EXECUTION COPY
AMENDMENT No. 4 entered into as of September
8, 1999 (this "AMENDMENT"), to the Credit Agreement
dated as of February 12, 1998 (as amended,
supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT"), among Magellan Health
Services, Inc., a Delaware corporation (the "PARENT
BORROWER"); Charter Behavioral Health System of New
Mexico, Inc., a New Mexico corporation; Merit
Behavioral Care Corporation, a Delaware corporation;
each other wholly owned domestic subsidiary of the
Parent Borrower that becomes a "Subsidiary Borrower"
pursuant to Section 2.23 of the Credit Agreement
(each, a "SUBSIDIARY BORROWER" and, collectively, the
"SUBSIDIARY BORROWERS" (such term is used herein as
modified in Article I of the Credit Agreement); the
Parent Borrower and the Subsidiary Borrowers are
collectively referred to herein as the "BORROWERS");
the Lenders (as defined in Article I of the Credit
Agreement); The Chase Manhattan Bank, a New York
banking corporation, as administrative agent (in such
capacity, the "ADMINISTRATIVE AGENT") for the
Lenders, as collateral agent (in such capacity, the
"COLLATERAL AGENT") for the Lenders and as an issuing
bank (in such capacity, an "ISSUING BANK"); First
Union National Bank, a national banking corporation,
as syndication agent (in such capacity, the
"SYNDICATION AGENT") for the Lenders and as an
issuing bank (in such capacity, an "ISSUING BANK");
and Credit Lyonnais New York Branch, a licensed
branch of a bank organized and existing under the
laws of the Republic of France, as documentation
agent (in such capacity, the "DOCUMENTATION AGENT")
for the Lenders and as an issuing bank (in such
capacity, an "ISSUING BANK" and, together with The
Chase Manhattan Bank and First Union National Bank,
each in its capacity as an issuing bank, the "ISSUING
BANKS").
A. The Lenders and the Issuing Banks have extended credit to
the Borrowers, and have agreed to extend credit to the Borrowers, in each case
pursuant to the terms and subject to the conditions set forth in the Credit
Agreement.
B. The Parent Borrower has advised the Lenders that it and the
Subsidiaries intend to reduce their ownership interest in, and restructure their
relationships with, CBHS and its subsidiaries and that, accordingly, they intend
to effect the CBHS-Magellan Transactions.
C. The Borrowers have requested that the Required Lenders
amend certain provisions of the Credit Agreement in connection with the
transactions described in the preceding paragraph B, and the Required Lenders
are willing so to amend such provisions of the Credit Agreement, on the terms
and subject to the conditions set forth in this Amendment.
D. Capitalized terms used but not defined herein have the
meanings assigned
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to them in the Credit Agreement (as amended hereby).
Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO SECTION 1.01. (a) Section 1.01 of the
Credit Agreement is hereby amended to add the defined term "CBHS-Magellan Letter
Agreement" in the appropriate alphabetical order, to read in its entirety as
follows:
""CBHS-MAGELLAN LETTER AGREEMENT" shall mean the Letter
Agreement dated August 10, 1999, among CBHS, Crescent,
Crescent Affiliate and the Parent Borrower, as the same may be
amended or waived from time to time, PROVIDED that any such
amendments or waivers are either (a) not adverse to the
Lenders in any material respect or (b) have been approved in
writing by the Required Lenders."
(b) Section 1.01 of the Credit Agreement is hereby amended to
add the defined term "CBHS-Magellan Transaction Agreements" in the appropriate
alphabetical order, to read in its entirety as follows:
""CBHS-MAGELLAN TRANSACTION AGREEMENTS" shall mean the
agreements, to be entered into pursuant to the CBHS-Magellan
Letter Agreement, among CBHS, Crescent, Crescent Affiliate and
the Parent Borrower (and their respective relevant
subsidiaries) as more particularly described on Schedule 1
hereto, together with such other agreements among such parties
as may be necessary or appropriate to effect the transactions
contemplated by the CBHS-Magellan Letter Agreement, all such
agreements to contain terms and conditions consistent with,
and necessary to effect, the CBHS-Magellan Transactions, and
as such CBHS-Magellan Transaction Agreements may be
supplemented, amended or waived from time to time, PROVIDED
that any such supplements, amendments or waivers are either
(a) not adverse to the Lenders in any material respect or (b)
have been approved in writing by the Required Lenders."
(c) Section 1.01 of the Credit Agreement is hereby amended by
deleting the definition of the term "Permitted CBHS Sale" in its entirety and
restating it to read as follows:
""PERMITTED CBHS SALE" shall mean the redemption by CBHS in
accordance with the CBHS-Magellan Transaction Agreements and
the Operating Agreement of (a) a 40% common membership
interest in CBHS that is owned, directly or indirectly, by the
Parent Borrower and (b) all the preferred membership interests
in CBHS that are owned, directly or indirectly, by the
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Parent Borrower, in each case held pursuant to the Operating
Agreement."
(d) Section 1.01 of the Credit Agreement is hereby amended to
add the defined term "Charter Heights JV" in the appropriate alphabetical order,
to read in its entirety as follows:
"CHARTER HEIGHTS JV" means the CBHS Joint Venture described in
clause (a) of the definition of that term."
(e) Section 1.01 of the Credit Agreement is hereby amended to
add the defined term "Permitted CBHS-Magellan Transfers" in the appropriate
alphabetical order, to read in its entirety as follows:
""PERMITTED CBHS-MAGELLAN TRANSFERS" shall mean the sales,
transfers and other dispositions to CBHS and its subsidiaries
of the assets set forth on Schedule 6.05 on the basis set out
in the CBHS-Magellan Letter Agreement and in accordance with
the terms and conditions of the CBHS-Magellan Transaction
Agreements."
(f) Section 1.01 of the Credit Agreement is hereby amended to
add the defined term "CBHS-Magellan Transactions" in the appropriate alphabetic
order, to read in its entirety as follows:
""CBHS-MAGELLAN TRANSACTIONS" shall mean the Permitted CBHS
Sale, the Permitted CBHS-Magellan Transfers, and the other
releases, indemnifications, assumptions and forgiveness of
liabilities, and other transactions, contemplated by the
CBHS-Magellan Letter Agreement."
(g) Section 1.01 of the Credit Agreement is hereby amended to
delete the text "any Permitted CBHS Sale" in clause (b)(vi) of the definition of
"Consolidated EBITDA" and replace it with the text "the CBHS-Magellan
Transactions".
(h) Section 1.01 of the Credit Agreement is hereby amended by
adding a new clause (b)(v) to the definition of the term "Consolidated Net
Income" to read in its entirety as follows:
", (v) the gain, income, loss or charge (including the
establishment of any reserves reasonably determined by the
Parent Borrower) attributable to any (a) write-downs,
write-offs or charges in such period in respect of the Parent
Borrower's investment in any CBHS Joint Venture as a result of
any CBHS Joint Venture Sale or otherwise in connection with
the Parent Borrower's exit from the healthcare provider and
healthcare franchising businesses or (b) reversal or other
reduction in such period of any write-downs, write-offs or
charges referred to in clause (v)(a), PROVIDED that the amount
of all such
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losses or charges referenced in this clause (v) shall not
exceed in the aggregate for all periods, on an after tax
basis, $48,000,000 minus the amount of any reversal or other
reduction of any loss or charge referred to in this
clause (v)."
(i) Section 1.01 of the Credit Agreement is hereby amended by
adding a new clause (b)(vi) to the definition of the term "Consolidated Net
Income" (as amended hereby) to read in its entirety as follows:
"and (vi) the gain, income, loss or charge (including the
establishment of any reserves reasonably determined by the
Parent Borrower and without duplicating any gain, income,
loss or charge that has already been recognized pursuant to
clause (v)) in such period attributable to any (a)
write-downs, write-offs, losses or charges in such period as
a result of the CBHS-Magellan Transactions or (b) reversal
or other reduction in such period of any write-downs,
write-offs, losses or charges referred to in clause (vi)(a),
PROVIDED that the amount of all such losses or charges
referenced in this clause (vi) shall not exceed in the
aggregate for all periods, on an after tax basis,
$48,000,000 minus the sum of (x) the amount of any reversal
or other reduction of any loss or charge referred to in this
clause (vi) and (y) the aggregate amount of the loss or
charge excluded from the determination of Consolidated Net
Income pursuant to clause (v)(a) hereof."
(j) Section 1.01 of the Credit Agreement is hereby amended by
adding to the definition of the term "Excess Cash Flow" as follows:
(i) adding the text "(excluding the amount of any decrease in
Consolidated Working Capital arising solely from (x) an Asset Sale or (y) the
deconsolidation of certain joint ventures on October 1, 1998, as previously
disclosed in the Parent Borrower's Annual Report on Form 10-K that was publicly
filed with respect to the fiscal year ended September 30, 1998)" to
clause (a)(iii) of the definition of that term, after the text "during such
fiscal year"; and
(ii) adding the text "the CBHS-Magellan Transactions," to
clause (b)(iii) of the definition of that term, after the text "in respect of"
in that clause.
