Exhibit 2.7
THIRD AMENDMENT TO
MASTER SERVICE AGREEMENT
Amendment dated as of January 5, 2003 (this "THIRD AMENDMENT") to the
Original Agreement, dated as of August 5, 1997 as originally in effect and as
amended from time to time prior to the date hereof, including by the Second
Amendment, dated March 11, 2003 (the "SECOND AMENDED MSA") by and among Aetna
Inc. (formerly know as Aetna U.S. Healthcare Inc.), on behalf of itself and all
of its affiliates (collectively, "AETNA"), Magellan Health Services, Inc., on
behalf of itself and all of its affiliates (collectively, "MAGELLAN") and Human
Affairs International, Incorporated (together with its subsidiaries,
"CONTRACTOR"), a Subsidiary of Magellan. Aetna and Magellan are hereinafter
sometimes referred to collectively as "Parties" and individually as a "Party".
Unless otherwise specifically defined herein, each capitalized term used herein
has the meaning assigned to such term in the Original Agreement as amended by
the Second Amended MSA.
W I T N E S S E T H:
WHEREAS, on March 11, 2003, as part of a restructuring, Magellan and
certain of its affiliates filed petitions for reorganization under chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York (the "CHAPTER 11 CASE");
WHEREAS, prior to the filing of the Chapter 11 Case, Aetna, Magellan
and Contractor entered into the Second Amended MSA;
WHEREAS, at the time the Second Amended MSA was executed, the Parties
contemplated that Magellan would enter into the New Senior Secured Credit
Agreement;(1)
WHEREAS, during the Chapter 11 Case, Magellan determined not to enter
into the New Senior Secured Credit Agreement and instead determined to enter
into the Deutsche Bank Credit Agreement;
WHEREAS, Aetna and Magellan desire to enter into this Third
Amendment, as of the date hereof, to implement the terms of the Second Amended
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(1) All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Second Amended MSA including as amended by this
Third Amendment.
MSA and to reflect the fact that Magellan determined to enter into the Deutsche
Bank Credit Agreement rather than the New Senior Secured Credit Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises stated
herein and in the Second Amended MSA and other good and valuable consideration,
the parties hereby agree as follows:
I. Section 1 of the Original Agreement as amended by the Second Amended
MSA ("Behavioral Health Care Services") shall be amended by inserting
the following new clause 1.L:
"L. One Single Indivisible Contact; Specific Performance.
Magellan agrees and acknowledges that all rights,
contracts, obligations and transactions agreed to,
associated with and contemplated under the Original
Agreement as amended by the Second Amended MSA and this
Third Amendment (including the Vendor Contracts, the HMO
Agreements, the non-HMO Agreements, and the Purchase
Option) are part of one single and indivisible contract
and such rights, contracts, obligations and transactions
must (absent Aetna's written consent) all be assumed or
rejected in their entirety in the event of any future
insolvency proceeding. In addition, Magellan agrees and
acknowledges that money damages would not be an adequate
remedy for any breaches of the Original Agreement as
amended by the Second Amended MSA and this Third
Amendment, that any such breaches would cause Aetna
irreparable harm and that in the event of any such
breaches Aetna shall be entitled, to injunctive relief,
including specific performance, in addition to all other
available remedies."
II. Section 7.C of the Original Agreement as amended by the Second
Amended MSA ("Security Interests and Guarantees") shall be amended
and restated in its entirety as follows:
"C. Security Interest and Guarantees. Magellan's obligations
under this Section 7, under the Asset Purchase Agreement
and under the Note, shall be (x) secured by a "silent
second" Lien on all of the assets of Magellan and its
subsidiaries in which any Lender, the Collateral Agent or
the Administrative Agent at any time and from time to time
has a Lien (the "SECURITY INTEREST"), on the terms and
conditions set forth in this Agreement and the Security
Documents; and (y) guaranteed on a secured basis by each
Magellan entity that is a guarantor of Magellan's
obligations under the Deutsche Bank Credit Agreement, on
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the terms and conditions set forth in the Second Amended
MSA as amended by this Third Amendment and the Security
Documents (the "GUARANTEES");"
III. Section 7.D of the Original Agreement as amended by the Second
Amended MSA ("Letter of Credit") shall be amended and restated in its
entirety as follows:
"D. Magellan shall provide and maintain a letter of credit for
the benefit of Aetna (the "LETTER OF CREDIT") on the Plan
Effective Date until nine months after the termination of
the Original Agreement as amended by the Second Amended
MSA and this Third Amendment in the amount of $5 million
for the six month period following termination of the
Original Agreement as amended by the Second Amended MSA
and this Third Amendment and $2.5 million for the three
months following such six month period to cover incurred
but not reported ("IBNR") payments, until such time as
Aetna reasonably determines that no IBNR payments are
outstanding. At all times when the Letter of Credit is in
effect, the terms and conditions thereof shall remain the
same as the terms and conditions in effect as of the Plan
Effective Date."
