Exhibit 10.1

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(the ”Amendment”), dated effective as of January 26, 2006 (except as specified
in Section 2.1) below is among HORIZON HEALTH CORPORATION, a Delaware
Corporation (the “Parent”), HORIZON MENTAL HEALTH MANAGEMENT, INC., a Texas
Corporation (the “Borrower”), each of the banks or other lending institutions
party hereto, and JPMORGAN CHASE BANK, N.A. (formerly known as JPMorgan Chase
Bank, who was formerly known as The Chase Manhattan Bank, who was the successor
in interest by merger to Chase Bank of Texas, National Association, formerly
known as Texas Commerce Bank National Association), as the agent (the “Agent”).

 

RECITALS:

 

A. The Parent, the Borrower, the Agent, and certain banks and other lending
institutions have entered into that certain Third Amended and Restated Credit
Agreement dated as of June 10, 2005 (as amended by that certain Consent and
First Amendment to Third Amended and Restated Credit Agreement dated effective
as of November 14, 2005 among the Parent, the Borrower, the Agent and the banks
party thereto, and as the same may be further amended or otherwise modified,
herein the “Agreement”).

 

B. The Parent and the Borrower have requested that the Agent and the Banks amend
certain of the delivery requirements related to a Permitted Acquisition under
Section 9.5(a) of the Agreement and the Indebtedness to Adjusted EBITDA covenant
set forth in Section 10.3 of the Agreement. Subject to satisfaction of the
conditions set forth herein, the Agent and the Banks party hereto are willing to
amend the Agreement as herein set forth.

 

C. After the effectiveness of this Amendment, the Parent, the Borrower, the
Agent and the financial institutions party thereto shall execute an Increased
Commitment Supplement dated the date hereof (the “Supplement”) which will
increase the aggregate principal amount of the Revolving Commitments to
$175,000,000.

 

NOW, THEREFORE, in consideration of the premises herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows effective as of the date
hereof unless otherwise indicated:

 

ARTICLE I.

 

Definitions

 

Section 1.1. Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.

 

ARTICLE II.

 

Amendments

 

Section 2.1. Amendment to Section 9.5 – Investments. Effective as of
December 15, 2005, clause (a)(iv) of Section 9.5 of the Agreement is amended in
its entirety to read as follows:

 

(iv) Delivery and Notice Requirements. Parent shall provide to Agent, prior to
the consummation of the acquisition, the following: (A) notice of the
acquisition, (B) the most recent financial statements of the Target that Parent
has available, and (C) such other documentation and information relating to the
Target and the acquisition as Agent

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 1

--------------------------------------------------------------------------------

may reasonably request including, without limitation, evidence certified by the
chief executive or chief financial officer of Parent that Parent shall be in
compliance with the covenants contained in Article X on a pro forma basis for
the four (4) Fiscal Quarter period then most recently ending (assuming (1) the
consummation of the acquisition in question; (2) that the incurrence or
assumption of any Debt in connection therewith occurred on the first day of such
period; (3) to the extent such Debt bears interest at a floating rate, the rate
in effect for the entire period of calculation was the rate in effect at the
time of calculation; and (4) any sale of Subsidiaries or lines of business which
occurred during such period occurred on the first day of such period);

 

Section 2.2. Amendment to Section 10.3 – Indebtedness to Adjusted EBITDA. The
first sentence of Section 10.3 of the Agreement is amended in its entirety to
read as follows:

 

As of the last day of each Fiscal Quarter, Parent shall not permit the ratio of
Indebtedness outstanding as of such day to Adjusted EBITDA for the four
(4) Fiscal Quarter period then ended to exceed the ratio set forth in the table
below for such Fiscal Quarter:

 

Fiscal Quarter

--------------------------------------------------------------------------------

  

Maximum Ratio

--------------------------------------------------------------------------------

Fiscal Quarter ended February 28, 2006

  

3.75 to 1.00

Fiscal Quarter ended May 31, 2006

  

3.50 to 1.00

Fiscal Quarter ended August 31, 2006

  

3.50 to 1.00

Fiscal Quarter ended November 30, 2006

  

3.50 to 1.00

Fiscal Quarter ended February 28, 2007

  

3.50 to 1.00

Fiscal Quarter ended May 31, 2007

  

3.50 to 1.00

Fiscal Quarter ended August 31, 2007

  

3.25 to 1.00

Fiscal Quarter ended November 30, 2007

  

3.25 to 1.00

Fiscal Quarter ended February 28, 2008 and

each Fiscal Quarter end thereafter

  

3.00 to 1.00

 

Section 2.3. Amendment to Exhibit C – Compliance Certificate. Exhibit C to the
Agreement is amended in its entirety to read as set forth on Exhibit A attached
hereto.

 

ARTICLE III.

 

Conditions Precedent

 

Section 3.1. Conditions. The effectiveness of Article II of this Amendment is
subject to the satisfaction of the following conditions precedent:

 

(a) The Agent shall have received all of the following, each dated (unless
otherwise indicated) the date of this Amendment, in form and substance
satisfactory to the Agent:

 

(i) Amendment. This Amendment duly executed by the Borrower, the Parent, the
other Obligated Parties and the Required Banks;

 

(ii) Resolutions. Resolutions of the Board of Directors of the Borrower
certified by its Secretary or an Assistant Secretary which authorize the
execution, delivery, and performance by the Borrower of this Amendment, the
Supplement and the Revolving Notes executed pursuant thereto;

 

(iii) Incumbency Certificate. A certificate of incumbency certified by the
Secretary or an Assistant Secretary of Borrower certifying the name of each
officer of the Borrower who

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 2

--------------------------------------------------------------------------------

is authorized to sign this Amendment, the Supplement and the Revolving Notes
executed pursuant thereto together with specimen signatures of each such
officer;

 

(iv) Governmental Certificates. Certificates of the appropriate government
officials of the state of incorporation of the Borrower as to the existence and
good standing of the Borrower, each dated a current date;

 

(v) Additional Information. Such additional documentation, approvals, opinions,
and information as Agent or its legal counsel Jenkens & Gilchrist, a
Professional Corporation, may request;

 

(b) The representations and warranties contained herein and in all other Loan
Documents, as amended hereby, shall be true and correct in all material respects
as of the date hereof as if made on the date hereof, except for such
representations and warranties limited by their terms to a specific date;

 

(c) No Default shall have occurred and be continuing; and

 

(d) All proceedings taken in connection with the transactions contemplated by
this Amendment and all documentation and other legal matters incident thereto
shall be satisfactory to the Agent and its legal counsel Jenkens & Gilchrist, a
Professional Corporation.

 

ARTICLE IV.

 

Miscellaneous

 

Section 4.1. Ratifications. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Agreement and except as expressly modified and superseded by this Amendment,
the terms and provisions of the Agreement and the other Loan Documents are
ratified and confirmed and shall continue in full force and effect.

 

Section 4.2. Representations and Warranties. Borrower hereby represents and
warrants to the Agent and the Banks as follows: (a) after giving effect to this
Amendment, no Default exists; (b) after giving effect to this Amendment, the
representations and warranties set forth in the Loan Documents are true and
correct in all material respects on and as of the date hereof with the same
effect as though made on and as of such date except with respect to any
representations and warranties limited by their terms to a specific date;
(c) the execution, delivery, and performance of this Amendment has been duly
authorized by all necessary action on the part of the Parent, the Borrower, and
each Obligated Party and does not and will not (i) violate any provision of law
applicable to the Borrower, the Parent, or any Obligated Party, the certificate
of incorporation, bylaws, partnership agreement, membership agreement, or other
applicable governing document of the Borrower, the Parent, or any Obligated
Party or any order, judgment, or decree of any court or agency of government
binding upon the Borrower, the Parent, or any Obligated Party, (ii) conflict
with, result in a breach of or constitute (with due notice of lapse of time or
both) a default under any material contractual obligation of the Borrower, the
Parent, or any Obligated Party, (iii) result in or require the creation or
imposition of any material lien upon any of the assets of the Borrower, the
Parent, or any Obligated Party, or (iv) require any approval or consent of any
Person under any material contractual obligation of the Borrower, the Parent, or
any Obligated Party; and (d) the articles of incorporation and bylaws of the
Borrower furnished to the Agent on November 15, 2000 have not been modified or
rescinded and remain in full force and effect.

 

IN ADDITION, TO INDUCE THE AGENT AND THE BANKS TO AGREE TO THE TERMS OF THIS
AMENDMENT, THE BORROWER, THE PARENT, AND EACH OBLIGATED PARTY (BY ITS EXECUTION
BELOW) REPRESENTS AND WARRANTS THAT AS OF THE DATE OF

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 3

--------------------------------------------------------------------------------

ITS EXECUTION OF THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR
DEFENSES OR COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS AND IN
ACCORDANCE THEREWITH IT:

 

(a) WAIVER. WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES OR COUNTERCLAIMS,
WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF ITS EXECUTION OF THIS
AMENDMENT AND

 

(b) RELEASE. RELEASES AND DISCHARGES THE AGENT AND THE BANKS, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SHAREHOLDERS, AFFILIATES AND
ATTORNEYS (COLLECTIVELY THE “RELEASED PARTIES”) FROM ANY AND ALL OBLIGATIONS,
INDEBTEDNESS, LIABILITIES, CLAIMS, RIGHTS, CAUSES OF ACTION OR DEMANDS
WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, IN LAW OR
EQUITY, WHICH THE BORROWER OR ANY OBLIGATED PARTY EVER HAD, NOW HAS, CLAIMS TO
HAVE OR MAY HAVE AGAINST ANY RELEASED PARTY ARISING PRIOR TO THE DATE HEREOF AND
FROM OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY.

 

Section 4.3. Survival of Representations and Warranties. All representations and
warranties made in this Amendment shall survive the execution and delivery of
this Amendment, and no investigation by the Agent or any Bank or any closing
shall affect the representations and warranties or the right of the Agent or any
Bank to rely upon them.

 

Section 4.4. Reference to Agreement. Each of the Loan Documents, including the
Agreement, are hereby amended so that any reference in such Loan Documents to
the Agreement shall mean a reference to the Agreement as amended hereby.

 

Section 4.5. Expenses of Agent. As provided in the Agreement, the Borrower
agrees to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, negotiation, and execution of this Amendment,
including without limitation, the costs and fees of the Agent’s legal counsel.

 

Section 4.6. Severability. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

 

Section 4.7. Applicable Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas and the applicable laws of the
United States of America.

 

Section 4.8. Successors and Assigns. This Amendment is binding upon and shall
inure to the benefit of the Agent, each Bank and the Borrower and their
respective successors and assigns, except the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Banks.

 

Section 4.9. Counterparts. This Amendment may be executed in one or more
counterparts and on telecopy counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.

 

Section 4.10. Effect of Waiver. No consent or waiver, express or implied, by the
Agent or any Bank to or for any breach of or deviation from any covenant,
condition or duty by the Borrower or any

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 4

--------------------------------------------------------------------------------

Obligated Party shall be deemed a consent or waiver to or of any other breach of
the same or any other covenant, condition or duty.

 

Section 4.11. Headings. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.

 

Section 4.12. ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

Section 4.13. Required Banks. The Agreement may be modified as provided in this
Amendment with the agreement of the Required Banks which means Banks having
fifty—one percent (51%) or more of the sum of the total Revolving Commitments
(such percentage applicable to a Bank, herein such Bank’s “Required Bank
Percentage”). For purposes of determining the effectiveness of this Amendment,
each Bank’s Required Bank Percentage is set forth on Schedule 4.13 hereto.

 

Executed as of the date first written above.

 

PARENT AND BORROWER:

HORIZON HEALTH CORPORATION

HORIZON MENTAL HEALTH MANAGEMENT,

INC.

By:

 

/s/ John Pitts

--------------------------------------------------------------------------------

   

John Pitts, Authorized Officer for both Parent

and Borrower

AGENT AND BANKS: JPMORGAN CHASE BANK, N.A. (formerly known as JPMorgan Chase
Bank, who was formerly The Chase Manhattan Bank, who was successor-in-interest
by merger to the Chase Bank of Texas, National Association who was formerly
known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION), individually as a Bank, as
Agent, and as Issuing Bank

By:

 

/s/ Matthew H. Hildreth

--------------------------------------------------------------------------------

   

Matthew H. Hildreth, Senior Vice President

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 5

--------------------------------------------------------------------------------

BANK OF AMERICA, NATIONAL

ASSOCIATION

By:

 

/s/ Daniel H. Penkar

--------------------------------------------------------------------------------

Name:

 

Daniel H. Penkar

--------------------------------------------------------------------------------

Title:

 

Senior Vice President

--------------------------------------------------------------------------------

WELLS FARGO BANK, N.A. (formerly Wells

Fargo Bank Texas, National Association)

By:

 

/s/ Linda G. Davis

--------------------------------------------------------------------------------

Name:

 

Linda G. Davis

--------------------------------------------------------------------------------

Title:

 

Vice President

--------------------------------------------------------------------------------

KEYBANK NATIONAL ASSOCIATION

By:

 

/s/ Joanne Bramanti

--------------------------------------------------------------------------------

Name:

 

Joanne Bramanti

--------------------------------------------------------------------------------

Title:

 

Senior Vice President

--------------------------------------------------------------------------------

WACHOVIA BANK, NATIONAL ASSOCIATION

By:

 

/s/ Gideon Oosthuizen

--------------------------------------------------------------------------------

Name:

 

Gideon Oosthuizen

--------------------------------------------------------------------------------

Title:

 

Vice President

--------------------------------------------------------------------------------

AMEGY BANK, N.A.

By:

 

/s/ Lisa Armstrong

--------------------------------------------------------------------------------

Name:

 

Lisa Armstrong

--------------------------------------------------------------------------------

Title:

 

Vice President

--------------------------------------------------------------------------------

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 6

--------------------------------------------------------------------------------

OBLIGATED PARTY CONSENT

 

Each Obligated Party (i) consents and agrees to this Second Amendment to Third
Amended and Restated Credit Agreement; (ii) agrees that the Guaranty, Subsidiary
Security Agreement, and the Subsidiary Pledge Agreement to which it is a party
shall remain in full force and effect and shall continue to be the legal, valid,
and binding obligation of such Obligated Party enforceable against it in
accordance with its terms; and (iii) agrees that the “Obligations” as defined in
the Agreement as amended hereby (including, without limitation, all obligations,
indebtedness, and liabilities arising in connection with the Letters of Credit
and the increase in the Revolving Commitments contemplated hereby) are
“Obligations” as defined in the Guaranty.

 

OBLIGATED PARTIES:

MENTAL HEALTH OUTCOMES, INC.

HORIZON HEALTH PHYSICAL REHABILITATION SERVICES, INC. (formerly Specialty Rehab
Management, Inc.)

HHMC PARTNERS, INC.

HORIZON BEHAVIORAL SERVICES, INC. (successor in interest by merger to Horizon
Behavioral Services IPA, Inc., Horizon Behavioral Services of New Jersey, Inc.,
Horizon Behavioral Services of New York, Inc., Horizon Behavioral Services of
California, Inc., Employee Assistance Programs International, LLC, Florida
Psychiatric Associates, LLC, Horizon Behavioral Services of Florida, LLC, and
Occupational Health Consultants of America, Inc.)

HMHM OF TENNESSEE, INC.

EMPLOYEE ASSISTANCE SERVICES, INC.

HHC INDIANA, INC.

HHC OHIO, INC.

HHC POPLAR SPRINGS, INC.

HHC RIVER PARK, INC.

PSYCHMANAGEMENT GROUP, INC.

HHC SERVICES, LLC

By:

 

/s/ John Pitts

--------------------------------------------------------------------------------

   

John Pitts

   

Authorized Officer for each Obligated Party

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 7