Consent and First Amendment to Third Amended and Restated Credit Agreement



 Exhibit 10.1 
  
 CONSENT AND FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT 
  
 THIS CONSENT AND FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT (the ”Amendment”), dated effective as of November 14, 2005 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 the same may be further amended or otherwise modified, herein the “Agreement”). 
  
 B. On August 1, 2005, HHC River Park, Inc. and PsychManagement Group, LLC joined the Agreement as Obligated Parties. 
  
 C. On or about August 19, 2005, Employee Assistance Programs
International, LLC, Florida Psychiatric Associates, LLC, Horizon Behavioral Services of Florida, LLC, and Occupational Health Consultants of America, Inc. merged with and into Horizon Behavioral Services, Inc. 
  
 D. The Borrower and the other Obligated Parties have advised the Agent and
the Banks that the Borrower desires to purchase certain of the assets of Focus Healthcare, LLC, Lighthouse Care Centers, LLC, and related entities through existing Obligated Parties or Subsidiaries of the Parent who will become Obligated Parties
(the “Focus Acquisition”). The total consideration to be paid by the Obligated Parties in connection with the Focus Acquisition shall not exceed $100,000,000. 
  
 E. On September 14, 2005, Parent formed a new Subsidiary, HHC Services, LLC, a Texas limited liability company
(“HHC Services”), to acquire an ownership interest in an aircraft. On September 30, 2005, HHC Services entered into that Purchase & Interim Lease Agreement with CitationShares Sales, Inc. pursuant to which HHC Services
acquired an ownership interest in an aircraft. In accordance with the Agreement, the Borrower and the other Obligated Parties have requested that the Required Banks consent to: 
  
 1) HHC Services executing and delivering a Subsidiary Joinder Agreement and granting the Agent a Lien on certain of its
assets on or before December 15, 2005 which is later than the deadline specified for such joinder in Section 8.10(b) of the Agreement; 
  
 2) HHC Services not pledging its ownership interest in any aircraft, now owned or hereafter acquired, which HHC Services does not wholly-own, as required
by Section 8.10(b) of the Agreement and the Subsidiary Security Agreement; and 
  
 3) Parent pledging its membership interest in HHC Services on or before December 15, 2005 which is later than the deadline specified for such pledge in Section 8.10(c) of the Agreement. 
  
 The specifically described provisions of the Agreement described in this paragraph, are
herein referred to as the “Applicable Covenants.” 
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 1 








 F. The Parent and the Borrower have requested that the Agent and the Banks amend certain provisions of
the Agreement and consent to the departure from the Applicable Covenants. 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. 
  
 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 1.1 – Definitions.
Section 1.1 of the Agreement is amended to add the following definition, in proper alphabetical order, thereto: 
  
 “Focus Acquisition” means the purchase of certain assets of Focus Healthcare, LLC, Lighthouse Care Centers, LLC, and
related entities through existing Obligated Parties or Subsidiaries of the Parent who will become Obligated Parties pursuant to Section 8.10(b) for an aggregate purchase price not to exceed $100,000,000. 
  
 Section 2.2. Amendment to Section 3.2 – Determinations of
Margins and Fees. The table set forth in Section 3.2 of the Agreement is amended in its entirety to read as follows: 
  

							
	 Indebtedness to Adjusted
 EBITDA Ratio
	 	Eurodollar Rate        
Margin        	 	Base        
Margin        	 	Commitment Fee        
Rate        
	Less than 1.25 to 1.00	 	1.25%	 	  .25%	 	.200%
	Greater than or equal to 1.25 to 1.00 but less than 1.75 to
1.00	 	1.50%	 	  .50%	 	.250%
	Greater than or equal to 1.75 to 1.00 but less than 2.25 to
1.00	 	1.75%	 	  .75%	 	.300%
	Greater than or equal to 2.25 but less than 2.75 to 1.00	 	2.00%	 	1.00%	 	.375%
	Greater than or equal to 2.75 to 1.00 but less than 3.00 to
1.00	 	2.25%	 	1.25%	 	.500%
	Greater than or equal to 3.00 to 1.00	 	2.50%	 	1.50%	 	.500%

  
 Section 2.3.
Amendment to Section 9.1 – Debt. Clause (h) of Section 9.1 of the Agreement is amended in its entirety to read as follows: 
  
 (h) Debt of any Person (or any of such Person’s subsidiaries) existing at the time such Person becomes
a Subsidiary (or is merged into or consolidated with Parent or any of the Subsidiaries), but only to the extent that such Debt was not incurred in 

  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 2 








 
connection with, as a result of or in contemplation of such Person becoming a Subsidiary (or being merged into or consolidated with Parent or any
Subsidiary); provided, however, that (i) in no event shall the aggregate amount of such Debt outstanding at any time that is Capital Lease Obligations exceed Ten Million Dollars ($10,000,000); (ii) in no event shall the
aggregate amount of such Debt outstanding at any time that is not (A) Capital Lease Obligations or (B) Debt assumed in connection with the Focus Acquisition exceed Five Million Dollars ($5,000,000); and (iii) immediately after such
acquired Person becomes a Subsidiary (or is merged into or consolidated with Parent or any Subsidiary), no Default exists; 
  
 Section 2.4. Amendment to Section 9.5 – Investments. Subclauses (ii) and (iii) of
Section 9.5(a) of the Agreement are amended in their respective entireties to read as follows: 
  
 (ii) Indebtedness to Adjusted EBITDA. The ratio of Indebtedness outstanding as of the date of determination (which shall not be
more than thirty (30) days prior to the acquisition date) to Adjusted EBITDA (as defined in Section 10.3) for the most recent four (4) Fiscal Quarter period then ended as of such date is less than the lesser of (A) the
Indebtedness to Adjusted EBITDA Ratio then in effect under Section 10.3 reduced by 0.25 and (B) an Indebtedness to Adjusted EBITDA Ratio of 3.00 to 1.00, calculated on a pro forma basis as if the acquisition had occurred as
of the first day of such four (4) Fiscal Quarters and including in the ratio calculation any Debt incurred or assumed in connection therewith as if the Target were a “Prior Target” for purposes of calculating Adjusted EBITDA;

  
 (iii) Purchase Price. The ratio of
Indebtedness outstanding as of the date of determination (which shall not be more than thirty (30) days prior to the acquisition date) to Adjusted EBITDA (as defined in Section 10.3) for the most recent four (4) Fiscal Quarter
period then ended as of such date calculated on a pro forma basis as if the acquisition had occurred as of the first day of such four (4) Fiscal Quarters and including in the ratio calculation any Debt incurred or assumed in connection
therewith as if the Target were a “Prior Target” for purposes of calculating Adjusted EBITDA is: (A) less than or equal to 2.00 to 1.00; or (B) is more than 2.00 to 1.00 but less than the Indebtedness to Adjusted EBITDA Ratio
then in effect under Section 10.3 reduced by 0.25, and (1) the Required Banks shall have provided their prior approval, (2) the proposed acquisition is the Focus Acquisition, or (3) after giving effect to such acquisition,
the aggregate of the Purchase Prices for all Permitted Acquisitions (other than the Focus Acquisition) that have occurred during the then current Fiscal Year (including the Purchase Price for the acquisition in question) is less than Twenty-Five
Million Dollars ($25,000,000) (as used above, the phrase “Purchase Price” means, as of any date of determination and with respect to a proposed acquisition, the purchase price to be paid for the Target or its assets, including all
cash consideration paid (whether classified as purchase price, non-compete, consulting or post-closing performance based payments or otherwise) or to be paid (based on the estimated amount thereof), the value of all other assets to be transferred by
the purchaser in connection with such acquisition to the seller (but specifically excluding any stock of Parent issued to the seller which shall not be part of the Purchase Price for purposes of this clause (iii)) all valued in
accordance with the applicable purchase agreement and the outstanding principal amount of all Debt of the Target or the seller assumed or acquired in connection with such acquisition); 
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 3 








 Section 2.5. Amendment to Section 10.2 – Fixed Charge Coverage. Clause
(s) of the definition of “Consolidated Net Income” contained in Section 10.2 of the Agreement is amended in its entirety to read as follows: 
  
 (s) the one time loss related to the reorganization of certain employees, locations and services of Employee
Assistance Programs International, LLC in an amount not to exceed $5,700,000; 
  
 Section 2.6. 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: (a) 3.00 to 1.00 for the Fiscal Quarter ended November 30, 2005;
(b) 3.50 to 1.00 for the Fiscal Quarter ended February 28, 2006; (c) 3.25 to 1.00 for the Fiscal Quarter ended May 31, 2006; and (d) 3.00 to 1.00 for the Fiscal Quarter ended August 31, 2006 and all Fiscal Quarters
thereafter. 
  
 Section 2.7. 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. 
  
 Consent 
  
 Section 3.1. Consent. Subject to the satisfaction of the conditions precedent described in Article IV hereof, each of the undersigned Banks consent to the Obligated Parties’ departure from the Applicable Covenants as
specifically described above for purposes described herein and agree that such departure will not result in an Event of Default under the Agreement. 
  
 Section 3.2. Limitations on Consent. The consent set forth herein shall not be deemed a consent to the departure from or waiver of (a) the
Applicable Covenants for any purpose other than as described herein, (b) any other covenant or condition in any Loan Document or (c) any Event of Default that otherwise may arise as a result of the formation of HHC Services and its
acquisition of aircraft. The failure to comply with the Applicable Covenants for any other purpose at any other time shall constitute an Event of Default. 
  
 Section 3.3. Joinder of HHC Services; Pledge by Parent. To induce the Banks to agree to the terms of Section 3.1, the Parent, on or
before December 15, 2005, shall (a) cause HHC Services to execute and deliver a Subsidiary Joinder Agreement and such other documentation as the Agent may request to evidence, perfect, or otherwise implement the guaranty and security for
repayment of the Obligations contemplated by a Guaranty and the Subsidiary Security Agreement; provided, however, in accordance with the terms hereof, HHC Services will not be required to pledge its ownership interest in any aircraft,
now owned or hereafter acquired, that is not wholly-owned by HHC Services, and (b) execute and deliver to Agent an amendment to the Parent’s Pledge Agreement describing as collateral thereunder the membership interests in HHC Services.

  
 ARTICLE IV. 
  
 Conditions Precedent 
  
 Section 4.1. Conditions. The effectiveness of Article II and
Article III of this Amendment is subject to the satisfaction of the following conditions precedent: 
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 4 








 (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 other Obligated Parties and the Required Banks; and 
  
 (ii) 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 V. 

 
 Miscellaneous 
  
 Section 5.1. 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 5.2. 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; and (c) the execution, delivery, and performance of this Amendment has been duly authorized by all necessary action on the part of Parent, 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. 
  
 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 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: 
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 5 








 (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 5.3. 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 5.4. 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 5.5. 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 5.6. 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 5.7. 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 5.8. 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 5.9. 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 5.10. 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 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. 
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 6 








 Section 5.11. Headings. The headings, captions, and arrangements used in this Amendment are for
convenience only and shall not affect the interpretation of this Amendment. 
  
 Section 5.12. 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 5.13. Required Banks. The Agreement and the
Consent Letter 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 5.13 hereto. 
  
 Executed as of the date first written above. 
  

			
	PARENT AND BORROWER:
	
	 HORIZON HEALTH CORPORATION
 HORIZON MENTAL HEALTH MANAGEMENT, INC.

		
	By:	 	 /s/ David K. Meyercord

	Name:	 	 David K. Meyercord

	 	 	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/ Denise Parks

	Name:	 	 Denise Parks

	Title:	 	 Senior Vice President



  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 7 









			
	BANK OF AMERICA, NATIONAL ASSOCIATION
		
	By:	 	/s/ Daniel Penkar
	Name:	 	Daniel 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 Beamanti

	Name:	 	 Joanne Beamanti

	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



  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 8 








 OBLIGATED PARTY CONSENT 
  
 Each Obligated Party (i) consents and agrees to this First 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; (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; and (iv) agrees that any reference to the “Borrower” in the Guaranty,
Subsidiary Security Agreement or Subsidiary Pledge Agreement shall mean Horizon Mental Health Management, Inc. as the “Borrower” hereunder successor by assumption to the obligations of the Parent. 
  

			
	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.

		
	By:	 	 /s/ David K. Meyercord

	Name:	 	      David K. Meyercord

	 	 	 Authorized Officer for each Obligated Party



  
  
  
  
  

 CONSENT AND FIRST AMENDMENT TO 
 THIRD AMENDED AND RESTATED CREDIT AGREEMENT, Page 9 








 EXHIBIT A 
 TO 
 HORIZON HEALTH CORPORATION 
 FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT 
  
 Compliance Certificate 
  

 EXHIBIT A, Cover Page 








 COMPLIANCE CERTIFICATE 
 for the 
 Fiscal Quarter ending
                                 ,
             
  

	To:	JPMorgan Chase Bank, N.A. 


	    	P.O. Box 660197 


	    	Dallas, Texas 75266-0197 


	    	Fax No.: (972) 888-7837 


	    	Telephone No.: (972) 888-7802 


	    	Attention: Brian McDougal 

  
 Ladies and Gentlemen: 
  
 This Compliance Certificate (the “Certificate”) is being delivered pursuant to Section 8.1(c) of that certain Third Amended and Restated
Credit Agreement (as amended, the “Agreement”) dated as of June 10, 2005, among the Horizon Health Corporation (“Parent”), Horizon Mental Health Management, Inc. (“Borrower”), the banks and
lending institutions named therein (the “Banks”) and JPMorgan Chase Bank, N.A., as agent for the Banks (“Agent”). All capitalized terms, unless otherwise defined herein, shall have the same meanings as in the
Agreement. All the calculations set forth below shall be made pursuant to the terms of the Agreement. 
  
 The undersigned, as an authorized financial officer of Parent, and not individually, does hereby certify to the Agents and the Banks that: 
  

										
	1.      DEFAULT.
	 No Default has occurred and is continuing or if a Default has occurred and is continuing, I have described on the attached Exhibit A the
nature thereof and the steps taken or proposed to remedy such Default.

					
	 2.      SECTION 8.1 – Financial Statements and Records
	  	 	 	    	 	    	 	    	 
					
	 (a)    Annual audited financial statements of Parent and the Subsidiaries on or before ninety (90) days after the end
of each Fiscal Year.
	  	 	 	    	Yes	    	No	    	N/A
					
	 (b)    Quarterly unaudited financial statements of Parent and the Subsidiaries within forty-five (45) days after the
end of each Fiscal Quarter.
	  	 	 	    	Yes	    	No	    	N/A
					
	 (c)    Financial Projections of Parent and Subsidiaries within forty-five (45) days after the beginning of each
Fiscal Year.
	  	 	 	    	Yes	    	No	    	N/A
					
	 3.      SECTION 8.10(d) – Restricted Group Members
	  	 	 	    	 	    	 	    	 
					
	 EBITDA for the Restricted Group Members for the most recently completed four Fiscal Quarter period not to exceed 12.5% of line 9(f) (such percentage may
increase to 15% or 20% depending on the Borrower’s election to amend Section 10.3):
	  	$	                	    	 	    	 	    	 
					
	 Actual EBITDA for the Restricted Group Members for the most recently completed four Fiscal Quarter period:
	  	$	                	    	Yes	    	No	    	 
			
	 4.      SECTION 9.1 – Debt
	  	 	 	    	 
					
	 (a)    Purchase money not to exceed:
	  	$	5,000,000	    	Yes	    	No	    	 
	 Actual Outstanding:
	  	$	                	    	 	    	 	    	 

  

 COMPLIANCE CERTIFICATE, Page 1 









										
	 (b)    Guarantees of surety, appeal bonds, etc. not to exceed:
	  	$	1,000,000	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
	 (c)    Aggregate Debt of newly acquired or merged Subsidiaries not to exceed:
	  	 	 	    	 	    	 	  	 
	 Capital Lease Obligations
	  	$	10,000,000	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
	 Other Debt:
	  	$	5,000,000	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
	 (d)    Debt owing from Restricted Group Members plus Investments in Restricted Group Members may not exceed 20% of line
8(f)
	  	$	                	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
	 (e)    Other Debt not to exceed:
	  	$	5,000,000	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
					
	 5.      SECTION 9.5 – Investments
	  	 	 	    	 	    	 	  	 
	 (a)    Aggregate amount of loans to physicians employed by a Subsidiary not to exceed (calculated net of bad debt
reserve):
	  	$	500,000	    	 	    	 	  	 
	 Actual Outstanding:
	  	$	                	    	Yes	    	No	  	 
	 (b)    Aggregate amount of investments in Insights in addition to the Purchase Price paid for Insights not to
exceed:
	  	$	1,000,000	    	 	    	 	  	 
	 Actual Aggregate Amount:
	  	$	                	    	Yes	    	No	  	 
	 (c)    Aggregate amount of initial capital contribution made to Friends LP not to exceed without being included in line
4(d)
	  	$	17,500,000	    	 	    	 	  	 
	 Actual Aggregate Amount:
	  	$	                	    	Yes	    	No	  	 
					
	 6.      SECTION 9.8 – Asset Dispositions
	  	 	 	    	 	    	 	  	 
	 (a)    Aggregate book value of assets disposed during current Fiscal Year not to exceed:
	  	$	2,500,000	    	 	    	 	  	 
	 (b)    Total book value of asset dispositions not otherwise permitted for the current Fiscal Year:
	  	$	                	    	Yes	    	No	  	 
					
	 7.      SECTION 9.11 – Prepayment of Debt
	  	 	 	    	 	    	 	  	 
	 (a)    Aggregate amount of Debt, other than the Obligations, prepaid or optionally redeemed during period from the Closing
Date to the Revolving Termination Date not to exceed:
	  	$	2,500,000	    	 	    	 	  	 
	 (b)    Total amount of Debt, other than the Obligations, prepaid or optionally redeemed:
	  	$	                	    	Yes	    	No	  	 
					
	 8.      SECTION 10.1 – Consolidated Net Worth
	  	 	 	    	 	    	 	  	 
	 (a)    Base Consolidated Net Worth
	  	$	                	    	 	    	 	  	 
	 (b)    Cumulative positive Net Income since 2/28/05 Fiscal Quarter end
	  	$	                	    	 	    	 	  	 

  

 COMPLIANCE CERTIFICATE, Page 2 









										
	 (c)    50% of 8(b)
	  	$	                	    	 	    	 	  	 
	 (d)    Aggregate amount of net cash proceeds or other Capital Contribution to Parent since 2/28/05
	  	$	                	    	 	    	 	  	 
	 (e)    Required Consolidated Net Worth:
 8(a) plus 9(c) plus 8(d)
	  	$	                	    	 	    	 	  	 
	 (f)     Actual Consolidated Net Worth
	  	$	                	    	Yes	    	No	  	 
					
	 9.      Section 10.2 – Fixed Charge Coverage
	  	 	 	    	 	    	 	  	 
	 (a)    Parent and the Subsidiaries’ Consolidated Net Income for last four Fiscal Quarters (from
Schedule 1)
	  	$	                	    	 	    	 	  	 
	 (b)    Plus provisions for tax
	  	$	                	    	 	    	 	  	 
	 (c)    less benefit from tax
	  	$	                	    	 	    	 	  	 
	 (d)    Plus interest expense
	  	$	                	    	 	    	 	  	 
	 (e)    Plus amortization and depreciation
	  	$	                	    	 	    	 	  	 
	 (f)     Parent and the Subsidiaries’ EBITDA:
 (9(a) plus 9(b) minus 9(c) plus 9(d) plus 9(e))
	  	$	                	    	 	    	 	  	 
	 (g)    provisions for taxes
	  	$	                	    	 	    	 	  	 
	 (h)    plus benefit from taxes
	  	$	                	    	 	    	 	  	 
	 (i)     minus cash dividends and other distributions made on account of the Parent’s capital
stock
	  	$	                	    	 	    	 	  	 
	 (j)     Cash Flow
 (10(g)  plus 9(h) minus 9(g) minus 9(i))
	  	$	                	    	 	    	 	  	 
	 (k)    Fixed Charges
	  	 	 	    	 	    	 	  	 
	 (i)     Cash interest expense for last four Fiscal Quarters
	  	$	                	    	 	    	 	  	 
	 (ii)    as of each date of determination, the current maturities of long term debt reflected on Parent’s consolidated
balance sheet
	  	$	                	    	 	    	 	  	 
	 (iii)  4/5 of the outstanding Loans (excluded beginning August 31, 2009 and each Fiscal Quarter thereafter)
	  	$	                	    	 	    	 	  	 
	 (iv)   Aggregate amount of Capital Expenditures for last four Fiscal Quarters
	  	$	                	    	 	    	 	  	 
	 (v)    Payments made pursuant to Capital Lease Obligations for last four Fiscal Quarters
	  	$	                	    	 	    	 	  	 
	 (vi)   Payments made with respect to deferred purchase price and performance obligations for last four Fiscal
Quarters
	  	$	                	    	 	    	 	  	 
	 (vi)   Sum of 9(k)(i)+(ii)-(iii)+(iv)+(v)+(vi)
	  	$	                	    	 	    	 	  	 
	 (l)     Actual Fixed Charge Coverage (9(j) : 9(k)(vi))=
	  	 	            :1.00	    	 	    	 	  	 
	 (m)   Minimum Fixed Charge Coverage
	  	 	1.25:1.00	    	Yes	    	No	  	 
					
	 10.    SECTION 10.3 – Indebtedness to Adjusted EBITDA
	  	 	 	    	 	    	 	  	 
	 (a)    Debt for borrowed money
	  	$	                	    	 	    	 	  	 
	 (b)    Debt evidenced by bonds, notes, etc.
	  	$	                	    	 	    	 	  	 
	 (c)    Capital Lease Obligations
	  	$	                	    	 	    	 	  	 
	 (d)    Reimbursement obligations for letters of credit
	  	$	                	    	 	    	 	  	 

  

 COMPLIANCE CERTIFICATE, Page 3 









														
	 (e)    Amount payable with respect to all deferred purchase price and performance
obligations
	  	$	                	  	 	    	 	  	 
	 (f)     Sum of 10(a) through 10(e)
	  	$	                	  	 	    	 	  	 
	 (g)    Actual EBITDA (from 9(f))
	  	$	                	  	 	    	 	  	 
	 (h)    Prior Period/Prior Target EBITDA; provided that, the EBITDA for a Prior Target
will not be included unless it can be established in a manner satisfactory to Agent based on financial statements of the Prior Target prepared in accordance with GAAP without adjustment for expense or other charges that will be eliminated after the
acquisition;
	  	$	                	  	 	    	 	  	 
	 (i)     Adjusted EBITDA (10(g) plus 10(h))
	  	$	                	  	 	    	 	  	 
	 (j)     10(f) : 10(i)
	  	 	            :1.00	  	 	    	 	  	 
	 (k)    Maximum Indebtedness to Adjusted EBITDA allowed by Credit Agreement (see
table below; ratio may decrease to 2.75:1.00 or 2.50:1:00 depending on the Borrower’s election under Section 8.10(d)):
	  	 	 	  	Yes	    	No	  	 
	 	  	 	 	  	 	    	 	  	 
	     Fiscal Quarter ended
November 30, 2005
	  	3.00 to 1.00	  	 	    	 	  	 
	     Fiscal Quarter ended February 28, 2006
	  	3.50 to 1.00	  	 	    	 	  	 
	     Fiscal Quarter ended May 31, 2006
	  	3.25 to 1.00	  	 	    	 	  	 
	     Fiscal Quarter ended
August 31, 2006 and thereafter
	  	3.00 to 1.00	  	 	    	 	  	 
							
	 11.    SECTION 10.4 – Managed Care Contracts
	  	 	  	 	  	 	 	  	 	    	 	  	 
	 (a)    Gross revenue during the immediately preceding 12 month period from contracts providing
exclusively for managed care
	  	 	  	 	  	$	                	  	 	    	 	  	 
	 (b)    Gross revenue during the immediately preceding 12 month period from the managed care
portions of contracts providing for employee assistance services and managed care
	  	 	  	 	  	$	                	  	 	    	 	  	 
	 (c)    Total Managed Care Gross Revenue (11(a) plus (11(b))
	  	 	  	 	  	$	                	  	 	    	 	  	 
	 (d)    Total Gross Revenue during such 12 month period
	  	 	  	 	  	$	                	  	 	    	 	  	 
	 (e)    25% of 11(d)
	  	 	  	 	  	$	                	  	 	    	 	  	 
	 (f)     Maximum Permitted Gross Revenue from Managed Care Contracts
	  	 	  	 	  	 
 	11(c) >
11(e)	  	Yes	    	No	  	 

  

 COMPLIANCE CERTIFICATE, Page 4 









	
	 13.    ATTACHED SCHEDULES

	 Attached hereto as schedules are the calculations supporting the computation set forth above in this Certificate. All information contained herein and on the
attached schedules is true and correct.

	 14.    FINANCIAL STATEMENTS

	 The unaudited financial statements attached hereto were prepared in accordance with GAAP (excluding footnotes) and fairly present (subject to year end audit
adjustments) the financial conditions and the results of the operations of the Persons reflected thereon, at the date and for the periods indicated therein.

	 15.    CREATION OF SUBSIDIARIES.

	 Since the delivery of the last Compliance Certificate, the Obligated Parties have created the following Subsidiaries each of which has been designated as an
Acquisition Subsidiary, a Restricted Group Member or both.

	 
	 16.    CONFLICT

	 In the event of any conflict between the definitions or covenants contained in the Credit Agreement and as they may be interpreted or abbreviated in the Compliance
Certificate, the Credit Agreement shall control.


  
 IN WITNESS WHEREOF,
the undersigned has executed this Certificate effective this          day of
                        ,             . 
  

					
	 HORIZON HEALTH CORPORATION

		
	 By:
	 	  


	 	 	 Name:
	 	  


	 	 	 Title:
	 	  




  
  

 COMPLIANCE CERTIFICATE, Page 5 








 Schedule 1 
 to 
 Compliance Certificate 
  
 Parent Consolidated Net Income 
 for period                              to
                             
  

				
	 1.      GAAP consolidated net income for Parent (the “Subject Person”) excluding the following (to the
extent included):
	  	$	                             
	 (a)    extraordinary gains or losses or nonrecurring revenue or expenses
	  	 	                               
	 (b)    gains on sale of securities
	  	 	                               
	 (c)    losses on sale of securities
	  	 	                               
	 (d)    any gains or losses in respect of the write-up of any asset at greater than original cost or write-down at less
than original cost;
	  	 	                               
	 (e)    any gains or losses realized upon the sale or other disposition of property, plant, equipment or intangible assets
which is not sold or otherwise disposed of in the ordinary course of business;
	  	 	                               
	 (f)     any gains or losses from the disposal of a discontinued business;
	  	 	                               
	 (g)    any net gains or losses arising from the extinguishment of any debt;
	  	 	                               
	 (h)    any restoration to income of any contingency reserve for long term asset or long term liabilities, except to the
extent that provision for such reserve was made out of income accrued during such period;
	  	 	                               
	 (i)     the cumulative effect of any change in an accounting principle on income of prior periods;
	  	 	                               
	 (j)     any deferred credit representing the excess of equity in any acquired company or assets at the date of
acquisition over the cost of the investment in such company or asset;
	  	 	                               
	 (k)    the income from any sale of assets in which the book value of such assets prior to their sale had been the book
value inherited;
	  	 	                               
	 (l)     the income (or loss) of any Person (other than a subsidiary) in which the Subject Person or a subsidiary has
an ownership interest; provided, however, that (i) Consolidated Net Income shall include amounts in respect of the income of such Person when actually received in cash by the Subject Person or such subsidiary in the form of dividends or similar
distributions and (ii) Consolidated Net Income shall be reduced by the aggregate amount of all investments, regardless of the form thereof, made by the Subject Person or any of its subsidiaries in such Person for the purpose of funding any deficit
or loss of such Person;
	  	 	                               
	 (m)   the income of any subsidiaries to the extent the payment of such income in the form of a distribution or repayment of any
Debt to the Subject Person or a Subsidiary is not permitted, whether on account of any restriction in by-laws, articles of incorporation or similar governing document, any agreement or any law, statute, judgment, decree or governmental order, rule
or regulation applicable to such Subsidiary;
	  	 	                               
	 (n)    any reduction in or addition to income tax expense resulting from an increase or decrease in a deferred income tax
asset due to the anticipation of future income tax benefits;
	  	 	                               
	 (o)    any reduction in or addition to income tax expense due to the change in a statutory tax rate resulting in an
increase or decrease in a deferred income tax asset or in a deferred income tax liability;
	  	 	                               

  

 Schedule 1 to Compliance Certificate, Page 1 









				
	 (q)    any gains or losses attributable to returned surplus assets of any pension-benefit plan or any pension credit
attributable to the excess of (i) the return on pension-plan assets over (ii) the pension obligation’s service cost and interest cost;
	  	 	                          
	 (p)    the income or loss of any Person acquired by the Subject Person or a subsidiary for any period prior to the date of
such acquisition;
	  	 	                          
	 	  	 	                          
	 (q)    the income from any sale of assets in which the accounting basis of such assets had been the book value of any
Person acquired by the Subject Person or a subsidiary prior to the date such Person became a subsidiary or was merged into or consolidated with the Subject Person or a subsidiary;
	  	 	                          
	 	  	 	                          
	 (r)     One–time loss relating to reorganization of certain employees, locations and services of Employee
Assistance Programs International, LLC in an amount not to exceed $5,700,000; and
	  	 	                          
	 (s)    any non-cash expense attributable to the expensing of stock option programs of such Person; provided,
however, that Consolidated Net Income shall be reduced by the aggregate amount of cash payments made by such Person during any period for the purpose of funding any such expense.
	  	 	                          
		
	 TOTAL:
	  	$	                    
	 	  	
	


  

 Schedule 1 to Compliance Certificate, Page 2 








 SCHEDULE 5.13 
 TO 
 HORIZON HEALTH CORPORATION 
 CONSENT AND FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT 
 AGREEMENT 
  
 Required Banks 
  

					
	Bank	 	 Required Bank    
 Percentage    
	 	 Banks Agreeing to Consent        
 and First Amendment
(insert        
     % from prior column if Bank        
 signs Amendment then total        
 % in this
column)        

	 1.      JPMorgan Chase
Bank, N.A.
	 	  20.00%	 	 
	 2.      Bank of
America, National Association
	 	  20.00%	 	 
	 3.      Wells Fargo
Bank, N.A.
	 	  20.00%	 	 
	 4.      KeyBank
National Association
	 	  20.00%	 	 
	 5.      Wachovia Bank,
National Association
	 	  12.00%	 	 
	 6.      Amegy Bank,
National Association
	 	    8.00%	 	 
	 Total
	 	100.00%	 	 

  

 Schedule 4.13, Solo Page