<PAGE>

                                                                   Exhibit 4(r)


                    AMENDMENT No. 7 entered into as of September 19, 2000 (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.  Capitalized terms used but not defined herein have the
meanings assigned to them in the Credit Agreement (as amended hereby).

                  C. The Borrowers and the Required Lenders have agreed to amend
certain provisions of the Credit Agreement as set forth herein on the terms and
subject to the conditions set forth in this Amendment.

                  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) The definition of
the term "Excess Cash Flow" is hereby amended by (i) adding after the words "the
term `Net Cash Proceeds'" the following text: "arising as a result of any
Condemnation Event or Casualty Event" and (ii)(A) replacing the term "and" with
a "," prior to clause (ii) of the

<PAGE>


proviso at the end of such defined term and (B) adding the following text at
the end of such clause (ii): "and (iii) for avoidance of doubt, any proceeds
resulting from the Mentor Sale."

                           (b) The definition of the term "Permitted
 Acquisition" is amended by replacing clause (e) with the following text:

                           (e) the amounts paid for all Permitted Acquisitions
                  (including, without limitation, any Indebtedness incurred or
                  assumed in connection therewith, but excluding (i) any capital
                  stock or other equity interests issued or delivered as part of
                  the consideration for such Permitted Acquisition, (ii)
                  Permitted CBHS Lease Transaction Amounts, and (iii) the
                  Permitted Premier Acquisition and the Permitted CBHS Joint
                  Venture Acquisitions/Sales) (x) after the Closing Date shall
                  not exceed, in the event the Leverage Ratio as of the last day
                  of the most recently ended fiscal quarter for which financial
                  statements have been delivered, or were required to have been
                  delivered, by the Parent Borrower pursuant to Section 5.04(a)
                  or 5.04(b), prior to such Permitted Acquisition, on a pro
                  forma basis after giving effect to all such Permitted
                  Acquisitions, is greater than or equal to 4.00:1.00,
                  $100,000,000, and (y) after the completion of the Mentor Sale
                  shall not exceed, in the event the Leverage Ratio as of the
                  last day of the most recently ended fiscal quarter for which
                  financial statements have been delivered, or were required to
                  have been delivered, by the Parent Borrower pursuant to
                  Section 5.04(a) or 5.04(b), prior to such Permitted
                  Acquisition, on a pro forma basis after giving effect to all
                  such Permitted Acquisitions, is greater than or equal to the
                  applicable Leverage Ratio shown below, the respective sublimit
                  amount shown for such Leverage Ratio:

<TABLE>
<CAPTION>
LEVERAGE RATIO                                                   PERMITTED ACQUISITIONS SUBLIMIT
--------------                                                   -------------------------------
<S>                                                             <C>
Greater than 5.00:1.00                                                     $2,500,000

Greater than 4.50:1.00, but less than or equal to                         $10,000,000
5:00:1.00

Greater than 3.75:1.00, but less than or equal to                         $25,000,000
4.50:1.00

Less than or equal to 3.75:1.00                                           No Sublimit
</TABLE>


                  (c) The definition of the term "Permitted Stock Repurchases or
Dividends" is hereby amended to replace the word "and" prior to clause (y) in
the second clause (B) of the first sentence thereof with a "," and adding the
following text after such clause (y):

                   and (z) in the case of Permitted Stock Repurchases or
                   Dividends as described in clauses (a) or (b) above made
                   after the completion of the Mentor Sale, and so long as the
                   Leverage Ratio as of the last day of the most recently ended
                   fiscal quarter for which financial statements have been
                   delivered, or were required to have been delivered, by the
                   Parent Borrower pursuant to Section 5.04(a) or 5.04(b),
                   prior to such Permitted



                                       2

<PAGE>


                   Stock Repurchase or Dividend, is greater than or equal to
                   4.00:1.00, $2,000,000,


                  (d) Section 1.01 of the Credit Agreement is hereby amended by
adding the defined terms "Permitted CBHS Joint Venture Acquisition/Sale" and
"Permitted Premier Acquisition" to read in the entirety as follows:

                  "PERMITTED CBHS JOINT VENTURE ACQUISITION/SALE" shall mean the
acquisition by the Parent Borrower or any of its Subsidiaries of the partnership
or limited liability company interests of any other partners or limited
liability company members of any CBHS Joint Venture, to the extent such
acquisition is (i) made in contemplation of a CBHS Joint Venture Sale in respect
of such CBHS Joint Venture or the assets owned or used by it, (ii) effected for
an amount paid by the Parent Borrower or such Subsidiaries that is to be
recouped by the Parent Borrower or such Subsidiaries in the contemplated CBHS
Joint Venture Sale, and (iii) preceded or promptly followed by a closing of the
contemplated CBHS Joint Venture Sale pursuant to which such amount is recouped;
PROVIDED, HOWEVER, that to the extent any such amount is not so recouped, such
excess amount shall be included in determining the Parent Borrower's compliance
with the limitations on Permitted Acquisitions set forth in clause (e) of the
definition thereof.

                  "PERMITTED PREMIER ACQUISITION" shall mean the acquisition by
the Parent Borrower or any of its Subsidiaries of Premier Behavioral Systems of
Tennessee, LLC ("Premier") through the redemption or purchase of the limited
liability company interests held by other member(s) of Premier, to the extent
such redemption or purchase is effected directly or indirectly from funds or
other property of Premier paid or distributed for such purpose; PROVIDED,
HOWEVER, to the extent any funds or other property of the Parent Borrower or any
Subsidiary are used to effect such redemption or purchase, the amount of such
funds or property shall be included in determining the Parent Borrower's
compliance with the limitations on Permitted Acquisitions set forth in clause
(e) of the definition thereof.

                  SECTION 2. AMENDMENT TO SECTION 2.13(B). Section 2.13(b) of
the Credit Agreement is hereby amended by substituting the date "September 30,
2001" for the date "September 30, 2002" in clause (i) of such Section.

                  SECTION 3. 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 party hereto, enforceable against such Loan Party in accordance with
its terms.

                  (b) Before and 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) Before and after giving effect to this Amendment, no Event
of Default or Default has occurred and is continuing.


                                       3

<PAGE>

                  SECTION 4. CONDITIONS TO EFFECTIVENESS. This Amendment shall
be deemed agreed to by the parties to the Credit Agreement when the
Administrative Agent shall have received counterparts of this Amendment that,
when taken together, bear the signatures of the Borrowers and the Required
Lenders, but this Amendment shall not become effective until the date that the
Mentor Sale is completed.

                  SECTION 5. 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 6. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  SECTION 7. 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 8. 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 & Moore, counsel for the Administrative Agent.


                                       4

<PAGE>


                  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  /s/ James R. Bedenbaugh
                                ----------------------------
                                Name:  James R. Bedenbaugh
                                Title: SVP & Treasurer

                            CHARTER BEHAVIORAL HEALTH SYSTEM OF NEW MEXICO,
                            INC.,

                              By  /s/ Charlotte A. Sanford
                                ----------------------------
                                Name:  Charlotte A. Sanford
                                Title: Treasurer

                            MERIT BEHAVIORAL CARE CORPORATION,

                              By  /s/ Charlotte A. Sanford
                                ----------------------------
                                Name:  Charlotte A. Sanford
                                Title: Treasurer

                            THE CHASE MANHATTAN BANK, individually and as
                            Administrative Agent, Collateral Agent and an
                            Issuing Bank,

                              By  /s/ Dawn Lee Lum
                                ----------------------------
                                Name:  Dawn Lee Lum
                                Title: Vice President

                            FIRST UNION NATIONAL BANK, individually and as
                            Syndication Agent and an Issuing Bank,

                              By  /s/ Joyce L. Barry
                                ----------------------------
                                Name:  Joyce L. Barry
                                Title: SVP



                                       5

<PAGE>




                            ML CLO XV PILGRIM AMERICA (CAYMAN) LTD.
                            BY: PILGRIM INVESTMENTS, INC.
                                AS ITS INVESTMENT MANAGER

                              By  /s/ Michel Prince, CFA
                                 ------------------------------
                                 Name:  Michel Prince, CFA
                                 Title: Vice President


                            PILGRIM AMERICA HIGH INCOME INVESTMENTS LTD.
                            BY: PILGRIM INVESTMENTS, INC.
                                AS ITS INVESTMENT MANAGER

                              By  /s/ Michel Prince, CFA
                                 ------------------------------
                                 Name:  Michel Prince, CFA
                                 Title: Vice President


                            PILGRIM PRIME RATE TRUST
                            BY: PILGRIM INVESTMENTS, INC.
                                AS ITS INVESTMENT MANAGER

                              By  /s/ Michel Prince, CFA
                                 ------------------------------
                                 Name:  Michel Prince, CFA
                                 Title: Vice President


                            HIGHLAND CAPITAL MANAGEMENT, L.P.,

                              By  /s/ James Dondero
                                 ------------------------------
                                 Name:  James Dondero
                                 Title: President


                            MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.

                              By  /s/ Colleen M. Cunniffe
                                 ------------------------------
                                 Name:  Colleen M. Cunniffe
                                 Title: Authorized Signatory


                                       6

<PAGE>




                            MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
                            BY: MERRILL LYNCH INVESTMENT MANAGERS, L.P.,
                                AS INVESTMENT ADVISOR,

                              By  /s/ Colleen M. Cunniffe
                                 ------------------------------
                                 Name:  Colleen M. Cunniffe
                                 Title: Authorized Signatory


                            MERRILL LYNCH GLOBAL INVESTMENT
                            SERIES: INCOME STRATEGIES PORTFOLIO
                            BY: MERRILL LYNCH INVESTMENT MANAGERS, L.P.,
                                AS INVESTMENT ADVISOR,

                              By  /s/ Colleen M. Cunniffe
                                 ------------------------------
                                 Name:  Colleen M. Cunniffe
                                 Title: Authorized Signatory


                            INDOSUEZ CAPITAL FUNDING IV, L.P.
                            BY: INDOSUEZ CAPITAL
                                AS PORTFOLIO ADVISOR,

                              By  /s/ Melissa Marano
                                 ------------------------------
                                 Name:  Melissa Marano
                                 Title: Vice President


                            BLACK DIAMOND CLO 1998-1 LTD.,

                              By  /s/ John H. Cullinane
                                 ------------------------------
                                 Name:  John H. Cullinane
                                 Title: Director


                            BLACK DIAMOND INTERNATIONAL FUNDING, LTD.,

                              By  /s/ John H. Cullinane
                                 ------------------------------
                                 Name:  John H. Cullinane
                                 Title: Director


                                       7

<PAGE>





                            VAN KAMPEN PRIME RATE INCOME TRUST
                            BY: VAN KAMPEN INVESTMENT ADVISORY CORP.,

                              By  /s/ Brian T. Buscher
                                 ------------------------------
                                 Name:  Brian T. Buscher
                                 Title: Manager Operations & Compliance


                            SENIOR DEBT PORTFOLIO
                            BY: BOSTON MANAGEMENT AND RESEARCH
                                AS INVESTMENT ADVISOR,

                              By  /s/ Scott H. Page
                                 ------------------------------
                                 Name:  Scott H. Page
                                 Title: Vice President


                            EATON VANCE INSTITUTIONAL SENIOR LOAN FUND
                            BY: EATON VANCE MANAGEMENT
                                AS INVESTMENT ADVISOR,

                              By  /s/ Scott H. Page
                                 ------------------------------
                                 Name:  Scott H. Page
                                 Title: Vice President


                            ARCHIMEDES FUNDING II, LTD.,

                               By  /s/ Helen Y. Rhee
                                  ------------------------------
                                  Name:  Helen Y. Rhee
                                  Title: Vice President & Portfolio Manager


                            SUMMIT BANK,

                              By  /s/ William Dinicola
                                 ------------------------------
                                 Name:  William Dinicola
                                 Title: Vice President


                                       8

<PAGE>


                            BATTERSON PARK CBO I
                            BY: GENERAL RE-NEW ENGLAND ASSET MANAGEMENT, INC.,
                                AS COLLATERAL MANAGER,

                              By  /s/ Susan Bosworth
                                 ------------------------------
                                 Name:  Susan Bosworth
                                 Title: Vice President


                            BANK POLSKA KASA OPIEKI S.A., NEW YORK BRANCH,

                              By  /s/ Barry W. Henry
                                 ------------------------------
                                 Name:  Barry W. Henry
                                 Title: Vice President
                                        Senior Lending Officer

                            C.M. LIFE INSURANCE COMPANY,

                              By  /s/ Clifford M. Noreen
                                 ------------------------------
                                 Name:  Clifford M. Noreen
                                 Title: Senior Managing Director


                            MASSMUTUAL HIGH YIELD PARTNERS II LLC,
                            BY: HYP MANAGEMENT, INC.
                                AS MANAGING MEMBER

                              By  /s/ Clifford M. Noreen
                                 ------------------------------
                                 Name:  Clifford M. Noreen
                                 Title: Senior Managing Director


                            MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

                               By  /s/ Clifford M. Noreen
                                  ------------------------------
                                  Name:  Clifford M. Noreen
                                 Title: Senior Managing Director




                                       9

<PAGE>


                            MASSMUTUAL/DARBY CBO LLC
                            BY: MASSMUTUAL/DARBY CBO IM, INC.
                                AS LLC MANAGER

                               By  /s/ Clifford M. Noreen
                                  ------------------------------
                                  Name:  Clifford M. Noreen
                                  Title: Senior Managing Director


                            MASSMUTUAL CORPORATE VALUE PARTNERS LTD.
                            BY: DAVID L. BABSON AND COMPANY INC. UNDER DELEGATED
                            AUTHORITY FROM MASS. MUTUAL LIFE INSURANCE COMPANY,
                            AS MANAGER,

                              By  /s/ Clifford M. Noreen
                                 ------------------------------
                                 Name:  Clifford M. Noreen
                                 Title: Senior Managing Director



                            KZH HIGHLAND-2 LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            KZH PAMCO LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            CREDIT LYONNAIS NEW YORK BRANCH,

                              By  /s/ Charles Heidsieck
                                 ------------------------------
                                 Name:  Charles Heidsieck
                                 Title: Senior Vice President




                                       10

<PAGE>



                            KZH ING-2 LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            KZH ING-3 LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            KZH PONDVIEW LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            KZH SHOSHONE LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            KZH SOLEIL LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            BANK OF TOKYO-MITSUBISHI TRUST CO.,

                               By  /s/ Spencer Hughes
                                  ------------------------------
                                  Name:  Spencer Hughes
                                  Title: Vice President



                                       11

<PAGE>


                            THE BANK OF NOVA SCOTIA,

                              By  /s/ W.J. Brown
                                 ------------------------------
                                 Name:  W.J. Brown
                                 Title: Vice President


                            GENERAL ELECTRIC CAPITAL CORPORATION,

                              By  /s/ Thomas E. Johnstone
                                 ------------------------------
                                 Name:  Thomas E. Johnstone
                                 Title: Duly Authorized Signatory


                            KZH CRESCENT-2 LLC,

                              By  /s/ Kimberly Rowe
                                 ------------------------------
                                 Name:  Kimberly Rowe
                                 Title: Authorized Agent


                            TCW LEVERAGED INCOME TRUST, L.P.
                            BY: TCW ADVISERS (BERMUDA), LTD.,
                                AS GENERAL PARTNER,

                              By  /s/ Mark Gold
                                 ------------------------------
                                 Name:  Mark Gold
                                 Title: Managing Director


                            By: TCW INVESTMENT MANAGEMENT COMPANY,
                                AS INVESTMENT ADVISER,

                              By  /s/ Jonathan Berg
                                 ------------------------------
                                 Name:  Jonathan Berg
                                 Title: Assistant Vice President




                                       12


<PAGE>


                            TCW LEVERAGED INCOME TRUST II, L.P.
                            BY: TCW ADVISERS (BERMUDA), LTD.,
                                AS GENERAL PARTNER,

                              By  /s/ Mark Gold
                                 ------------------------------
                                 Name:  Mark Gold
                                 Title: Managing Director


                            By: TCW INVESTMENT MANAGEMENT COMPANY,
                                AS INVESTMENT ADVISER,

                              By  /s/ Jonathan Berg
                                 ------------------------------
                                 Name:  Jonathan Berg
                                 Title: Assistant Vice President


                            SEQUILS I, LTD.
                            BY: TCW ADVISORS, INC.
                                AS ITS COLLATERAL MANAGER,

                               By /s/ Mark Gold
                                 ------------------------------
                                 Name:  Mark Gold
                                 Title: Managing Director


                               By /s/ Jonathan Berg
                                 ------------------------------
                                 Name:  Jonathan Berg
                                 Title:  Assistant Vice President





                                       13