lock-Up Agreement. No Management Investor or other holder of
Restricted Shares shall (A) offer, sell, contract to sell, pledge or otherwise dispose of
(including sales pursuant to Rule 144), directly or indirectly, any equity securities of the
Company or any of its Subsidiaries, or any securities convertible into or exchangeable or
exercisable for such securities (including equity securities of the Company or any of its
Subsidiaries that may be deemed to be owned beneficially by such holder in accordance with the
rules and regulations of the Securities and Exchange Commission), (B) enter into a transaction
which would have the same effect as described in clause (A) above, (C) enter into any swap,
hedge or other arrangement that transfers, in whole or in part, any of the economic consequences or



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ownership of any securities referred to in clause (A) above, whether such transaction
is to be settled by delivery of such securities, in cash or otherwise (each of (A),
(B) and (C) above, a “Sale Transaction”), or (D) publicly disclose the
intention to enter into any Sale Transaction, in any such case from the date the Company gives
notice to the Management Investors that a preliminary or final prospectus has been circulated for a
Public Offering and during the 90 days following the date of the final prospectus for such Public
Offering (a “Holdback Period”), except as part of any such Public Offering, unless the
underwriters managing such Public Offering otherwise agree in writing. If requested by the managing
underwriters, each Management Investor and each other holder of Restricted Shares agrees to execute
customary lock-up agreements consistent with the foregoing obligations with the managing
underwriter(s) of an underwritten offering with a duration not to exceed the Holdback Period. If
(i) the Company issues an earnings release or discloses other material information or a material
event relating to the Company occurs during the last 17 days of the Holdback Period or (ii) prior
to the expiration of the Holdback Period, the Company announces that it will release earnings
results during the 16-day period beginning upon the expiration of such period, then to the extent
necessary for a managing or co-managing underwriter of a registered offering required hereunder to
comply with FINRA Rule 2711(f)(4), the Holdback Period will be extended until 18 days after the
earnings release or disclosure of other material information or the occurrence of the material
event, as the case may be (a “Holdback Extension”). The Company may impose stop-transfer
instructions with respect to the shares of its common stock (or other securities) subject to the
foregoing restriction during any Holdback Period or any period of Holdback Extension.




     Section 5. Certain Affirmative and Negative Covenants.


          5A. Financial Statements and Other Information. Subject to the last sentence of this
Section 5A, for so long as the WCP Investors continue to hold at least 17.5% of the
outstanding voting securities of the Company (it being understood that, for purposes of this
Section 5A, (x) all holdings of Equity Securities by Persons who are Affiliates of each
other shall be aggregated for purposes of meeting any threshold tests under this Agreement and (y)
no Management Investor shall be deemed an Affiliate of any WCP Investor), the Company shall deliver
to each WCP Investor:


          (i) as soon as available but in any event within thirty (30) days after the end of each
monthly accounting period in each fiscal year, unaudited consolidated and consolidating statements
of income or operations, stockholders’ equity (or the equivalent) and cash flows of the Company and
its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year
to the end of such month, and an unaudited consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the end of such monthly period, setting forth for each monthly
accounting period in each fiscal year comparisons to the Company’s annual budget and to the
corresponding period in the preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP, consistently applied (except for the absence of footnotes and subject to
changes resulting from normal year-end audit adjustments for recurring accruals of the types
included in the audited financial statements of the Company and its Subsidiaries in prior fiscal
years), and shall be certified by the Company’s chief financial officer;


          (ii) as soon as available but in any event within forty-five (45) days after the end of each
quarterly accounting period in each fiscal year, unaudited consolidated and consolidating
statements of income or operations, stockholders’ equity (or the equivalent) and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period from the beginning of the
fiscal year to the end of such quarter, and an unaudited consolidated and consolidating balance
sheet of the Company and its Subsidiaries as of the end of such quarterly period, setting forth for
each quarterly accounting period in each fiscal year comparisons to the annual budget and to the
corresponding period in the preceding fiscal year, and all such statements shall be prepared in
accordance with GAAP, consistently applied (except for



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the absence of footnotes and subject to changes resulting from normal year-end audit
adjustments for recurring accruals of the types included in the audited financial statements of the
Company and its Subsidiaries in prior fiscal years), and shall be certified by the Company’s chief
financial officer;



          (iii) as soon as available but in any event within ninety (90) days after the end of each
fiscal year, audited consolidated and consolidating statements of income or operations,
stockholders’ equity (or the equivalent) and cash flows of the Company and its Subsidiaries for
such fiscal year, and a consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each case comparisons to the
annual budget and to the preceding fiscal year, all prepared in accordance with GAAP, consistently
applied, and accompanied by (a) an unqualified opinion of a “Big Four” independent accounting firm
selected by the Company’s audit committee or another accounting firm selected by the Company’s
audit committee and (b) a copy of such firm’s annual management letter to the Company’s audit
committee;


          (iv) promptly upon receipt thereof, any additional reports, management letters or other
detailed information concerning significant aspects of the Company’s or any of its Subsidiaries’
operations or financial affairs given to the Company or any of its Subsidiaries by their
independent accountants (and not otherwise contained in other materials provided hereunder or
received by the Board);


          (v) at least thirty (30) days but no more than sixty (60) days prior to the beginning of each
fiscal year after 2011, an annual budget and operating plan (as approved by the Board and the
Majority WCP Investors) prepared on a monthly basis for the Company and its Subsidiaries for such
fiscal year (displaying anticipated statements of income and cash flows and balance sheets), and
promptly upon preparation thereof any other significant budgets or operating plans prepared by the
Company or any Subsidiary and any revisions of such annual or other budgets or operating plans, and
within thirty (30) days after any monthly period in which there is a material adverse deviation
from the annual budget, a certificate explaining the deviation and what actions the Company and/or
its Subsidiaries have taken and propose to take with respect thereto;


          (vi) with reasonable promptness, such other information and financial data concerning the
Company and its Subsidiaries as any WCP Investor may reasonably request.


Each of the financial statements referred to in Sections 5A(i), 5A(ii) and
5A(iii) shall be true and correct and present fairly in all material respects the financial
condition and operating results of the Company and its Subsidiaries as and to the extent specified
above as of the dates and for the periods set forth therein, subject in the case of unaudited
financial statements to changes resulting from normal year-end adjustments for recurring accruals
of the types included in audited financial statements from prior fiscal years (none of which would,
individually or in the aggregate, be material) and the absence of footnotes with respect thereto.
The provisions of this Section 5A shall cease to be effective so long as the Company is
subject to the reporting requirements of the Securities Exchange Act and remains in compliance with
such requirements.


          5B. Inspection Rights. Subject to the last sentence of this Section 5B, for so long
as the WCP Investors continue to hold at least 17.5% of the outstanding voting securities of the
Company (it being understood that, for purposes of this Section 5B, (x) all holdings of
Equity Securities by Persons who are Affiliates of each other shall be aggregated for purposes of
meeting any threshold tests under this Agreement and (y) no Management Investor shall be deemed an
Affiliate of any WCP Investor), the Company permit any representatives designated by any WCP
Investor, upon reasonable notice and execution of a customary confidentiality agreement and during
normal business hours, to (i) visit and inspect any of the properties of the Company and its
Subsidiaries, (ii) examine the corporate, financial



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and other records of the Company and its Subsidiaries and make copies thereof or extracts
therefrom, and (iii) consult with the directors, officers, managers, key employees and independent
accountants of the Company and its Subsidiaries concerning the business, affairs, finances and
accounts of the Company and its Subsidiaries. The presentation of an executed copy of this
Agreement by any WCP Investor to the independent accountants of the Company or any of its
Subsidiaries shall constitute permission to its independent accountants to participate in
discussions with any WCP Investors or their respective officers, directors, managers, employees,
agents or advisors.



          5C. Negative Covenants. So long as the WCP Investors continue to hold at least 17.5% of the
outstanding voting securities of the Company (it being understood that, for purposes of this
Section 5C, (x) all holdings of Equity Securities by Persons who are Affiliates of each
other shall be aggregated for purposes of meeting any threshold tests under this Agreement and (y)
no Management Investor shall be deemed an Affiliate of any WCP Investor), the Company shall not
(and shall cause each of its Subsidiaries not to), without the prior written consent of the
Majority WCP Investors:


          (i) directly or indirectly declare or pay, or permit any of its Subsidiaries to declare or
pay, any dividends or make any distributions upon any of its capital stock or other Equity
Securities;


          (ii) directly or indirectly (a) redeem, repurchase or otherwise acquire, or permit any of its
Subsidiaries to redeem, purchase or otherwise acquire, any of the Company’s or any of its
Subsidiary’s capital stock or other Equity Securities, or assign or transfer any rights or options
to make any such redemption, repurchase or other acquisition, or (b) redeem, repurchase or make any
payments with respect to any stock appreciation rights, phantom stock plans or similar rights or
plans, or permit any of its Subsidiaries to so redeem, repurchase or make such payments, or assign
or transfer any rights or options to make such redemption, repurchase or payment;


          (iii) authorize, issue or enter into any agreement providing for the issuance (contingent or
otherwise) of (a) any notes or debt securities containing equity features (including any notes or
debt securities convertible into or exchangeable for capital stock or other Equity Securities,
issued in connection with the issuance of capital stock or other Equity Securities or containing
profit participation features), or (b) any capital stock or other Equity Securities (or any
securities convertible into or exchangeable or exercisable for any capital stock or other Equity
Securities or containing profit participation features), except that a Wholly-Owned Subsidiary may
issue Equity Securities to the Company or any other Wholly-Owned Subsidiary;


          (iv) make, or permit any Subsidiary to make, any loans or advances to, guarantees for the
benefit of, or Investments in, any Person, except for (a) reasonable advances to employees in the
ordinary course of business (but expressly prohibiting any loans or the arranging of any loans to
or for the benefit of any employees for any purpose), (b) acquisitions permitted pursuant to
Section 5C(ix), and (c) Investments having a stated maturity no greater than one year from
the date the Company or any Subsidiary makes such Investment in (1) obligations of the United
States government or any agency thereof or obligations guaranteed by the United States government,
(2) certificates of deposit of commercial banks having combined capital and surplus of at least $50
million or (3) commercial paper with a rating of at least “Prime 1” by Moody’s Investors Service,
Inc.;


          (v) merge or consolidate with any Person or permit any Subsidiary to merge or consolidate with
any Person or consummate, permit or in any manner facilitate a sale of the Company or any of its
Subsidiaries or a change in control of the Company or any of its Subsidiaries, except that a
Wholly-Owned Subsidiary may merge or consolidate with any other Wholly-Owned Subsidiary;



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          (vi) make or fail to make, or permit any Subsidiary to make or fail to make, any capital
expenditures (including payments with respect to capitalized leases, as determined in accordance
with GAAP consistently applied), which capital expenditures made or failed to have been made (a)
would deviate from the annual budget in any material respect or (b) would exceed $4,000,000
individually or $10,000,000 in the aggregate in any twelve-month period;


          (vii) sell, lease, license or otherwise dispose of, or permit any Subsidiary to sell, lease,
license or otherwise dispose of, any assets (whether tangible or intangible and including the
capital stock or other Equity Securities of any of its Subsidiaries), other than sales of inventory
in the ordinary course of business and other sales of assets in the ordinary course of business
where the aggregate consideration (including the assumption of liabilities, whether direct or
indirect) does not exceed 25% of the consolidated assets of the Company and its Subsidiaries
(computed on the basis of book value or fair market value) as of the date hereof;


          (viii) liquidate, dissolve or wind up the Company or any of its Subsidiaries or effect a
recapitalization, reclassification or reorganization or change in the form of organization in any
form of transaction (including the formation of a parent holding company for the Company, the
conversion of the Company or any of its Subsidiaries into a partnership or limited liability
company or a transaction to change the domicile of the Company or any of its Subsidiaries) or
amend, supplement, modify, alter, repeal, terminate or waive any provision of the Governing
Documents of the Company or any of its Subsidiaries, or file any resolution with any Secretary of
State;


          (ix) acquire, or permit any Subsidiary to acquire, any interest in any company or business
(whether by a purchase of assets, purchase of stock or other equity interests, merger or
otherwise), except any such acquisitions where the aggregate consideration payable by the Company
and its Subsidiaries (including the assumption of liabilities, whether direct or indirect) does not
exceed $10,000,000 in the aggregate for all such acquisitions, or enter into, or permit any
Subsidiary to enter into, any joint venture;


          (x) materially change, or cause or allow any Subsidiary to materially change, the business
activities of the Company or any of its Subsidiaries as currently conducted, or enter into, or
permit any Subsidiary to enter into, the ownership, active management or operation of any business
that is not related to the current business activities of the Company or any of its Subsidiaries;


          (xi) enter into, amend, modify or supplement, or waive any provisions of, or permit any
Subsidiary to enter into, amend, modify or supplement, or waive any provisions of, any agreement,
transaction, commitment or arrangement with any of its or any of its Subsidiaries’ or any of its
Affiliates’ direct or indirect officers, managers, directors, key employees, members, partners,
stockholders or Affiliates or with any Person related by blood, marriage or adoption to any such
Person or any entity in which any of the foregoing owns a beneficial interest, except for entering
into customary employment arrangements (but not employment agreements) and benefit programs, in
each case on reasonable terms as approved by the Board and, if applicable, subject to Section
5C(iii);


          (xii) create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur,
assume or suffer to exist, any Indebtedness exceeding an aggregate principal amount of $10,000,000
outstanding at any time on a consolidated basis, or amend, modify, supplement or waive any
provision of the documents, agreements or instruments evidencing, securing or otherwise pertaining
to any existing Indebtedness of the Company or any Subsidiary, refinance, substitute or replace any
existing Indebtedness of the Company or any Subsidiary, or otherwise take any action with respect
to any existing Indebtedness of the Company or any Subsidiary that would reasonably be expected to
result in an adverse economic consequence or tax liability to the WCP Investors; or

- 9 -









 






           (xiii) make an assignment for the benefit of creditors or admit in writing its inability to
pay its debts generally as they become due, file a voluntary bankruptcy or similar proceeding or
fail to contest any bankruptcy, insolvency or similar proceeding filed against the Company or any
of its Subsidiaries.


          5D. Affirmative Covenants. So long as the WCP Investors continue to hold at least 17.5% of
the outstanding voting securities of the Company (it being understood that, for purposes of this
Section 5D, (x) all holdings of Equity Securities by Persons who are Affiliates of each
other shall be aggregated for purposes of meeting any threshold tests under this Agreement and (y)
no Management Investor shall be deemed an Affiliate of any WCP Investor), the Company shall (and
shall cause each of its Subsidiaries to), unless it has received the prior written consent of the
Majority WCP Investors:


          (i) maintain and keep its material tangible properties in good repair, working order and
condition, and from time to time make all reasonable repairs, renewals and replacements, so that
its businesses may be properly conducted in all material respects at all times;


          (ii) maintain all material Intellectual Property Rights necessary to the conduct of its
business and enter into and maintain agreements providing for confidentiality, the assignment of
Intellectual Property Rights to the Company, and other protection for proprietary information with
all employees of the Company or any of its Subsidiaries in a form reasonably acceptable to the
Majority WCP Investors;


          (iii) comply in all material respects with all applicable laws, rules and regulations of all
Governmental Entities and all other obligations which it incurs pursuant to any material agreement
as such obligations become due, unless and to the extent that the same are being contested in good
faith and by appropriate proceedings and adequate reserves (as determined in accordance with GAAP
consistently applied) have been established on its books with respect thereto;


          (iv) cause to be done all things reasonably necessary to maintain, preserve and renew all
licenses, permits and other approvals currently held by the Company or any of its Subsidiaries or
necessary for the conduct of their businesses or the consummation of the transactions contemplated
by the Merger Agreement;


          (v) pay and discharge when payable all material taxes, assessments and governmental charges
imposed upon its properties or upon the income or profits therefrom (in each case before the same
becomes delinquent and before penalties accrue thereon), unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate reserves (as determined
in accordance with GAAP consistently applied) have been established on its books with respect
thereto;


          (vi) use commercially reasonable efforts to continue in force with one or more responsible
insurance companies adequate insurance covering risks of such types and in such amounts as are
customary for companies of similar size engaged in similar lines of business and directors’ and
officers’ liability insurance reasonably satisfactory to the Majority WCP Investors (and not borrow
against, assign, modify, cancel or surrender any such policy); and


          (vii) maintain proper books of record and account which present fairly in all material
respects its financial condition and results of operations and make provisions on its financial
statements for all such proper reserves as in each case are required in accordance with GAAP,
consistently applied.



- 10 -









 







          5E. Company Name. For a period of two (2) years following the effective time of the
Merger, the Company will file a “dba” in Delaware and such other jurisdictions as it deems
necessary to enable it to conduct business as “Pioneer Behavioral Health,” and the Company shall
conduct business under such dba, including by using corporate stationary bearing such name and by
answering the telephone in the corporate offices under such name. The Company anticipates that each
of the subsidiaries of the surviving company in the Merger will retain their current names from and
after the effective time of the Merger.



     Section 6. Definitions. For the purposes of this Agreement, the following terms have
the meanings set forth below:


          “Affiliate” of any particular Person means any other Person controlling, controlled by
or under common control with such particular Person, where “control” means the possession, directly
or indirectly, of the power to direct the management and policies of a Person whether through the
ownership of voting securities, contract or otherwise, and such “control” will be conclusively
presumed if any Person owns ten percent (10%) or more of the voting capital stock or other
ownership interests, directly or indirectly, of any other Person.


          “Certificate of Incorporation” means the Amended and Restated Certificate of
Incorporation of Acadia Healthcare Company, Inc., a Delaware corporation, as amended and in effect
from time to time in accordance with its terms, applicable law and this Agreement.


          “Common Stock” means the Company’s common stock, par value $0.01 per share.


          “Equity Securities” means any (i) capital stock (including the Common Stock) of, or
membership, partnership or other equity interests in, the Company or any of its Subsidiaries, (ii)
obligations, evidences of indebtedness or other debt or equity securities or interests convertible
or exchangeable into such capital stock of or other equity interests in the Company or any of its
Subsidiaries and (iii) warrants, options or other rights to purchase or otherwise acquire such
capital stock of or other equity interests in the Company or any of its Subsidiaries.


          “Family Group” means, as to any particular Person, (i) such Person’s spouse and
descendants (whether natural or adopted), (ii) any trust solely for the benefit of such Person
and/or such Person’s spouse and/or descendants, and (iii) any partnerships, corporations or limited
liability companies where the only partners, stockholders or members are such Person and/or such
Person’s spouse, descendants and/or trusts referred to in clause (ii) of this definition.


          “Governing Documents” means, with respect to any Person, its certificate of
incorporation or bylaws, its certificate of formation and limited liability company agreement or
limited partnership agreement or similar governing documents.


          “Governmental Entity” means (i) any federal, state, local, municipal, foreign or other
government; (ii) any governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, entity or self-regulatory organization and any
court, arbitration body or other tribunal); (iii) any body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power
of any nature, including any arbitral tribunal; or (iv) any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of any federal, state,
province, local, municipal or foreign government or other political subdivision or otherwise, or
any officer or official thereof with requisite authority.



- 11 -









 







          “Indebtedness” means, with respect to the Company and its Subsidiaries at any date,
without duplication: (i) all obligations of such Persons for borrowed money or in respect of loans
or advances, whether current, short-term or long-term, secured or unsecured, (ii) all obligations
of such Persons evidenced by bonds, debentures, notes or other similar instruments or debt
securities (including any seller notes relating to prior acquisitions), (iii) any commitment by
which any such Person assures a creditor against loss (including contingent reimbursement
obligations with respect to letters of credit and bankers’ acceptances), (iv) all obligations
arising from cash/book overdrafts, (v) all obligations of such Persons secured by a Lien, (vi) all
guarantees of the Company and its Subsidiaries of the obligations of another Person (including
guarantees in the form of an agreement to repurchase or reimburse), (vii) all capital lease
obligations, (viii) all indebtedness for the deferred purchase price of property or services with
respect to which such a Person is liable, contingently or otherwise, as obligor or otherwise
(including with respect to any earnout or similar payments), (ix) all liabilities of the Company
classified as non-current liabilities in accordance with GAAP, (x) all deferred compensation
obligations that are owed or that are not cancelable by unilateral action of the Company or a
Subsidiary and may become owing, (xi) all obligations that are owed or that are not cancelable by
unilateral action of the Company and may become owing under agreements or arrangements existing as
of the Closing in consideration for non-competition, non-solicitation, consulting, intellectual
property assignment or protection, or information confidentiality obligations of any current or
former employee, consultant, agent, officer, director, contractor or other service provider of or
to the Company, (xii) all deferred rent obligations, (vi) all guarantees of any such Person in
connection with any of the foregoing and any other indebtedness guaranteed in any manner by a
Person (including guarantees in the form of an agreement to repurchase or reimburse), and (xiii)
all accrued interest, prepayment premiums or penalties related to any of the foregoing.


          “Intellectual Property Rights” means any and all of the following rights to the extent
recognized in any jurisdiction throughout the world, and all corresponding proprietary rights: (i)
all inventions (whether or not patentable or reduced to practice), all improvements thereto, and
all patents and industrial designs (including utility model rights, design rights and industrial
property rights), patent and industrial design applications, and patent disclosure statements,
together with all reissues, continuations, continuations-in-part, revisions, divisionals,
extensions, and reexaminations in connection therewith; (ii) all trademarks, service marks,
designs, trade dress, logos, slogans, trade names, business names, corporate names, Internet domain
names, and all other indicia of origin, all applications, registrations, and renewals in connection
therewith, and all goodwill associated with any of the foregoing; (iii) all works of authorship
(whether or not copyrightable), copyrights, mask works, database rights and moral rights, and all
applications, registrations, and renewals in connection therewith; (iv) all trade secrets,
know-how, technologies, processes, techniques, protocols, methods, formulae, product
specifications, data, algorithms, compositions, industrial models, architectures, layouts, designs,
drawings, plans, specifications, methodologies, ideas, research and development, and confidential
information (including technical data, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals); (v) all rights of privacy and publicity, including
rights to the use of names, likenesses, images, voices, signatures and biographical information of
real persons; (vi) all proprietary rights in software; and (vii) all other registrations,
issuances, and certificates associated with any of the foregoing proprietary rights.


          “Majority WCP Investors” means, as of the date of any determination, the WCP Investors
holding a majority of the outstanding shares of Common Stock held by all WCP Investors as of such
date.


          “Permitted Transferee” means, with respect to any Management Investor, such Management
Investor’s spouse and descendants (whether natural or adopted) and any trust solely for the benefit
of such Management Investor and/or such Management Investor’s spouse and/or descendants.



- 12 -









 







          “Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a Governmental Entity.


          “Public Offering” means any offering by the Company of its capital stock or other
Equity Securities to the public pursuant to an effective registration statement under the
Securities Act or any comparable statement under any similar federal statute then in force.


          “Restricted Shares” means, with respect to any Management Investor, as of the date of
any determination, all Subject Shares held by such Management Investor that are not Unrestricted
Shares as of such date.


          “Securities Act” means the Securities Act of 1933, as amended.


          “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.


          “Stockholder Shares” means (i) any shares of Common Stock or other Equity Securities
from time to time purchased or otherwise acquired or held by any Stockholder, (ii) any Common Stock
or other Equity Securities from time to time issued or issuable directly or indirectly upon the
conversion, exercise or exchange of any securities purchased or otherwise acquired by any
Stockholder (excluding options to purchase Common Stock granted by the Company unless and until
such options are exercised), and (iii) any other capital stock or other Equity Securities from time
to time issued or issuable directly or indirectly with respect to the securities referred to in
clauses (i) or (ii) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other reorganization.


          “Subject Shares” means, with respect to any Management Investor, all Stockholder
Shares purchased or otherwise acquired or held by such Management Investor other than (i) any
Stockholder Shares received by such Management Investor as consideration in the Merger, and (ii)
any Stockholder Shares purchased or otherwise acquired by such Management Investor after the
effective time of the Merger (which, for purposes of clarity, shall not include any Stockholder
Shares received by such Management Investor in the Distribution or otherwise in connection with the
liquidation and dissolution of Holdings).


          “Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership, association or other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the limited liability company, partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a limited liability
company, partnership, association or other business entity if such Person or Persons shall be
allocated a majority of the limited liability company, partnership, association or other business
entity gains or losses or shall be or control the managing member, general partner or managing
director of such limited liability company, partnership, association or other business entity.


          “Transfer” means any sale, transfer, assignment, pledge, mortgage, exchange,
hypothecation, grant of a security interest or other direct or indirect disposition or encumbrance
of an interest, whether with or without consideration and whether voluntarily or involuntarily or
by operation of



- 13 -









 








law. The terms “Transferee,” “Transferred,” and other forms of the word
“Transfer” shall have correlative meanings. For the avoidance of doubt, a Transfer of any
interest in a trust or other entity shall be deemed a Transfer of Units for purposes of this
Agreement.



          “Unrestricted Shares” means, with respect to any Management Investor, as of the date
of any determination, a number of such Management Investor’s Subject Shares determined by
multiplying (x) the total number of Subject Shares held by such Management Investor as of
the date of this Agreement (as appropriately adjusted for stock splits, stock dividends, stock
combinations, recapitalizations and the like), by (y) the result of 100% minus the
WCP Liquidity Percentage; provided, that (i) from and after the third anniversary of the
date hereof, no fewer than 33% of the Subject Shares held by such Management Investor as of the
date of this Agreement shall be Unrestricted Shares, (ii) from and after the fourth anniversary of
the date hereof, no fewer than 67% of the Subject Shares held by such Management Investor as of the
date of this Agreement shall be Unrestricted Shares, and (iii) from and after the fifth anniversary
of the date hereof, 100% of such Management Investor’s Subject Shares shall be Unrestricted Shares.


          “WCP Equity” means (i) the Common Stock held by the WCP Investors on the date of this
Agreement and any other Stockholder Shares from time to time issued to or otherwise acquired by the
WCP Investors (other than pursuant to purchases made on the open market and not in connection with
any private placement by the Company), and (ii) any securities issued with respect to the
securities referred to in clause (i) above by way of a stock split, stock dividend, or other
division of securities, or in connection with a combination of securities, recapitalization,
merger, consolidation, or other reorganization. As to any particular securities constituting WCP
Equity, such securities shall cease to be WCP Equity when they have been (A) effectively registered
under the Securities Act and disposed of for cash in accordance with the registration statement
covering them, (B) purchased or otherwise acquired for cash by any Person other than a WCP
Investor, or (C) redeemed or repurchased for cash by the Company or any of its Subsidiaries or any
designee thereof.


          “WCP Liquidity Percentage” means, as of any date of determination, the percentage
obtained by dividing (i) the total number of Stockholder Shares constituting WCP Equity as
of the date of such determination, by (ii) the total number of Stockholder Shares
constituting WCP Equity as of the date of this Agreement (as appropriately adjusted for stock
splits, stock dividends, stock combinations, recapitalizations and the like).


          “WCP Investors” means, collectively, the Persons listed on the Schedule of WCP
Investors attached hereto.


          “Wholly-Owned Subsidiary” means, with respect to any Person, a Subsidiary of which all
of the outstanding capital stock or other Equity Securities are owned by such Person or another
Wholly-Owned Subsidiary of such Person.



     Section 7. Miscellaneous.


          7A. Expenses. The Company shall pay, and hold each WCP Investor harmless against liability
for the payment of (i) the out-of-pocket fees and expenses of such Persons (including the fees and
expenses of legal counsel or other third party advisors) arising in connection with (a) any
completed or proposed financing, public offering, reorganization, acquisition, merger, sale,
recapitalization or similar transaction involving the Company or any of its Subsidiaries or the
rendering of any other services by such Persons or their respective Affiliates to the Company or
any of its Subsidiaries or (b) any amendments or waivers (whether or not the same become effective)
under or in respect of this Agreement, the Merger Agreement or the other agreements contemplated
hereby or thereby (including in



- 14 -









 








connection with any completed or proposed financing, public offering, reorganization, acquisition,
merger, sale or recapitalization or similar transaction by or involving the Company or any of its
Subsidiaries), or (c) the interpretation, investigation and enforcement of the rights granted under
this Agreement, the Merger Agreement or the other agreements contemplated hereby or thereby, (ii)
stamp and other similar taxes which may be payable in respect of the execution and delivery of this
Agreement, the Merger Agreement or the other agreements contemplated hereby or thereby or the
issuance, delivery or acquisition of any shares of capital stock or other Equity Securities, (iii)
the reasonable fees and expenses incurred by each such Person in any filing with any Governmental
Entity with respect to its investment in the Company (including in connection with any transaction
contemplated by clause (i)(a) above) or in any other filing with any Governmental Entity with
respect to the Company or any of its Subsidiaries which mentions such Person, or (iv) all
reasonable travel expenses, legal fees and other fees and expenses as have been or may be incurred
in connection with any Company-related financing or in connection with the rendering of any other
services by such Person or its Affiliates to the Company and its Subsidiaries (including reasonable
fees and expenses incurred in attending meetings of the Board or committees thereof or other
Company-related meetings). In addition, the Company shall pay, and hold each Management Investor
harmless against liability for the payment of (A) the reasonable out-of-pocket fees and expenses of
such Management Investor (including the fees and expenses of legal counsel) arising in connection
with any amendments or waivers (whether or not the same become effective) under or in respect of
this Agreement, the Merger Agreement or the other agreements contemplated hereby or thereby, (B)
stamp and other similar taxes which may be payable in respect of the execution and delivery of this
Agreement, the Merger Agreement or the other agreements contemplated hereby or thereby or the
issuance, delivery or acquisition of any shares of capital stock or other Equity Securities, or (C)
the reasonable fees and expenses incurred by each such Person in any filing with any Governmental
Entity with respect to its investment in the Company (including in connection with any transaction
contemplated by clause (i)(a) above) or in any other filing with any Governmental Entity with
respect to the Company or any of its Subsidiaries which mentions such Person. In the event that any
Management Investor is the prevailing party in any dispute arising in connection with the
interpretation, investigation and enforcement of the rights granted under this Agreement, the
Merger Agreement or the other agreements contemplated hereby or thereby, such Management Investor
shall be entitled to, and the Company shall pay to such Management Investor, the costs and expenses
(including the fees and expenses of legal counsel) incurred by such Management Investor in
connection with enforcing its rights or defending claims hereunder.



          7B. Remedies. Each WCP Investor and each Management Investor shall have all rights and
remedies set forth in this Agreement, the Certificate of Incorporation and all rights and remedies
which such holders have been granted at any time under any other agreement or contract and all of
the rights which such holders have under applicable law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties hereto agree and
acknowledge that the WCP Investors and the Management Investors would be irreparably harmed by, and
money damages would not be an adequate remedy for, any breach of the provisions of this Agreement
and that, in addition to any other rights and remedies existing in its favor, any party shall be
entitled to specific performance and/or other injunctive relief from any court of law or equity of
competent jurisdiction (without posting any bond or other security) in order to enforce or prevent
violation of the provisions of this Agreement.


          7C. Consent to Amendments. Except as otherwise expressly provided herein, the provisions of
this Agreement may be amended, and the Company may take any action herein prohibited, or fail to
perform any act herein required to be performed by it, only if the Company has obtained the prior
written consent of the Majority WCP Investors; provided, that, if any such amendment would
further limit the rights in any material respect or expand the obligations in any material respect
of the



- 15 -









 








Management Investors hereunder, then such amendment shall also require the prior written consent of
Joey Jacobs or his designee, as representative of the Management Investors. No course of dealing
between or among the Company, any WCP Investor or any other holder of Equity Securities (including
the failure of any such Person to enforce any of the provisions of this Agreement) shall be deemed
effective to modify, amend, waive or discharge any part of this Agreement or any rights or
obligations of any party hereto under or by reason of this Agreement, and the failure of any party
hereto to enforce any of the provisions of this Agreement shall in no way be construed as a waiver
of such provisions and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach.



          7D. Successors and Assigns. Except as otherwise expressly provided herein, all covenants
and agreements contained in this Agreement by or on behalf of any of the Parties shall bind and
inure to the benefit of the respective successors and assigns of the Parties whether so expressed
or not. In addition, and whether or not any express assignment has been made, the provisions of
this Agreement which are for any WCP Investor’s benefit as a WCP Investor are also for the benefit
of, and enforceable by, any subsequent holder of such WCP Investor’s Stockholder Shares.
Notwithstanding anything herein to the contrary, the provisions of Section 1 and
Section 5E are for the benefit of, and shall be enforceable in accordance with their terms
by, Bruce A. Shear.


          7E. Severability. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any provision of this
Agreement or the application of any such provision to any Person or circumstance is held to be
prohibited by or invalid under applicable law, such provision shall be ineffective only in such
jurisdiction where so found and only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement in such jurisdiction or any provision of this
Agreement in any other jurisdiction.


          7F. Counterparts. This Agreement may be executed simultaneously in two or more counterparts
(including by means of facsimile or electronic transmission in portable document format (pdf)), any
one of which need not contain the signatures of more than one party, but all such counterparts
taken together shall constitute one and the same Agreement.


          7G. Descriptive Headings; Interpretation. The headings and captions used in this Agreement
are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The use of the phrase “ordinary course of business” shall mean “ordinary course of
business consistent with past practice, including with respect to frequency and quantity.” The use
of the word “including” herein shall mean “including without limitation.” Any reference to the
masculine, feminine or neuter gender shall be deemed to include any gender or all three as
appropriate.


          7H. Governing Law. The corporate law of the State of Delaware shall govern all issues and
questions concerning the relative rights and obligations of the Company and its stockholders. All
other issues and questions concerning the construction, validity, enforcement and interpretation of
this Agreement and the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Delaware.


          7I. Notices. All notices, demands or other communications to be given or delivered under or
by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been
given only (i) when delivered personally to the recipient, (ii) one (1) business day after being
sent to the recipient by reputable overnight courier service (charges prepaid) provided that
confirmation of



- 16 -









 








delivery is received, (iii) upon machine-generated acknowledgment of receipt after transmittal by
facsimile (provided that a confirmation copy is sent via reputable overnight courier service for
delivery within two (2) business days thereafter), or (iv) five (5) business days after being
mailed to the recipient by certified or registered mail (return receipt requested and postage
prepaid). Such notices, demands and other communications shall be sent to the WCP Investors at the
addresses set forth on the Schedule of WCP Investors attached hereto, to the Management
Investors at the addresses set forth on the Schedule of Management Investors attached
hereto and to the Company at the addresses indicated below:



Notices to the Company:


Acadia Healthcare Company, Inc.

725 Cool Springs Blvd., Suite 600

Franklin, Tennessee 37067


Attention: Chief Executive Officer

Facsimile: 615-732-6315



or to such other address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.



          7J. No Strict Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. The Parties intend that each covenant and agreement contained
herein shall have independent significance. If any party has breached any covenant or agreement
contained herein in any respect, the fact that there exists another covenant or agreement relating
to the same subject matter (regardless of the relative levels of specificity) which such party has
not breached shall not detract from or mitigate the fact that such party is in breach of the first
covenant or agreement.


          7K. Complete Agreement. This Agreement and the other agreements and instruments referred to
herein contain the complete agreement between the Parties with respect to the subject matter hereof
and thereof and supersede any prior understandings, agreements and representations by or between
the Parties (whether written or oral) which may have related to the subject matter hereof or
thereof in any way.



*  *  *  *  *





- 17 -









 








     IN WITNESS WHEREOF, the Parties have executed or caused to be executed on their behalf this
Stockholders Agreement as of the date first written above.



	 	 	 	 	 
	 	COMPANY



ACADIA HEALTHCARE COMPANY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Its: 	 	 
	 
	 	WCP INVESTORS



[Signature blocks to come]
 	 
	 
	 	MANAGEMENT INVESTORS



[Signature blocks to come]

 	 
	 	 	 
	 	 	 
	 	 	 



 









 






	 	 	 	 	 



SCHEDULE OF WCP INVESTORS




Waud Capital Partners II, L.P.

Waud Capital Partners QP II, L.P. 

Reeve B. Waud 2011 Family Trust

Waud Family Partners, L.P.

WCP FIF II (Acadia), L.P. 

Waud Capital Affiliates II, L.L.C. 

Waud Capital Affiliates III, L.L.C.

WCP FIF III (Acadia), L.P. 

Waud Capital Partners QP III, L.P. 

Waud Capital Partners III, L.P. 

Waud Capital Partners Management II, L.P. 

Waud Capital Partners II, L.L.C. 

Waud Capital Partners Management III, L.P.






	 	 	 

	Notice address for the WCP Investors:

	 	300 North LaSalle Street, Ste. 4900
	 

	 	Chicago, Illinois 60654
	 

	 	Attention: Reeve B. Waud

                 Charles E. Edwards
	 

	 	Facsimile: (312) 676-8444






 









 






SCHEDULE OF MANAGEMENT INVESTORS




Danny Carpenter

Norman K. Carter, III

Fred T. Dodd

Ron Fincher

Christopher L. Howard

Joey A. Jacobs

Jack E. Polson

Karen Prince

Robert Swinson

Brent Turner




	 	 	 

	Notice address for the Management Investors:

	 	c/o Acadia Healthcare Company, Inc.
	 

	 	725 Cool Springs Blvd., Suite 600
	 

	 	Franklin, Tennessee 37067
	 

	 	Attention: Joey Jacobs
	 

	 	Facsimile: 615-732-6315