IV. Section 7.E of the Original Agreement as amended by the Second
Amended MSA ("New Senior Secured Credit Agreement") shall be amended
and restated in its entirety as follows:
"E. Provisions Relating to Deutsche Bank Credit Agreement,
Security Interest, Guarantees and Purchase Option.
Magellan agrees and covenants that (i) on the Plan
Effective Date, each Guarantor shall have duly authorized,
executed and delivered to Aetna its Aetna Subordinated
Subsidiaries Guarantee; (ii) in the event that Magellan
takes any action to provide any additional Liens,
guarantees or rights relating to the Collateral or any
further assurances to any Lender, the Administrative Agent
or the Collateral Agent at any time and from time to time
(including any action taken under Sections 8.12, 8.13,
8.16(b) or 8.16(c) of the Deutsche Bank Credit Agreement)
Magellan expressly agrees and acknowledges that it shall
simultaneously provide to or for the benefit of Aetna the
same additional Liens, guarantees, rights or further
assurances, ranking in priority immediately junior to the
additional Liens, guarantees, rights or further assurances
granted to such Lender, Collateral Agent or Administrative
Agent (or if a guarantee, subordinated in the same manner
as and on the terms of the Guarantees); (iii) at least 5
days prior to any sale or other disposition of any
Collateral (including any sale or disposition pursuant to
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any of the Security Documents or the Deutsche Bank Credit
Agreement) with a value in excess of $1 million, Magellan
shall provide Aetna with written notice of the specific
Collateral to be sold or otherwise disposed of."
IV. Section 7.F of the Original Agreement as amended by the Second
Amended MSA ("Additional Matters Related to Early Purchase Option")
shall be amended and restated by deleting the first sentence thereof
(with the remainder of Section 7.F to remain unchanged) and replacing
that first sentence with the following:
"In the event that Aetna is entitled to exercise the
Purchase Option at any time, but is prevented for any
reason from immediately consummating such purchase (a
"CONTROL TRIGGER"), then Aetna shall have the right (which
right is exercisable in its sole discretion) to appoint
one or more individuals (who may be Aetna employees or
third parties) (the "DESIGNATED INDIVIDUALS") who will
have responsibility and full decision-making authority
over the management and direction of all employees of the
Business and at each Aetna-Dedicated Facility, it being
understood that at all times all employees of Magellan
shall remain employees of Magellan and Aetna shall not be
responsible for any Magellan obligations to such
employees. It is understood and agreed that this section
7.F is not, and shall not be invoked by any Party as an
acknowledgment by Aetna that Aetna's right to exercise the
Purchase Option is or could be in any way limited by any
agreement, contract, arrangement or other transaction to
which Magellan is or becomes a party (including the
Deutsche Bank Credit Agreement or the Security
Documents)."
V. Section 8.C of the Original Agreement as amended by the Second
Amended MSA shall be amended be deleting Section 8.C(ii) and
replacing that Section 8.C(ii) with the following:
"(ii) Magellan shall not, and shall cause each of its affiliates
not to, enter into, renew, amend, modify, supplement or
extend (or to agree or commit to do any of the foregoing)
any agreement, contract, arrangement or other transaction
(including the Deutsche Bank Credit Agreement or the
Security Documents or any other bank facility, or any
refinancing of any of the foregoing, or any agreement,
contract, arrangement or other transaction relating to
Capital Expenditures or Indebtedness) that would (A)
result in the imposition or continuance of any Lien on any
of the Purchased Assets (as defined in the Asset Purchase
Agreement) that would not be released upon the sale of the
Purchased Assets to Aetna, (B) prevent, alter, inhibit or
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delay any of the actions or transactions contemplated by
this Third Amendment, the Second Amended MSA or the Asset
Purchase Agreement (including without limitation the
repayment of the Note, the Migration, the Critical
Performance Measures, the provision of and payment on the
Letter of Credit, the exercise of the Purchase Option, the
execution of the Asset Purchase Agreement or the
consummation of the purchase contemplated thereunder), or
(C) waive, modify or vary in any manner whatsoever without
the written consent of Aetna (x) any of the terms or
conditions of the Security Documents in a manner adversely
affecting the rights, benefits or obligations of Aetna and
not all Secured Creditors in a like or similar manner; or
(y) (I) Section 7.4 or Section 10.2 of the Security
Agreement (or any comparable provision of any other
Security Document), in each case, to the extent relating
to or affecting the rights, benefits or obligations of
Aetna, (II) Section 10.8 hereof (or any comparable
provision of any other Security Document), in each case to
the extent relating to the Aetna Purchased Assets or the
Aetna Purchase Option or Aetna's rights with respect
thereto or (III) Section 6, 13, 14, 15 or 16 of Annex N to
the Security Agreement, in each case to the extent
relating to or affecting the rights, benefits or
obligations of Aetna."
In addition, section 8.C shall be amended by inserting the following
new clause 8.C.(iii):
"(iii) Notwithstanding anything herein to the contrary, Magellan
may (A) amend, supplement or otherwise modify or (B)
refinance, replace or extend the Deutsche Bank Credit
Agreement and the Security Documents (including increasing
or decreasing the borrowings and other extensions of
credit thereunder) provided, however, that in each such
case Magellan remains in compliance with Section 8.C(ii)
and provided further that in each such case Aetna shall be
entitled to an intercreditor agreement which shall be
reasonably acceptable to Aetna and which shall contain
terms and conditions substantially similar to the
intercreditor terms and conditions contained in the
Deutsche Bank Credit Agreement and the Security Documents.
In each such case, the terms "Deutsche Bank Credit
Agreement" and "Security Documents" shall refer to such
amended, supplemented, modified, refinanced, or replaced
credit agreement and security documents, as applicable;
provided that the references to the sections of the
Deutsche Bank Credit Agreement in Section 7.E(ii) shall
refer to such provisions as in effect on the Plan
Effective Date."
All other provisions of section 8.C shall remain the same.
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VI. Section 9 of the Original Agreement as amended by the Second Amended
MSA ("Term and Termination") be amended by deleting section 9.B(iv)
and replacing that section 9.B(iv) with the following:
"(iv) Magellan or any of its subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced
against Magellan or any of its subsidiaries, and the
petition is not dismissed within 60 days; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property
of Magellan or any of its subsidiaries which custodian is
not dismissed within 60 days after the date of such
appointment or the date such custodian takes charge, or
Magellan or any of its subsidiaries commences any other
proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating
to Magellan or any of its subsidiaries, or there is
commenced against Magellan or any of its subsidiaries any
such proceeding that remains undismissed for a period of
60 days, or Magellan or any of its subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is
entered; or Magellan or any of its subsidiaries suffers
any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged
or unstayed for a period of 60 days; or Magellan or any of
its subsidiaries makes a general assignment for the
benefit of creditors or any corporate limited liability
company; or any similar action is taken by Magellan or any
of its subsidiaries for the purpose of effecting any of
the foregoing;"
In addition, section 9 shall be amended by inserting the following
new clause 9.B.(xi):
"(xi) the Collateral Agent, Administrative Agent or any Lender
at any time (A) begins to exercise any remedies available
under the Deutsche Bank Credit Agreement or the Security
Documents, including the remedies available under Article
VII of the Security Agreement, or (B) indicates (whether
orally or in writing), after the acceleration of the
obligations under the Deutsche Bank Credit Agreement, that
the exercise of any such remedies will begin within six
months.
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In addition, section 9 shall be amended by deleting section 9.C.(ii)
and replacing that section 9.C.(ii) with the following:
"(ii) Upon the occurrence of an Event of Default set forth in
subsections B(ii), (iii), (vi), (vii)(provided that
termination was by Magellan or Contractor), (viii), (ix)
or (xi) above by Magellan or Contractor, in addition to
Aetna's rights under paragraph C(i) above, Aetna shall be
entitled at any time to deliver the Exercise Notice and
immediately to exercise the Purchase Option as provided in
Section 7 of this Agreement."
All other provisions of section 9 shall remain the same.
VII. Section 19 of the Original Agreement as amended by the Second Amended
MSA ("Amendment to Definitions") shall be amended by deleting the
definition of "New Senior Secured Credit Agreement", and shall be
further amended by inserting the following at the end thereof:
"Administrative Agent" shall have the meaning set forth in the
Deutsche Bank Credit Agreement.
"Aetna Subsidiaries Subordinated Guaranty" shall have the meaning set
forth in the Deutsche Bank Credit Agreement.
"Capital Expenditure" shall have the meaning set forth in the
Deutsche Bank Credit Agreement.
"Chapter 11 Case" shall have the meaning set forth in the recitals of
this Third Amendment.
"Collateral" shall have the meaning set forth in the Deutsche Bank
Credit Agreement.
"Collateral Agent" shall have the meaning set forth in the Deutsche
Bank Credit Agreement.
"Deutsche Bank Credit Agreement" shall mean that certain credit
agreement, in effect as of the Plan Effective Date and without giving
effect to any amendments thereof, between Magellan and Deutsche Bank
AG, New York Branch, as administrative agent, and the lenders from
time to time party thereto.
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"Guarantor" shall have the meaning set forth in the Aetna
Subsidiaries Subordinated Guaranty.
"Indebtedness" shall have the meaning set forth in the Deutsche Bank
Credit Agreement.
"Lien" shall have the meaning set forth in the Deutsche Bank Credit
Agreement.
"Lender" shall have the meaning set forth in the Deutsche Bank Credit
Agreement.
"Plan Effective Date" shall mean the Effective Date as defined in
Magellan's Third Amended Joint Plan of Reorganization, confirmed by
the United States Bankruptcy Court for the Southern District of New
York on October 8, 2003.
"Second Amended MSA" shall have the meaning set forth in the recitals
to this Third Amendment.
"Security Agreement" shall have the meaning set forth in the Deutsche
Bank Credit Agreement.
"Security Documents" shall mean and include the Security Documents as
that term is defined in the Deutsche Bank Credit Agreement plus the
Aetna Subsidiaries Subordinated Guaranty and the Subsidiaries
Guaranty.
"Subsidiaries Guaranty" shall have the meaning set forth in the
Deutsche Bank Credit Agreement.
"Third Amendment" shall have the meaning set forth in the recitals to
this Third Amendment.
Governing Law; Counterparts; Effectiveness
This Third Amendment shall be governed by and construed in accordance
with the laws of the State of Delaware. This Amendment may be signed
in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Third Amendment shall take effect as
of the Plan Effective Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
AETNA INC.
By:
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Name:
Title:
Date:
HUMAN AFFAIRS INTERNATIONAL, INCORPORATED
By:
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Name:
Title:
Date:
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MAGELLAN HEALTH SERVICES INC.
By:
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Name:
Title:
Date:
ADVANTAGE BEHAVIORAL SYSTEMS, INC.(2)
ADVOCARE OF TENNESSEE, INC.
XXXX NEW YORK, INC.
XXXX, INC.
ALLIANCE HEALTH SYSTEMS, INC.
ALLIED SPECIALTY CARE SERVICES, LLC
CARE MANAGEMENT RESOURCES, INC.
CHARTER XXXXXXXX BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER BAY HARBOR BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM AT FAIR OAKS, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM AT HIDDEN BROOK, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM AT POTOMAC RIDGE, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF COLUMBIA, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF DALLAS, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF DELMARVA, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF LAKE XXXXXXX, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF MASSACHUSETTS, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF NASHUA, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF NEW MEXICO, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF NORTHWEST INDIANA, LLC
CHARTER BEHAVIORAL HEALTH SYSTEM OF PADUCAH, INC.
CHARTER BEHAVIORAL HEALTH SYSTEM OF TOLEDO, INC.
CHARTER BEHAVIORAL OF LAYAFETTE, INC.
CHARTER CENTENNIAL PEAKS BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER FAIRMOUNT BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER FENWICK HALL BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER FOREST BEHAVIORAL HEALTH SYSTEM, INC.
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(2) NEED TO CONFIRM THAT THIS IS A COMPLETE LIST OF SUBS
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CHARTER GRAPEVINE BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER HOSPITAL OF MOBILE, INC.
CHARTER HOSPITAL OF SANTA XXXXXX, INC.
CHARTER HOSPITAL OF ST. LOUIS, INC.
CHARTER LAKESIDE BEHAVIORAL HEALTH SYSTEMS, INC.
CHARTER LINDEN OAKS BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER MEDICAL - XXXXXXX COUNTY, INC.
CHARTER MEDICAL - LONG BEACH, INC.
CHARTER MEDICAL OF EAST VALLEY, INC.
CHARTER MEDICAL OF PUERTO RICO, INC.
CHARTER MILWAUKEE BEHAVIORAL HEALTH SYSTEM, INC.
CHARTER MOB OF CHARLOTTESVILLE, INC.
CHARTER NORTHRIDGE BEHAVIORAL HEALTH SYSTEM, LLC
CMCI, INC.
CMFC, INC.
CMG HEALTH OF NEW YORK, INC.
CMG HEALTH, INC.
CONTINUUM BEHAVIORAL HEALTHCARE CORPORATION
CORRECTIONAL BEHAVIORAL SOLUTIONS OF INDIANA, INC.
CORRECTIONAL BEHAVIORAL SOLUTIONS OF NEW JERSEY, INC.
FLORIDA HEALTH FACILITIES, INC.
GPA OF PENNSYLVANIA, INC.
GREEN SPRING HEALTH SERVICES, INC.
GREEN SPRING OF PENNSYLVANIA, INC.
GROUP PLAN CLINIC, INC.
HAWAII BIODYNE, INC.
HUMAN AFFAIRS INTERNATIONAL OF PENNSYLVANIA, INC.
HUMAN AFFAIRS INTERNATIONAL OF CALIFORNIA, INC.
IHEALTH TECHNOLOGIES, LLC
INROADS BEHAVIORAL HEALTH SERVICES OF TEXAS, LP
LOUISIANA BIODYNE, INC.
MAGELLAN BEHAVIORAL HEALTH OF WASHINGTON, INC.
MAGELLAN BEHAVIORAL HEALTH SYSTEMS, LLC
MAGELLAN BEHAVIORAL HEALTH, INC.
MAGELLAN BEHAVIORAL OF MICHIGAN, INC.
MAGELLAN CAPITAL, INC.
MAGELLAN CBHS HOLDINGS, INC.
MAGELLAN HRSC, INC.
MAGELLAN PUBLIC SOLUTIONS, INC.
MAGELLAN SPECIALTY HEALTH, INC.
MANAGED CARE SERVICES MAINSTAY OF CENTRAL PA, INC.
MBC FEDERAL PROGRAMS, INC.
MBC NATIONAL SERVICE CORPORATION
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MBC OF AMERICA, INC.
MBC OF NEW MEXICO, INC.
MBC OF TENNESSEE, INC.
MBC OF TENNESSEE, LLC
MBC HEALTH PROVIDERS OF TEXAS, INC.
MBH CAPITAL, INC.
MBH OF PUERTO RICO, INC.
MERIT BEHAVIORAL CARE CORPORATION
MERIT BEHAVIORAL CARE OF FLORIDA, INC.
MERIT BEHAVIORAL CARE OF MASSACHUSETTS, INC.
MERIT INROADS BEHAVIORAL HEALTH SERVICES OF ILLINOIS, LLC MERIT INROADS
BEHAVIORAL HEALTH SERVICES, LLC NEW GPA, INC.
P.P.C GROUP, INC.
P.P.C., INC.
PERSONAL PERFORMANCE CONSULTANTS OF NEW YORK, INC.
PREMIER HOLDINGS, INC.
U.S. IPA PROVIDERS, INC.
VIVRA, INC.
WESTWOOD/PEMBROKE HEALTH SYSTEM LIMITED PARTNERSHIP.
By: MAGELLAN HEALTH SERVICE, INC., as agent and
attorney-in-fact for each of the
foregoing entities
By:
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Name:
Title:
Date:
