Exhibit 99.2
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AMENDMENT NO.
11 AND WAIVER dated as of January 1, 2003 (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);
JPMorgan Chase Bank, formerly 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 "); Wachovia Bank,
National Association, formerly First Union National Bank, a
national banking association, 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 JPMorgan Chase Bank and Wachovia Bank, National
Association, each in its capacity as an issuing bank, the "
Issuing Banks ").
A. The
Lenders and the Issuing Banks have extended credit to the
Borrowers, and have agreed to extend credit to the Borrowers, in
each case pursuant to the terms and subject to the conditions set
forth in the Credit Agreement.
B. The
Parent Borrower has requested that the Required Lenders grant a
waiver of any Event of Default that may exist or occur as a result
of any failure by the Borrowers to comply with any of the financial
covenant requirements for the periods ending September 30,
2002, and December 31, 2002, as set forth in Sections 6.10,
6.11 and 6.12 of the Credit Agreement and to amend certain
provisions of the Credit Agreement, and the Required Lenders are
willing so to grant such waiver and so to amend such provisions, on
the terms and subject to the conditions set forth
herein.
C. Capitalized
terms used but not defined herein have the meanings assigned to
them in the Credit Agreement.
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.
Waivers. (a) The
Lenders hereby waive any Event of Default arising directly as a
result of the failure of the Borrowers to comply with the
requirement of Section 6.10 of the Credit Agreement that the
Borrowers not permit the Interest Expense Coverage Ratio to be less
than 1.95 to 1.00 as tested at September 30, 2002, and
December 31, 2002.
(b) The
Lenders hereby waive any Event of Default arising directly as a
result of the failure of the Borrowers to comply with the
requirement of Section 6.11 of the Credit Agreement that the
Borrowers not permit the Leverage Ratio to be more than 5.00 to
1.00 as tested at September 30, 2002, and December 31,
2002.
(c) The
Lenders hereby waive any Event of Default arising directly as a
result of the failure of the Borrowers to comply with the
requirement of Section 6.12 of the Credit Agreement that the
Borrowers not permit the Senior Debt Ratio to be more than 2.25 to
1.00 as tested at September 30, 2002, and December 31,
2002.
(d) The
waivers provided for in paragraphs (a), (b) and (c) above
shall terminate and expire at 11:59 p.m., New York City time,
on January 15, 2003, and at all times thereafter the Credit
Agreement shall apply in all respects, and the Administrative Agent
and the Lenders shall have all such rights and remedies, as if such
waivers had never been granted. The period commencing on
December 31, 2002, through and including January 15,
2003, is referred to herein as the "Waiver Period".
SECTION
2.
Amendment.
(a) Section 2.03 of the Credit
Agreement is hereby amended by inserting at the end
thereof:
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Notwithstanding anything to the contrary in this
Section 2.03, on and after January 1, 2003, the Lenders
shall not be obligated to make any Eurodollar Loan.
(b) Section 2.10
of the Credit Agreement is hereby amended by inserting at the end
thereof:
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Notwithstanding anything to the contrary in this
Section 2.10, on and after January 1, 2003, (a) each
Eurodollar Borrowing with an Interest Period ending on or after
January 1, 2003, that is not repaid in full at the end of such
Interest Period shall be automatically continued at the end of such
Interest Period as an ABR Borrowing and (b) any request to
convert any portion of any ABR Borrowing to a Eurodollar Borrowing,
to convert any Interest Period or to continue any Eurodollar
Borrowing shall be ineffective.
SECTION
3.
Agreements.
(a) Each of the Borrowers and the
Lenders agrees that, notwithstanding the provisions of
Section 2.01(b) and (c) and Section 2.24(a) of the Credit
Agreement, during the Waiver Period, the Lenders will not be
obligated to make any Revolving Loan or Swingline Loan to the
extent (i) the sum of (x) the amount of such Revolving
Loan or Swingline Loan, (y) the amount of Available
Unrestricted Cash (as hereinafter defined) as set forth on the
Consolidated Magellan Cash Flow Statement (as hereinafter defined)
most recently delivered to the Lenders and (z) the amount by
which then outstanding Revolving Loans and Swingline Loans (not
including the Revolving Loans or Swingline Loan then being
requested) exceeds $45,000,000 would exceed (ii) $20,000,000.
Each of the Borrowers and the Lenders agrees that, notwithstanding
the provisions set forth in Section 2.02(a) of the Credit
Agreement, during the Waiver Period, each Revolving Loan shall be
in an aggregate principal amount that is an integral multiple of
$100,000 and not less than $3,000,000 (or, if less, the entire
amount then available for a Borrowing as provided
herein).
(b) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions set forth in the definition of the term "Applicable
Percentage" in Section 1.01 of the Credit Agreement, during
the Waiver Period, the "Eurodollar Spread", "ABR Spread" and "Fee
Percentage", in each case as used in the definition of the term
"Applicable Percentage", shall be 3.50%, 2.50% and 1.00%,
respectively.
(c) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions set forth in the definition of the term "Asset Sale" in
Section 1.01 of the Credit Agreement, during the Waiver
Period, any sales, transfers or other dispositions of Real Estate
for Sale in one transaction or a series of related transactions
having an aggregate value in excess of $200,000 shall be deemed to
be an "Asset Sale" for purposes of Section 2.13(a) of the
Credit Agreement.
(d) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions of Section 2.06(a) and (b) of the Credit Agreement,
during the Waiver Period, the interest rate spreads set forth in
Section 2.06(a) of the Credit Agreement with respect to
Tranche B Term Loans and Tranche C Term Loans shall be 3.25% and
3.50%, respectively and (ii) the interest rate spreads set
forth in Section 2.06(b) of the Credit Agreement with respect
to Tranche B Term Loans and Tranche C Term Loans shall be 4.25% and
4.50%, respectively.
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(e) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions of Section 2.13(a) of the Credit Agreement, during
the Waiver Period, the reference to "$2,500,000" in
Section 2.13(a) of the Credit Agreement shall be deemed to be
"$1,000,000".
(f) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions of Section 2.13(c) of the Credit Agreement, during
the Waiver Period, the reference to "$5,000,000" in
Section 2.13(c) of the Credit Agreement shall be deemed to be
"$1,000,000".
(g) Each
of the Borrowers and the Lenders agrees that, notwithstanding the
provisions of Section 2.13(d) of the Credit Agreement, during
the Waiver Period, the reference to "$5,000,000" in
Section 2.13(d) of the Credit Agreement shall be deemed to be
"$1,000,000".
(h) The
Parent Borrower agrees (i) to deliver to the Administrative
Agent, not later than January 10, 2003, a detailed report
setting forth its plans with respect to a refinancing of the
Obligations under the Credit Agreement, including a list of
financing sources that the Parent Borrower has contacted prior to
such date and additional financing sources that the Parent Borrower
proposes to contact and a timetable for engaging in discussions
with such financing sources regarding such refinancing,
(ii) to deliver promptly to the Administrative Agent copies of
all communications and correspondence with financing sources with
respect to such refinancing and (iii) to use its commercially
reasonable efforts to effect such refinancing.
SECTION
4.
Prohibition on Certain Transactions.
During the Waiver Period, the Borrowers
will not, and will not cause or permit any of the Subsidiaries
(other than the Subsidiary Non-Guarantors, except with respect to
Section 6.01) to, effect any transaction that would be
permitted by:
(a) paragraphs (d),
(i), (j) and (k) of Section 6.01 of the Credit
Agreement;
(b) paragraphs (c)
and (e) of Section 6.01 of the Credit Agreement to the
extent the aggregate amount of Indebtedness incurred since
September 30, 2002, and remaining outstanding under
paragraphs (c), (e) and (f) of Section 6.01 would exceed
$10,000,000 at any time;
(c) paragraph (k)
of Section 6.02 of the Credit Agreement;
(d) paragraph (r)
of Section 6.02 of the Credit Agreement to the extent such
Liens would apply to any assets other than Restricted Cash (as used
herein, "Restricted Cash" shall mean, at any time, cash or cash
equivalents held by the Parent Borrower and its Subsidiaries that,
in accordance with GAAP and otherwise consistent with the Parent
Borrower's classification thereof in its prior financial
statements, would be classified as "restricted cash" on the Parent
Borrower's consolidated balance sheet at such time);
(e) Section 6.03
of the Credit Agreement;
(f) paragraphs (c),
(f), (n) and (o) of Section 6.04 of the Credit
Agreement;
(g) paragraphs (g)
and (h) of Section 6.04 of the Credit Agreement to the extent
(i) the aggregate amount of loans, advances and investments
outstanding under such paragraphs would exceed $5,000,000 or
(ii) such loans, advances and investments are made other than
in the ordinary course of business and consistent with past
practices;
(h) paragraph (d)
and (e) of Section 6.05 of the Credit Agreement;
and
(i) paragraph (a)(ii)
of Section 6.06 of the Credit Agreement.
SECTION
5.
Financial Information.
On a weekly basis during the Waiver Period,
the Parent Borrower shall provide to the Administrative Agent and
the Agent's Advisor (as hereinafter defined) (for distribution to
the Lenders) on Friday of each week (i) an analysis of actual
cash flows (including receipts and disbursements) for the
immediately preceding week, including the amount of Available
Unrestricted Cash, and a reconciliation of projected cash flows for
such week to actual cash flows for
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such week (the " Consolidated Magellan Cash Flow Statement"
) and (ii) a report containing any other
information relating to the Parent Borrower's financial condition
and operations as the Administrative Agent may reasonably request,
in each case in form and substance reasonably satisfactory to the
Administrative Agent and certified by a Financial Officer. In
addition, on January 3, 2003, the Parent Borrower shall
provide to the Administrative Agent and the Agent's Advisor (for
distribution to the Lenders) a cash forecast of the Parent Borrower
and the Subsidiaries for the 90-day period commencing on the date
of each such report setting forth such cash flows on a weekly
basis, including the projected amount of Available Unrestricted
Cash. As used herein, " Available
Unrestricted Cash" means cash and cash
equivalents (i) held by the Parent Borrower and available for
use to pay its working capital and other general corporate
obligations free of any required regulatory or contractual
restrictions or approvals (excluding contractual restrictions on
dividends and distributions in the 2001 Notes Indenture, the
Subordinated Notes Indenture, the Credit Agreement, and other debt
instruments), and (ii) held by any Subsidiaries and available
for dividend or distribution, directly or indirectly, to the Parent
Borrower for use as described in the preceding clause (i),
free of any required regulatory or contractual restrictions or
approvals.
SECTION
6.
Certain Payments.
During the Waiver Period, the Borrowers
will not, and will not cause or permit any of the Subsidiaries to,
pay (whether in cash or otherwise, including through the issuance
of Letters of Credit), offer to commit to pay or prepay, any
contractual payment obligation, deferred earn-out obligation or
other performance-based payment obligation incurred in connection
with any Permitted Acquisition or any other contract or agreement,
other than any such payments made substantially contemporaneously
when due in accordance with the terms of the applicable agreement
relating to any such obligation.
SECTION
7.
Cooperation.
(a) The Parent Borrower shall make its
senior management and Gleacher Partners, LLC (the "
Financial Advisor" )
available for meetings and conference calls with the Lenders and
Alvarez & Marsal, Inc. (the " Agent's Advisor" ) as frequently
as reasonably requested by the Administrative Agent. In addition,
the Parent Borrower agrees to provide the Agent's Advisor access to
its management, employees and the Financial Advisor, at the
reasonable request of the Agent's Advisor, to review and discuss
the Parent Borrower's business and financial plan.
(b) The
Parent Borrower shall cooperate with, and provide assistance to,
the Administrative Agent and the Agent's Advisor in their
performance of reasonable due diligence activities with respect to
the Parent Borrower and the Subsidiaries, including, at the
Administrative Agent's option, an examination of accounts
receivable, cash, accounting policies and procedures and such other
aspects of the operations, business affairs and financial condition
of the Parent Borrower or any Subsidiary as the Administrative
Agent may reasonably request. No later than five Business Days
after written demand therefor, the Parent Borrower shall pay all
reasonable costs and out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates (including all reasonable
fees, charges and disbursements of counsel to the Administrative
Agent) in connection with any such due diligence
activities.
SECTION
8.
Events of Default.
Any failure by any Borrower to comply with
any term, condition or agreement set forth in Section 4, 5, 6
or 7 of this Amendment shall constitute an immediate Event of
Default for all purposes under the Loan Documents, subject to a
five Business Day grace period in the case of a failure to comply
with Section 5 of this Amendment.
SECTION
9.
Representations and Warranties.
Each Borrower represents and warrants to
the Administrative Agent and to each of the Lenders
that:
(a) This
Amendment has been duly authorized, executed and delivered by it
and constitutes a legal, valid and binding obligation of each Loan
Party hereto, enforceable against such Loan Party in accordance
with its terms.
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(b) After
giving effect to this Amendment, the representations and warranties
set forth in Article III of the Credit Agreement are true and
correct in all material respects on and as of the date hereof with
the same effect as if made on and as of the date hereof, except to
the extent such representations and warranties expressly relate to
an earlier date.
(c) Immediately
after giving effect to this Amendment, no Default has occurred and
is continuing.
(d) All
Indebtedness and Liens incurred, and investments made, by the
Parent Borrower or any of the Subsidiaries (other than the
Subsidiary Non-Guarantors, except with respect to
Section 6.01) pursuant to Section 6.01(c), (d), (e), (f),
(i), (j) and (k), Section 6.02(k) and (r), and
Section 6.04(c), (f), (g), (h), (n) and (o) of the Credit
Agreement that remain outstanding on the date hereof are identified
on Schedules I, II, III, respectively, to this Amendment, and all
transactions effected by the Parent Borrower or any of the
Subsidiaries pursuant to Section 6.03 of the Credit Agreement,
Section 6.05(d) and (e) of the Credit Agreement or
Section 6.06(a)(ii) of the Credit Agreement through and
including the date hereof are identified on Schedules IV, V and VI,
respectively, to this Amendment.
(e) No
Eurodollar Borrowing has been made or requested since
December 18, 2002, and no conversion of any Borrowing or an
Interest Period has been made or requested since December 18,
2002.
SECTION
10.
Conditions to Effectiveness.
This Amendment shall become effective as of
January 1, 2003, when (a) the Administrative Agent shall
have received counterparts of this Amendment that, when taken
together, bear the signatures of the Borrowers and the Required
Lenders, (b) the representations and warranties set forth in
Section 9 hereof are true and correct and (c) all fees
and expenses submitted to the Borrowers and required to be paid or
reimbursed by the Borrowers under or in connection with this
Amendment and the Credit Agreement (including (i) all
reasonable invoiced fee
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