Second Amendment to Third Amended and Restated Credit Agreement



 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 

  

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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 

  

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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 

  

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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 

  

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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



  

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	 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




  

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 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



  

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