(k) Section 1.01 of the Credit Agreement is hereby amended by
deleting all the text after the text "100,000,000" in clause (e)(ii) of the
definition of the term "Permitted Acquisitions".
(l) Section 1.01 of the Credit Agreement is hereby amended by
deleting the
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text "(including as a result of any material impairment of the Parent Borrower's
rights or benefits under the Franchise Agreement)" from the definition of the
term "Material Adverse Effect".
SECTION 2. AMENDMENT TO SECTION 2.13(a): The Lenders hereby
amend Section 2.13(a) of the Credit Agreement by adding the following new clause
(iii) at the end of that Section:
"or (iii) in respect of a sale or transfer of any of the CBHS
Joint Ventures described in clauses (b), (c), (d), (e) and (f)
of the definition of that term, as contemplated by the
CBHS-Magellan Transactions, to the extent the Net Cash
Proceeds received from such sale or transfer are required to
be paid to CBHS or its subsidiaries pursuant to the terms of
the CBHS-Magellan Transaction Agreements."
SECTION 3. AMENDMENTS TO SECTION 6.01. The Lenders hereby
amend Section 6.01 by adding the following new paragraph (cc) after the existing
paragraph (c):
"(cc) the unsecured obligations of the Parent Borrower to pay
to CBHS and its subsidiaries an aggregate amount not to exceed
$2,000,000 under the CBHS- Magellan Transaction Agreements, as
more particularly described in paragraph III.a.9 of Addendum A
to the CBHS-Magellan Letter Agreement."
SECTION 4. AMENDMENTS TO SECTION 6.05. (a) The Lenders hereby
amend Section 6.05 of the Credit Agreement by deleting the text "(other than the
GPA Sale and each CBHS Joint Venture Sale)" after the text "Asset Sale" in the
third line of that Section and replacing it with "(other than the GPA Sale, each
CBHS Joint Venture Sale, the Permitted CBHS Sale and each Permitted
CBHS-Magellan Transfer)".
(b) The Lenders hereby amend Section 6.05(c) of the Credit
Agreement by deleting it in its entirety.
SECTION 5. AMENDMENT TO SECTION 6.06(b). The Lenders hereby
amend Section 6.06(b) of the Credit Agreement to add the following new paragraph
"(H)" in the appropriate alphabetical order to read in its entirety as follows:
"(H) imposed in respect of Charter Medical of Puerto Rico,
Inc. or Charter Behavioral Health of Puerto Rico,
Inc. pursuant to the CBHS-Magellan Transaction
Agreements in connection with the transactions
described in clause 4 of Schedule 6.05 hereto."
SECTION 6. AMENDMENT TO SECTION 6.14: The Lenders hereby amend
Section 6.14 of the Credit Agreement by adding the following proviso to the end
of that
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Section:
"(collectively, the "Required Minimum Consolidated Net
Worth"), PROVIDED that (a) in the event of any write-downs,
write-offs or charges in respect of the Parent Borrower's
investments in any CBHS Joint Venture as a result of any CBHS
Joint Venture Sale or otherwise in connection with the Parent
Borrower's exit from the healthcare provider and healthcare
franchising businesses, the amount of the Required Minimum
Consolidated Net Worth shall be reduced by an amount equal to
the reduction in stockholders' equity of the Parent Borrower
and the Subsidiaries, as determined in accordance with GAAP,
resulting from such write-downs, write-offs or charges
(including the establishment of any reserves reasonably
determined by the Parent Borrower and excluding any such
reduction in stockholders' equity that is attributable to any
such write-downs, write-offs or charges that are reversed or
reduced for any reason), and PROVIDED FURTHER that such
reduction shall not exceed, on an after tax basis, $48,000,000
minus the amount of any reduction in stockholders' equity that
is attributable to any such write-downs, write-offs or charges
that are reversed or reduced for any reason."
SECTION 7. AMENDMENT TO SECTION 6.14: The Lenders hereby amend
Section 6.14 of the Credit Agreement by adding the following proviso to the end
of that Section (as amended hereby):
", and (b) in the event of the CBHS-Magellan Transactions, the
amount of the Required Minimum Consolidated Net Worth shall be
further reduced (but without duplicating any reduction that
has already been made pursuant to clause (a)) by an amount
equal to the reduction in stockholders' equity of the Parent
Borrower and the Subsidiaries, as determined in accordance
with GAAP, resulting from any losses or charges arising from
such CBHS-Magellan Transactions (including the establishment
of any reserves reasonably determined by the Parent Borrower
and excluding any such reduction in stockholders' equity that
is attributable to any such losses or charges that are
reversed or reduced for any reason), and provided further that
such reduction shall not exceed, on an after tax basis,
$48,000,000 minus the sum of (x) the amount of any reduction
in stockholders' equity that is attributable to any losses or
charges arising from such CBHS-Magellan Transactions that are
reversed or reduced for any reason and (y) the reduction in
the Required Minimum Consolidated Net Worth pursuant to clause
(a)."
SECTION 8. AMENDMENT TO SCHEDULE 1.01(d): The Lenders hereby
amend Schedule 1.01(d) by deleting it in its entirety and replacing it with a
new Schedule 1.01(d) in
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the form of Schedule 3 hereto.
SECTION 9. ADDITION OF SCHEDULE 6.05. The Lenders hereby amend
the Credit Agreement by adding a new Schedule 6.05 in the form of Schedule 2
hereto.
SECTION 10. TIMING OF TRANSACTIONS. The Lenders agree that,
for all purposes in the Credit Agreement, the Permitted CBHS Sale shall be
deemed to occur prior to all the other CBHS-Magellan Transactions.
SECTION 11. REPRESENTATIONS AND WARRANTIES. Each Borrower
represents and warrants to the Administrative Agent and to each of the Lenders
that:
(a) This Amendment has been duly authorized, executed and
delivered by it and constitutes a legal, valid and binding obligation of each
Loan Party hereto, enforceable against such Loan Party party in accordance with
its terms.
(b) After giving effect to this Amendment, the representations
and warranties set forth in Article III of the Credit Agreement are true and
correct in all material respects on and as of the date hereof with the same
effect as if made on and as of the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date.
(c) On the date hereof and immediately after giving effect to
this Amendment, no Event of Default or Default has occurred and is continuing.
SECTION 12. AMENDMENT FEE. In consideration of the agreements
of the Lenders contained in this Amendment, the Parent Borrower agrees to pay to
the Administrative Agent, for the account of each Lender that delivers an
executed counterpart of this Amendment prior to 12:00 noon, New York City time,
on September 8, 1999, an amendment fee (the "AMENDMENT FEE") in an amount equal
to 0.05% of the sum of such Lender's outstanding Term Loans and Revolving Credit
Commitment as of such date.
SECTION 13. CONDITIONS TO EFFECTIVENESS. This Amendment shall
become effective as of the date first above written when (a) the Administrative
Agent shall have received (i) counterparts of this Amendment that, when taken
together, bear the signatures of the Borrowers and the Required Lenders and (ii)
the Amendment Fees and (b) all fees and expenses required to be paid or
reimbursed by the Borrowers pursuant hereto or to the Credit Agreement shall
have been paid or reimbursed, as applicable, PROVIDED that the amendments
contained in this Amendment, other than the amendments in Section 1(h), Section
1(j)(i), Section 1(l), Section 6 and Section 8, shall not become effective
unless and until the closing of the Permitted CBHS Sale, and the closing of the
other CBHS-Magellan Transactions that are to close on the same day as the
Permitted CBHS Sale, have occurred under the CBHS-Magellan Transaction
Agreements (without any amendment or waiver that is adverse to the Lenders in
any material respect that has not been agreed to by the Required Lenders).
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SECTION 14. CREDIT AGREEMENT. Except as specifically amended
hereby, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof as in existence on the date hereof. After
the date hereof, any reference to the Credit Agreement shall mean the Credit
Agreement as amended hereby. This Amendment shall be a Loan Document for all
purposes.
SECTION 15. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 16. COUNTERPARTS. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement. Delivery of an
executed signature page to this Amendment by facsimile transmission shall be
effective as delivery of a manually signed counterpart of this Amendment.
SECTION 17. EXPENSES. The Parent Borrower agrees to reimburse
the Administrative Agent for its out-of-pocket expenses in connection with this
Amendment, including the reasonable fees, charges and disbursements of Cravath,
Swaine & ▇▇▇▇▇, counsel for the Administrative Agent.
SECTION 18. APPROVAL OF TERMS OF CBHS-MAGELLAN LETTER
AGREEMENT. By its execution hereof, each Lender shall have given its approval to
the terms and conditions of the CBHS-Magellan Letter Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
day and year first written above.
MAGELLAN HEALTH SERVICES, INC.,
by
Name:
Title:
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent, Collateral Agent and an
Issuing Bank,
by
Name:
Title:
FIRST UNION NATIONAL BANK,
individually and as Syndication
Agent and an Issuing Bank,
by
Name:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH, individually and as
Documentation Agent and an
Issuing Bank,
by
Name:
Title:
