S-3

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As filed with the Securities and Exchange Commission on June 29, 2001

Registration No. 333-      

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

MAGELLAN HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	58-1076937
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6950 Columbia Gateway Drive
Columbia, Maryland 21046
(410) 953-1000
(Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices)

MARK S. DEMILIO, ESQ.
EXECUTIVE VICE PRESIDENT, FINANCE AND LEGAL
MAGELLAN HEALTH SERVICES, INC.
6950 Columbia Gateway Drive
Columbia, Maryland 21046
(410) 953-1000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement.

   If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ]

   If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X]

   If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

   If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

   If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

TITLE OF SHARES TO BE REGISTERED	AMOUNT TO BE REGISTERED			PROPOSED MAXIMUM OFFERING PRICE PER UNIT			PROPOSED MAXIMUM AGGREGATE OFFERING PRICE			AMOUNT OF REGISTRATION FEE
Series A Cumulative Convertible Preferred Stock		80,063		$	1,000	(1)	$	80,063,000	(1)	$	21,137
Common Stock		16,273,573	(2)	$	12.51	(3)	$	96,746,335	(3)	$	25,541
Series A Junior Subordinated Convertible Debentures due December 15, 2009	$	80,063,000		$	—		$	—		$	—	(4)

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act.

(2)

A total of 8,540,053 shares of Magellan Health Services, Inc. common stock may be issued upon conversion of the Series A Cumulative Convertible Preferred Stock. No additional consideration will be received upon the issuance of such shares of common stock and, therefore, no registration fee is due with respect to such shares, pursuant to Rule 457(i) under the Securities Act. In accordance with Rule 416 under the Securities Act, this registration statement also covers an indeterminable number of shares of Magellan Health Services, Inc. common stock as may become issuable upon conversion of the Series A Cumulative Convertible Preferred Stock to prevent dilution resulting from stock splits, stock dividends and similar transactions pursuant to the terms of the Series A Cumulative Convertible Preferred Stock. The remaining 7,733,520 shares of Magellan Health Services, Inc. common stock registered hereby may be issued in payment of dividends on the Series A Cumulative Convertible Preferred Stock or interest on the Series A Junior Convertible Debentures.

(3)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) based on the average of the high and low price per share of Magellan Health Services, Inc. common stock on June 28, 2001, as reported on the New York Stock Exchange.

(4)

The Series A Junior Convertible Debentures may be issued in exchange for the Series A Cumulative Convertible Preferred Stock. No additional consideration will be received upon the issuance of the Series A Junior Convertible Debentures and, therefore, no registration fee is due with respect to them pursuant to Rule 457(i).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

SUBJECT TO COMPLETION
PROSPECTUS DATED            

MAGELLAN HEALTH SERVICES, INC.

16,273,573 shares of Common Stock

80,063 shares of Series A Cumulative Convertible Preferred Stock

$80,063,000 Series A Junior Subordinated Convertible Debentures due December 15, 2009

    We are registering shares of our preferred stock, common stock and junior subordinated convertible debentures to provide certain security holders and their affiliates and transferees, who we refer to collectively as the "selling security holders," with freely tradable securities pursuant to a registration rights agreement to which we are a party.

    We will not receive any of the proceeds from the sale of the shares of preferred stock, common stock or junior subordinated convertible debentures by the selling security holders.

Investing in these securities involves certain risks. See the section of this prospectus called "Risk Factors" beginning on page 10.

    You should read this prospectus and any documents incorporated in this prospectus before you invest.

    Our common stock is listed on the New York Stock Exchange under the symbol "MGL." On June 28, 2001, the last reported sale price of our common stock was $12.45 per share. We urge you to obtain a current sale price for our common stock before you buy any of the securities offered by this prospectus.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

The date of this prospectus is            , 2001.

TABLE OF CONTENTS

	Page
SUMMARY	1
RISK FACTORS	10
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS	21
DESCRIPTION OF SERIES A PREFERRED STOCK	22
THE OPTION	33
DESCRIPTION OF THE SERIES A DEBENTURES	34
DESCRIPTION OF OTHER INDEBTEDNESS	46
REGISTRATION RIGHTS AGREEMENT	51
USE OF PROCEEDS	53
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	54
SELLING SECURITYHOLDERS	64
PLAN OF DISTRIBUTION	66
VALIDITY OF SECURITIES	68
EXPERTS	68
WHERE YOU CAN FIND MORE INFORMATION	68
FORWARD-LOOKING STATEMENTS	69

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REFERENCES TO ADDITIONAL INFORMATION

    This prospectus incorporates important business and financial information about us from documents that are not included in or delivered with this document. You can obtain documents incorporated by reference in this prospectus (other than certain exhibits to those documents) by requesting them in writing or by telephone from us at the following address:

Investor Relations
Magellan Health Services, Inc.
6950 Columbia Gateway Drive
Columbia, Maryland 21046
(410) 953-1000

     YOU WILL NOT BE CHARGED FOR ANY OF THESE DOCUMENTS THAT YOU REQUEST.

    See the section of this prospectus called "Where You Can Find More Information."

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SUMMARY

This brief summary highlights selected information from this prospectus and documents we have incorporated in this prospectus by reference. It does not contain all of the information that is important to you. We urge you to read carefully the entire prospectus, the documents incorporated in this prospectus by reference and the other documents to which this prospectus refers, including our consolidated financial statements and the notes to those consolidated financial statements, which are incorporated in this prospectus by reference.

MAGELLAN HEALTH SERVICES, INC.

    Magellan Health Services, Inc., which was incorporated under the laws of the State of Delaware in 1969, is a national healthcare company. We are the nation's largest provider of behavioral managed healthcare services according to enrollment data reported in "Open Minds Yearbook of Managed Behavioral Health Market Share in the United States, 2000-2001" published by Open Minds, Gettysburg, Pennsylvania ("Open Minds"). As of March 31, 2001, we had approximately 69.7 million covered lives under behavioral managed healthcare contracts and managed behavioral healthcare programs for approximately 3,300 customers. Through our current network of approximately 40,000 providers and 5,000 treatment facilities, we manage behavioral healthcare programs for health maintenance organizations ("HMOs"), Blue Cross/Blue Shield organizations and other insurance companies, corporations, federal, state and local governmental agencies, labor unions and various state Medicaid programs. We believe we have the largest and most comprehensive behavioral healthcare provider network in the United States. Our common stock is publicly traded on the New York Stock Exchange under the symbol "MGL."

    For a full description of our business, including the risks involved in our business, refer to our most recently filed Annual Report for fiscal year ended September 30, 2000 filed on Form 10-K/A which is incorporated into this prospectus by reference.

    Our principal executive offices are located at 6950 Columbia Gateway Drive, Columbia, Maryland 21046, and our main telephone number is (410) 953-1000.

SECURITIES BEING OFFERED

    This prospectus covers the offer and sale of the following:

•

80,063 shares of our Series A Cumulative Convertible Preferred Stock, no par value per share, which we refer to as the "Series A preferred stock."



•

$80,063,000 aggregate principal amount of our Series A Junior Subordinated Convertible Debentures due December 15, 2009, which we refer to as the "Series A debentures" or the "debentures."



•

16,273,573 shares of our common stock, par value $0.25 per share, which we refer to as the "common stock," issuable upon conversion of the Series A preferred stock or Series A debentures, and in payment of dividends on the Series A preferred stock or interest on the Series A debentures.

    We issued a total of 59,063 shares of Series A preferred stock on December 15, 1999 to TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors II, L.P. and TPG 1999 Equity Partners, L.P., who we sometimes refer to as the "initial purchasers," in a private placement. We made the private placement under an investment agreement (the "investment agreement"), as amended and restated as of December 14, 1999, between an affiliate of the initial purchasers and us. Under the investment agreement, and a related assignment agreement, the initial purchasers also have the option (the "Option") to purchase 21,000 additional shares of Series A preferred stock for $1,000 per share. For

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more information regarding the Option, see the section of this prospectus called "The Option." The investment agreement has been filed as an exhibit to the registration statement of which this prospectus is a part.

TERMS OF THE SERIES A PREFERRED STOCK

Stated Value	The stated value of each share of Series A preferred stock is $1,000.
Dividends	Holders of the Series A preferred stock are entitled to receive dividends.
	•	Dividends accumulate at the rate of 6.50% per year on the stated value of the Series A preferred stock.
	•	In general, dividends are payable in four equal quarterly installments on the last business day of March, June, September and December of each year commencing in March 2000. However, we have the right to elect not to make any dividend payment when due on a dividend payment date. In such case, we will remain obligated to make the missed dividend payment, and additional dividends will accumulate on the missed payment. As of the date of this prospectus, we have not made any dividend payments in respect of the Series A preferred stock.
	•	We have the right to issue shares of common stock to pay dividends on the Series A preferred stock. However, there are many restrictions on our ability to do so. See the section of this prospectus called "Description of Series A Preferred Stock—Dividends" for a more detailed discussion of this subject.
	•	We may only pay dividends out of funds legally available for the payment of dividends under Delaware law. In addition, under certain instruments relating to our indebtedness, we are subject to restrictive covenants that may limit our ability to pay dividends. See the section of this prospectus called "Description of Other Indebtedness" for a description of these covenants. If we fail to make a dividend payment when due, we will not be released from our obligation to make that dividend payment, and additional dividends will accumulate on the missed payment.
Mandatory Redemption	We are required to redeem all outstanding shares of Series A preferred stock on December 15, 2009, at a redemption price in cash for each share equal to (a) $1,000 (the stated value of the Series A preferred stock), plus (b) all accrued and unpaid dividends to the date of payment of the redemption price.
Optional Conversion	Holders of the Series A preferred stock may convert any or all of their shares of Series A preferred stock, including all accrued and unpaid dividends on those shares, into shares of common stock. Each share of Series A preferred stock is convertible into the number of shares of common stock determined by dividing (a) the sum of $1,000 (the stated value of the Series A preferred stock), plus all accrued and unpaid dividends in respect of the share being converted, by (b) the conversion price.

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	As of the date of this prospectus, the conversion price was $9.375. The conversion price of the Series A preferred stock is subject to adjustment to protect against dilution.
Mandatory Conversion	We have the right to require that all of the Series A preferred stock be converted into shares of common stock in the following circumstances:
	•	if the average closing price per share of common stock exceeds 200% of the conversion price for 180 consecutive calendar days, ending no earlier than December 15, 2000 and no later than December 15, 2001, and for the last two calendar weeks of such 180 consecutive calendar-day period; or
	•	if the average closing price per share of common stock exceeds 200% of the conversion price for 45 consecutive trading days, ending no earlier than December 15, 2001, and for the last two calendar weeks of such 45 consecutive trading-day period.
	If we require that the Series A preferred stock be converted into common stock, the shares will be converted on the same terms as if they were converted at the option of the holder.
	We will not be allowed to require that shares of Series A preferred stock be converted into shares of common stock unless:
	•	our common stock has been validly listed for trading on a national securities exchange or quoted on a nationally recognized quotation system during the relevant period described above and as of the date of the exchange;
	•	the average daily trading volume in our common stock during the relevant period described above is at least 50% of the average daily trading volume in our common stock for the 180-day period ending on July 19, 1999; and
	•	as of the date of the conversion, the registration statement, of which this prospectus is a part, is effective under the Securities Act of 1933 and is available for use in connection with the offer and sale of the common stock in accordance with the registration rights agreement.
Change of Control Redemption	If a "change of control" occurs with respect to us, holders of Series A preferred stock may require us to redeem any or all of the shares of Series A preferred stock they hold at a redemption price in cash for each share equal to (a) $1,010 (101% of the stated value of the Series A preferred stock), plus (b) all accrued and unpaid dividends to the date of payment of the redemption price.
	Generally, a "change of control" will occur when:
	•	a person or group of persons acquires direct or indirect ownership of more than 35% of the voting power of our outstanding equity securities unless that person or group of persons owned 5% of our equity securities as of February 12, 1998;
	•	a majority of the seats of our board of directors is held by persons neither nominated nor appointed by our board of directors;

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	•	any change in control occurs under any indenture or agreement for indebtedness for borrowed money with an aggregate outstanding principal amount in excess of $10,000,000 and to which we or certain of our subsidiaries is a party; or
	•	a change in control occurs under our Credit Agreement, dated February 12, 1998 (the "Credit Agreement"), while at least $10,000,000 million in principal amount of our 9.375% Senior Notes due 2007 (the "Senior Notes") are outstanding, the indenture governing the Senior Notes (the "Senior Notes Indenture") or while at least $10,000,000 million in principal amount of our 9% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes") are outstanding, the indenture governing our Senior Subordinated Notes (the "Senior Subordinated Notes Indenture"); provided, however, that no event described above will constitute a "change of control" if such event resulted directly from any action taken by TPG Magellan LLC or any of its affiliates.
	The right of a holder of Series A preferred stock to receive payment of the redemption price payable upon a change of control is subordinated to the payment in full of all amounts outstanding under our Credit Agreement, our Senior Notes, and our Senior Subordinated Notes. In addition, restrictive covenants in the Credit Agreement, the Senior Notes and the Senior Subordinated Notes may limit our ability to redeem shares of Series A preferred stock upon a change of control.
Ranking	With respect to the right to receive dividends and payments upon our liquidation, dissolution or winding up, the Series A preferred stock ranks:
	•	senior to our common stock and, except as specified below, all other classes and series of capital stock that we issue in the future;
	•	equal to each other class of preferred stock that provides that it ranks equal to the Series A preferred stock; and
	•	junior to each other class of preferred stock that provides that it ranks senior to the Series A preferred stock.
	Currently, there are no classes of preferred stock issued or outstanding other than the Series A preferred stock. The consent of holders of 67% of the outstanding shares of Series A preferred stock is required for us to create a class of preferred stock that ranks senior to the Series A preferred stock. There is no limitation on our right to create a class of preferred stock that has the same rank as the Series A preferred stock.
Liquidation Preference	Upon our liquidation, dissolution or winding up, a holder of a share of Series A preferred stock is entitled to receive the greater of the following amounts before any payment is made to securities that rank junior to the Series A preferred stock:
	•	$1,000 (the stated value of the Series A preferred stock), plus the accrued and unpaid dividends, if any, on the share of Series A preferred stock to the date of final distribution to the holders of Series A preferred stock, and

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	•	the amount that would be payable if the share of Series A preferred stock had been converted into shares of common stock immediately prior to such liquidation, dissolution or winding up.
	If the assets or proceeds from such a liquidation, dissolution or winding up are insufficient to make these payments, then the assets and proceeds will be distributed ratably among holders of Series A preferred stock and any securities that have the same ranking with respect to payments on liquidation as the Series A preferred stock.
Exchange for Debentures	Once the Option to acquire additional Series A preferred stock held by the initial purchasers has been exercised or has expired, we have the right to exchange Series A debentures for all of the outstanding shares of Series A preferred stock on any dividend payment date. We may effect an exchange only if:
	•	full cumulative dividends have been paid, accrued or set aside for payment on all outstanding shares of the Series A preferred stock to be exchanged;
	•	we have amended our certificate of incorporation to give holders of the Series A debentures the same voting rights as holders of Series A preferred stock; and
	•	we are not notified by a holder of Series A preferred stock that the exchange would result in any adverse tax consequences to that holder.
	The indenture that will govern the Series A debentures, (the "Series A debentures indenture"), will have terms comparable to the terms of the Series A preferred stock, including an interest rate that is the same as the dividend rate on the Series A preferred stock. For a description of the Series A debentures, see the section of this prospectus called "Description of the Series A Debentures."
Voting Rights	A holder of an outstanding share of Series A preferred stock is entitled to vote on all matters voted on by holders of common stock. Holders of Series A preferred stock will vote together with holders of common stock as a single class. Each share of Series A preferred stock entitles the holder to a number of votes equal to the number of shares of common stock into which the share of Series A preferred stock is convertible on the record date for the vote.
	If dividends have not been paid in full when required on the Series A preferred stock, or the Series A preferred stock has not been redeemed when required, the holders of a majority of the outstanding shares of Series A preferred stock will have the exclusive right, voting together as a single class, to designate two directors to our board of directors. If we exercise our right to elect not to make any dividend payment when due on a dividend payment date, this will not give the holders of Series A preferred stock the right to designate any directors.

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If the initial purchasers, certain assignees of the initial purchasers and their respective affiliates own a majority of the Series A preferred stock, and (1) any default or event of default under any instrument or agreement evidencing our indebtedness or indebtedness of any of our subsidiaries in an outstanding principal amount of more than $10,000,000 has given rise to the acceleration of, or the right to accelerate, the maturity date of that indebtedness, and (2) such default is not cured or waived within 75 days, the holders of a majority of the outstanding Series A preferred stock then held by the initial purchasers, certain assignees of the initial purchasers and their respective affiliates voting together as single class will have the right to designate a majority of the members of our board of directors.
We are required to obtain the consent of holders of at least 67% of the outstanding shares of Series A preferred stock before we:
•	authorize, create or issue, or increase the authorized amount of, any capital stock senior to the Series A preferred stock, or any capital stock or any security convertible or exercisable into capital stock that is mandatorily redeemable or redeemable at the holder's option on or prior to December 15, 2009;
•	amend or repeal any provision of our certificate of incorporation or bylaws to alter the powers, preferences or special rights of the Series A preferred stock adversely; or
•	authorize or take any action that alters any of the rights of the Series A preferred stock and the holders of any class or series of our capital stock have the right to vote on such action.

    For detailed information regarding the Series A preferred stock, you should refer to the section of this prospectus entitled "Description of Series A Preferred Stock."

TERMS OF THE SERIES A DEBENTURES

General	As discussed above, under certain circumstances we have the right to exchange Series A debentures for all of the outstanding shares of Series A preferred stock. A form of the indenture for the Series A debentures has been filed as an exhibit to the registration statement of which this prospectus is a part.
Principal	Upon an exchange of Series A debentures for Series A preferred stock, holders of Series A preferred stock will be entitled to receive debentures with a principal amount equal to $1,000 in exchange for each share of Series A preferred stock.
Maturity	The Series A debentures will mature on December 15, 2009.
Interest	The Series A debentures will bear interest at a rate of 6.50% per year.

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	Interest is payable on the Series A debentures in equal quarterly installments on the last day of March, June, September and December of each year. However, we may elect not to make any payment of interest on the Series A debentures when due on an interest payment date (other than an interest payment due on the repayment of principal, redemption or repurchase of Series A debentures, or upon our liquidation, dissolution or winding up). If we elect not to make an interest payment, we will still be obligated to pay such amount, which is called an arrearage, and such amount will bear interest. Any arrearage and the interest payable on any arrearage may be paid at any time, in whole or in part, before or after the regular interest payment dates, to registered holders of the Series A debentures on a record date fixed by the board of directors and falling no less than 10 days prior to the corresponding payment date.
	We have the right to issue shares of common stock to pay interest on the Series A debentures. However, there are many restrictions on our ability to do so. See the section of this prospectus called "Description of Series A Debentures—Interest" for a more detailed discussion of this subject.
	We are subject to restrictive covenants that may limit our ability to pay interest on the Series A debentures. See the section of this prospectus called "Description of Other Indebtedness" for a description of these covenants.
Subordination	The indebtedness evidenced by the Series A debentures will be subordinated in right of payment to the prior payment in full of all "senior indebtedness." Senior indebtedness generally includes:
	•	our outstanding Senior Notes, and any replacements or refinancings thereof;
	•	our outstanding Senior Subordinated Notes, and any replacements or refinancings thereof;
	•	any indebtedness incurred by us under our Credit Agreement, and any replacements or refinancings thereof; and
	•	any other indebtedness incurred by us, excluding liabilities for taxes, indebtedness to our subsidiaries or other affiliates, trade payables, indebtedness that is contractually subordinated to the Series A debentures and obligations with respect to our equity securities.
	For more information on the subordination of the Series A debentures, see the sections of this prospectus called "Description of the Series A Debentures—Subordination."
	The Series A debentures will also be effectively subordinated to creditors (including trade creditors) and preferred stockholders (if any) of our subsidiaries.

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	As of March 31, 2001, the aggregate amount of our outstanding senior indebtedness was $1,004.4 million (exclusive of unused commitments). The indebtedness outstanding under our Credit Agreement is secured indebtedness and is guaranteed by substantially all of our subsidiaries. As of March 31, 2001, the total liabilities (excluding subsidiary guarantees of amounts outstanding under our Credit Agreement) of our subsidiaries were approximately $386.3 million, including trade payables. The indenture for the Series A debentures does not contain restrictions on our or our subsidiaries' ability to incur additional indebtedness.
Optional Redemption	The Series A debentures are not subject to optional redemption.
Change of Control Redemption	If a "change of control" occurs with respect to us, holders of Series A debentures may require us to redeem any or all of the Series A debentures that they hold, at a redemption price for each Series A debenture equal to 101% of the principal amount of the Series A debenture to be redeemed, plus accrued and unpaid interest to the redemption date. Events that constitute a "change of control" generally are described above in "—Terms of the Series A Preferred Stock—Change of Control Redemption."
	The right of a holder to receive payment of the redemption price payable upon a change of control is subordinated to the payment in full of all amounts outstanding under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes. In addition, restrictive covenants in the Credit Agreement, the Senior Notes and the Senior Subordinated Notes may limit our ability to redeem Series A debentures upon a change of control.
Voting Rights	Holders of Series A debentures will have voting rights that are substantially similar to the voting rights of holders of Series A preferred stock. These voting rights are summarized above in "—Terms of the Series A Preferred Stock—Voting Rights." See the section of this prospectus called "Description of the Series A Debentures—Voting Rights" for a more detailed description of the subject.
Conversion	The Series A debentures are subject to mandatory and optional conversion into shares of common stock on substantially the same terms that apply to the Series A preferred stock. The conversion provisions are summarized above in "—Terms of the Series A Preferred Stock—Mandatory Conversion" and "—Optional Conversion." See the section of this prospectus called "Description of the Series A Debentures—Conversion into Common Stock" for a more detailed description of the subject.

    For detailed information regarding the Series A debentures, you should refer to the section of this prospectus entitled "Description of the Series A Debentures."

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OTHER

Use of Proceeds	We will not receive any proceeds from the sale of the Series A preferred stock, the Series A debentures or the shares of common stock covered by this prospectus; all proceeds will be received by the selling securityholders.
Shelf Registration Statement	Under the registration rights agreement, dated as of July 19, 1999, between us and an affiliate of the initial purchasers, we have agreed to use our best efforts to keep effective a shelf registration statement under which the selling securityholders may offer and sell the Series A preferred stock, the Series A debentures, and the common stock issuable upon the conversion of the Series A preferred stock and the Series A debentures, in payment of dividends on the Series A preferred stock and in payment of interest on the Series A debentures. We refer to these securities together as the "registrable securities." Generally, we are required to keep the shelf registration statement effective until:
	•	10 years after the date it is first declared effective; or
	•	if earlier, the date that all registrable securities have been sold under the shelf registration statement or on which the initial purchasers and their affiliates are no longer entitled to appoint directors to our board of directors under the investment agreement and are permitted to sell their registrable securities without registration under Rule 144(k) under the Securities Act.
	The shelf registration statement generally is intended to permit the selling securityholders to resell the registrable securities from time to time. Purchasers of the registrable securities offered by means of this prospectus will not have any rights under the registration rights agreement, although once sold under this registration statement the registrable securities should be freely tradable except by purchasers who are our "affiliates" or are "underwriters" of the registrable securities for purposes of the Securities Act. We have filed the registration statement of which this prospectus is a part with the Securities and Exchange Commission to meet our obligations under the registration rights agreement.
Trading	Our common stock currently trades on the New York Stock Exchange under the symbol "MGL."

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RISK FACTORS

You should carefully consider the risk factors and cautionary statements described in this section and elsewhere in this prospectus, in our most recent Annual Report on Form 10-K/A, and elsewhere in the documents incorporated herein by reference, together with all of the other information included in this prospectus and in the documents we incorporate by reference before you decide to purchase the Series A preferred stock, Series A debentures or common stock. You may obtain the documents incorporated by reference into the accompanying prospectus without charge by following the instructions set forth in the section of this prospectus called "Where You Can Find More Information."

Substantial Leverage—Our substantial leverage results in significant debt service obligations that could adversely affect our ability to fulfill our obligations under our existing debt agreements and operate our business.

    We are currently highly leveraged, with indebtedness that is substantial in relation to our stockholders' equity. As of March 31, 2001, our aggregate outstanding indebtedness was approximately $1,004.4 million and our stockholders' equity was approximately $145.8 million. The Credit Agreement, the Senior Notes Indenture and the Senior Subordinated Notes Indenture permit us to incur or guarantee certain additional indebtedness, subject to certain limitations.

    Our high level of indebtedness could have important consequences to you, including the risks that:

•

our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired in the future;



•

a substantial portion of our cash flows from operations must be dedicated to the payment of principal and interest on our indebtedness;



•

we are substantially more leveraged than certain of our competitors, which might place us at a competitive disadvantage;



•

we may be hindered in our ability to adjust rapidly to changing market conditions;



•

our indebtedness may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, product development efforts and strategic acquisitions;



•

our high degree of leverage could make us more vulnerable in the event of a downturn in general economic conditions or our business or in the event of adverse changes in the regulatory environment or other adverse circumstances applicable to us;



•

our interest expense could increase if interest rates in general increase because a portion of our indebtedness bears interest at a floating rate;



•

our level of indebtedness may prevent us from raising the funds necessary to pay our obligations under the Credit Agreement or repurchase the Senior Notes or Senior Subordinated Notes tendered to us upon the occurrence of a change of control, which would constitute an event of default under our Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture; and



•

our failure to comply with the financial and other restrictive covenants in our Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture, which, among other things, require us to maintain certain financial ratios and/or limit our ability to incur debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or our prospects.

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Ability to Service Debt—To service our indebtedness, we will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.

    Our ability to repay or to refinance our indebtedness and to pay interest on our indebtedness will depend on our financial and operating performance, which, in turn, is subject to prevailing economic and competitive conditions and to certain financial, business and other factors, many of which are beyond our control. These factors could include operating difficulties, increased operating costs, the actions of competitors, regulatory developments and delays in implementing strategic projects. Our ability to meet our debt service and other obligations may depend in significant part on the extent to which we can successfully implement our business strategy. There can be no assurance that we will be able to implement our strategy fully or that the anticipated results of our strategy will be realized.

    If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or seek to obtain additional equity capital or to restructure our debt. There can be no assurance that our cash flows and capital resources will be sufficient for payment of principal of and interest on our indebtedness in the future, or that any of these alternative measures would be successful or would permit us to meet our scheduled debt service obligations.

    In addition, because our obligations under the Credit Agreement bear interest at floating rates, an increase in interest rates could adversely affect, among other things, our ability to meet our debt service obligations.

Additional Borrowing Capacity—Despite our substantial leverage at present, we will be able to incur more debt.

    The Credit Agreement, the Senior Notes Indenture and the Senior Subordinated Notes Indenture allow us to incur additional indebtedness under certain circumstances, including, as of March 31, 2001, up to $115.7 million of additional debt under the Revolving Facility (the "Revolving Facility"), giving effect to the reduction of availability due to $34.3 million of outstanding stand-by letters of credit. If we incur additional debt above the levels in effect, the risks associated with these levels of debt could intensify.

Structural Subordination—Claims of creditors of our subsidiaries will have priority with respect to the assets and earnings of those subsidiaries over your claims.

    Claims of creditors of our subsidiaries, including trade creditors, secured creditors and creditors holding indebtedness, preferred stock or guarantees issued by those subsidiaries, will generally have priority with respect to the assets and earnings of such subsidiaries over the claims of the Company's creditors even if the obligations of those subsidiaries do not constitute senior indebtedness.

    The indebtedness outstanding under the Credit Agreement is fully guaranteed by substantially all of our direct and indirect domestic wholly-owned subsidiaries and substantially all of our future direct and indirect domestic wholly-owned subsidiaries (collectively, the "Bank Guarantors"). The obligations of the Bank Guarantors are secured by security interests in, or liens on, substantially all tangible and intangible assets of the Bank Guarantors (excluding real property).

    We conduct substantially all of our operations through our subsidiaries. As a result, we are required to rely upon payments from our subsidiaries for the funds necessary to meet our obligations, including debt service payments. The ability of our subsidiaries to pay dividends and make other payments to us is contingent upon the earnings of those subsidiaries and may be restricted by, among other things, agreements of the subsidiaries with their customers and applicable corporate and other laws and regulations, including regulations that may require our subsidiaries to maintain minimum

11

levels of deposits, net worth, capital, surplus or reserves, or limit their ability to pay dividends, make investments or repay indebtedness.

    Our subsidiaries had:

•

assets of $1,468.8 million, or 90.6% of our total assets, as of March 31, 2001;



•

liabilities (excluding guarantees of amounts outstanding under the Credit Agreement) of $386.3 million as of March 31, 2001;



•

revenue of $1,640.9 million and $890.1 million, or 100% and 100% of our consolidated net revenue, for fiscal year 2000 and the six months ended March 31, 2001, respectively.

Restrictive Covenants in Our Debt Instruments—Restrictions imposed by the Credit Agreement, the Senior Notes Indenture and the Senior Subordinated Notes Indenture may limit our ability to take certain actions.

    Our debt instruments contain a number of covenants that limit our management's discretion in the operation of our business by restricting our ability to:

•

incur additional indebtedness or issue preferred or redeemable stock;



•

pay dividends and make other distributions;



•

repurchase equity interests;



•

prepay subordinated debt;



•

make restricted payments;



•

enter into sale and leaseback transactions;



•

create liens;



•

sell and otherwise dispose of assets;



•

enter into certain transactions with affiliates; and



•

merge or consolidate.

    We cannot assure you that these restrictions will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. In addition, the Credit Agreement, as amended, includes other and more restrictive covenants and prohibits us from prepaying certain of our other indebtedness. The Credit Agreement also requires us to comply with specified financial ratios and tests, including a minimum interest coverage ratio, a maximum leverage ratio and a maximum senior debt ratio. There can be no assurance that we will be able to comply with such covenants, ratios and tests in the future. Our ability to comply with such covenants, ratios and tests may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any such covenants, ratios or tests could result in a default under one or more of the Credit Agreement, the Senior Notes Indenture or the Senior Subordinated Notes Indenture, which would permit the lenders under the Credit Agreement, and in certain circumstances the holders of the Senior Notes or Senior Subordinated Notes, to declare all amounts outstanding under those agreements to be immediately due and payable, together with accrued and unpaid interest.

    Furthermore, the commitments of the lenders under the Credit Agreement to make further extensions of credit thereunder could be terminated. If we were unable to repay all amounts accelerated, the lenders could proceed against us and the Bank Guarantors and the collateral securing the Company's and the Bank Guarantors' obligations pursuant to the Credit Agreement. If the

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indebtedness outstanding pursuant to the Credit Agreement were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness and our other indebtedness. If not cured or waived, such default could have a material adverse effect on our business or our prospects.

Risk-Related Products—The profitability of our risk-related contracts depends on our ability to predict and control behavioral healthcare costs, and we may not be able to accurately predict these costs.

    Revenues under contracts for risk-related products (which include contracts for risk-based products, Employee Assistance Programs ("EAPs") and integrated products) are the primary source of our revenue. Such revenues accounted for approximately 87.7% of our net revenue in fiscal year 2000 and approximately 88.0% of our net revenue for the six months ended March 31, 2001. Under a risk-based contract, we assume all or a portion of the responsibility for the cost of providing a full or specified range of behavioral healthcare treatment services (excluding at present the cost of medication) to a specified beneficiary population in exchange, generally, for a fixed fee per member per month. Under EAPs and integrated contracts we also assume the responsibility for providing certain behavioral healthcare treatment services, although such products generally require us to assume less risk than under a risk-based product. In order for such contracts to be profitable, we must accurately estimate the rate of service utilization by beneficiaries enrolled in programs managed by us and control the unit cost of such services. The most significant factor affecting the profitability of risk-related contracts is the ability to control direct service costs in relation to contract pricing. If the aggregate cost of behavioral healthcare treatment services provided to a given beneficiary population in a given period exceeds the aggregate of the per member per month fees received by us with respect to the beneficiary population in such period, we will incur a loss with respect to such beneficiary population during such period. There can be no assurance that our assumptions as to service utilization rates and costs will accurately and adequately reflect actual utilization rates and costs, nor can there be any assurance that increases in behavioral healthcare costs or higher-than-anticipated utilization rates, significant aspects of which are outside our control, will not cause expenses associated with such contracts to exceed our revenue from such contracts.

    In addition, there can be no assurance that adjustments will not be required to the estimates, particularly those regarding cost of care, made in reporting historical financial results. Medical claims payable in our financial statements includes reserves for incurred but not reported ("IBNR") claims which are estimated by us. We determine the amount of such reserves based on past claim payment experience for member groups, including the average interval between the date services are rendered and the date claims are paid and between the date services are rendered and the date we receive the claims, enrollment data, utilization statistics, adjudication decisions, authorized healthcare services and other factors. The estimates for submitted claims and IBNR claims are made on an accrual basis and adjusted in future periods as required. However, there can be no assurances as to the ultimate accuracy of such estimates. During the three months ended March 31, 2001, we recorded an adjustment (and corresponding income statement charge) of $15.0 million to our estimate of claims incurred in prior years based on the results of our reduction in claims inventory and other claims processing improvements. As of March 31, 2001, we believe that our reserves for IBNR claims are adequate in order to satisfy ultimate claim liabilities. Any adjustments to such estimates could adversely affect our results of operations in future periods.

    We expect to attempt to increase membership in our risk-related products. If we are successful in this regard, our exposure to potential losses from our risk-related products will also be increased. Furthermore, certain of these contracts and certain state regulations limit the profits that we may earn on risk-related business and may require refunds if the loss experience is more favorable than that originally anticipated. We frequently record retroactive customer settlements which may be unfavorable. These contracts and regulations may also require us or certain of our subsidiaries to reserve a specified

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amount of cash as financial assurance that we can meet our obligations under such contracts. As of March 31, 2001, we had restricted cash and investments of $88.3 million pursuant to such contracts and regulations. Such amounts will not be available to us for general corporate purposes. Furthermore, certain state regulations restrict the ability of subsidiaries that offer risk-related products to pay dividends to us. Certain state regulations relating to the licensing of insurance companies may also adversely affect our risk-related business. Although experience varies on a contract-by-contract basis, historically, our risk-related contracts have been profitable in the aggregate. However, the degree of profitability varies significantly from contract to contract. For example, our Medicaid contracts with governmental entities generally tend to have direct profit margins that are lower than our other contracts. The most significant factor affecting the profitability of risk-related contracts is the ability to control direct service costs in relation to contract pricing.

Integration of Operations—Our efforts to integrate our operations may not result in the level of cost savings and improved services that we are anticipating.

    In the past two years, we consolidated our behavioral managed healthcare businesses, eliminating duplicate staffing and facilities. We are now focusing on the next level of integration that includes reduction in computer system platforms, best practices analysis, standardization of provider contracting and utilization of the Internet to reduce the administrative burden to providers, customers and beneficiaries. We believe that we will reduce administrative costs and improve customer service through these measures. However, there can be no assurance that we will be able to implement these initiatives or realize the anticipated savings. Also, certain costs may increase during the transition period even if savings are ultimately realized.

    In addition, if we experience significant disruptions in our computer systems and related claims payment problems during the integration process, these developments would adversely affect our relationships with many of our contracted providers and our business and results of operations.

Reliance on Customer Contracts—Our inability to renegotiate customer contracts could adversely affect us.

    All of our net revenue in fiscal year 2000 and in the six-month period ended March 31, 2001 was derived from contracts with payors of behavioral healthcare benefits. Our behavioral managed healthcare contracts typically have terms of one to three years, and in certain cases contain renewal provisions (at the customer's option) providing for successive terms of between one and two years (unless terminated earlier). Substantially all of these contracts are immediately terminable with cause and many, including some of the Company's most significant contracts, are terminable without cause by the customer upon the provision of requisite notice and the passage of a specified period of time (typically between 60 and 180 days), or upon the occurrence of certain other specified events. Our ten largest behavioral managed healthcare customers accounted for approximately 56.3% of our net revenue for fiscal year 2000 and 59.7% of our net revenue for the six-month period ended March 31, 2001. Both we and Premier Behavioral Systems of Tennessee, LLC ("Premier"), in which we have a fifty percent interest, separately contract with the State of Tennessee to manage the behavioral healthcare benefits for the State's TennCare program. Our direct TennCare contract (exclusive of Premier) represented approximately 13.8% and 13.6% of our net revenue in fiscal year 2000 and the six-month period ended March 31, 2001, respectively. Our managed behavioral contracts with Aetna, including NYLCare Health Plans and Prudential HealthCare, which were acquired by Aetna in July 1998 and August 1999, respectively, represented approximately 17.2% and 17.8% of our net revenue in fiscal year 2000 and the six-month period ended March 31, 2001, respectively. The current TennCare and Aetna contracts extend through June 30, 2002 and December 31, 2003, respectively. There can be no assurance that such contracts will be extended or successfully renegotiated or that the terms of any new contracts will be comparable to those of existing contracts. Loss of all of these

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contracts or customers would, and loss of any one of these contracts or customers could, have a material adverse effect on us. In addition, price competition in bidding for contracts can significantly affect the financial terms of any new or renegotiated contract.

Fluctuation in Operating Results—Our operating results have been and may in the future be subject to significant fluctuations on a quarterly basis.

    Our quarterly operating results have varied in the past and may fluctuate significantly in the future due to a combination of factors, including:

•

changes in utilization levels by enrolled members of our risk-based contracts, including seasonal utilization patterns;



•

performance-based contractual adjustments to revenue, reflecting utilization results or other performance measures;



•

retroactive contractual adjustments under commercial contracts and TRICARE contracts;



•

retrospective membership adjustments;



•

the timing of implementation of new contracts and enrollment changes;



•

pricing adjustments upon long-term contract renewals; and



•

changes in estimates regarding medical costs and incurred but not yet reported medical claims.

    These factors may affect our quarterly revenues, expenses and results of operations in the future. Accordingly, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. It is possible that in future periods our results of operations may be below the expectations of the public market, analysts and investors.

Dependence On Government Spending For Managed Healthcare; Possible Impact of Healthcare Reform—We could be adversely affected by changes in federal, state and local healthcare policies.

    A significant portion of our revenue is derived, directly or indirectly, from federal, state and local governmental agencies, including state Medicaid programs. Reimbursement rates vary from state to state, are subject to periodic negotiation and may limit our ability to maintain or increase rates. We are unable to predict the impact on our operations of future regulations or legislation affecting Medicaid or Medicare programs, or the healthcare industry in general, and there can be no assurance that future regulations or legislation will not have a material adverse effect on us. Moreover, any reduction in government spending for such programs could also have a material adverse effect on us. In addition, our contracts with federal, state and local governmental agencies, under both direct contract and subcontract arrangements, generally are conditioned upon financial appropriations by one or more governmental agencies, especially with respect to state Medicaid programs. These contracts generally can be terminated or modified by the customer if such appropriations are not made. Finally, some of our contracts with federal, state and local governmental agencies, under both direct contract and subcontract arrangements, require us to perform additional services if federal, state or local laws or regulations imposed after the contract is signed so require, in exchange for additional compensation to be negotiated by the parties in good faith. Government and other third-party payors are generally seeking to impose lower reimbursement rates and to renegotiate reduced contract rates with service providers in a trend toward cost control.

    The U.S. Congress is considering legislation which, among other things, would place limits on healthcare plans and methods of operations, limit employers' and healthcare plans' ability to define medical necessity and permit employers and healthcare plans to be sued in state courts for coverage determinations. It is uncertain whether we could recoup, through higher premiums or other measures,

15

the increased costs of federally mandated benefits or other increased costs caused by such legislation or similar legislation. In addition, if any federal parity legislation is adopted and the difference in coverage limits for mental health coverage and medical health coverage is reduced or eliminated, there can be no assurance that any increase in revenue we derive following such legislation will be sufficient to cover the increase in costs that would result from a greater utilization of mental healthcare services. We cannot predict the effect of this legislation, nor other legislation that may be adopted by Congress, and no assurance can be given that such legislation will not have an adverse effect on us.

Regulation—Regulatory matters could adversely affect our ability to conduct our business.

    The healthcare industry and the provision of behavioral healthcare services are subject to extensive and evolving state and federal regulation. We are subject to certain state laws and regulations, including those governing: (i) the licensing of insurance companies, HMOs, preferred provider organizations ("PPOs"), third party administrators ("TPAs") and companies engaged in utilization review and (ii) the licensing of healthcare professionals, including restrictions on business corporations from providing, controlling or exercising excessive influence over behavioral healthcare services through the direct employment of psychiatrists or, in a few states, psychologists and other behavioral healthcare professionals. In addition, we are subject to certain federal laws as a result of the role we assume in connection with managing our customers' employee benefit plans.

    In many states, entities that assume risk under contracts with licensed insurance companies or HMOs have not been considered by state regulators to be conducting an insurance or HMO business. As a result, we have not sought licenses as either an insurer or HMO in certain states. Regulators in some states, however, have determined that risk-assuming activity by entities that are not themselves providers of care is an activity that requires some form of license. There can be no assurance that other states in which we operate will not adopt a similar view, thus requiring us to obtain additional licenses. These additional licenses might require us or certain of our subsidiaries to maintain minimum levels of deposits, net worth, capital, surplus or reserves, or limit our ability or the ability of certain of our subsidiaries to pay dividends, make investments or repay indebtedness. The imposition of these additional license requirements could increase our cost of doing business or delay our conduct or expansion of our business.

    Regulators may impose operational restrictions on entities granted licenses to operate as insurance companies or HMOs. For example, the California Department of Corporations ("DOC") imposed certain restrictions on us in connection with the issuance of an approval of our acquisitions of HAI and Merit, including restrictions on the ability of the California subsidiaries of HAI and Merit to fund our operations in other states and on our ability to make certain operational changes with respect to the subsidiaries of HAI and Merit in California.

    In addition, utilization review and TPA activities that we conduct are regulated by many states which impose requirements upon us that increase our business costs. We believe that our TPA activities performed for our self-insured employee benefit plan customers are exempt from otherwise applicable state licensing or registration requirements based upon federal preemption under the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), and we have relied on this general principle in determining not to seek licenses for certain of our activities in many states. Existing case law is not uniform on the applicability of ERISA preemption with respect to state regulation of utilization review or TPA activities. There can be no assurance that additional licenses will not be required with respect to utilization review or TPA activities in certain states.

    State regulatory agencies responsible for the administration and enforcement of the laws and regulations to which our operations are subject have broad discretionary powers. A regulatory agency or a court in a state in which we operate could take a position under existing or future laws or regulations, or change its interpretation or enforcement practices with respect to such laws and

16

regulations, that such laws or regulations apply to us in a manner different from the manner in which we believe such laws and regulations apply or should be enforced. The resultant compliance with, or revocation of, or failure to obtain, required licenses and governmental approvals could result in significant alteration to our business operations, delays in the expansion of our business and lost business opportunities, any of which, under certain circumstances, could have a material adverse effect on us.

    The laws of some states limit the ability of a business corporation to directly provide, control or exercise excessive influence over behavioral healthcare services through the direct employment of psychiatrists, psychologists, or other behavioral healthcare professionals. In addition, the laws of some states prohibit psychiatrists, psychologists, or other healthcare professionals from splitting fees with other persons or entities. These laws and their interpretations vary from state to state and enforcement by the courts and regulatory authorities may vary from state to state and may change over time. Although we believe that our operations as currently conducted are in material compliance with applicable laws, there can be no assurance that our existing operations and our contractual arrangements with psychiatrists, psychologists and other healthcare professionals will not be successfully challenged under state laws prohibiting fee splitting or the practice of a profession by an unlicensed entity, or that the enforceability of such contractual arrangements will not be limited.

    Several states in which we do business have adopted, or are expected to adopt, "any willing provider" laws. Such laws typically impose upon insurance companies, PPOs, HMOs or other types of third-party payors an obligation to contract with, or pay for the services of, any healthcare provider willing to meet the terms of the payor's contracts with similar providers. Compliance with any willing provider laws could increase our costs of assembling and administering provider networks and could, therefore, have a material adverse effect on our operations.

    Confidentiality and patient privacy requirements are particularly strict in the field of behavioral healthcare services, and additional legislative initiatives relating to confidentiality and privacy are expected. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") requires the Secretary of the Department of Health and Human Services ("HHS") to adopt standards relating to the transmission, privacy and security of health information by healthcare providers and healthcare plans. HIPAA calls for HHS to create regulations to address the following areas: electronic transactions and code sets, privacy, security, provider IDs, employer IDs, health plan IDs and individual IDs. At present, only the regulation relating to electronic transactions and code sets and the regulation relating to privacy have been released in final form. In addition, the Gramm-Leach-Bliley Act of 1999 calls on departments of insurance in various states to enact regulations relating to, among other things, the privacy of health information, with an implementation date of July 1, 2001.

    We are currently assessing and acting on the wide reaching implications of these laws and regulations to ensure our compliance by the implementation dates. We believe that significant resources will be required over the next 3 to 5 years to ensure compliance with the new requirements.

Highly Competitive Industry—Our industry is very competitive and increased competition could adversely affect us.

    The industry in which we conduct our managed care business is highly competitive. We compete with large insurance companies, HMOs, PPOs, TPAs, independent practitioner associations ("IPAs"), multi-disciplinary medical groups and other managed care companies. Many of our competitors are significantly larger and have greater financial, marketing and other resources than us, and some of our competitors provide a broader range of services. We may also encounter substantial competition in the future from new market entrants. Many of our customers that are managed care companies may, in the future, seek to provide behavioral managed healthcare services to their employees or subscribers directly, rather than contracting with us for such services. Because of competition, we do not expect to

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be able to rely solely on price increases to achieve revenue growth and expect to continue experiencing pressure on direct operating margins.

Risks Related To Amortization Of Intangible Assets—We could be adversely affected if the value of intangible assets is not fully realized.

    Our total assets at March 31, 2001 reflect goodwill of approximately $1.0 billion, which is being amortized over 25 to 40 years, and other identifiable intangible assets (primarily customer lists, provider networks and treatment protocols) of approximately $143.9 million, which are being amortized over 4 to 30 years. At March 31, 2001, net intangible assets were 70.6% of total assets of approximately $1.6 billion. The amortization periods used by us may differ from those used by other entities. In addition, we may be required to shorten the amortization period for intangible assets in future periods based on the prospects of acquired companies. There can be no assurance that we will ever realize the value of such assets. We evaluate, on a regular basis, whether events and circumstances have occurred that indicate that all or a portion of the carrying value of intangible assets may no longer be recoverable, in which case a charge to earnings for impairment losses could become necessary. During fiscal year 2000, we recorded a $91.0 million impairment charge associated with now discontinued business operations. This charge related to the write-down of certain long-lived assets of our specialty managed healthcare segment and our Group Practice Affiliates ("GPA") subsidiary. Any determination requiring additional write-offs of a significant portion of unamortized intangible assets would adversely affect our results of operations. A write-off of intangible assets could become necessary if the anticipated undiscounted cash flows of an acquired company do not support the carrying value of long-lived assets, including intangible assets.

Professional Liability Insurance—We may be adversely affected by claims of professional liability.

    The management and administration of the delivery of behavioral managed healthcare services, and the direct provision of behavioral healthcare treatment services, entail significant risks of liability. From time to time, we are subject to various actions and claims of professional liability for alleged negligence in performing utilization review activities, as well as for the acts or omissions of our employees, network providers or other parties. In the normal course of business, we receive reports relating to suicides and other serious incidents involving patients enrolled in our programs. Such incidents occasionally give rise to malpractice, professional negligence and other related actions and claims against us or our network providers. To the extent that certain actions and claims seek punitive and compensatory damages arising from alleged intentional misconduct by us, such damages, if awarded, may not be covered, in whole or in part, by our insurance policies. As the number of lives covered by us grows and the number of providers under contract increases, actions and claims against us (and, in turn, possible legal liability) predicated on malpractice, professional negligence or other related legal theories can be expected to increase. We are also subject to actions and claims for the costs of services for which payment was denied. Many of these actions and claims seek substantial damages and require us to incur significant fees and costs related to our defense. There can be no assurance that pending or future actions or claims for professional liability (including any judgments, settlements or costs associated therewith) will not have a material adverse effect on us.

    Recently, certain managed healthcare companies, including us, have been targeted as defendants in several national class action lawsuits regarding their business practices. The class action complaints against us allege misrepresentations with respect to, and failure to disclose, our claims practices, the extent of the benefits coverage and other matters that cause the value of the benefits to be less than the amount of premium paid. We believe that these national class action lawsuits are part of a trend targeting the healthcare industry, particularly managed care companies. There can be no assurance that such lawsuits will not have a material adverse effect on us.

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    We carry professional liability insurance, subject to certain deductibles. There can be no assurance that such insurance will be sufficient to cover any judgments, settlements or costs relating to present or future claims, suits or complaints or that, upon expiration thereof, sufficient insurance will be available on favorable terms, if at all. To the extent our customers are entitled to indemnification under their contracts with us relating to liabilities they incur arising from the operation of our programs, such indemnification may not be covered under our insurance policies. If we are unable to secure adequate insurance in the future, or if the insurance we carry is not sufficient to cover any judgments, settlements or costs relating to any present or future actions or claims, there can be no assurance that any such judgments, settlements or costs would not have a material adverse effect on us.

    From time to time, we receive notifications from and engage in discussions with various government agencies concerning our respective managed care businesses and operations. As a result of these contacts with regulators, we in many instances implement changes to our operations, revise our filings with such agencies and/or seek additional licenses to conduct our business. We also have certain potential liabilities relating to the self-insurance program we maintained with respect to our provider business prior to the Crescent Transactions. In addition, we continue to be subject to governmental investigations and inquiries, civil suits and other claims and assessments with respect to the provider business. We are also subject to or party to other litigation, claims and civil suits, relating to our operations and business practices. Certain of our managed care litigation matters involve class action lawsuits, which allege that (i) we inappropriately denied and/or failed to authorize benefits for mental health treatment under insurance policies with one of our customers and (ii) a provider at one of our facilities violated privacy rights of certain patients.

Inability to Implement Our Business Strategy—We may be adversely affected if we are unable to implement our business strategy.

    Our future financial performance and success are largely dependent on our ability to implement successfully our business strategy. We cannot assure you that we will successfully implement the business strategy described in this offering memorandum or that implementing our strategy will sustain or improve our results of operations.

    Any failure to implement our business strategy or to revise our business strategy in a timely and effective manner may adversely affect our ability to service our indebtedness.

Subordination of Series A Debentures—The Series A debentures are subordinated to our senior indebtedness.

    The indebtedness evidenced by the Series A debentures will be unsecured and subordinated in right of payment to all of our existing and future senior indebtedness. Senior indebtedness generally includes:

•

our outstanding Senior Notes, and any replacements or refinancings thereof;



•

our outstanding Senior Subordinated Notes, and any replacements or refinancings thereof;



•

any indebtedness incurred by us under our Credit Agreement, and any replacements or refinancings thereof, and



•

any other indebtedness incurred by us, excluding liabilities for taxes, indebtedness to our subsidiaries or other affiliates, trade payables, indebtedness that is contractually subordinated to the Series A debentures and obligations with respect to our equity securities.

    If we are determined to be bankrupt, holders of senior indebtedness will be entitled to receive payment in full before the holders of the Series A debentures will be entitled to receive any payment of principal or interest on the Series A debentures, subject to certain exceptions, and there may not be

19

sufficient assets remaining to pay amounts due on any or all of the Series A debentures then outstanding. In addition, no payment may be made to holders of Series A debentures when certain defaults have occurred and are continuing with respect to the senior indebtedness, subject to certain exceptions.

    As of March 31, 2001, the aggregate amount of our outstanding senior indebtedness was $1,004.4 million (exclusive of unused commitments). The indebtedness outstanding under our Credit Agreement is secured indebtedness and is guaranteed by substantially all of our subsidiaries. The indenture for the Series A debentures (the "Series A debentures indenture") does not contain restrictions on our ability to incur additional indebtedness. The incurrence of additional indebtedness and other liabilities by us or our subsidiaries could adversely affect our ability to pay our obligations on the Series A debentures.

    For more information on the subordination of the Series A debentures, see the section of this prospectus called "Description of the Series A Debentures—Subordination."

Ability to Pay Interest—Our ability to pay interest on the Series A debentures, to pay dividends on the Series A preferred stock and common stock, and to redeem Series A preferred stock and Series A debentures upon a change of control is limited.

    Under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes, we are subject to restrictive covenants that may limit our ability to pay interest on the Series A debentures and dividends on the Series A preferred stock and our common stock. See the section of this prospectus called "Description of Other Indebtedness" for a description of these covenants. If we fail to make a dividend payment on the Series A preferred stock or an interest payment on the Series A debentures when due, we will not be released from our obligation to make that dividend or interest payment, and additional dividends or interest will accumulate on the missed payment.

    The right of a holder of Series A preferred stock and Series A debentures to receive payment of the redemption price payable upon a change of control is subordinated to the payment in full of all amounts outstanding under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes. At the time a change of control occurs, we may not have the necessary resources to pay all amounts outstanding under the Credit Agreement, the Senior Notes and the Senior Subordinated Notes, and in such case we may not be able to redeem shares of Series A preferred stock and Series A debentures tendered. Additional future credit agreements or other agreements relating to our indebtedness (including additional senior indebtedness) may contain prohibitions or restrictions on our ability to effect a change of control payment and our subsidiaries may be parties in the future to credit agreements and other agreements relating to indebtedness which contain restrictions on transferring funds sufficient to permit us to effect a change of control payment.

Public Market—There is no public market for our Series A preferred stock or Series A debentures.

    There is no public market for our Series A preferred stock or Series A debentures. We cannot predict the extent to which a trading market for those securities will develop, if at all, or how liquid that market may be. We have no plans to list the Series A preferred stock or Series A debentures on any public securities exchange. An investor may find it difficult to obtain accurate quotations as to the price of the Series A preferred stock and the Series A debentures, and to dispose of such securities.

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RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS

    The ratio (or dollar amount of the deficiency) of earnings to combined fixed charges and preference dividends for each of the periods indicated is as follows (in thousands):

Fiscal Year Ended September 30
										Six Months Ended March 31, 2001
1996			1997		1998			1999	2000
$	(69,640	)	(50,596	)	$	(10,798	)	1.3x	1.1x	1.4x

    For purposes of calculating the ratio of earnings to fixed charges, "earnings" represent income from continuing operations before income taxes, plus fixed charges. "Fixed charges" consist of interest expense, including amortization of debt issuance costs and that portion of rental expense considered to be a reasonable approximation of interest and pretax earnings required to pay preferred stock dividends. In fiscal years 1996, 1997 and 1998, we had a deficiency of earnings to fixed charges.

    The figures used to calculate the ratios above are filed as an exhibit to the registration statement of which this prospectus is a part.

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DESCRIPTION OF SERIES A PREFERRED STOCK

The following summarizes certain terms and provisions of the Series A preferred stock. This summary is not complete and is subject to, and qualified in its entirety by reference to, applicable Delaware law and to the provisions of our Certificate of Incorporation, Bylaws and the Certificate of Designations for the Series A preferred stock. These documents are filed as exhibits to the registration statement of which this prospectus is a part.

AUTHORITY TO ISSUE PREFERRED STOCK

    Our certificate of incorporation authorizes our board of directors to issue, without the approval of our stockholders, up to 10,000,000 shares of preferred stock, with no par value. As of June 20, 2001, we had designated 87,000 shares of Series A preferred stock, and had issued 59,063 shares of Series A preferred stock and an Option to purchase an additional 21,000 shares of Series A preferred stock.

    Our board of directors has the right to designate, for each series of preferred stock:

•

the serial designations;



•

dividend rates;



•

the offering price or prices;



•

provisions for redemption or repurchase;



•

provisions for conversion;



•

voting rights;



•

special or relative rights in the event of a liquidation, distribution or sale of assets or dissolution or winding up;



•

provisions for a sinking fund; and



•

any other rights, obligations or provisions which our board of directors is permitted to designate under Delaware law.

    As described below, our board of directors cannot create any class of capital stock that is senior to the Series A preferred stock or that is redeemable on or before December 15, 2009 without the consent of holders of 67% of the outstanding shares of the Series A preferred stock. There is no limitation on our board of directors' ability to create a class of preferred stock that has the same rank as the Series A preferred stock.

GENERAL

    Under the investment agreement, the initial purchasers purchased 59,063 shares of our Series A Cumulative Convertible Preferred Stock, which we refer to as the Series A preferred stock (as defined). We also granted the initial purchasers an Option to purchase an additional 21,000 shares of Series A preferred stock for an aggregate purchase price of $21,000,000. For more information regarding the Option, see the section of this prospectus called "The Option."

    Currently, substantially all of our operations are conducted through subsidiaries. Our ability to make payments on the Series A preferred stock, therefore, depends in part on the earnings of our subsidiaries and on our ability to receive funds from our subsidiaries through dividends or other payments. Our subsidiaries are not obligated to pay any amount due under the Series A preferred stock or to make funds available for payments on the Series A preferred stock in the form of dividends or advances to us. The ability of some of our subsidiaries to pay dividends to us is restricted by various insurance and healthcare regulations. If operating losses are incurred, we may be required to make

22

additional capital contributions to those subsidiaries to comply with statutory capital requirements and payment of dividends by those subsidiaries would likely not be permitted.

    In addition, the Series A preferred stock effectively is subordinated to all outstanding indebtedness and other liabilities and commitments, including accounts payable and other accrued liabilities, of our subsidiaries. Any right we have to receive assets from any of our subsidiaries upon their liquidation or reorganization, and the resulting right of holders of the Series A preferred stock to participate in those assets, will be subordinated to the claims of that subsidiary's creditors. Such subordination will not apply, however, to the extent we are recognized as a creditor of the liquidating or reorganizing subsidiary, though our claims would still be subordinated to any senior security interest in the assets of the subsidiary and any senior indebtedness of the subsidiary.

    First Union National Bank will be the transfer agent, dividend disbursing agent and registrar for the Series A preferred stock unless otherwise specified in a prospectus supplement.

STATED VALUE

    The stated value of the Series A preferred stock is $1,000 per share.

RANKING

    With respect to the right to receive dividends and payments upon our liquidation, dissolution or winding up, the Series A preferred stock ranks:

•

senior to our common stock, and except as specified below, all other classes and series of our capital stock that we issue in the future;



•

equally with each other class or series of preferred stock that by its terms ranks equally with the Series A preferred stock; and



•

junior to each other class of preferred stock that by its terms ranks senior to the Series A preferred stock.

    Currently, there are no classes of preferred stock issued or outstanding other than the Series A preferred stock. The consent of holders of 67% of the Series A preferred stock is required for us to create a class of preferred stock that ranks senior to the Series A preferred stock. There is no limitation on our board of directors' ability to create a class of preferred stock that has the same rank as the Series A preferred stock.

DIVIDENDS

    The Series A preferred stock will accumulate dividends at a rate of 6.50% per year. The amount of dividends will be computed based on the stated value of a share of Series A preferred stock, which is $1,000.

    Dividends began to accumulate on outstanding shares of Series A preferred stock from the date of issuance and accumulate from day to day whether or not earned or declared until the dividends are paid. Dividends accumulate on the basis of a 360-day year consisting of twelve 30-day months and the actual number of days elapsed in the period for which payable.

    We will pay dividends to holders of record as they appear on our stock record books 15 days prior to the relevant dividend payment date. We will pay dividends only when, as and if declared by our board of directors, out of funds at the time legally available for the payment of dividends.

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DIVIDEND PAYMENT DATES

    In general, dividends will be paid in four equal quarterly installments on the last business day of March, June, September and December of each year commencing in March 2000. If any date specified as a dividend payment date is not a business day, we will pay the dividends due on the preceding business day.

RIGHT NOT TO MAKE DIVIDEND PAYMENTS WHEN FIRST DUE

    We have the right to elect not to make any dividend payment when due on a dividend payment date (other than as required in connection with any redemption of shares of Series A preferred stock or our liquidation, dissolution or winding up). In such case, we will remain obligated to make the missed dividend payment, and additional dividends will accumulate on the missed payment. As of the date of this prospectus, we have not made any dividend payments in respect of the Series A preferred stock.

    If at any time we make a dividend payment that is less than the total amount of accumulated dividends payable on all outstanding shares of Series A preferred stock, the amount we pay will be allocated pro rata on a share-by-share basis among all outstanding shares of Series A preferred stock. Dividends that are declared and paid in an amount less than the full amount of dividends accumulated on the Series A preferred stock will be applied first to the earliest dividend that has not yet been paid.

PAYMENT IN COMMON STOCK

    We may pay dividends in cash or by the issuance of shares of our common stock. We may issue shares of common stock in payment of any dividend on the first date the dividend is due. We may issue shares of common stock in respect of a missed dividend payment at any time before December 15, 2001. After that date, we may not issue shares of common stock in respect of a missed dividend payment.

    For the purpose of determining the number of common shares to be paid, the value of a share of common stock used to pay dividends on the Series A preferred stock will be equal to the average of the closing prices per share of common stock for the twenty consecutive trading days ending on the second trading day prior to the relevant dividend payment date (subject to adjustment if an adjustment to the conversion price takes effect during the period used to compute such average).

    We may not issue shares of common stock in payment of dividends unless:

•

the common stock is listed for trading on a national securities exchange or quoted on a nationally recognized quotation system;



•

the shares of common stock to be issued have been duly authorized and when issued in connection with such payment, will be validly issued, fully paid and non-assessable;



•

the issuance of the shares of common stock will not: (a) violate any provision of our certificate of incorporation or our bylaws; (b) give rise to any preemptive rights, rights of first refusal or other similar rights on behalf of any person; (c) constitute a default under or give rise to a right to put or to compel a tender offer for our outstanding securities or require any consent, waiver or approval under, any note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan agreement, joint venture agreement, regulatory approval, contract or any other agreement, instrument or obligation to which we are a party or by which we are bound; (d) result in the creation or imposition of any lien upon any of our assets or (e) violate any law applicable to us;



•

no uncured default or event of default has occurred and is continuing (or will occur as a result of the issuance of shares of common stock in satisfaction of such payment), under any agreement or instrument evidencing our indebtedness, the outstanding principal amount of

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which is in excess of $10,000,000, and as a result of such default or event of default holders of the indebtedness have accelerated or have the right to accelerate the maturity of the indebtedness;

•

we have not been notified that a breach of the investment agreement or the terms of the Series A preferred stock has occurred and is continuing;



•

(a) in the case of a dividend payment made on the first date the dividend is due, the average of the closing prices per share of our common stock for the 20 consecutive trading days ending on the second trading day prior to the payment date is at least 40% of the conversion price for the Series A preferred stock, and (b) in the case of a payment made in respect of a missed dividend payment, the average of the closing prices per share of our common stock for the 20 consecutive trading days ending on the second trading day prior to the relevant payment date is at least 60% of the conversion price for the Series A preferred stock;



•

(a) in the case of a dividend payment made on the first date the dividend is due, the average daily trading volume in the common stock during the 20 consecutive trading days ending on the second trading day prior to the relevant payment date is at least 50% of the average daily trading volume in the common stock for the 180-day period ending on July 19, 1999, and (b) in the case of a payment made in respect of a missed dividend payment, the average daily trading volume in the common stock during the 20 consecutive trading days ending on the second trading day prior to the relevant payment date is at least 67% of the average daily trading volume in the common stock for the 180-day period ending on July 19, 1999;



•

the issuance of shares of common stock in satisfaction of the payment does not require the approval or affirmative vote of the holders of any class or series of our equity securities; and



•

as of the relevant payment date, the registration statement of which this prospectus is a part is effective under the Securities Act and is available for use in connection with the offer and sale of such shares of common stock by the holders of Series A preferred stock that have such right under the registration rights agreement (unless suspension of the registration statement's effectiveness is permitted under the registration rights agreement).

    We intend to pay dividends by issuing shares of common stock if we satisfy the conditions on our ability to do so.

ADDITIONAL DIVIDENDS

    Whenever any dividend that has accumulated through any dividend payment date has not been paid in full, or whenever any redemption payment has not been paid in full on any payment date set for a redemption, additional dividends will accumulate on the amount of the unpaid dividends or the unpaid redemption payment. An unpaid amount is referred to as an "arrearage." Additional dividends accumulate on an arrearage at the annual dividend rate then in effect or such lesser rate as may be the maximum rate that is then permitted by applicable law. Additional dividends in respect of any arrearage:

•

will accumulate from day to day whether or not earned or declared until the arrearage is paid; and



•

will be calculated as of each successive dividend payment date and will constitute an additional arrearage from and after any dividend payment date to the extent not paid on that dividend payment date.

    Additional dividends on any arrearage may be declared and paid at any time, in whole or in part, without reference to regular dividend payment dates, to the registered holders of Series A preferred stock as they appear on our record books on the record date fixed by our board of directors. The

25

record date in respect of an arrearage payment must be at least 10 days before the corresponding payment date.

LIQUIDATION PREFERENCE

    In the event of our voluntary or involuntary liquidation, dissolution or winding up, a holder of Series A preferred stock will be entitled to receive out of our assets, before any payment is made or any assets are distributed to the holders of any securities that rank junior to the Series A preferred stock, an amount per share equal to the greater of:

    (1) the sum of (a) the dividends, if any, accumulated or deemed to have accumulated on the Series A preferred stock to the date of final distribution to holders, whether or not dividends have been declared, and (b) $1,000 (the stated value of the Series A preferred stock); and

    (2) the amount that would have been payable if the shares of Series A preferred stock had been converted into shares of common stock immediately prior to the liquidation, dissolution or winding up.

    If our assets or proceeds are insufficient to satisfy all claims with the same priority of payment as the Series A preferred stock, then the available assets and proceeds will be distributed ratably among the holders of the Series A preferred stock and the holders of claims with the same priority of payment as the Series A preferred stock.

    After payment in full of the amounts described above, the holders of common stock are entitled to receive an amount per share equal to the amount paid per share of the Series A preferred stock. Then the holders of the Series A preferred stock will participate with the holders of common stock on a pro rata basis in any further distributions of our assets. After holders are paid the full amount of the liquidation preference to which they are entitled, they will not be entitled to participate in any further distribution of our assets. Neither a consolidation or merger of us nor a sale, conveyance, lease, exchange or transfer of all or part of our assets will be a liquidation, dissolution or winding up of us.

CONVERSION INTO COMMON STOCK

    The Series A preferred stock may be converted into shares of common stock in the following ways:

•

Optional Conversion—Before the date of mandatory redemption, holders of Series A preferred stock may elect to convert any or all of their shares of Series A preferred stock into common stock.



•

Mandatory Conversion—We have the right to require that any or all of the Series A preferred stock be converted into shares of common stock if (i) the average closing price per share of common stock exceeds 200% of the conversion price for 180 consecutive calendar days ending no earlier than December 15, 2000 and no later than December 15, 2001, and for the last two-calendar weeks of such 180 consecutive calendar days, or (ii) the average closing price per share of common stock exceeds 200% of the conversion price for 45 consecutive trading days ending no earlier than December 15, 2001 and for the last two-calendar weeks of such 45 consecutive trading days.

We will not be allowed to require that shares of Series A preferred stock be converted into shares of common stock unless:

•

our common stock has been validly listed for trading on a national securities exchange or quoted on a nationally recognized quotation system during the relevant period described above and as of the date of the conversion;

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•

the average daily trading volume in our common stock during the relevant periods described above is at least 50% of the average daily trading volume in our common stock for the 180 day period ending on July 19, 1999; and



•

as of the date of the conversion, the registration statement, of which this prospectus is a part, is effective under the Securities Act and is available for use in connection with the offer and sale of the common stock in accordance with the registration rights agreement (unless suspension of the registration statement's effectiveness is permitted under the registration rights agreement).

    In connection with either type of conversion, each share of the Series A preferred stock will be converted into the number of shares of common stock determined by dividing (a) the sum of (i) $1,000, the stated value of the Series A preferred stock, plus (ii) all accrued and unpaid dividends, by (b) the conversion price.

    As of the date of this prospectus, the conversion price was $9.375. The conversion price of the Series A preferred stock is subject to adjustment to protect holders against dilution in the event of a stock split, reclassification of capital stock, merger, consolidation, recapitalization or other transaction that results in the conversion of our common stock into other securities, property or cash.

REDEMPTION

MANDATORY REDEMPTION

    On December 15, 2009, we are required to redeem all outstanding shares of Series A preferred stock for cash in an amount per share equal to the sum of (a) $1,000 (the stated value of the Series A preferred stock); and (b) the amount, if any, of all accrued and unpaid dividends on the share of Series A preferred stock to the date of actual payment of the redemption price, whether or not dividends have been declared.

MANDATORY REDEMPTION PROCEDURES

    We will send notice of our obligation to redeem the Series A preferred stock on the mandatory redemption date to the holders of record of the Series A preferred stock by first class mail, postage prepaid, at each holder's address as it appears on our stock record books. We will send the notice between 60 and 100 days before the date fixed for redemption.

    On or after the redemption date, holders of the shares called for redemption will be required to surrender the certificates evidencing shares to us at the place designated in the notice, and will be entitled to receive payment of the redemption price when they surrender their certificates. No dividends will accumulate after the redemption date, and after that date all rights of the holders of Series A preferred stock that is redeemed will cease and terminate, except to the extent we default in payment on the redemption date.

CHANGE OF CONTROL REDEMPTION

    If a "change of control" occurs, holders of Series A preferred stock may require us to redeem any or all of their shares of Series A preferred stock for cash in an amount per share equal to the sum of (a) $1,010 (101% of the stated value of the Series A preferred stock); and (b) the amount, if any, of all accrued and unpaid dividends on the share of Series A preferred stock to the date of actual payment of the redemption price, whether or not dividends have been declared.

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    A "change of control" means the time that any of the following occurs:

    (1) any person or group of persons acquires direct or indirect ownership of more than 35% of the voting power of our outstanding equity securities unless that person or group of persons owned 5% of our equity securities as of February 12, 1998;

    (2) a majority of the seats on our board of directors is held by persons neither nominated nor appointed by our board of directors;

    (3) any change of control occurs under any indenture or other agreement for indebtedness for borrowed money with an aggregate principal amount in excess of $10,000,000 outstanding and to which we or certain of our subsidiaries is a party; or

    (4) a change in control occurs under our Credit Agreement, while at least $10,000,000 million in principal amount of our Senior Notes are outstanding, the Senior Notes Indenture, or while at least $10,000,000 million in principal amount of our Senior Subordinated Notes are outstanding, the Senior Subordinated Notes Indenture; provided, however, that no event described above will constitute a "change of control" if such event resulted directly from any action taken by TPG Magellan LLC or any of its affiliates.

CHANGE OF CONTROL REDEMPTION PROCEDURES

    We are required to send notice of any change of control to the holders of record of the outstanding Series A preferred stock not more than five days following a change of control. This notice will describe the transaction constituting the change of control and will set forth:

•

each holder's right to require us to redeem any or all shares of Series A preferred stock held by him or her out of legally available funds;



•

the redemption date, which will be between 30 and 45 days from the date of the change of control notice; and



•

the procedures to be followed by holders in exercising their right to have their shares of Series A preferred stock redeemed.

    If the Series A preferred stock is owned by more than 50 holders or groups of affiliated holders and if the Series A preferred stock is listed on any national securities exchange or quoted on any national quotation system, we also are required to give notice of a change of control by publication in a newspaper of general circulation in the Borough of Manhattan, The City of New York, within 30 days following the change of control. Our failure to give a notice of a change of control, or the formal insufficiency of any notice, will not prejudice the rights of holders of Series A preferred stock to have us redeem their shares.

    If a holder of Series A preferred stock elects to require us to redeem his or her shares of Series A preferred stock following a change of control, the holder must deliver a written notice to us, in the form specified by us, stating that the holder wants us to redeem his or her shares, and specifying the number of shares to be redeemed. This notice must be delivered prior to the redemption date set forth in the notice of a change of control, or, if the notice of a change of control is not given, at any time following the last day we were required to give the notice of a change of control. If we do not give the required notice, the redemption date for any holder that elects to redeem shares of Series A preferred stock will be the date that is the later of (a) 45 days following the last day we were required to give the notice of change of control and (b) 30 days following the delivery of a notice of election by that holder. If all of the shares of the Series A preferred stock are owned by 50 or fewer holders or groups of affiliated holders, the holders or groups of holders may deliver a notice or an election to redeem at any time within 90 days following the occurrence of a change of control without awaiting receipt of a notice

28

of a change of control or the expiration of the time allowed for the delivery of a notice of a change of control.

SUBORDINATION RESTRICTIONS ON ABILITY TO PAY CHANGE OF CONTROL REDEMPTION PRICE

    Each holder of Series A preferred stock is deemed to have acknowledged and agreed that (a) the holder's right to receive payment of the change of control redemption price is subject and subordinated in right of payment to the payment in full and discharge of all amounts of principal, interest and fees (however denominated) then outstanding under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes (and any replacements or refinancings thereof) and (b) until payment in full of all such amounts (however denominated) under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes (and any replacements or refinancings thereof) has been made in cash, we are prohibited from making any payment, whether directly or indirectly, by exercise of any right of set-off or otherwise, of the change of control redemption price. If a holder of Series A preferred stock receives any prohibited payment of the change of control redemption price, he must hold the payment in trust for the benefit of the lenders under our Credit Agreement, Senior Notes and Senior Subordinated Notes (and any replacements or refinancings thereof). In addition, certain restrictive covenants in our Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture may prohibit us from redeeming shares of Series A preferred stock upon a change of control. See the section of this prospectus called "Description of Other Indebtedness." If a change of control occurs, we are required to pay all amounts outstanding under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes (and any replacements or refinancings thereof) to the extent necessary to permit us to pay the change of control redemption price. However, at the time a change of control occurs, we may not have the necessary resources to pay all amounts outstanding under the Credit Agreement, the Senior Notes and the Senior Subordinated Notes (and any replacements or refinancings thereof), and in such case we may not be able to pay the change of control redemption price.

DEPOSIT OF FUNDS

    On or prior to any redemption date, we are required to deposit with our transfer agent or other redemption agent, in trust for the benefit of the holders of the shares of Series A preferred stock to be redeemed, an amount of cash that is sufficient to complete the redemption. This deposit will constitute full payment to the holders. After the date we make this deposit, all rights of the holders with respect to the shares of the Series A preferred stock that are to be redeemed, except the right to receive the redemption price upon the surrender of their respective certificates, will cease and terminate.

    If the holders of any shares of Series A preferred stock called for redemption do not claim the cash deposited for redemption within two years after the deposit, the transfer agent or other redemption agent will pay the balance to us. Upon this payment, the transfer agent or other redemption agent will be relieved of all responsibility to holders and the sole right of holders, with respect to shares to be redeemed, will be to receive the redemption price as our general creditors. Any interest accrued on the deposited funds will belong to us and will be paid to us from time to time on demand.

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EXCHANGE

    Once the Option to acquire additional shares of Series A preferred stock held by the initial purchasers has been exercised in full or has expired, we may exchange Series A debentures, which will be unsecured junior subordinated convertible debentures for all (but not less than all) of the outstanding shares of Series A preferred stock. Such debentures would be issued pursuant to the Series A debentures indenture, a form of which has been prepared in accordance with the investment agreement and filed as an exhibit to the registration statement of which this prospectus is a part. A debenture in the principal amount of $1,000 would be issued in exchange for each share of the Series A preferred stock. The debentures will have terms comparable to the terms of the Series A preferred stock, including comparable conversion rights and interest rates that are the same as the dividend rates on the Series A preferred stock. The exchange may take place on any dividend payment date.

    Unless we receive the prior written consent of the holders of all outstanding shares of the Series A preferred stock, we may effect the exchange of Series A debentures for Series A preferred stock only if:

    (a) full cumulative dividends, to the extent payable or deemed payable through the date of exchange, have been paid, accrued or set aside for payment on all outstanding shares of the Series A preferred stock;

    (b) we have amended our certificate of incorporation pursuant to Delaware law to give holders of the Series A debentures the same voting rights as holders of Series A preferred stock; and

    (c) no holder of Series A preferred stock notifies the Company that the exchange could result in an adverse tax consequence to it.

    To prevent an exchange of shares of the Series A preferred stock because it could result in any adverse tax consequence to any holder, the holder must deliver a written notice to us specifying in reasonable detail the nature of the tax consequence. The holder must deliver that notice by the fifteenth day after it received the notice of exchange. If we receive an objection notice, then we will not exchange any shares of Series A preferred stock, and we will mail, within 15 days after receipt of the objection notice, written notice that we are canceling the proposed exchange. If we, based on the advice of nationally recognized tax counsel, believe that the tax consequences described in an objection notice are incorrect, we may discuss the tax consequences in question with the holder delivering such objection notice. If the holder withdraws the objection notice within 15 days of its delivery, we may consummate the proposed exchange.

    Before giving notice of our intention to exchange, we will execute and deliver the Series A debentures indenture to a bank or trust company selected by our board of directors and, if required by applicable law, will qualify the Series A debentures indenture under the Trust Indenture Act of 1939.

    We will mail written notice of our intention to exchange Series A preferred stock for Series A debentures to each holder of record of Series A preferred stock between 60 and 100 days prior to the date fixed for exchange.

    Upon the exchange of Series A preferred stock for Series A debentures, the rights of the holders of Series A preferred stock as our stockholders will terminate, and the Series A preferred stock will no longer be outstanding.

    Before any holder of Series A preferred stock will be entitled to receive Series A debentures, a holder must surrender his or her certificates representing the Series A preferred stock at our office or at any other place that our board of directors may designate, and must state in writing the name or names with addresses in which it, he or she wishes the certificates for the Series A debentures to be issued. After the surrender of certificates, we will issue and deliver certificates for the Series A

30

debentures to the holder, or to its, his or her nominee, at our office or other designated place. Shares of Series A preferred stock will be exchanged as of the close of business on the date fixed for exchange as provided above, and the person entitled to receive the Series A debentures issuable upon exchange will be treated for all purposes, including the accrual and payment of interest, as the record holder or holders of Series A debentures as of the close of business on that date.

VOTING RIGHTS

    The holders of the Series A preferred stock have the right to vote on all matters voted on by holders of common stock. The holders of the Series A preferred stock vote together with the holders of common stock as a single class. Each share of Series A preferred stock will entitle its holder to a number of votes equal to the number of shares of common stock into which the share of Series A preferred stock is convertible on the record date for the vote.

    If on any date:

    (1) dividends payable on the Series A preferred stock have not been paid in full, when required; or

    (2) we fail to redeem the Series A preferred stock when required,

then the holders of a majority of the outstanding shares of Series A preferred stock will have the exclusive right, voting together as a single class, to designate two directors on our board of directors. If we exercise our right to elect not to make any interest payment when due on an interest payment date, this will not give the holders of Series A debentures the right to designate any directors.

    If:

    (1) the initial purchasers, certain assignees of the initial purchasers and their respective affiliates own a majority of the Series A preferred stock,

    (2) any default or event of default under any instrument or agreement evidencing our indebtedness or indebtedness of any of our subsidiaries in an outstanding principal amount of more than $10,000,000 has resulted in the acceleration of the indebtedness or has given the holders of the indebtedness the right to accelerate the maturity date of that indebtedness, and

    (3) the default is not cured or waived within 75 days after it occurs,

the holders of a majority of the outstanding Series A preferred stock then held by the initial purchasers, certain assignees of the initial purchasers and their respective affiliates voting together as a single class shall have the right to designate a majority of the members of our board of directors.

    Without the consent or affirmative vote of the holders of at least 67% of the outstanding shares of Series A preferred stock, voting separately as a class, we may not:

    (1) authorize, create or issue, or increase the authorized amount of, any equity securities that rank senior to the Series A preferred stock with respect to receiving dividends or distributions upon our liquidation, dissolution or winding-up;

    (2) authorize, create or issue, or increase the authorized amount of, any class or series of capital stock, or any security convertible into or exercisable for any class or series of capital stock, that is mandatorily redeemable or redeemable at the option of the holder at any time on or prior to December 15, 2009, whether or not redemption may occur only upon the occurrence of a specified event;

    (3) amend, alter or repeal any provision of our certificate of incorporation or our bylaws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the Series A preferred stock so as to affect them adversely; or

31

    (4) authorize or take any other action if such action alters or changes any of the rights of the Series A preferred stock in any respect or otherwise would be inconsistent with the provisions of the certificate of designations for the Series A preferred stock and the holders of any class or series of our capital stock are entitled to vote on that action.

RESTRICTION ON DIVIDENDS

    As long as any shares of Series A preferred stock are outstanding, our board of directors:

•

will not declare, and we will not pay or set apart for payment any dividend on any securities that rank junior or equal to the Series A preferred stock;



•

will not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any securities that rank junior or equal to the Series A preferred stock or any warrants, rights or options exercisable for or convertible into any securities that rank junior or equal to the Series A preferred stock, other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for any securities that rank junior or equal to the Series A preferred stock;



•

will not make any distribution in respect of securities that rank junior or equal to the Series A preferred stock, either directly or indirectly, and whether in cash, obligations, shares or other property (other than distributions or dividends in securities that rank junior to the Series A preferred stock that are made to the holders of securities that rank junior to the Series A preferred stock); and



•

will not permit any corporation or other entity directly or indirectly controlled by us to purchase or redeem any securities that rank junior or equal to the Series A preferred stock or any warrants, rights, calls or options exercisable for or convertible into any securities that rank junior or equal to the Series A preferred stock (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for any securities that rank junior or equal to the Series A preferred stock),

unless before or at the time we take the relevant action all accumulated dividends on shares of the Series A preferred stock, including arrearages and accumulated dividends on arrearages, have been paid.

    When dividends are not paid in full on the Series A preferred stock, all dividends declared on any series of securities that ranks equally with the Series A preferred stock with respect to dividends will be declared and paid pro rata with the Series A preferred stock so that the amount of dividends declared and paid will bear to each other the same ratio that accumulated dividends, including additional dividends accrued in respect of such accumulated dividends, on the shares of Series A preferred stock and the other securities bear to each other.

    The following actions are not prohibited by the restrictions described above:

    (1) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value of shares of Series A preferred stock or any security that ranks equal to the Series A preferred stock with respect to dividends if required by the terms of such securities; or

    (2) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value by us of any securities that rank junior to the Series A preferred stock in accordance with any obligation in existence at the time of original issuance of the Series A preferred stock.

NO INCONSISTENT OBLIGATIONS

    We are not permitted to enter into any agreement or issue any security that prohibits, conflicts or is inconsistent with, or would be breached by, our performance of our obligations with respect to the Series A preferred stock.

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THE OPTION

    In connection with our sale of 59,063 shares of Series A preferred stock to the initial purchasers, we also issued to the initial purchasers an irrevocable Option (as defined) to purchase an additional 21,000 shares of Series A preferred stock for $21,000,000. In general, the initial purchasers, certain assignees of the initial purchasers and their respective affiliates may elect to exercise the Option at any time, in whole and not in part, until August 19, 2002. In certain circumstances the exercise period could be extended, but in any event the Option will expire not later than August 17, 2004. Any Series A preferred stock issued upon exercise of the Option would have the same terms as the other Series A preferred stock.

    We can also require the option holders to exercise the Option, in whole and not in part, and to purchase the underlying 21,000 shares of our Series A preferred stock, if the closing price per share of our common stock exceeds the conversion price of the Series A preferred stock on each trading day for 45 consecutive trading days ending on or before August 19, 2002. As of the date of this prospectus, the conversion price was $9.375. The conversion price is subject to adjustment to protect against dilution.

    Our right to require the option holders to exercise the Option and to purchase the underlying 21,000 shares of our Series A preferred stock is subject to the satisfaction or waiver of certain customary closing conditions. We will also not be allowed to require exercise of the Option, unless:

•

our common stock has been validly listed for trading on a national securities exchange or quoted on a nationally recognized quotation system during the relevant 45-day period described above and as of the date of the exercise;



•

the average daily trading volume in our common stock during the relevant 45-day period described above is at least 60% of the average daily trading volume in our common stock for the 180 day period ending on July 19, 1999; and



•

as of the date of the exercise, the registration statement, of which this prospectus is a part, is effective under the Securities Act and is available for use in connection with the offer and sale of Series A preferred stock and common stock in accordance with the registration rights agreement.

    The terms of the Option are set forth in the investment agreement which was filed as an exhibit to the registration statement of which this prospectus is a part.

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DESCRIPTION OF THE SERIES A DEBENTURES

The following summarizes certain terms and provisions of the Series A debentures. This summary is not complete and is subject to, and qualified in its entirety by reference to, the provisions of the Series A Debentures Indenture. The form of the Series A Debentures Indenture, which will be governed by the Trust Indenture Act of 1939, and the form of the Series A debentures, are exhibits to the registration statement of which this prospectus is a part.

GENERAL

    Under certain circumstances, we may exchange our Series A Junior Subordinated Convertible Debentures due December 15, 2009 for all (but not less than all) of the outstanding shares of Series A preferred stock. For a description of these circumstances, see the section of this prospectus called "Description of the Series A Preferred Stock—Exchange."

    If we elect to exchange Series A debentures for the outstanding Series A preferred stock, we will issue the Series A debentures pursuant to an indenture to be entered into between us and a trustee to be selected by us prior to such exchange, the Series A debentures indenture (as defined), which trustee would qualify at the time of such designation as a trustee under the Trust Indenture Act of 1939.

    The Series A debentures would be subordinated to our senior indebtedness and effectively subordinated to the obligations of our subsidiaries. A description of this subordination is set forth in the subsection below called "—Subordination" and a discussion of the effect of subordination is set forth in the section of this prospectus called "Risk Factors."

PRINCIPAL

    Upon an exchange of Series A preferred stock for Series A debentures, holders of the Series A preferred stock to be exchanged will be entitled to receive Series A debentures with a principal amount equal to $1,000 in exchange for each share of Series A preferred stock exchanged.

MATURITY

    The Series A debentures will mature on December 15, 2009. We are not permitted to redeem the Series A debentures prior to their maturity date.

INTEREST

    The Series A debentures will bear interest at a rate of 6.50% per year.

INTEREST PAYMENT DATES

    Interest is payable quarterly in arrears on the last day of March, June, September and December of each year, or if any such date is not a business day, then on the preceding business day. Interest accrues on the Series A debentures from the date of issuance on the basis of a 360-day year consisting of twelve 30-day months (four 90-day quarters) and the actual number of days elapsed in the period for which the interest is payable.

RIGHT NOT TO MAKE INTEREST PAYMENTS WHEN FIRST DUE

    We may elect not to make any payment of interest on the Series A debentures when due on an interest payment date (other than an interest payment due on the repayment of principal, redemption or repurchase of Series A debentures or on our liquidation, dissolution or winding up). Any amount of interest not paid, which we sometimes refer to as an arrearage, will accrue interest at a rate of 6.50% per year. Arrearages and the interest payable on any arrearage may be paid at any time, in whole or in

34

part, without reference to regular interest payment dates, to registered holders of the Series A debentures on a record date fixed by our board of directors. The record date in respect of an arrearage payment must be at least 10 days prior to the corresponding payment date.

    If less than the total amount of interest due on all outstanding Series A debentures is paid, then the amount paid will be allocated pro rata on the basis of the principal amount outstanding of each Series A debenture.

PAYMENT IN COMMON STOCK

    We have the right to issue shares of our common stock to pay interest on the Series A debentures. We may issue shares of common stock in payment of interest on the first date it is due. We may issue shares of common stock in payment of an arrearage at any time before December 15, 2001. After that date, we may not issue shares of common stock in payment of arrearages.

    For the purpose of determining the number of common shares to be paid, the value of a share of common stock used to pay interest on the Series A debentures will be equal to the average of the closing prices per share of common stock for the twenty consecutive trading days ending on the second trading day prior to the relevant dividend payment date (subject to adjustment if an adjustment to the conversion price takes effect during the period used to compute such average).

    We may not issue shares of common stock in payment of interest unless:

•

the common stock is listed for trading on a national securities exchange or quoted on a nationally recognized quotation system;



•

the shares of common stock to be issued have been duly authorized and when issued in connection with such payment, will be validly issued, fully paid and non-assessable;



•

the issuance of the shares of common stock will not: (a) violate any provision of our certificate of incorporation or our bylaws; (b) give rise to any preemptive rights, rights of first refusal or other similar rights on behalf of any person; (c) constitute a default under or give rise to a right to put or to compel a tender offer for our outstanding securities or require any consent, waiver or approval under, any note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan agreement, joint venture agreement, regulatory approval, contract or any other agreement, instrument or obligation to which we are a party or by which we are bound; (d) result in the creation or imposition of any lien upon any of our assets or (e) violate any law applicable to us;



•

no uncured default or event of default has occurred and is continuing (or will occur as a result of the issuance of shares of common stock in satisfaction of such payment) under any agreement or instrument evidencing our indebtedness, the outstanding principal amount of which is in excess of $10,000,000, and as a result of such default or event of default holders of the indebtedness have accelerated or have the right to accelerate the maturity of the indebtedness;



•

we have not been notified that a breach of the investment agreement or the terms of the Series A debentures has occurred and is continuing;



•

(a) in the case of an interest payment made on the date originally due, the average of the closing prices per share of common stock for the 20 consecutive trading days ending on the second trading day prior to the relevant payment date is at least 40% of the conversion price for the Series A debentures, and (b) in the case of a payment made in respect of a missed interest payment, the average of the closing prices per share of our common stock for the 20 consecutive trading days ending on the second trading day prior to the relevant interest payment date is at least 60% of the conversion price for the Series A debentures;

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•

(a) in the case of an interest payment made on the date originally due, the average daily trading volume in the common stock during the 20 consecutive trading days ending on the second trading day prior to the relevant interest payment date is at least 50% of the average daily trading volume in the common stock for the 180-day period ending on July 19, 1999, and (b) in the case of a payment made in respect of a missed interest payment, the average daily trading volume in the common stock during the 20 consecutive trading days ending on the second trading day prior to the relevant interest payment date is at least 67% of the average daily trading volume in the common stock for the 180-day period ending on July 19, 1999;



•

the issuance of shares of common stock in satisfaction of the payment does not require the approval or affirmative vote of the holders of any class or series of our equity securities; and



•

as of the relevant interest payment date, the registration statement of which this prospectus is part is effective under the Securities Act and is available for use in connection with the offer and sale of such shares of common stock by the holders of Series A debentures that have such right under the registration rights agreement (unless suspension of the registration statement's effectiveness is permitted under the registration rights agreement).

SUBORDINATION

    The Series A debentures will be unsecured subordinated indebtedness. They will be subordinated in right of payment to all of our existing and future senior indebtedness, whether such senior indebtedness is secured or unsecured. As of March 31, 2001, the aggregate amount of our outstanding senior indebtedness was $1,004.4 million (exclusive of unused commitments). Payment from any money or proceeds of obligations of the United States government held in any defeasance trust described under "Defeasance and Discharge of the Indenture and the Series A Debentures" below is not subordinated to any senior indebtedness or subject to the restrictions described in this summary.

    Currently, substantially all of our operations are conducted through our subsidiaries. Claims of creditors of our subsidiaries, including trade creditors, and claims of preferred stockholders (if any) of our subsidiaries generally will have priority with respect to the assets and earnings of our subsidiaries over the claims of our creditors, including holders of the Series A debentures. The indebtedness outstanding under our Credit Agreement is secured indebtedness and is guaranteed by substantially all of our subsidiaries. The Series A debentures, therefore, will be effectively subordinated to creditors (including the lenders under our Credit Agreement and trade creditors) and preferred stockholders (if any) of our subsidiaries. At March 31, 2001, the total liabilities of our subsidiaries (excluding subsidiary guarantees of amounts outstanding under our Credit Agreement) were approximately $386.3 million, including trade payables.

    Upon any distribution to creditors upon any liquidation, dissolution, winding up, bankruptcy, reorganization, assignment for the benefit of creditors, marshaling of assets and liabilities, insolvency, receivership or similar proceedings relating to us, the holders of senior indebtedness will be entitled to receive payment in full of all obligations with respect to the senior indebtedness before the holders of Series A debentures receive any direct or indirect payment on account of principal of, premium, if any, or interest on the Series A debentures.

    We may not pay principal of or interest on the Series A debentures or make any deposit pursuant to the provisions described under "Defeasance and Discharge of the Indenture and the Series A Debentures" below and we may not otherwise purchase, redeem or otherwise retire any Series A debentures if (i) any senior indebtedness is not paid when due or (ii) any other default on senior indebtedness occurs which results in the maturity of the senior indebtedness being accelerated unless, (a) the default has been cured or waived or the acceleration has been rescinded or the senior indebtedness has been paid in full, or (b) we and the Series A debenture trustee receive written notice approving such payment from the representative of the senior indebtedness. During the continuance of

36

any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any senior indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except any notice required to effect acceleration) or the expiration of any applicable grace periods, we may not pay the Series A debentures for a period commencing on the Series A debentures trustee's receipt of written notice of the default from the representative of the senior indebtedness specifying an election to prohibit us from paying the Series A debentures for a period ending 179 days after the date of the notice. The representative may terminate the prohibition by written notice to the Series A debentures trustee and us. We may terminate the prohibition by repaying the senior indebtedness in full or by curing the default that gave rise to the prohibition. We may resume making payments on the Series A debentures after the end of such a prohibition unless

•

any senior indebtedness has not been paid when due;



•

any other default has occurred on senior indebtedness that results in the maturity of the senior indebtedness being accelerated; or



•

the holders of the senior indebtedness that issued the notice prohibiting us from making payments on the Series A debentures or their representative have accelerated the maturity of the senior indebtedness.

    We may not be prohibited from making payments on the Series A debentures more than once in any consecutive 360-day period, irrespective of the number of defaults that may exist or occur during the period, except that if the notice prohibiting us from making payments on the Series A debentures was delivered by holders of senior indebtedness other than the lenders under our Credit Agreement, the lenders under our Credit Agreement may again prohibit us from making payments in the same 360-day period. However, in no event may the total number of days during which we are prohibited from making payments on the Series A debentures exceed 179 days in the aggregate during any 360 consecutive day period. The holders of any senior indebtedness may not make any default or event of default on their senior indebtedness that existed on the date that they first prohibited us from making payments on the Series A debentures the basis for again prohibiting us from making payments on the Series A debentures whether or not within a period of 360 consecutive days, unless the default or event of default was cured or waived for a period of not less than 90 consecutive days.

    When we refer to "senior indebtedness" we mean the principal of and premium, if any, interest (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate—including any rate applicable upon any default or event of default, to the extent lawful—specified in any document evidencing the senior indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) and other amounts (including, but not limited to, fees, expenses, reimbursement obligations in respect of letters of credit and indemnities) due or payable from time to time on or in connection with any of our indebtedness whether outstanding on the date the Series A debentures are issued or thereafter incurred, unless the instrument creating any particular indebtedness expressly provides that such indebtedness is not senior in right of payment to the Series A debentures. Senior indebtedness includes obligations under the Credit Agreement, Senior Notes and Senior Subordinated Notes. Senior indebtedness does not include, however, (a) any of our indebtedness to any of our subsidiaries or other affiliates, (b) any indebtedness incurred after the date the Series A debentures are issued that is contractually subordinated in right of payment to any senior indebtedness, (c) amounts owed (except to banks and other financial institutions) for goods, materials or services purchased in the ordinary course of business or for compensation to employees, (d) any liability for federal, state, local or other taxes owed or owing by us, or (e) any obligations with respect to any of our capital stock.

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CONVERSION INTO COMMON STOCK

    The Series A debentures may be converted into shares of common stock in the following ways:

•

Optional Conversion—Before the date of mandatory redemption, holders of the Series A debentures may elect to convert any or all of their Series A debentures into common stock.



•

Mandatory Conversion—We have the right to require that any or all of the Series A debentures be converted into shares of common stock if (i) the average closing price per share of common stock exceeds 200% of the conversion price for 180 consecutive calendar days ending no earlier than December 15, 2000 and no later than December 15, 2001, and for the last two-calendar weeks of such 180 consecutive calendar days, or (ii) the average closing price per share of common stock exceeds 200% of the conversion price for 45 consecutive trading days and for the last two-calendar weeks of such 45 consecutive trading days, ending no earlier than December 15, 2001.

    We will not be allowed to mandatorily convert the Series A debentures unless:

•

our common stock has been validly listed for trading on a national securities exchange or quoted on a nationally recognized quotation system during the relevant period described above and as of the date of the exchange;



•

the average daily trading volume in our common stock during the relevant periods described above is at least 50% of the average daily trading volume in our common stock for the 180 day period ending on July 19, 1999; and



•

as of the date of the exchange, the registration statement, of which this prospectus is a part, is effective under the Securities Act and is available for use in connection with the offer and sale of the common stock in accordance with the registration rights agreement (unless suspension of the registration statement's effectiveness is permitted under the registration rights agreement).

    In connection with either type of conversion, the Series A debentures will be converted into the number of shares of common stock calculated by dividing (a) the sum of (i) the principal amount of the Series A debentures being converted, plus (ii) all unpaid interest accrued on the Series A debentures to be converted to the conversion date, by (b) the conversion price.

    As of the date of this prospectus, the conversion price was $9.375. The conversion price of the Series A debentures is subject to adjustment to protect holders against dilution in the event of a stock split, reclassification of capital stock, merger, consolidation, recapitalization or other transaction that results in the conversion of our common stock into other securities, property or cash.

REDEMPTION ON CHANGE OF CONTROL

    If a "change of control" occurs, holders of Series A debentures may require us to redeem any or all of their Series A debentures for cash in an amount equal to the sum of (a) 101% of the principal amount of the Series A debentures to be redeemed, and (b) all unpaid interest accrued on the Series A debentures to be redeemed to the date of actual payment of the redemption price.

    Each holder of Series A debentures is deemed to have acknowledged and agreed that (a) the holder's right to receive payment of the change of control redemption price is subject and subordinated in right of payment to the payment in full and discharge of all amounts of principal, interest and fees (however denominated) then outstanding under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes (and any replacements or refinancings thereof) and (b) until payment in full of all such amounts (however denominated) under our Credit Agreement, our Senior Notes and our Senior Subordinated Notes (and any replacements or refinancings thereof) has been made in cash, we

38

are prohibited from making any payment, whether directly or indirectly, by exercise of any right of set-off or otherwise, of the change of control redemption price. If a holder of Series A debentures receives any prohibited payment of the change of control redemption price, he or she must hold the payment in trust for the benefit of the lenders under our Credit Agreement, Senior Notes and Senior Subordinated Notes. In addition, certain restrictive covenants in our Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture (and any replacements or refinancings thereof) may prohibit us from redeeming the Series A debentures upon a change of control. See the section of this prospectus called "Description of Other Indebtedness." If a change of control occurs, we are required to pay all amounts outstanding under our Credit Agreement, Senior Notes and Senior Subordinated Notes (and any replacements or refinancings thereof) to the extent necessary to permit us to pay the change of control redemption price. However, at the time a change of control occurs, we may not have the necessary resources to pay all amounts outstanding under the Credit Agreement, the Senior Notes and the Senior Subordinated Notes (and any replacements or refinancings thereof), and in such case we may not be able to pay the change of control redemption price.

    A "change of control" means the time that any of the following occurs:

    (1) any person or group of persons acquires direct or indirect ownership of more than 35% of the voting power of our outstanding equity securities unless that person or group of persons owned 5% of our equity securities as of February 12, 1998;

    (2) a majority of the seats on our board of directors is held by persons neither nominated nor appointed by our board of directors;

    (3) any change of control occurs under any indenture or other agreement for indebtedness for borrowed money with an aggregate principal amount in excess of $10,000,000 outstanding and to which we or certain of our subsidiaries is a party; or

    (4) a change in control occurs: under our Credit Agreement, while at least $10,000,000 million in principal amount of our Senior Notes are outstanding, the Senior Notes Indenture, or while at least $10,000,000 million in principal amount of our Senior Subordinated Notes are outstanding, the Senior Subordinated Notes Indenture; provided, however, that no event described above will constitute a "change of control" if such event resulted directly from any action taken by TPG Magellan LLC or any of its affiliates.

REDEMPTION PROCEDURES

    We are required to send notice of any change of control to the holders of the Series A debentures not more than five days following a change of control. This notice will describe the transaction constituting such change of control and will set forth:

•

each holder's right to require us to redeem any or all Series A debentures held by him or her out of legally available funds;



•

the redemption date, which will not be less than 30 nor more than 45 days from the date of the change of control notice; and



•

the procedures to be followed by holders in exercising their right to have their Series A debentures redeemed.

    If Series A debentures are owned by more than 50 holders or groups of affiliated holders and if the Series A debentures are listed on any national securities exchange or quoted on any national quotation system, we also are required to give notice of a change of control by publication in a newspaper of general circulation in the Borough of Manhattan, The City of New York, within 30 days following the change of control. Our failure to give a notice of a change of control, or the formal

39

insufficiency of any notice, will not prejudice the rights of holders of Series A debentures to have us redeem their Series A debentures.

    If a holder of Series A debentures elects to require us to redeem his or her Series A debentures following a change of control, the holder must deliver a written notice to us, in the form specified by us, if we did in fact give notice of a change of control as required, stating that the holder wants us to redeem his or her Series A debentures, and specifying the principal amount of Series A debentures to be redeemed. This notice must be delivered prior to the redemption date set forth in the notice of a change of control, or, if the notice of a change of control is not given, at any time following the last day we were required to give the notice of a change of control. If we do not give the required notice, the redemption date for any holder that elects to redeem Series A debentures will be the date that is the later of (a) 45 days following the last day we were required to give the notice of change of control and (b) 30 days following the delivery of a notice of election by that holder. If the Series A debentures are owned by 50 or fewer holders or groups of affiliated holders, the holders or groups of holders of that series may deliver a notice or an election to redeem at any time within 90 days following the occurrence of a change of control without awaiting receipt of a notice of a change of control or the expiration of the time allowed for the delivery of a notice of a change of control.

DEPOSIT OF FUNDS

    On or prior to the redemption date following a change of control, we are required to deposit with the Series A debentures trustee, in trust for the benefit of the holders of the Series A debentures to be redeemed, an amount of cash that is sufficient to complete the redemption. This deposit will constitute full payment to the holders. After the date we make this deposit, all rights of the holders with respect to the Series A debentures that are to be redeemed, except the right to receive the redemption price upon the surrender of their respective certificates, will cease and terminate.

    If the holders of any Series A debentures called for redemption do not claim the cash deposited for redemption within two years after the deposit, the Series A debentures trustee will pay the balance to us. Upon this payment, the Series A debentures trustee will be relieved of all responsibility to holders and the sole right of holders, with respect to Series A debentures to be redeemed, will be to receive the redemption price as our general creditors. Any interest accrued on the deposited funds will belong to us and will be paid to us from time to time on demand.

VOTING RIGHTS

    The holders of the Series A debentures will have the right to vote on all matters voted on by holders of common stock. The holders of the Series A debentures vote together with the holders of common stock as a single class. With respect to any such vote, each Series A debenture will entitle its holder to a number of votes equal to the number of shares of common stock into which the Series A debenture is convertible on the record date of the vote.

    If on any date:

    (1) interest payable on Series A debentures have not been paid in full when required; or

    (2) we fail to satisfy our obligation to redeem Series A debentures following a change of control or to pay the Series A debentures at maturity,

then the holders of a majority in principal amount of the outstanding Series A debentures will have the exclusive right, voting together as a single class, to designate two directors on our board of directors. If we exercise our right to elect not to make any interest payment when due on an interest payment date, this will not give the holders of Series A debentures the right to designate any directors.

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    If the initial purchasers, certain assignees of the initial purchasers and their respective affiliates own a majority in principal amount of the outstanding Series A debentures, and (a) any default or event of default under any instrument or agreement evidencing our indebtedness or indebtedness of any of our subsidiaries in an outstanding principal amount of more than $10,000,000 has resulted in the acceleration of the indebtedness or has given the holders of the indebtedness the right to accelerate the indebtedness, and (b) such default or event of default is not cured or waived within 75 days, the holders of a majority of the outstanding Series A preferred stock then held by the initial purchasers, certain assignees of the initial purchasers and their respective affiliates voting together as a single class shall have the right to designate a majority of the members of the board of directors.

    Without the approval of the holders of at least 67% in principal amount of the outstanding Series A debentures, voting separately as a class, we may not:

    (1) authorize, create or issue, or increase the authorized amount of, any equity securities that rank senior to our Series A preferred stock for the purpose of receiving dividends or distributions upon our liquidation, dissolution or winding-up;

    (2) authorize, create or issue, or increase the authorized amount of, any class or series of capital stock or any security convertible into or exercisable for any class or series of capital stock, that is mandatorily redeemable or redeemable at the option of the holder at any time on or prior to December 15, 2009, whether or not redemption may occur only upon the occurrence of a specified event;

    (3) amend, alter or repeal any provision of our certificate of incorporation or our bylaws, if the amendment, alteration or repeal alters or changes the powers, preferences or special rights of the Series A debentures so as to affect them adversely; or

    (4) authorize or take any other action if such action alters or changes any of the rights of the Series A debentures in any respect or otherwise would be inconsistent with the provisions of the debenture indenture and the holders of the Series A debentures are entitled to vote on that action.

RESTRICTION ON DIVIDENDS

    As long as any Series A debentures are outstanding, our board of directors:

•

will not declare, and we will not pay or set apart for payment, any dividend on any of our equity securities (excluding any equity security that was senior in right of payment of dividends to the Series A preferred stock at the time the Series A preferred stock was exchanged for Series A debentures);



•

will not make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the repurchase, redemption or other retirement of, any such equity securities or any warrants, rights or options exercisable for or convertible into any such equity securities, other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for such equity securities;



•

will not make any distribution in respect of such equity securities, either directly or indirectly, and whether in cash, obligations, shares or other property (other than distributions or dividends in such equity securities to the holders of such equity securities); and



•

will not permit any corporation or other entity directly or indirectly controlled by us to purchase or redeem any such equity securities or any warrants, rights, calls or options exercisable for or convertible into any such equity securities (other than the repurchase, redemption or other retirement of debentures or other debt securities that are convertible into or exchangeable for any such equity securities),

41

unless before or at the time we take the relevant action, all accumulated interest on the Series A debentures, including arrearages, have been paid.

    The following actions are not prohibited by the restrictions described above:

    (1) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value of any Series A debentures if required by their terms; or

    (2) the acquisition, repurchase, exchange, conversion, redemption or other retirement for value by us of any securities that rank junior in right of payment to the Series A debentures in accordance with any obligation in existence on December 15, 1999.

EVENTS OF DEFAULT AND REMEDIES

    Each of the following is an "event of default":

•

we default in payment when due of principal of the Series A debentures, whether at stated maturity, or upon acceleration, redemption or otherwise, whether or not such payment is prohibited by provisions described under "—Subordination" above;



•

we fail to comply with any of our agreements in the Series A debentures indenture or the Series A debentures and our failure continues for 30 days after receipt of a written notice from the Series A debentures trustee or holders of at least 25% of the aggregate principal amount of the Series A debentures then outstanding specifying such default and requiring that it be remedied; or



•

we default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any of our indebtedness (or the payment of which is guaranteed by us), which default results from the failure to pay any such indebtedness at its stated final maturity or results in the acceleration of such indebtedness prior to its stated final maturity, and the principal amount of such indebtedness is at least $20 million, or the principal amount of such indebtedness, together with the principal amount of any other such indebtedness the maturity of which has been accelerated, aggregates $35 million or more;



•

certain events of bankruptcy or insolvency occur with respect to us.

    If an event of default occurs and is continuing and if it is known to the Series A debentures trustee, the Series A debentures trustee shall mail to each holder of the Series A debentures notice of the event of default within 90 days after it becomes known to the Series A debentures trustee, unless such event of default has been cured or waived. Except in the case of an event of default in the payment of principal of or interest on any Series A debenture, the Series A debentures trustee may withhold the notice if and so long as a committee of its trust officers in good faith determines that withholding the notice is in the interest of the holders of the Series A debentures.

    If an event of default (other than an event of default resulting from bankruptcy, insolvency or reorganization) occurs and is continuing, the Series A debentures trustee or the holders of at least 25% of the principal amount of the Series A debentures then outstanding, by written notice to us (and to the Series A debentures trustee if such notice is given by such holders), may, and the Series A debentures trustee at the request of such holders shall, declare all unpaid principal of and accrued interest on such Series A debentures to be due and payable immediately. Upon a declaration of acceleration, the principal, premium and accrued interest on the Series A debentures shall be due and payable. If an event of default resulting from certain events of bankruptcy, insolvency or reorganization occurs, all unpaid principal of and accrued interest on the Series A debentures then outstanding will automatically become and be immediately due and payable without any declaration or other act on our part or on the part of the Series A debentures trustee or any holder. If all events of default have been cured or waived, except for an event of default related to non-payment of principal and interest that

42

has become due solely because of acceleration, the holders of a majority of the aggregate principal amount of the Series A debentures outstanding (or the initial purchasers and their affiliates, so long as they own 20% of the aggregate principal amount of the outstanding Series A debentures) by notice to the Series A debentures trustee may rescind an acceleration and its consequences. The holders of a majority of the aggregate principal amount of the outstanding Series A debentures (or the initial purchasers and their affiliates, so long as they own 20% of the aggregate principal amount of the outstanding Series A debentures) by notice to the Series A debentures trustee may waive an existing default or event of default and its consequences, except a default in the payment of principal of or interest on the Series A debentures or a default under a provision which requires the consent of all holders of Series A debentures to amend the Series A debentures indenture or Series A debentures. When a default or event of default is waived, it is cured and ceases to exist, but no waiver extends to any subsequent or other default or impairs any consequent right. A holder of Series A debentures may not pursue any remedy with respect to the Series A debentures indenture or the Series A debentures unless: (i) the holder gives to the Series A debentures trustee written notice of a continuing event of default; (ii) the holders of at least 25% in principal amount of the Series A debentures outstanding (or the initial purchasers and their affiliates, so long as they own 20% of the aggregate principal amount of the outstanding Series A debentures) make a written request to the Series A debentures trustee to pursue the remedy; (iii) such holder offers the Series A debentures trustee reasonable indemnity or security satisfactory to the Series A debentures trustee against any loss, liability or expense; (iv) the Series A debentures trustee does not comply with the request within 30 days after receipt thereof and the offer of indemnity or security; and (v) during such 30-day period the holders of a majority of the aggregate principal amount of the outstanding Series A debentures (or the initial purchasers and their affiliates, so long as they own 20% of the aggregate principal amount of the outstanding Series A debentures) do not give the Series A debentures trustee a direction which is inconsistent with the request.

    We are required to deliver to the Series A debentures trustee annually a statement regarding compliance with the Series A debentures indenture. Furthermore, we are required, upon becoming aware of any default or event of default, to deliver a statement to the Series A debentures trustee specifying such default or event of default.

DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE SERIES A DEBENTURES

    We may at any time, elect to have our obligations discharged with respect to the outstanding Series A debentures ("legal defeasance"). Legal defeasance means that we will be deemed to have paid and discharged the entire indebtedness represented by the outstanding Series A debentures, except for (i) the rights of holders of outstanding Series A debentures to receive solely out of the trust described below payments in respect of the principal of and interest on the Series A debentures when such payments are due, (ii) the rights of holders to convert Series A debentures into common stock, (iii) our obligations concerning registration of Series A debentures, replacing mutilated, destroyed, lost or stolen Series A debentures and the maintenance of an office or agency for payment and money for payments held in trust, (iv) the rights, powers, trusts, duties and immunities of the Series A debentures trustee, and (v) the defeasance provisions of the Series A debentures indenture.

    We may at any time elect to have our obligation to deliver compliance certificates, redeem Series A debentures following a change of control and take actions requested by the Series A debentures trustee to carry out the purposes of the Series A debentures indenture and the restrictions on our ability to pay dividends discharged with respect to the outstanding Series A debentures ("covenant defeasance"). Such covenant defeasance means that, with respect to the outstanding Series A debentures, we may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such provisions and such omission to comply will not constitute a default or an event of default.

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    In order to exercise defeasance, (i) we must irrevocably deposit with the Series A debentures trustee, in trust, for the benefit of the holders of the Series A debentures, cash in U.S. dollars, U.S. government obligations, or a combination of cash and U.S. government obligations, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and interest on the outstanding Series A debentures on the stated maturity of the principal or installment of interest or upon redemption; (ii) we must deliver to the Series A debentures trustee an opinion of counsel stating that the holders of the outstanding Series A debentures will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the defeasance had not occurred; (iii) no default or event of default shall have occurred and be continuing on the date of such deposit; and (iv) the defeasance will not result in a breach or violation of or constitute a default under any material agreement or instrument to which we are a party or by which we are bound.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

    None of our directors, officers, employees or stockholders will have any liability for any of our obligations under the Series A debentures or the Series A debentures indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each holder of the Series A debentures by accepting the Series A debentures waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Series A debentures. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Securities and Exchange Commission that such a waiver is against public policy.

TRANSFER AND EXCHANGE

    A holder may transfer or exchange Series A debentures in accordance with the Series A debentures indenture. The registrar may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Series A debentures indenture. The registrar is not required to register a transfer or exchange of any Series A debentures selected for redemption except for the unredeemed portion of any Series A debenture being redeemed in part. Also, the registrar is not required to register a transfer or exchange of any Series A debenture for a period of 15 days before the mailing of a notice of redemption offer. The registered holder of a Series A debenture will be treated as the owner of it for all purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

    Subject to certain exceptions, the Series A debentures indenture or the Series A debentures may be amended or supplemented with the consent of the holders of a majority of the aggregate principal amount of the Series A debentures then outstanding, and any existing default or compliance with any provision may be waived (other than a continuing default or event of default in the payment of principal or interest on any Series A debenture) with the consent of the holders of a majority of the aggregate principal amount of the then outstanding Series A debentures.

    Without the consent of each holder affected, an amendment may not (i) reduce the percentage of principal amount of the Series A debentures whose holders must consent to an amendment, supplement or waiver, (ii) change the stated maturity or the time or currency of payment of the principal of or any interest on, or reduce the rate of interest on or principal of payable on any Series A debentures or alter the redemption provisions of the Series A debentures indenture, (iii) make any change in the subordination provisions of the Series A debentures indenture that adversely affects the rights of any holder of the Series A debentures, (iv) impair the right of any holder to institute suit for the enforcement of any payment on or with respect to such holder's Series A debenture, (v) waive a default in the payment of the principal of or interest on any Series A debenture, (vi) make any change

44

to the conversion provisions of the Series A debentures indenture or the provisions of the Series A debentures indenture regarding the control of the exercise of remedies or the right of a holder to bring suit against us if we fail to pay the Series A debentures, or (vii) make any change in the provision of the Series A debentures indenture containing the terms described in this paragraph.

    Notwithstanding the foregoing, without the consent of any holder of the Series A debentures, we and the Series A debentures trustee may amend or supplement the Series A debentures indenture or the Series A debentures to cure any ambiguity, defect or inconsistency, to make any change that does not adversely affect the rights of any holder of the Series A debentures, or to comply with any requirement of the Securities and Exchange Commission in connection with the qualification of the Series A debentures indenture or the Series A debentures trustee under the Trust Indenture Act.

CONCERNING THE TRUSTEE

    The Series A debentures indenture contains certain limitations on the rights of the Series A debentures trustee, should it become our creditor, to obtain payment of claims, or to realize on property received in respect of any such claim as security or otherwise. The Series A debentures trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest, it must eliminate such conflict within 90 days or apply to the Securities and Exchange Commission for permission to continue or resign.

    The holders of a majority of the aggregate principal amount of the then outstanding Series A debentures will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Series A debentures trustee, subject to certain exceptions. The Series A debentures indenture provides that in case an event of default shall occur (which shall not be cured), the Series A debentures trustee will be required, in the exercise of its power, to use the degree of care and skill of a prudent person under the circumstances in the conduct of such person's own affairs. Subject to such provisions, the Series A debentures trustee will be under no obligation to exercise any of its rights or powers under the Series A debentures indenture at the request of any of the holders of the Series A debentures, unless they shall have offered to the Series A debentures trustee reasonable security or indemnity satisfactory to it against any loss, liability or expense.

GOVERNING LAW

    The Series A debentures indenture provides that it and the Series A debentures will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

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DESCRIPTION OF OTHER INDEBTEDNESS

The following summarizes the principal terms and conditions of our Credit Agreement, our Senior Notes Indenture and our Senior Subordinated Notes Indenture. The description below does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, the Senior Notes Indenture and the Senior Subordinated Notes Indenture, which are incorporated by reference into the registration statement of which this prospectus is a part.

    As of March 31, 2001, the aggregate scheduled maturities of long-term debt and capital lease obligations during the remainder of fiscal year 2001 and the four fiscal years and beyond were as set forth in the following table (in millions):

Year	Payment Amount
2001	$	11.9
2002		43.0
2003		75.7
2004		120.4
2005		99.9
2006 and beyond		653.5

    The Senior Subordinated Notes, which are carried at cost, had a fair value of approximately $534 million at September 30, 1999, $421 million at September 30, 2000 and $587 million at March 31, 2001 based on market quotes. Our remaining debt is also carried at cost, which approximates fair market value.

Senior Credit Facilities

    The Credit Agreement provides for a Term Loan Facility (the "Term Loan Facility") in an original aggregate principal amount of $550 million, consisting of an approximately $183.3 million Tranche A Term Loan (the "Tranche A Term Loan"), an approximately $183.3 million Tranche B Term Loan (the "Tranche B Term Loan") and an approximately $183.4 million Tranche C Term Loan (the "Tranche C Term Loan"), and a Revolving Facility providing for revolving loans to the Company and the "Subsidiary Borrowers" (as defined therein) and the issuance of letters of credit for the account of the Company and the account of the Subsidiary Borrowers in an aggregate principal amount (including the aggregate stated amount of letters of credit) of $150.0 million. Letters of credit outstanding were $34.3 million at March 31, 2001.

    The Tranche A Term Loan and the Revolving Facility (as defined) mature on February 12, 2004. The Tranche B Term Loan matures on February 12, 2005 and the Tranche C Term Loan matures on February 12, 2006. On May 31, 2001, the Company completed a private debt offering of $250 million in aggregate principal amount of senior unsecured notes (the "Senior Notes"). The Senior Notes have a coupon rate of 9.375% and mature in November 2007. Giving effect to the issuance of the Senior Notes and the use of the gross proceeds to make prepayments on the Term Loan Facility in the aggregate amount of $250.0 million, the aggregate amount outstanding under the Tranche A Term Loan, the Tranche B Term Loan and the Tranche C Term Loan is $0, $60.0 million and $60.0 million, respectively, as of May 31, 2001. Giving effect to the issuance of the Senior Notes and such use of proceeds, the Tranche B Term Loan will amortize in quarterly installments aggregating to approximately $0.4 million for the remainder of 2001, approximately $0.7 million in 2002, approximately $14.1 million in 2003, approximately $34.8 million in 2004 and approximately $10.0 million in 2005, and the Tranche C Term Loan will amortize in quarterly installments in each fiscal year aggregating to approximately $0.4 million for the remainder of 2001, approximately $0.7 million in 2002, approximately $0.7 million in 2003, approximately $14.1 million in 2004, approximately $34.3 million in 2005 and approximately $9.8 million in 2006. In addition, the Revolving Facility and Term Loan Facility are

46

subject to mandatory prepayment and reductions (to be applied first to the Term Loan Facility) in an amount equal to (a) a range of between 25% and 75%, depending on our leverage ratio, of the net proceeds of certain offerings of equity securities by us or any of our subsidiaries, (b) 50% for the sale of certain identified non-core assets and 100% of the net proceeds of certain other asset sales or other dispositions of our property and our subsidiaries, (c) a range of between 25% and 75%, depending on our leverage ratio, of our excess cash flow (as defined) beginning September 30, 2001 and (d) 100% of the net proceeds of certain debt issues by us or any of our subsidiaries in each case subject to certain limited exceptions.

    The Credit Agreement contains a number of covenants that, among other things restrict our ability and our subsidiaries' ability to (i) dispose of assets, (ii) incur additional indebtedness, (iii) incur or guarantee obligations, (iv) prepay other indebtedness or amend other debt instruments (including the Senior Subordinated Notes Indenture), (v) pay dividends, (vi) create liens on assets, (vii) make investments, (viii) make loans or advances, (ix) redeem or repurchase common stock, (x) make acquisitions, (xi) engage in mergers or consolidations, (xii) change the business conducted by the Company and its subsidiaries, (xiii) enter into sale and leaseback transactions, (xiv) permit restrictions on the ability of the Company's subsidiaries to pay dividends to the Company, (xv) enter into transactions with affiliates and (xvi) make capital expenditures. In addition, the Credit Agreement requires us to comply with specified financial ratios and tests, including minimum interest expense coverage ratios, maximum leverage ratios and maximum senior debt ratios. As of March 31, 2001, we were in compliance with our debt covenants and expect to be in compliance for the remainder of fiscal year 2001.

    The Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture restricts our ability to pay cash dividends on or redeem the Series A preferred stock or to redeem the Series A debentures, if we ever issue them. Pursuant to the Credit Agreement, Senior Notes Indenture and Senior Subordinated Notes Indenture, we are prohibited from declaring or paying dividends on, or redeeming, shares of our capital stock, except in limited circumstances. The prohibition applies to the payment of dividends in cash or with property or securities other than shares of our common stock. An exception to the Credit Agreement prohibition permits us to pay dividends on the Series A preferred stock with cash, property or securities if we satisfy the following conditions:

•

after paying the dividend, we comply with the interest-expense-coverage, leverage and senior debt ratios imposed by the Credit Agreement;



•

on the date we pay the dividend and after giving effect to the payment, we are not in default under the Credit Agreement;



•

the total amount we spend during the term of the Credit Agreement for dividends and redemption payments is limited to between $10 and $60 million, depending on the leverage ratios of the Company, minus the amount of any payments made after the issuance of the Senior Notes; and



•

after paying the dividend, the total of our cash and cash equivalents plus the amount we are permitted to borrow under the Revolving Facility equals at least $50 million.

    We may choose to pay dividends on Series A preferred stock by issuing shares of common stock, if we satisfy the requirements described in the section of this prospectus called "Description of Series A Preferred Stock—Dividends". We intend to pay dividends by issuing shares of common stock if we satisfy the conditions on our ability to do so. If we are prohibited from paying dividends by the restrictions imposed by the Credit Agreement, the Senior Notes Indenture and/or the Senior Subordinated Notes Indenture, we remain obligated to pay the dividends and the unpaid dividends will accumulate.

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    The exception to the Credit Agreement that would permit us to pay dividends on the Series A preferred stock with cash, property or securities would not permit us to redeem the Series A preferred stock or the Series A debentures following a change of control. If a change of control occurs, we may be unable to pay the redemption price without causing a default under our Credit Agreement. In addition, each holder of Series A preferred stock and Series A debentures is deemed to have acknowledged and agreed that (a) the holder's right to receive payment of the change of control redemption price is subject and subordinated in right of payment to the payment in full and discharge of all amounts of principal, interest and fees then outstanding under our Credit Agreement and (b) until payment in full of all such amounts under our Credit Agreement has been made in cash, we are prohibited from making any payment, whether directly or indirectly, by exercise of any right of set-off or otherwise, of the change of control redemption price. If a change of control occurs, we are required to pay all amounts outstanding under our Credit Agreement, Senior Notes and Senior Subordinated Notes, and to pay the redemption price of the Series A preferred stock or the Series A debentures, if they are outstanding. However, at the time a change of control occurs, we may not have the necessary resources to pay all amounts outstanding under the Credit Agreement, the Senior Notes and the Senior Subordinated Notes, and in such case we may not be able to redeem the Series A preferred stock or Series A debentures.

    The interest rates per annum applicable to the loans under the Credit Agreement are fluctuating rates of interest measured by reference, at our election, to either (a) an adjusted London inter-bank offer rate ("LIBOR") plus a borrowing margin or (b) an alternate base rate ("ABR") (equal to the higher of the Chase Manhattan Bank's published prime rate or the Federal Funds effective rate plus 1/2 of 1%) plus a borrowing margin. The borrowing margins applicable to the loans under the Revolving Facility are currently 2.50% for ABR loans and 3.50% for LIBOR loans. Following delivery to the administrative agent under the Credit Agreement of our consolidated financial statements for the fiscal year ended September 30, 2001, the borrowing margins will be based on our leverage ratio, with maximum borrowing margins for ABR Loans and LIBOR Loans of 2.0% and 3.0%, respectively, and minimum borrowing margins for ABR Loans and LIBOR Loans of 0.75% and 1.75%, respectively. The borrowing margins applicable to the Tranche B Term Loan and the Tranche C Term Loan are currently 2.75% and 3.0%, respectively, for ABR loans and 3.75% and 4.0%, respectively, for LIBOR loans, and are not subject to increase or reduction. Amounts outstanding under the Credit Agreement not paid when due bear interest at a default rate equal to 2.00% above the rates otherwise applicable to each of the loans under the Term Loan Facility and the Revolving Facility.

    The Company's obligations and the obligations of the Bank Guarantors under the Credit Agreement and the related documents are unconditionally and irrevocably guaranteed by, subject to certain exceptions, each of our domestic wholly owned subsidiaries. In addition, the Company's obligations and the obligations of the Bank Guarantors under the Credit Agreement and the related documents are secured by first priority security interests in and pledges of or liens on substantially all the tangible and intangible assets of the Company and the Bank Guarantors and a pledge of substantially all of the capital stock owned by the Company and the Bank Guarantors, subject to certain exceptions.

Senior Subordinated Notes

    The Senior Subordinated Notes are general unsecured senior subordinated obligations of the Company. The Senior Subordinated Notes are limited in aggregate principal amount to $625.0 million and will mature on February 15, 2008. Interest on the Senior Subordinated Notes accrues at the rate of 9.0% per annum and is payable semi-annually on each February 15 and August 15. The Senior Subordinated Notes were originally issued pursuant to an exemption from the registration requirements of the Securities Act and later exchanged for securities which were registered under the Securities Act. Due to a delay in the registration of the Senior Subordinated Notes to be exchanged, we were required

48

to pay liquidated damages to each holder of Senior Subordinated Notes at a rate of $0.192 per week per $1,000 principal amount of Senior Subordinated Notes held by such holder for the period from July 13, 1998 through November 9, 1998, the date of issuance of the Senior Subordinated Notes to be exchanged.

    The Senior Subordinated Notes may be redeemed at our option, in whole or in part, at the redemption prices (expressed as a percentage of the principal amount) set forth below, plus accrued and unpaid interest, during the twelve-month period beginning on February 15 of the years indicated below:

Year	Redemption Prices
2003	104.5	%
2004	103.0	%
2005	101.5	%
2006 and thereafter	100.0	%

    The Senior Subordinated Notes Indenture limits, among other things: (i) the incurrence of additional indebtedness by us and our restricted subsidiaries; (ii) the payment of dividends on, and redemption or repurchase of, our capital stock and the capital stock of our restricted subsidiaries and the redemption of certain of our subordinated obligations; (iii) certain other restricted payments, including investments; (iv) sales of assets; (v) certain transactions with affiliates; (vi) the creation of liens; and (vii) consolidations, mergers and transfers of all or substantially all of our assets. The Senior Subordinated Notes Indenture also prohibits certain restrictions on distributions from restricted subsidiaries. However, all such limitations and prohibitions are subject to certain qualifications and exceptions. For the purposes of the foregoing description of the Senior Subordinated Notes Indenture only, "restricted subsidiaries" refers to each of our subsidiaries, other than any subsidiaries that have been designated as unrestricted subsidiaries under the Senior Subordinated Notes Indenture.

Senior Notes

    The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes are limited in aggregate principal amount to $250.0 million and will mature on November 15, 2007. Interest on the Senior Notes accrues at the rate of 9.375% per annum and is payable semi-annually on each May 15 and November 15 beginning on November 15, 2001. The Senior Notes were issued on May 31, 2001 pursuant to an exemption from the registration requirements of the Securities Act and will be exchanged for securities which will be registered under the Securities Act. If there is a delay in the registration of the Senior Notes to be exchanged, we will be required to pay liquidated damages to each holder of Senior Notes at a rate of $0.192 per week per $1,000 principal amount of Senior Notes held by such holder for the period from the date the Senior Notes are required to be registered until such time as the Senior Notes are exchanged.

    The Senior Notes may be redeemed at our option, in whole or in part, at the redemption prices (expressed as a percentage of the principal amount) set forth below, plus accrued and unpaid interest, during the twelve-month period beginning on November 15 of the years indicated below:

Year	Redemption Prices
2005	104.688	%
2006	102.344	%

    The Senior Notes Indenture limits, among other things: (i) the incurrence of additional indebtedness by us and our restricted subsidiaries; (ii) the payment of dividends on, and redemption or repurchase of, our capital stock and the capital stock of our restricted subsidiaries and the redemption of certain of our subordinated obligations; (iii) certain other restricted payments, including investments;

49

(iv) sales of assets; (v) certain transactions with affiliates; (vi) the creation of liens; (vii) sale and leaseback transactions and (viii) consolidations, mergers and transfers of all or substantially all of our assets. The Senior Notes Indenture also prohibits certain restrictions on distributions from restricted subsidiaries. However, all such limitations and prohibitions are subject to certain qualifications and exceptions. For the purposes of the foregoing description of the Senior Notes Indenture only, "restricted subsidiaries" refers to each of our subsidiaries, other than any subsidiaries that have been designated as unrestricted subsidiaries under the Senior Notes Indenture.

Operating Leases

    We lease our operating facilities. The leases, which expire at various dates through 2008, generally require us to pay all maintenance, property and tax insurance costs.

    At September 30, 2000, aggregate amounts of future minimum payments under all operating leases for continuing operations including equipment leases are as set forth on the chart below:

Year	Payment Amount
2001	$	28.8 million
2002		25.4 million
2003		16.5 million
2004		9.9 million
2005		6.7 million
2006 and beyond		7.9 million

    Rent expense for continuing operations was $22.6 million, $32.3 million and $34.0 million, respectively, for the fiscal years ended September 30, 1998, 1999 and 2000. Rent expense for discontinued operations was $8.0 million, $9.3 million and $9.2 million, respectively, for the fiscal years ended September 30, 1998, 1999 and 2000.

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REGISTRATION RIGHTS AGREEMENT

The summary of certain provisions of the registration rights agreement set out below is subject to, and is qualified in its entirety by reference to, all of the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part.

    We are a party to a registration rights agreement with an affiliate of the initial purchasers under which we agreed to use our best efforts to keep effective a shelf registration statement at our expense, under which the registrable securities may be sold by the selling securityholders. We filed the registration statement of which this prospectus is a part with the SEC to comply with our obligations under the registration rights agreement. Under the registration rights agreement, we are required to use our best efforts to keep the shelf registration statement effective until 10 years after the date it is declared effective or, if earlier, the date that all registrable securities have been sold under the shelf registration statement or on which the initial purchasers and their affiliates are no longer entitled to board representation under the investment agreement and are permitted to sell their registrable securities without registration pursuant to Rule 144(k) under the Securities Act. We are permitted to suspend effectiveness of the registration statement under circumstances specified in the registration rights agreement.

    If on or after the 120^th day following the original issuance of the Series A preferred stock, the shelf registration statement is not effective under the Securities Act or is not available for use by the holders of registrable securities, the holders of at least 25% of any class of registrable securities may make a written demand that we register the registrable securities as long as the registrable securities subject to such demand have an estimated market value or stated value of at least $10 million in the aggregate. Within 30 days of a request for any demand registration, we will file a demand registration statement and will use our best efforts to cause the demand registration statement to promptly be declared effective under the Securities Act. We will not be required to effect more than four demand registrations.

    If we propose to file a registration statement under the Securities Act with respect to certain offerings of our securities for our own account or for the account of persons other than the holders of registrable securities, we will give notice of such proposed filing to the holders of the appropriate registrable securities. Our notice will offer the holders of the registrable securities the opportunity to register under the registration statement the number of registrable securities as each holder may request in writing. If, after we give notice of our intention to file such registration statement, we determine not to register or to delay the registration of the subject securities, then the registrable securities subject to such registration statement also will not be registered or will be delayed in being registered, as the case may be.

    The holders of at least a majority of any class of registrable securities included in any offering under the shelf registration or under any demand registration statement may elect to have the offering underwritten. We will amend or supplement the shelf registration statement or demand registration statement for such purpose.

    We will provide each holder of the registrable securities with copies of this prospectus, notify each holder when the shelf registration statement has been effective and take other actions described in the registration rights agreement as are required to permit unrestricted sales of the registrable securities. A holder that sells registrable securities under the shelf registration statement is required to be named as a selling securityholder in this prospectus and to deliver this prospectus to purchasers. Those holders also will be subject to certain civil liability provisions under the Securities Act in connection with these sales and are bound by the provisions of the registration rights agreement, including certain indemnification obligations. Pursuant to the registration rights agreement, we have agreed to bear certain expenses and indemnify the selling securityholders against certain liabilities in connection with

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the registration and sale of the registrable securities, as described in the section of this prospectus called "Plan of Distribution."

    If we file a registration statement under the Securities Act for certain offerings of our equity securities for our own account or for the account of holders other than holders of registrable securities, the holders of registrable securities have agreed, if requested, not to publicly sell or distribute any securities that are the same as or similar to those being registered by us in connection with our sale, or any securities convertible into or exchangeable or exercisable for any such securities, during the period beginning seven days before and ending no more than 90 days after the effective date of the registration statement filed by us.

    We have agreed, in the case of an underwritten offering of registrable securities, if requested, not to effect any public sale or distribution of any securities the same as or similar to those being sold in the underwritten offering, or any securities convertible into or exchangeable or exercisable for securities that are the same as or similar to those being sold, during the period beginning seven days before and ending no more than 90 days after the effective date of the registration statement related to the offering.

    Purchasers of the registrable securities offered by means of this prospectus will not have any rights under the registration rights agreement, although once sold under this prospectus the registrable securities should be freely tradable except by purchasers that are our "affiliates" or are "underwriters" of the registrable securities for purposes of the Securities Act.

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USE OF PROCEEDS

    We will not receive any of the proceeds from any sale of the securities offered under this prospectus. All of such proceeds will be received by the selling securityholders. We used one-half of the net proceeds of approximately $54.1 million from the sale of 59,063 shares of Series A preferred stock and the Option on December 15, 1999 to repay indebtedness outstanding under our Credit Agreement. The remaining net proceeds, and additional proceeds (if any) from the sale of additional Series A preferred stock pursuant to the initial purchasers' option, will be used for general corporate purposes, including the pursuit of strategic acquisitions, or as otherwise described in our public filings under the Securities Exchange Act of 1934 or in a prospectus supplement. If the initial purchasers were to fully exercise the Option, they would be required to pay us $21.0 million.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

    The following is a summary of the principal United States federal income tax consequences of the ownership of shares of Series A preferred stock, shares of common stock and the Series A debentures. This summary applies to you only if you hold shares of Series A preferred stock, shares of common stock or Series A debentures as capital assets and does not apply to you if you belong to a special class of holders, such as dealers in securities or currencies, traders in securities that elect to mark to market, banks, tax-exempt organizations, life insurance companies, persons that hold shares of Series A preferred stock, shares of common stock or Series A debentures as a hedge, or hedged against, currency or interest rate risks or that are part of a straddle or conversion transaction, or persons whose functional currency is not the U.S. dollar. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all of which are subject to change, or changes in interpretation, possibly with retroactive effect.

    For purposes of this discussion, you are a "United States holder" if you are a beneficial owner of shares of Series A preferred stock, shares of common stock or Series A debentures and you are:

    (1) a citizen or resident of the United States;

    (2) a corporation organized under the laws of the United States or any state;

    (3) an estate, the income of which is subject to United States federal income taxation regardless of its source; or

    (4) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.

    IF YOU ARE CONSIDERING AN INVESTMENT IN SHARES OF SERIES A PREFERRED STOCK, SHARES OF COMMON STOCK OR SERIES A DEBENTURES, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES, IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, UNDER THE CODE AND THE TAX CONSEQUENCES UNDER THE LAWS OF ANY OTHER STATE, LOCAL OR FOREIGN TAXING JURISDICTION, OF THE OWNERSHIP OF SHARES OF SERIES A PREFERRED STOCK, SHARES OF COMMON STOCK AND SERIES A DEBENTURES.

TAXATION OF UNITED STATES HOLDERS

    This section applies to you only if you are a United States holder.

SERIES A PREFERRED STOCK

Distributions on Series A Preferred Stock—General

    The amount of any distribution by us in respect of the Series A preferred stock or common stock will be equal to the amount of cash and the fair market value, on the date of distribution, of any property distributed. Generally, distributions to you will be treated as a dividend, subject to tax as ordinary income, to the extent of your proportionate share of our current or accumulated earnings and profits, then as a tax-free return of capital to the extent of your tax basis in the shares of Series A preferred stock or shares of common stock and thereafter as a gain from the sale or exchange of such stock.

    In general, if you are a corporate United States holder, a dividend distribution to you will qualify for the 70% dividends-received deduction. The dividends-received deduction is also subject to certain

54

limitations relating to the holder's holding period, taxable income and other factors, as further discussed below.

Distributions on Series A Preferred Stock—Dividends "Paid in Kind"

    We may pay current dividends on the Series A preferred stock and, until December 15, 2001, we may, at our option, pay dividend arrearages on the Series A preferred stock "in kind" through the issuance of shares of common stock. Dividends "paid in kind" will be treated as a distribution of an amount equal to the fair market value of such common stock as of the date of distribution and will be taxed as described in "—Distributions on Series A Preferred Stock—General." Such amount will also be the tax basis of the newly distributed common stock for United States federal income tax purposes.

Possible Constructive Dividend Income Due to Excess Redemption Premium

    The Series A preferred stock is mandatorily redeemable on December 15, 2009 for an amount equal to the $1,000 stated value per share plus any accrued and unpaid dividends. If the redemption price of the Series A preferred stock exceeds its issue price (a "Redemption Premium") by one-quarter of 1% of such stock's mandatory redemption price multiplied by the number of complete years to its mandatory redemption, the entire amount of such excess would be considered to be a constructive distribution to you over the period between issuance and redemption under a constant yield method. Although not free from doubt, it appears that the redemption price, as determined for federal income tax purposes, should include only the stated value per share. The issue price of the Series A preferred stock equals its fair market value at original issue. In the case of the Series A preferred stock currently held by the selling securityholders, the fair market value at original issue should equal the $1,000 stated amount per share (which was the purchase price originally paid by the selling securityholders), and should be no less than the $1,000 stated value per share in the case of Series A preferred stock acquired through exercise of the selling securityholders' option to acquire such stock (since the option exercise price is $1,000 per share).

Distributions on Series A Preferred Stock or Common Stock—Dividends-Received Deduction

    If we have current or accumulated earnings and profits, amounts treated as dividends would be eligible for the 70% dividends-received deduction allowable to corporations, subject to the limitations described below.

    Prospective corporate investors in shares of Series A preferred stock should consider the effect of:

    (1) Section 246A of the Code, which reduces the dividends-received deduction allowed to a corporate shareholder that has incurred indebtedness that is "directly attributable" to an investment in portfolio stock, such as the Series A preferred stock;

    (2) Section 246(c) of the Code, which, among other things, disallows, the dividends-received deduction in respect of any dividend on a share of stock that is held for less than the minimum holding period (generally at least 46 days during the 90-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend); and

    (3) Section 1059 of the Code, which, under certain circumstances, reduces the basis of stock for purposes of calculating gain or loss in a subsequent disposition by the portion of any "extraordinary dividend" that is eligible for the dividends-received deduction. In general, an extraordinary dividend on the Series A preferred stock would be a dividend that (i) equals or exceeds 5% of the corporate United States holder's adjusted tax basis in the Series A preferred stock or common stock, treating all dividends having ex-dividend dates within an 85-day period as one dividend; or (ii) exceeds 20% of the corporate United States holder's adjusted tax basis in the Series A preferred stock or common stock, treating all dividends having ex-dividend dates within a 365-day period as one dividend.

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Sale or Exchange of Series A Preferred Stock or Common Stock Other Than by Redemption

    Upon the sale or other disposition of your shares of Series A preferred stock or shares of common stock (other than by redemption), you will generally recognize capital gain or loss equal to the difference between the amount realized upon the disposition and your adjusted tax basis in your shares of the Series A preferred stock or shares of common stock. Such gain or loss would be long-term capital gain or loss if at the time of sale, exchange or other disposition, you have held your shares of Series A preferred stock or shares of common stock for more than one year. Long-term capital gain of a non-corporate United States holder is generally subject to a maximum tax rate of 20%. The deductibility of capital losses is subject to limitations.

Redemption of Series A Preferred Stock

    A redemption of the Series A preferred stock generally would be a taxable event and would be treated as a sale if you sold your shares of Series A preferred stock, if the redemption:

    (1) results in a "complete termination" of your stock interest;

    (2) is "substantially disproportionate"; or

    (3) is "not essentially equivalent to a dividend".

    In determining whether any of these tests has been met, shares of stock considered to be owned by you by reason of certain constructive ownership rules set forth in Section 318 of the Code, as well as shares actually owned, must be taken into account.

    If your shares of Series A preferred stock are redeemed in a redemption that meets one of the tests described above, you generally would recognize taxable gain or loss equal to the difference between the amount of cash you receive and your tax basis in the shares of Series A preferred stock redeemed. See "—Special Rules Regarding the Exchange of Series A Preferred Stock for Series A Debentures" below for a description of the rules applicable to a redemption in which you receive Series A debentures. Such gain or loss would be long-term capital gain or capital loss if you have held your shares of Series A preferred stock for more than one year.

    If a redemption does not meet any of the tests described above, the cash you receive generally would be taxed as a dividend to the extent paid out of our current or accumulated earnings and profits. Any amount in excess of our current or accumulated earnings and profits would first reduce your tax basis in your shares of Series A preferred stock and thereafter would be treated as capital gain. If a redemption of your shares of Series A preferred stock is taxable as a dividend, your tax basis in the redeemed Series A preferred stock would be transferred to your remaining shares of stock (if any).

Conversion of Series A Preferred Stock into Common Stock

    You generally will not recognize gain or loss on conversion of shares of Series A preferred stock into our common stock, except with respect to any cash paid in lieu of fractional shares of common stock, which would be treated as a redemption of such fractional shares and subject to the rules described above in "—Redemption of Series A Preferred Stock." However, you may recognize gain or dividend income to the extent that you receive cash or common stock in respect of dividends in arrears on the Series A preferred stock at the time of conversion into common stock. Your tax basis in the shares of common stock received upon conversion of the Series A preferred stock generally will be equal to your tax basis in the shares of Series A preferred stock, and the holding period of the common stock generally will include your holding period for your shares of Series A preferred stock. However, your tax basis in any shares of common stock received on conversion which are treated as a dividend will be equal to their fair market value on the date of the distribution, and your holding period for your shares of common stock will commence on the day after you receive such shares.

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    Treasury Regulations promulgated under Section 305 of the Code would treat you as having received a constructive distribution from us in the event that the conversion ratio of the Series A preferred stock were adjusted if:

    (1) as a result of the adjustment, your proportionate interest (measured by the amount of common stock into or for which the Series A preferred stock is convertible or exchangeable) in the assets or earnings and profits were increased, and

    (2) the adjustment was not made pursuant to a bona fide, reasonable anti-dilution formula.

    An adjustment in the conversion ratio would not be considered made pursuant to such a formula if the adjustment was made to compensate for certain taxable distributions with respect to the common stock. Thus, under certain circumstances, a reduction in the conversion price of the Series A preferred stock may result in deemed dividend income to you to the extent of our current or accumulated earnings and profits, even though you receive no cash or property from us.

Special Rules Regarding the Exchange of Series A Preferred Stock for Series A Debentures

    Pursuant to the rules discussed above in "—Redemption of Series A Preferred Stock," an exchange of outstanding Series A preferred stock for Series A debentures will be treated either as an exchange giving rise to capital gain or loss or as a dividend. The amount realized on the exchange would be equal to the "issue price" of the Series A debentures plus any cash received on the exchange. The issue price of a Series A debenture will be:

    (1) its fair market value as of the exchange date, if the Series A debentures are traded on an "established market" (as that term is defined in the Treasury Regulations dealing with the determination of "original issue discount") at any time during the 60-day period ending 30 days after the exchange date; or

    (2) if the Series A debentures are not traded on an established market, the fair market value of the Series A preferred stock as of the exchange date if such Series A preferred stock is traded on an established market at any time during the 60-day period ending 30 days after the exchange date.

    If neither the Series A preferred stock nor the Series A debentures are traded, the issue price of the Series A debentures will be determined under Section 1274 of the Code, in which case the issue price will be the stated principal amount of the Series A debentures, provided that the yield on the Series A debentures is equal to or greater than the "applicable federal rate" in effect at the time the Series A debentures are issued. If the yield is less than the applicable federal rate, the issue price under Section 1274 of the Code will be equal to the present value, as of the issue date, of all payments to be made on the Series A debentures, discounted at the applicable federal rate. It cannot be determined at the present time whether the Series A preferred stock or the Series A debentures will, at the relevant time, be traded on an established securities market within the meaning of the Treasury Regulations or whether the yield on the Series A debentures will equal or exceed the applicable federal rate, as discussed above.

    If you exchange your shares of the Series A preferred stock for Series A debentures, and the exchange is treated as a distribution by us, you would recognize dividend income (rather than capital gain) in an amount equal to the fair market value of the Series A debentures received without regard to your tax basis in the shares of Series A preferred stock surrendered in the exchange, but only to the extent of your proportionate share of our current or accumulated earnings and profits and, to the extent that the distribution is not made out of our current or accumulated earnings or profits, you would first reduce your tax basis in your shares of Series A preferred stock and thereafter would recognize capital gain. The holding period for the Series A debentures would begin on the day after the day on which you acquired the Series A debentures.

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    YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO WHETHER, IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, THE EXCHANGE WOULD BE TREATED AS A DISTRIBUTION OR AS A SALE OR EXCHANGE. ADDITIONALLY, CORPORATE UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE AVAILABILITY OF THE CORPORATE DIVIDENDS-RECEIVED DEDUCTION AND THE POSSIBLE APPLICATION OF THE EXTRAORDINARY DIVIDEND RULES OF SECTION 1059 OF THE CODE TO AN EXCHANGE IF THE DISTRIBUTION IS TAXABLE AS A DIVIDEND.

    Depending upon your particular circumstances, the tax consequences of holding Series A debentures may be less advantageous than the tax consequences of holding Series A preferred stock because, for example, payments of interest on the Series A debentures would be taxable to you as ordinary income, regardless of whether we have current or accumulated earnings and profits, and the corporate dividends-received deduction would not be available to a corporate holder with respect to such interest. In contrast, you would not recognize any income or gain on distributions on Series A preferred stock, if we do not have current or accumulated earnings and profits in a given year and such distribution does not reduce your tax basis in your shares of Series A preferred stock below zero. Finally, as discussed below in "Series A Debentures—Interest Income and Original Issue Discount," debentures will be issued with OID, which must be included in income as it economically accrues, and could result in taxable income to you prior to your receipt of the cash attributable thereto.

SERIES A DEBENTURES

Interest Income and Original Issue Discount

    Unless the Series A debentures have a term of one year or less, the Series A debentures would be treated as issued at an original issue discount if the excess of the Series A debentures' "stated redemption price at maturity" over their issue price is equal to or greater than a de minimis amount. The de minimis amount equals 1/4 of 1% multiplied by the number of complete years to maturity of the debentures, and then multiplied by their stated redemption price at maturity.

    The issue price of the debentures will be determined in the manner provided above in "—Special Rules Regarding the Exchange of Series A Preferred Stock for Series A Debentures." The stated redemption price at maturity of the debentures equals the sum of all payments due under the debentures other than payments of "qualified stated interest," which are payments of interest that are unconditionally required to be paid at least annually. Because the Company has the right to defer payment of stated interest on the debentures, none of such payments will constitute qualified stated interest, and therefore all stated interest payments will be included in the debentures' stated redemption price at maturity. This will cause the debentures to be issued with OID regardless of whether the issue price of the debentures is determined to be less than their stated principal amount. Consequently, you will be required to report all stated interest on a constant yield basis without regard to when such interest is actually paid or whether you use the cash or accrual method of accounting. As a result, you may be required to report taxable income attributable to such interest in advance of the receipt of the related cash payment.

    The amount of OID includible in your income is the sum of the daily portions of OID with respect to the Series A debenture for each day during the taxable year or portion thereof on which you hold the Series A debenture, which we refer to as "accrued OID." The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that accrual period. Accrual periods with respect to a Series A debenture may be of any length that you select and may vary in length over the term of the Series A debenture, as long as no accrual period is longer than one year and each scheduled payment of interest or principal on the Series A debentures occurs on either the final or first day of an accrual period. The amount of OID allocable to an accrual period will equal the product of the Series A debenture's adjusted issue price at the beginning of the accrual

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period and such Series A debenture's yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period).

    The "adjusted issue price" of a Series A debenture at the beginning of any accrual period is the issue price of the Series A debenture increased by the amount of accrued OID for each prior accrual period, and decreased by the amount of any payments previously made on the Series A debenture. The amount of OID allocable to an initial short accrual period may be computed using any reasonable method if all other accrual periods other than a final short accrual period are of equal length. The amount of OID allocable to the final accrual period is the difference between the amount payable at the maturity of the Series A debenture (other than any payment of qualified stated interest) and the Series A debenture's adjusted issue price as of the beginning of the final accrual period.

Purchase, Sale, Retirement and Other Disposition of the Series A Debentures

    Your adjusted tax basis in your Series A debentures received in exchange for Series A preferred stock will, in general, be equal to the initial tax basis of such Series A debentures (i.e., the issue price of the Series A debentures, if the exchange is treated as a redemption giving rise to capital gain, or the fair market value of the Series A debentures on the exchange date, if the exchange is treated as a dividend), increased by OID that you previously included in income. Upon the sale, exchange or retirement of a Series A debenture, you will generally recognize capital gain or loss equal to the difference between the amount realized (not including any amounts attributable to accrued and unpaid interest) and your adjusted tax basis in the Series A debenture.

TAXATION OF NON-UNITED STATES HOLDERS

    This section applies to you only if you are a "non-United States holder," as defined below.

    The rules governing the United States federal income taxation of a beneficial owner of shares of Series A preferred stock, shares of common stock or Series A debentures that, for United States federal income tax purposes, is a person other than a United States holder (a "non-United States holder") are complex and no attempt is made herein to provide more than a summary of such rules. IF YOU ARE A NON-UNITED STATES HOLDER, YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX LAWS, AS WELL AS TREATIES, WITH REGARD TO AN INVESTMENT IN SHARES OF SERIES A PREFERRED STOCK, SHARES OF COMMON STOCK OR SERIES A DEBENTURES, INCLUDING ANY REPORTING REQUIREMENTS.

DIVIDEND INCOME

    Dividends paid to you will be subject to withholding of United States federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty), unless the dividends are effectively connected with your conduct of a trade or business within the United States (and such income is attributable to your United States permanent establishment, if an applicable income tax treaty so requires as a condition for subjecting you to United States income tax on a net income basis). Such effectively connected dividends, generally, are not subject to withholding tax if certain certification requirements are satisfied. Instead, effectively connected dividends are taxed at rates applicable to United States citizens, resident aliens and domestic United States corporations. In addition, a corporate non-United States holder may, under certain circumstances, be subject to an additional branch profits tax on effectively connected dividends at a 30% rate or at a lower rate if it is eligible for the benefits of an applicable income tax treaty.

    Under current United States Treasury Regulations, dividends paid to an address in a foreign country are presumed to be paid to a resident of that country (unless the payor has knowledge to the contrary) for purposes of the 30% withholding discussed above. Under current interpretations of

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United States Treasury Regulations, this presumption also applies for purposes of determining whether a lower withholding rate applies under an income tax treaty.

    Under the Final Withholding Regulations defined and discussed below under "—Interest Income and Original Issue Discount on Series A Debentures," you must satisfy certain certification requirements in order to claim the benefit of a lower treaty rate.

    If you are eligible for a reduced rate of United States withholding tax under a tax treaty, you may obtain a refund of any amount withheld in excess of that rate by filing a refund claim with the United States Internal Revenue Service ("IRS").

INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT ON SERIES A DEBENTURES

    Generally, your interest income (or OID) that is not effectively connected with a United States trade or business will be subject to a withholding tax at a 30% rate (or, if applicable, a lower tax rate specified by a treaty). However, OID you earn on the Series A debentures will qualify for the "portfolio interest" exemption and therefore will not be subject to United States federal income tax or withholding tax, provided that such interest income is not effectively connected with your United States trade or business, if any, and provided that:

(a)

you do not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote;



(b)

you are not a controlled foreign corporation that is related to us through stock ownership; and



(c)

either:



(1)

you certify to us or our agent, under penalties of perjury, that you are not a United States holder and provide your name and address; or



(2)

a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the Series A debenture certifies to us or our agent under penalties of perjury that it, or a financial institution between it and you, has received such statement from you and furnishes the payor with a copy thereof.

Certain United States Treasury Regulations, which we refer to as the "Final Withholding Regulations," would provide for alternative methods for satisfying the certification requirement. The Final Withholding Regulations also would require, in the case of Series A debentures held by a foreign partnership, that:

    (1) the certification be provided by the partners rather than by the partnership; and

    (2) the partnership provide certain information, including a United States taxpayer identification number.

A look-through rule would apply in the case of tiered partnerships. The Final Withholding Regulations are effective for payments made after December 31, 2000, subject to certain transition rules.

    Except to the extent that an applicable treaty otherwise provides, you generally will be taxed in the same manner as a United States holder with respect to interest (or OID) if the interest (or OID) income is effectively connected with your conduct of a trade or business within the United States (and such income is attributable to your United States permanent establishment, if an applicable income tax treaty so requires as a condition for subjecting you to United States income tax on a net income basis). Effectively connected interest (or OID) received or accrued by a corporate non-United States holder may also, under certain circumstances, be subject to an additional "branch profits" tax at a 30% rate (or, if applicable, a lower tax rate specified by a treaty). Although such effectively connected interest

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(or OID) is subject to income tax, and may be subject to the branch profits tax, it is not subject to withholding if you deliver a properly executed IRS Form 4224 (or successor form) to the payor.

SALE OR DISPOSITION

    You will not be subject to United States federal income tax on the sale or disposition of your shares of Series A preferred stock, shares of common stock (or, if we do not have current or accumulated earnings and profits, to the extent distributions paid on your shares exceed your tax basis in such shares) or Series A debentures unless:

    (1) the gain is effectively connected with your trade or business in the United States (and is attributable to your permanent establishment maintained in the United States, if an applicable income tax treaty so requires as a condition for you to be subject to United States taxation on a net income basis in respect of capital gain);

    (2) if you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions apply; or

    (3) we are or have been a "United States real property holding corporation" for federal income tax purposes.

We have not been, are not and do not anticipate becoming a "United States real property holding corporation" for federal income tax purposes. Effectively connected gains realized by a corporate non-United States holder may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty.

REDEMPTION AND CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK

    You will not recognize any gain or loss for United States federal income tax purposes upon conversion of the Series A preferred stock into common stock, except with respect to any cash paid in lieu of fractional shares of common stock, which would be treated as a redemption of such fractional shares and subject to the rules described above in "Taxation of United States Holders—Conversion of Series A Preferred Stock into Common Stock." However, you may recognize gain or dividend income to the extent you receive cash or common stock in respect of dividends in arrears on the Series A preferred stock at the time of conversion into common stock, the tax consequences of which are described in the sections referred to in the next paragraph.

    A redemption of Series A preferred stock or common stock for cash will be an event which will constitute either a dividend (to the extent of our current and accumulated earnings and profits) or a sale or exchange. See the discussion above in "Taxation of United States Holders—Redemption of Series A Preferred Stock." To the extent the redemption is treated as a dividend, the tax consequences to you are described in "Taxation of Non-United States Holders—Dividend Income," and to the extent the redemption is treated as a sale or exchange, the tax consequences to you are described in "Taxation of Non-United States Holders—Sale or Disposition."

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ESTATE TAXES

    If you are an individual, and at death you are not a citizen or resident of the United States, your Series A debentures will not be includible in your gross estate for purposes of the United States federal estate tax as a result of your death if:

(a)

you did not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote; and



(b)

the income on the Series A debenture was not effectively connected with your United States trade or business at the time of death.

    Shares of Series A preferred stock or shares of common stock that you hold at the time of death will be included in your gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

BACKUP WITHHOLDING AND INFORMATION REPORTING

United States Holders

    In general, if you are a United States holder and are not an exempt recipient (such as a corporation), information reporting requirements will apply (i) to dividends paid in respect of Series A preferred stock or common stock, including the accrual of the Redemption Premium, (ii) principal and interest paid in respect of Series A debentures, and (iii) the proceeds received on the sale, exchange or redemption of Series A preferred stock, common stock or Series A debentures. "Backup withholding" at a rate of 31% will apply to such payments if you fail to provide an accurate taxpayer identification number or are notified by the IRS that you have failed to report all interest and dividends required to be shown on your federal income tax returns. You should consult your tax advisor concerning the application of information reporting and backup withholding to the Series A preferred stock, common stock or Series A debentures.

    Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability, provided the required information is furnished to the IRS.

Non-United States Holders

    In general, if you are a non-United States holder of shares of Series A preferred stock or shares of common stock, dividends paid to you will not be subject to United States information reporting requirements and backup withholding tax, if you are either subject to the 30% withholding tax discussed above, or are not subject to the 30% withholding tax because you are eligible for the benefits of an income tax treaty. However, dividend payments will be reported for purposes of the 30% withholding tax discussed above. If a non-United States holder does not meet any of the requirements listed above for exemption from backup withholding tax and fails to provide certain information, including a United States taxpayer identification number, or otherwise establish a status as an "exempt recipient," the non-United States holder may be subject to backup withholding of United States federal income tax at a rate of 31% on dividends paid.

    Under current law, dividends paid to an address in a foreign country are generally treated as exempt from backup withholding and information reporting unless the person making the payment has actual knowledge that the recipient is a United States person. However, under the Final Withholding Regulations discussed above, dividend payments generally will be subject to information reporting and backup withholding unless certain certification requirements are met.

    If you are a non-United States holder of Series A debentures, then information reporting on IRS Form 1099 and backup withholding will not apply to payments of principal and interest, including OID,

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made by us or a paying agent to you. You must certify to us or our agent, under penalties of perjury, that you are not a United States holder and must provide your name and address, or a financial institution that holds the debenture must certify to us or our agent, under penalties of perjury, that it, or a financial institution between it and you has received such statement from you, and must furnish the payor with a copy thereof. The payor must not have actual knowledge that you are a United States person. However, we or a paying agent may report (on IRS Form 1042S) payments of interest, including OID, on the Series A debentures.

    See the discussion above in "Taxation of Non-United States Holders—Interest Income and Original Issue Discount on Series A Debentures" with respect to the rules under the Final Withholding Regulations.

    In general, United States information reporting and backup withholding requirements also will not apply to a payment made outside the United States of the proceeds of a sale of shares of Series A preferred stock, shares of common stock or Series A debentures through an office outside the United States of a non-United States broker. However, United States information reporting, but not backup withholding, requirements will apply to a payment made outside the United States of the proceeds of a sale of shares of Series A preferred stock or shares of common stock through an office outside the United States of a broker:

    (1) that is a United States person;

    (2) that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States;

    (3) that is a "controlled foreign corporation" as to the United States; or

    (4) with respect to payments made after December 31, 2000, that is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons (as defined in the U.S. Treasury Regulations) who in the aggregate hold more than 50% of the income or capital interest in the partnership or if, at any time during its tax year, such foreign partnership is engaged in a United States trade or business, unless the broker has documentary evidence in its records that you are a non-United States person or you otherwise establish an exemption.

    Payment of the proceeds of the sale of shares of Series A preferred stock or shares of common stock to or through a United States office of a broker is currently subject to both United States backup withholding and information reporting, unless you certify your non-United States status under penalties of perjury or otherwise establish an exemption.

    You generally may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.

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SELLING SECURITYHOLDERS

    This section sets forth information with respect to the selling securityholders for whom we are registering securities for resale to the public under the registration statement of which this prospectus is a part. The securities offered hereby are:

•

80,063 shares of Series A preferred stock;



•

$80,063,000 aggregate principal amount of Series A debentures; and



•

16,273,573 shares of common stock issuable in respect of accrued and unpaid dividends on the Series A preferred stock and interest on the Series A debentures, and upon conversion of the Series A preferred stock and Series A debentures.

    In addition to the information included in this section, if Series A preferred stock, common stock or Series A debentures are offered by the selling securityholders under this prospectus, a prospectus supplement, if required, will include the following information:

•

the amount of Series A preferred stock, common stock or Series A debentures to be offered for the selling securityholder's account;



•

the amount of Series A preferred stock, common stock or Series A debentures to be owned by the selling securityholder after completion of the offering; and



•

the percentage of the Series A preferred stock, common stock or Series A debentures, if one percent or more, to be owned by the selling securityholders after completion of the offering.

    Under the investment agreement, the initial purchasers purchased 59,063 shares of our Series A preferred stock and an Option to acquire an additional 21,000 shares of Series A preferred stock for a total sum of $59,063,000. If the initial purchasers were to exercise the Option, they would be required to pay us an additional $21,000,000. For additional information regarding the Option, see the section of this prospectus called "The Option."

    As of the date of this prospectus, the initial purchasers held all of the outstanding shares of Series A preferred stock.

    Under the investment agreement, we agreed that TPG Magellan LLC, an affiliate of the initial purchasers, would be entitled to nominate three directors to our board of directors. David Bonderman, Jonathan J. Coslet and James B. Williams were nominated by TPG Magellan LLC pursuant to the investment agreement and joined our board of directors on December 15, 1999.

    Mr. Bonderman is a director and the president of TPG Advisors II, Inc. Mr. Coslet is an executive of TPG Advisors II, Inc. TPG Advisors II, Inc. is the general partner of TPG GenPar II, L.P., which is the general partner of each of TPG Partners II, L.P., TPG Parallel II, L.P., TPG 1999 Equity Partners II, L.P. and TPG Investors II, L.P., each of which is a selling securityholder.

    The investment agreement also contains covenants which restrict our ability to take significant actions without the consent of the initial purchasers, including the declaration or payment of dividends, purchases of our securities, incurrences of indebtedness, major acquisitions and dispositions of assets and certain issuances of equity securities. In connection with the investment agreement, we also entered into a registration rights agreement in which we agreed to register the Series A preferred stock, the Series A debentures and the common stock issuable upon conversion of the Series A preferred stock and the Series A debentures under the Securities Act for offer and sale by the selling securityholders. For more information regarding the registration rights agreement, see the section of this prospectus called "Registration Rights Agreement."

    The following table provides the name of each selling securityholder and the number of shares of Series A preferred stock held by each selling securityholder as of the date of this prospectus. The

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shares of Series A preferred stock listed below have been registered for offer and sale under the registration statement of which this prospectus is a part. In addition to the shares of Series A preferred stock listed below, each selling securityholder has an option to purchase additional shares of Series A preferred stock. We may issue shares of common stock as dividends on the shares of Series A preferred stock and upon the conversion of the Series A preferred stock. In addition, we may exchange Series A debentures for all of the outstanding shares of Series A preferred stock. We may also issue shares of common stock in payment of interest on the Series A debentures and upon conversion of the Series A debentures. The additional shares of Series A preferred stock, the shares of common stock and the Series A debentures also have been registered for offer and sale by the selling securityholders under the registration statement of which this prospectus is a part.

Name of Beneficial Owner	Number of Shares of Series A Preferred Stock Held
TPG Partners II, L.P.(1)	50,323
TPG Parallel II, L.P.(2)	3,434
TPG Investors II, L.P.(3)	5,249
TPG 1999 Equity Partners II, L.P.(4)	57

(1)

Exchangeable for $50,323,000 aggregate principal amount of Series A debentures and convertible into an indeterminate number of shares of common stock. TPG Partners II, L.P. has an option to acquire 17,892 additional shares of Series A preferred stock.

(2)

Exchangeable for $3,434,000 aggregate principal amount of Series A debentures and convertible into an indeterminate number of shares of common stock. TPG Investors II, L.P. has an option to acquire 1,867 additional shares of Series A preferred stock.

(3)

Exchangeable for $5,249,000 aggregate principal amount of Series A debentures and convertible into an indeterminate number of shares of common stock. TPG Parallel II, L.P. has an option to acquire 1,221 additional shares of Series A preferred stock.

(4)

Exchangeable for $57,000 aggregate principal amount of Series A debentures and convertible into an indeterminate number of shares of common stock. TPG 1999 Equity Partners, II, L.P. has an option to acquire 20 additional shares of Series A preferred stock.

    We have filed with the SEC under the Securities Act a Registration Statement on Form S-3, of which this prospectus forms a part, with respect to the offer and sale of the securities described in this prospectus. We have agreed, among other things, to bear certain expenses in connection with the registration and sale of the securities being offered by the selling securityholders, as described in the next section.

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PLAN OF DISTRIBUTION

    As used in this section of the prospectus, the term "selling securityholders" includes the selling securityholders named in the table in the section of this prospectus called "Selling Securityholders" above, and some of their pledgees, donees, transferees or other successors in interest selling securities received from a named selling securityholder after the date of this prospectus. The shares of Series A preferred stock, common stock and Series A debentures covered by this prospectus are referred to in this section as the "registrable securities."

    The selling securityholders may offer and sell, from time to time, some or all of the registrable securities under this prospectus. We have registered the registrable securities for offer and sale by the selling securityholders so that the registrable securities will be freely tradable. Registration of the registrable securities does not mean, however, that the registrable securities necessarily will be offered or sold. We will not receive any proceeds from any sale by the selling securityholders of the registrable securities. See the section of this prospectus called "Use of Proceeds" for information about our use of the proceeds from the issuance of the Series A preferred stock. We will pay all costs, expenses and fees in connection with the registration of the registrable securities, including fees of our counsel and accountants, fees payable to the SEC, listing fees, and the reasonable fees and disbursements of one law firm selected as counsel for the selling securityholders in connection with the registration. The selling securityholders will pay all underwriting discounts and commissions and similar selling expenses, if any, attributable to the sale of the registrable securities.

    The selling securityholders may sell the registrable securities from time to time, at market prices prevailing at the time of sale, at prices related to market prices, at a fixed price, at prices subject to change or at negotiated prices. Such sales could occur by a variety of methods, including the following:

•

on markets where our securities are traded or on an exchange in accordance with the rules of the exchange;



•

in privately negotiated transactions;



•

through broker-dealers, which may act as agents or principals;



•

in a block trade in which a broker-dealer will attempt to sell a block of registrable securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;



•

through one or more underwriters on a firm commitment or best-efforts basis;



•

directly to one or more purchasers;



•

through agents;



•

through option transactions, forward contracts, equity swaps or other derivative transactions relating to the registrable securities;



•

through short sales of the registrable securities;



•

in any combination of the above; or



•

by any other legally available means.

    In effecting sales, brokers or dealers engaged by the selling securityholders may arrange for other brokers or dealers to participate. Broker-dealer transactions may include:

•

purchases of the registrable securities by a broker-dealer as principal and resales of the registrable securities by the broker-dealer for its account pursuant to this prospectus;



•

ordinary brokerage transactions; or



•

transactions in which the broker-dealer solicits purchasers.

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    If we or the selling securityholders enter into a material arrangement with any underwriter, broker, dealer or other agent for the sale of any registrable securities or if other material changes are made in the plan of distribution of the registrable securities, we will file a prospectus supplement, if necessary, under the Securities Act disclosing the material terms and conditions of such arrangement. If we or the selling securityholders use an underwriter or underwriters in the sale of registrable securities, we and the selling securityholders expect to execute an underwriting agreement with the underwriter or underwriters at the time an agreement for the sale is reached. We will name the underwriter or underwriters with respect to an underwritten offering of registrable securities and describe the other material terms and conditions of the underwriting in a prospectus supplement relating to such offering and, if an underwriting syndicate is used, the name of the managing underwriter or underwriters will be on the cover of the prospectus supplement. In connection with an underwritten sale of registrable securities, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of registrable securities for whom they may act as agent. Underwriters may sell to or through dealers, and dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent.

    The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the registrable securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the registrable securities by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting commissions under the Securities Act. We have agreed to indemnify the selling securityholders and each person or entity which participates as or may be deemed to be an underwriter in the offering or sale of the selling securityholders' registrable securities against certain liabilities (and to contribute to payments in respect of those liabilities), including liabilities arising under the Securities Act. The selling securityholders have agreed to indemnify us, and may agree to indemnify any underwriter, agent or broker-dealer that participates in transactions involving offers or sales of the registrable securities, against certain liabilities, including liabilities arising under the Securities Act.

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VALIDITY OF SECURITIES

    The validity of the shares of Series A preferred stock, the Series A debentures, and the shares of common stock offered hereby has been passed upon for us by King & Spalding, Atlanta, Georgia.

EXPERTS

    The financial statements and schedule incorporated by reference in this prospectus and elsewhere in the registration statement to the extent and for the periods indicated in their reports have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

    We file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-3 to register the registrable securities. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information about us and the securities offered in this prospectus, you should refer to the registration statement and its exhibits.

    You may read and copy any document we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. We file our SEC materials electronically with the SEC, so you can also review our filings by accessing the internet web site maintained by the SEC at http://www.sec.gov. This web site contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

    Our principal executive offices are located at 6950 Columbia Gateway Drive, Columbia, Maryland 21046, and our main telephone number is (410) 953-1000.

    The SEC allows us to "incorporate by reference" the information we file with them, which means we can disclose important information to you by referring you to those documents. The information included in the following documents is incorporated by reference and is considered to be a part of this prospectus. The most recent information that we file with the SEC automatically updates and supersedes prior information. We have previously filed the following documents with the SEC and are incorporating them by reference into this prospectus:

•

our current reports on Form 8-K, which were filed with the SEC on May 21, 2001, May 22, 2001 and May 24, 2001;



•

our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2000;



•

our quarterly reports on Form 10-Q for the three month periods ended December 31, 2000 and March 31, 2001; and



•

the description of our common stock contained in the registration statement on Form 8-A dated December 27, 1996, filed pursuant to Section 12 of the Securities Exchange Act of 1934 (Commission File No. 0-19411).

    We also are incorporating into this prospectus all documents subsequently filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.

    We will provide without charge to each person, including any person having a control relationship with that person, to whom a prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus. If you would like to obtain this information from us, please direct your request, either in writing or by telephone, to:

Investor Relations
Magellan Health Services, Inc.
6950 Columbia Gateway Drive
Columbia, Maryland 21046
(410) 953-1000

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FORWARD-LOOKING STATEMENTS

    Some statements and information contained in this prospectus or incorporated herein by reference are not historical facts, but are "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "plans," "may," "will," "would," "could," "should," or "anticipates" or the negative of these words or other variations of these words or other comparable words, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements include, but are not limited to statements concerning:

•

future results of operations or financial position;



•

future ability to make required payments on the Series A preferred stock and/or Series A debentures; and



•

future tax treatment of the Series A preferred stock and Series A debentures.

    Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. We caution you that these forward-looking statements are only predictions, and actual events or results may differ materially as a result of risks that we face. Please refer to our most recent Annual Report on Form 10-K/A, which is incorporated by reference in this prospectus, for a discussion of risk factors and investment considerations applicable to us and to our business.

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, COMMON STOCK AND/OR SERIES A PREFERRED STOCK OR SERIES A DEBENTURES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN OUR AFFAIRS SINCE THE DATE HEREOF.

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MAGELLAN HEALTH SERVICES, INC.

16,273,573 shares of Common Stock
80,063 shares of Series A Cumulative Convertible Preferred Stock
$80,063,000 Series A Junior Subordinated Convertible Debentures due December 15, 2009

PROSPECTUS

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

    The estimated expenses in connection with the issuance and distribution of the securities being registered are:

Registration Fee		$	46,678
Fees and Expenses of Accountants			20,000
Fees and Expenses of Counsel			30,000
Printing Expenses			20,000
Agent's Fees			5,000
Miscellaneous			25,000
	Total	$	146,678

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

    The Company is a Delaware corporation. Section 145 of the Delaware General Corporation Law, which we refer to as the "DGCL," provides that a Delaware corporation has the power to indemnify its officers and directors in certain circumstances.

    Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of his service as director, officer, employee or agent of the corporation, or his service, at the corporation's request, as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding provided that such director or officer acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, provided that such director or officer had no reasonable cause to believe his conduct was unlawful.

    Subsection (b) of Section 145 empowers a corporation to indemnify any director or officer, or former director or officer, who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit provided that such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director or officer shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such director or officer is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

    Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) or (b) or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith; provided that

II–1

indemnification provided for by Section 145 or granted pursuant thereto shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and empowers the corporation to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the power to indemnify him against such liabilities under Section 145.

    Article VII of the Bylaws of the Company provides in substance that the Company shall indemnify director and officers against all liability and related expenses incurred in connection with our affairs if: (a) in the case of action not by or in our right, the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interests, and (with respect to a criminal proceeding) had no reasonable cause to believe his conduct was unlawful; and (b) in the case of actions by or in our right, the director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interests, provided that no indemnification shall be made for a claim as to which the director or officer is adjudged liable for negligence or misconduct unless (and only to the extent that) an appropriate court determines that, in view of all the circumstances, such person is fairly and reasonably entitled to indemnity.

    In addition, Section 102(b)(7) of the DGCL permits Delaware corporations to include a provision in their certificates of incorporation eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provisions shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) for unlawful payment of dividends or other unlawful distributions, or (iv) for any transactions from which the director derived an improper personal benefit. Article Twelfth of our Certificate of Incorporation sets forth such a provision.

    The Company maintains directors' and officers' liability insurance with various providers in the aggregate amount of $80 million.

    The foregoing summaries are necessarily subject to the complete text of the statutes, our Certificate of Incorporation, our Bylaws, our insurance policies and agreements referred to above and are qualified in their entirety by reference thereto.

ITEM 16. EXHIBITS

Exhibit No.			Description
	4	(a)	Credit Agreement, dated February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and The Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(d) to the Company's Current Report on Form 8-K, which was filed April 3, 1998, and is incorporated herein by reference.
	4	(b)	Amendment No. 1, dated as of September 30, 1998, to the Credit Agreement, dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and The Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(e) to the Company's Registration Statement Form S-4 (no. 333-49335), which was filed on October 5, 1998, and is incorporated herein by reference.
	4	(c)	Amendment No. 2, dated as of April 30, 1999, to the Credit Agreement, dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and The Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999, and is incorporated herein by reference.

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4	(d)	Amendment No. 3, dated as of July 29, 1999, to the Credit Agreement, dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and The Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(n) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999, and is incorporated herein by reference.
4	(e)	Amendment No. 4, dated as of September 8, 1999, to the Credit Agreement, dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and The Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(o) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999, and is incorporated herein by reference.
4	(f)	Amendment No. 5, dated as of January 12, 2000, to the Credit Agreement dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and the Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1999, and is incorporated herein by reference.
4	(g)	Indenture, dated as of February 12, 1998, between the Company and Marine Midland Bank, as trustee, relating to the 9% Senior Subordinated Notes due February 15, 2008 of the Company, which was filed as Exhibit 4(a) to the Company's Current Report on Form 8-K, which was filed April 3, 1998, and is incorporated herein by reference.
4	(h)	Amended and Restated Investment Agreement, dated December 14, 1999, between the Company and TPG Magellan LLC, together with the form of Certificate of Designations of Series A Cumulative Convertible Preferred Stock, which were filed as Exhibit 4(r) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999, and are incorporated herein by reference.
4	(i)*	Form of Series A Junior Subordinated Convertible Debenture Indenture and Series A Junior Subordinated Convertible Debenture.
4	(j)	Registration Rights Agreement, dated as of July 19, 1999, between the Company and TPG Magellan LLC, filed as Exhibit 4.2 to the Company's current report on Form 8-K, which was filed on July 21, 1999, and is incorporated herein by reference.
4	(k)	Amendment Number One to Registration Rights Agreement, dated as of October 15, 1999, between the Company and TPG Magellan LLC, which was filed as Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1999, and is incorporated herein by reference.
4	(l)	Amendment No. 6, dated as of August 10, 2000, to the Credit Agreement dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and the Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(a) to the Company's Annual Report on Form 10-Q for the quarterly period ended June 30, 2000 and is incorporated herein by reference.
4	(m)	Amendment No. 7, dated as of September 19, 2000, to the Credit Agreement dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and the Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(r) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, and is incorporated herein by reference.

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	4	(n)	Amendment No. 8, dated as of November 21, 2000, to the Credit Agreement dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and the Chase Manhattan Bank, as administrative agent, which was filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, and is incorporated herein by reference.
†	4	(o)	Amendment No. 9, dated as of April 25, 2001, to the Credit Agreement dated as of February 12, 1998, among the Company, certain of the Company's subsidiaries listed therein and the Chase Manhattan Bank, as administrative agent.
†	4	(p)	Indenture, dated as of May 31, 2001, between the Company and HSBC Bank USA, as trustee, relating to the 93/8% Senior Notes due November 15, 2007 of the Company.
†	5		Opinion of King & Spalding as to validity of the securities.
	†12		Computation of Ratio of Earnings to Combined Fixed Charges and Preference Dividends.
	†23	(a)	Consent of Arthur Andersen LLP.
	†23	(b)	Consent of King & Spalding (included in their opinion filed as Exhibit 5).
	†24		Powers of Attorney (see signature page).

*

To be filed by amendment.

†

Filed herewith.

ITEM 17. UNDERTAKINGS

    1.  The undersigned registrant hereby undertakes:

(a)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:



(i)

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;



(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and



(iii)

to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(b)

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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(c)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

    2.  The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

    3.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification by the registrant against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

    4.  The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee for the Series A debentures to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of such act.

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SIGNATURES

    Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbia, State of Maryland, on June 29, 2001.

MAGELLAN HEALTH SERVICES, INC.
By:	/s/ MARK S. DEMILIO Mark S. Demilio Executive Vice President, Finance and Legal

    Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below also constitutes and appoints Daniel S. Messina and Mark S. Demilio and each of them, his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Signature	Title	Date
/s/ HENRY T. HARBIN Henry T. Harbin	Chairman of the Board, Chief Executive officer and Director	June 29, 2001
/s/ DANIEL S. MESSINA Daniel S. Messina	President and Director	June 29, 2001
/s/ MARK S. DEMILIO Mark S. Demilio	Executive Vice President, Finance and Legal	June 29, 2001
/s/ THOMAS C. HOFMEISTER Thomas C. Hofmeister	Senior Vice President and Chief Accounting Officer	June 29, 2001
/s/ DAVID BONDERMAN David Bonderman	Director	June 29, 2001

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/s/ JONATHAN J. COSLET Jonathan J. Coslet	Director	June 29, 2001
/s/ G. FRED DIBONA, JR. G. Fred DiBona, Jr.	Director	June 29, 2001
/s/ ANDRE C. DIMITRIADIS Andre C. Dimitriadis	Director	June 29, 2001
/s/ A. D. FRAZIER, JR. A. D. Frazier, Jr.	Director	June 29, 2001
/s/ GERALD L. MCMANIS Gerald L. McManis	Director	June 29, 2001
/s/ ROBERT W. MILLER Robert W. Miller	Director	June 29, 2001
/s/ DARLA D. MOORE Darla D. Moore	Director	June 29, 2001
/s/ JEFFREY A. SONNENFELD Jeffrey A. Sonnenfeld	Director	June 29, 2001
/s/ JAMES B. WILLIAMS James B. Williams	Director	June 29, 2001

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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

     As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement of our reports dated April 6, 2001 on the consolidated financial statements and schedule of Magellan Health Services, Inc. and Subsidiaries included in Magellan Health Services, Inc.'s report on Form 8-K, dated May 21, 2001 (File No. 001-06639), and to all references to our Firm included in this Registration Statement on Form S-3.

/s/ ARTHUR ANDERSEN LLP

Baltimore, Maryland
June 29, 2001

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TABLE OF CONTENTS
REFERENCES TO ADDITIONAL INFORMATION
SUMMARY
RISK FACTORS
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS
DESCRIPTION OF SERIES A PREFERRED STOCK
THE OPTION
DESCRIPTION OF THE SERIES A DEBENTURES
DESCRIPTION OF OTHER INDEBTEDNESS
REGISTRATION RIGHTS AGREEMENT
USE OF PROCEEDS
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
SELLING SECURITYHOLDERS
PLAN OF DISTRIBUTION
VALIDITY OF SECURITIES
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
FORWARD-LOOKING STATEMENTS
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

EX-4.O

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Exhibit 4(o)

EXECUTION COPY

    AMENDMENT No. 9 entered into as of April 25, 2001 (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.  The Parent Borrower intends to issue the 2001 Notes (as defined in the Credit Agreement, as amended by this Amendment) and has requested that the Required Lenders amend certain provisions of the Credit Agreement as set forth herein, and the Required Lenders are willing so to amend such provisions of the Credit Agreement, on the terms and subject to the conditions set forth in this Amendment.

    C.  Capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement (as amended hereby).

    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 "Borrowing" in Section 1.01 of the Credit Agreement is hereby amended by (i) adding the text "(a)" immediately before the text "Loans of a single Class" in such definition and (ii) adding the text ", or (b) a Swingline Loan" at the end of such definition.

    (b) The definition of the term "Class" in Section 1.01 of the Credit Agreement is hereby amended by adding the text "Swingline Loans," immediately after the text "are Revolving Loans," in such definition.

    (c) The definition of the term "Consolidated Net Worth" in Section 1.01 of the Credit Agreement is hereby deleted.

    (d) The definition of the term "Excess Cash Flow" in Section 1.01 of the Credit Agreement is hereby amended by replacing all references to "Permitted Stock Repurchases or Dividends" in such definition with the text "Permitted Stock and Note Repurchases or Dividends".

    (e) The definition of the term "Interest Payment Date" in Section 1.01 of the Credit Agreement is hereby amended by (i) adding the text "(other than a Swingline Loan)" immediately after the text "with respect to any Loan" in such definition and (ii) adding the text ", and with respect to any Swingline Loan, the day that such Loan is required to be repaid" at the end of such definition.

    (f)  The definition of the term "Lenders" in Section 1.01 of the Credit Agreement is hereby amended by adding the following sentence at the end of such definition:

    Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender.

    (g) The definition of the term "Loans" in Section 1.01 of the Credit Agreement is hereby amended by adding the text ", the Swingline Loans" immediately after the text "shall mean the Revolving Loans" in such definition.

    (h) The definition of the term "Permitted Acquisition" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in clause (a)(i) of such definition and replacing it with the text "and", (ii) deleting the text "6.13 and 6.14," in clause (a)(i) of such definition, (iii) deleting the text "(x)" in clause (iii) of paragraph (e) of such definition, (iv) deleting the text ", and" immediately after the text "is greater than or equal to 4.00:1.00, $100,000,000" in clause (iii) of paragraph (e) of such definition and replacing it with a period and (v) deleting subclause (iii)(y) of paragraph (e) of such definition.

    (i)  The definition of the term "Permitted CBHS Investment" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in clause (a)(i) of such definition and replacing it with the text "and" and (ii) deleting the text "6.13 and 6.14," in clause (a)(i) of such definition.

    (j)  The definition of the term "Permitted CBHS Lease Transaction" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in paragraph (d) of such definition and replacing it with the text "and" and (ii) deleting the text "6.13 and 6.14," in paragraph (d) of such definition.

    (k) The definition of the term "Permitted Debt Repurchase" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in clause (a)(i) of such definition and replacing it with the text "and" and (ii) deleting the text "6.13 and 6.14," in clause (a)(i) of such definition.

    (l)  The definition of the term "Permitted Non-Control Investment" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in clause (a)(i) of such definition and replacing it with the text "and", (ii) deleting the text "6.13 and 6.14," in clause (a)(i) of such definition and (iii) replacing the text "$35,000,000" immediately following the text "outstanding at such time exceeds" in paragraph (d) of such definition with the text "$50,000,000".

    (m) The definition of the term "Permitted Non-Guarantor Transactions" in Section 1.01 of the Credit Agreement is hereby amended by (i) replacing the text "$35,000,000" immediately following the text "shall not exceed" in clause (v) of paragraph (d) of such definition with the text "$50,000,000", (ii) deleting the comma immediately after the text "6.11" in clause (v)(i) of paragraph (d) of such definition and replacing it with the text "and" and (iii) deleting the text "6.13 and 6.14," in clause (v)(i) of paragraph (d) of such definition.

    (n) The definition of the term "Permitted Post-Closing Crescent Transaction" in Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the comma immediately after the text "6.11" in paragraph (c) of such definition and replacing it with the text "and" and (ii) deleting the text "6.13 and 6.14," in paragraph (c) of such definition.

    (o) The definition of the term "Permitted Stock Repurchases or Dividends" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

    "Permitted Stock and Note Repurchases or Dividends" shall mean (a) any repurchase by the Parent Borrower of shares of its common stock, (b) any repurchase by the Parent Borrower of any stock option held by any director, officer or employee, and any amount paid by the Parent Borrower in respect of the cancelation or termination of any stock option, (c) any repurchase or redemption by the Parent Borrower of shares of non-voting capital stock issued by the Parent Borrower as part of a Specified Equity Issuance, the payment of accumulated and unpaid dividends and arrearages on such shares of non-voting capital stock to the extent that such dividends and arrearages become due and payable at the time of a repurchase or redemption permitted by this clause (c), or any payment made by the Parent Borrower in connection with the sale by the holder(s) of non-voting capital stock issued by the Parent Borrower as part of a Specified Equity Issuance, in each case (i) after March 5, 2002, (ii) only in the circumstances and to the extent required by the terms and conditions of the relevant Specified Equity Issuance and (iii) solely in accordance with the terms and conditions of the relevant Specified Equity Issuance, (d) any payment of a cash dividend on any capital stock issued pursuant to any Specified Equity Issuance, (e) any payment of dividends on any capital stock issued pursuant to any Specified Equity Issuance (i) in the form of (A) additional shares of such capital stock (or of other capital stock of the Parent Borrower issued pursuant to a Specified Equity Issuance or otherwise on terms that are not less favorable to the Lenders than the terms of such capital stock) or (B) shares of common stock of the Parent Borrower (such common stock to have the same terms as the common stock issued by the Parent Borrower as of the date hereof or terms that are not less favorable to the Lenders than the terms of such common stock) and (ii) in accordance with the terms of such capital stock issued pursuant to such Specified Equity Issuance or (f) any repurchase or redemption by the Parent Borrower of the Subordinated Notes, in each case described in clauses (a) through (f) above, so long as (A) after giving effect to such repurchase, redemption, cancelation, termination or payment, (1) the Parent Borrower shall be in compliance, on a pro forma basis, with all covenants set forth in this Agreement, including then effective covenants contained in Sections 6.10, 6.11 and 6.12, which shall be recomputed as at the last day of the most recently ended fiscal quarter (for which financial information has been delivered pursuant to Section 5.04) of the Parent Borrower as if such repurchase, redemption, cancelation, termination or payment had occurred on the first day of each relevant period for testing such compliance, and (2) on the date of such repurchase, redemption, cancelation, termination or payment and immediately after giving effect thereto, no Default or Event of Default shall exist, (B) the aggregate cash amount expended by the Parent Borrower in connection with all Permitted Stock and Note Repurchases or Dividends shall not exceed (y) during the term of this Agreement, in the case of all repurchases, redemptions and payments permitted by clause (c) of this definition, the sum of (I) the lesser of $18,500,000 and the aggregate cash consideration received by the Parent Borrower in respect of the issuance of non-voting capital stock as part of a Specified Equity Issuance to Persons other than the Preemptive Rights Holders, (II) the aggregate cash consideration received by the Parent Borrower in respect of the issuance of non-voting capital stock as part of a Specified Equity Issuance to the Preemptive Rights Holders solely pursuant to the exercise of their preemptive rights under the Preemptive Rights Agreement in respect of capital stock being issued to other Persons as a Specified Equity Issuance, (III) the aggregate cash consideration received by the Parent Borrower in respect of any Equity Issuance described in the first proviso to Section 2.13(d) and (IV) the aggregate amount set forth in the table below opposite the applicable Leverage Ratio as shown below, with such applicable Leverage Ratio calculated on a pro forma basis after giving effect to such repurchase, redemption, cancelation, termination or payment (including any Indebtedness incurred in connection therewith) and recomputed as of the last day of the most recently ended fiscal quarter of the Parent Borrower as if such payment had been made on the first day of the relevant period for calculating such Leverage Ratio, less the aggregate amount that has been expended pursuant to clause (a), (b), (d), (e) or (f) above (any payment made pursuant to this clause (IV) being an "additional payment") and (z) from May 31, 2001, through the term of this Agreement, in the case of all other Permitted Stock and Note Repurchases or Dividends as described in clauses (a), (b), (d), (e) or (f) above, (1) the aggregate amount set forth opposite the applicable Leverage Ratio as shown below, with such applicable Leverage Ratio calculated on a pro forma basis after giving effect to such repurchase, redemption, cancelation, termination or payment (including any Indebtedness incurred in connection therewith) and recomputed as of the last day of the most recently ended fiscal quarter of the Parent Borrower as if such payment had been made on the first day of the relevant period for calculating such Leverage Ratio, less (2) the aggregate amount that has been expended on additional payments from May 31, 2001

Leverage Ratio	Aggregate Amount
Greater than 4.00:1.00	$	10,000,000
Greater than 3.50:1.00 but less than or equal to 4.00:1.00	$	25,000,000
Greater than 3.00:1.00 but less than or equal to 3.50:1.00	$	40,000,000
Less than or equal to 3.00:1.00	$	60,000,000

provided that in the event that the Parent Borrower's Leverage Ratio increases to a level that causes the aggregate amount set forth above opposite the applicable Leverage Ratio to be less than the aggregate amount of repurchases, redemptions and payments made prior to such increase in the Leverage Ratio, (I) no Permitted Stock and Note Repurchases or Dividends as described in clauses (a), (b), (d), (e) or (f) above shall be permitted until such time as the Parent Borrower's Leverage Ratio decreases to a level that causes the applicable aggregate amount set forth above opposite the applicable Leverage Ratio to be greater than the aggregate amount of repurchases, redemptions and payments made prior to such decrease in the Leverage Ratio and (II) no Default shall exist solely as a result of such increase in the Leverage Ratio, and (C) after giving effect to any such repurchase, redemption, cancelation, termination or payment, the aggregate amount of cash and cash equivalents on the Parent Borrower's consolidated balance sheet plus the remaining available balance of the Total Revolving Credit Commitment shall be at least equal to (x) in the case of Permitted Stock and Note Repurchases or Dividends as described in clauses (a), (b), (d), (e) or (f) above, $50,000,000 or (y) in the case of Permitted Stock and Note Repurchases or Dividends as described in clause (c) above, $20,000,000. Notwithstanding anything to the contrary set forth in this definition, the issuance by the Parent Borrower of (a) common stock of the Parent Borrower (such common stock to have the same terms as the common stock issued by the Parent Borrower as of the date hereof or terms that are not less favorable to the Lenders than the terms of such common stock) or (b) non-redeemable participating preferred stock of the Parent Borrower (such preferred stock to be issued pursuant to the terms of a Specified Equity Issuance or on terms that are not less favorable to the Lenders than those provided in such Specified Equity Issuance), in each case in respect of accumulated and unpaid dividends and arrearages on capital stock issued pursuant to a Specified Equity Issuance when such capital stock is being converted to common stock or non-redeemable participating preferred stock of the Parent Borrower in accordance with the terms and conditions of the relevant Specified Equity Issuance, shall, to the extent that such common stock or non-redeemable participating preferred stock dividends are required under the terms and conditions of the relevant Specified Equity Issuance, constitute Permitted Stock and Note Repurchases or Dividends.

    (p) The definition of the term "Revolving Credit Exposure" in Section 1.01 of the Credit Agreement is hereby amended by adding the text ", plus the aggregate amount at such time of such Lender's Swingline Exposure" at the end of such definition.

    (q) The definition of the term "Specified Equity Issuance" in Section 1.01 of the Credit Agreement is hereby amended by replacing the text "Permitted Stock Repurchases or Dividends" at the end of such definition with the text "Permitted Stock and Note Repurchases or Dividends".

    (r) The definition of the term "Specified Joint Venture" in Section 1.01 of the Credit Agreement is hereby amended by adding the text "or any contractual obligation owed to such joint venture's customers" at the end of such definition.

    (s) The definition of the term "Specified Newly Formed Subsidiary" in Section 1.01 of the Credit Agreement is hereby amended by adding the text "or any contractual obligation owed to such Subsidiary's customers" at the end of such definition.

    (t)  Section 1.01 of the Credit Agreement is hereby amended by adding the defined terms "Permitted Senior Unsecured Indebtedness", "Swingline Exposure", "Swingline Lender", "Swingline Loan", "2001 Notes" and "2001 Notes Indenture" in the appropriate alphabetical order to read in their entirety as follows:

    "Permitted Senior Unsecured Indebtedness" shall mean, at any time, (a) the 2001 Notes and (b) any other unsecured Indebtedness of the Parent Borrower, provided for purposes of clause (b) that (i) the aggregate amount of scheduled principal payments in respect of such Indebtedness, without duplication, that can be due on a date that is on or prior to the Tranche C Maturity Date cannot exceed $25,000,000; (ii) such Indebtedness contains covenants (including financial and negative covenants) and events of default that are no more restrictive in any material respect than the analogous covenants and events of default contained in 2001 Notes Indenture; and (iii) on the date that any such Indebtedness is incurred and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing.

    "Swingline Exposure" shall mean, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Pro Rata Percentage of the total Swingline Exposure at such time.

    "Swingline Lender" shall mean The Chase Manhattan Bank, in its capacity as lender of Swingline Loans hereunder.

    "Swingline Loan" shall mean a Loan made pursuant to Section 2.24.

    "2001 Notes" shall mean the Parent Borrower's senior unsecured notes due November 15, 2007, issued on May 31, 2001, which notes shall not be guaranteed by any Subsidiary (and shall include any substantially identical senior unsecured notes of the Parent Borrower in the same aggregate principal amount issued in exchange therefor pursuant to a registered exchange offer or shelf registration statement in accordance with the 2001 Notes Indenture).

    "2001 Notes Indenture" shall mean the Indenture dated as of May 31, 2001, between the Parent Borrower and HSBC Bank USA, relating to the 2001 Notes, as the same may be amended and supplemented from time to time in accordance with the terms hereof and thereof.

    SECTION 2.  Amendments to Section 2.02(a).  Section 2.02(a) of the Credit Agreement is hereby amended by (a) adding the text "(other than a Swingline Loan)" immediately after the text "Each Loan" in the first sentence of such Section, (b) adding the text "Swingline Loans and" immediately after the text "Except for" in the second sentence of such section and (c) adding the following sentence at the end of such Section:

    Each Swingline Loan shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000.

    SECTION 3.  Amendment to Section 2.02(b).  Section 2.02(b) of the Credit Agreement is hereby amended by adding the following sentence at the end of such Section:

    Each Swingline Loan shall be an ABR Loan.

    SECTION 4.  Amendment to Section 2.03.  Section 2.03 of the Credit Agreement is hereby amended by adding the text "Swingline Loan or a" immediately after the text "other than a" in the first parenthetical in such Section.

    SECTION 5.  Amendments to Section 2.04(a).  Section 2.04(a) of the Credit Agreement is hereby amended by adding the following sentence to the end of such Section:

    The Borrowers, jointly and severally, unconditionally promise to pay to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Credit Maturity Date and the maturity date for such Swingline Loan agreed to by the Swingline Lender and the applicable Borrower, which maturity date shall be a date not later than seven Business Days after such Swingline Loan is made.

    SECTION 6.  Amendment to Section 2.05(a).  Section 2.05(a) of the Credit Agreement is hereby amended by adding the following sentence at the end of such Section:

    For purposes of computing Commitment Fees, a Revolving Credit Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and L/C Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

    SECTION 7.  Amendment to Section 2.06(a).  Section 2.06(a) of the Credit Agreement is hereby amended by adding the text "(including each Swingline Loan)" immediately after the text "the Loans comprising each "BR Borrowing" in the first sentence of such Section.

    SECTION 8.  Amendment to Section 2.10.  Section 2.10 of the Credit Agreement is hereby amended by adding the following sentence at the end of such Section:

    This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

    SECTION 9.  Amendments to Section 2.11(a).  Section 2.11(a) of the Credit Agreement is hereby amended by (a) adding the text "(or, in the case of Swingline Borrowings, one)" immediately after the text "upon at least two" in such Section and (b) adding the text "(except that this proviso shall not apply to Swingline Borrowings)" at the end of such Section.

    SECTION 10.  Amendment to Section 2.13(a).  Section 2.13(a) of the Credit Agreement is hereby amended by adding the text "(or other date, as applicable, marking the end of the fiscal year of the applicable Borrower)" immediately after the text "September 30" in clause (i) of the proviso to such Section.

    SECTION 11.  Amendments to Section 2.13(b).  Section 2.13(b) of the Credit Agreement is hereby amended by (a) replacing the text "75%" in such Section with the text "the applicable percentage set forth opposite the applicable Leverage Ratio as shown below (such Leverage Ratio being calculated as of the last day of the most recently ended fiscal quarter)" and (b) adding the following table at the end of such Section:

Leverage Ratio	Applicable Percentage
Greater than 3.50:1.00	75%
Greater than 3.00:1.00 but less than or equal to 3.50:1.00	50%
Less than or equal to 3.00:1.00	25%

    SECTION 12.  Amendment to Section 2.13(c).  Section 2.13(c) of the Credit Agreement is hereby amended by adding the text "(or other date, as applicable, marking the end of the fiscal year of the applicable Borrower)" immediately after the text "September 30" in the proviso to such Section.

    SECTION 13.  Amendments to Section 2.13(d).  Section 2.13(d) of the Credit Agreement is hereby amended by (a) replacing the text "75%" in clause (iv) of such Section with the text "the applicable percentage set forth opposite the applicable Leverage Ratio as shown below (such Leverage Ratio being calculated as of the last day of the most recently ended fiscal quarter)", (b) adding the text "(or other date, as applicable, marking the end of the fiscal year of the applicable Borrower)" immediately after the text "September 30" in the second proviso to such Section, (c) replacing the text "Permitted Stock Repurchases or Dividends" at the end of the first proviso to such Section with the text "Permitted Stock and Note Repurchases or Dividends" and (d) adding the following table at the end of such Section:

Leverage Ratio	Applicable Percentage
Greater than 3.50:1.00	75%
Greater than 2.50:1.00 but less than or equal to 3.50:1.00	50%
Less than or equal to 2.50:1.00	25%

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Exhibit 4(p)

MAGELLAN HEALTH SERVICES, INC.

9-³/8% Senior Notes due 2007

INDENTURE

Dated as of May 31, 2001

HSBC Bank USA,

Trustee

TABLE OF CONTENTS

		Page
ARTICLE 1 Definitions and Incorporation by Reference
SECTION 1.01.	Definitions	1
SECTION 1.02.	Other Definitions	15
SECTION 1.03.	Incorporation by Reference of Trust Indenture Act	15
SECTION 1.04.	Rules of Construction	16
ARTICLE 2 The Securities
SECTION 2.01.	Form and Dating	16
SECTION 2.02.	Execution and Authentication	16
SECTION 2.03.	Registrar and Paying Agent	17
SECTION 2.04.	Paying Agent To Hold Money in Trust	17
SECTION 2.05.	Securityholder Lists	17
SECTION 2.06.	Transfer and Exchange	18
SECTION 2.07.	Replacement Securities	18
SECTION 2.08.	Outstanding Securities	19
SECTION 2.09.	Temporary Securities	19
SECTION 2.10.	Cancelation	19
SECTION 2.11.	Defaulted Interest	19
SECTION 2.12.	CUSIP Numbers	19
ARTICLE 3 Redemption
SECTION 3.01.	Notices to Trustee	20
SECTION 3.02.	Selection of Securities To Be Redeemed	20
SECTION 3.03.	Notice of Redemption	20
SECTION 3.04.	Effect of Notice of Redemption	21
SECTION 3.05.	Deposit of Redemption Price	21
SECTION 3.06.	Securities Redeemed in Part	21
ARTICLE 4 Covenants
SECTION 4.01.	Payment of Securities	21
SECTION 4.02.	Provisions of Reports and Other Information	22
SECTION 4.03.	Limitation on Additional Indebtedness	22
SECTION 4.04.	Limitation on Restricted Payments	24
SECTION 4.05.	Limitation on Payment Restrictions Affecting Restricted Subsidiaries	27
SECTION 4.06.	Limitation on Use of Proceeds from Asset Sales	28
SECTION 4.07.	Limitation on Transactions with Affiliates	30
SECTION 4.08.	Change of Control	30
SECTION 4.09.	Compliance Certificate	32
SECTION 4.10.	Further Instruments and Acts	32
SECTION 4.11.	Limitation on Liens	32
SECTION 4.12.	Limitation on Sale/Leaseback Transactions	33

i

ARTICLE 5 Successor Company
SECTION 5.01.	Merger, Consolidation or Sale of Assets	33
ARTICLE 6 Defaults and Remedies
SECTION 6.01.	Events of Default	34
SECTION 6.02.	Acceleration	35
SECTION 6.03.	Other Remedies	36
SECTION 6.04.	Waiver of Past Defaults	36
SECTION 6.05.	Control by Majority	36
SECTION 6.06.	Limitation on Suits	36
SECTION 6.07.	Rights of Holders to Receive Payment	36
SECTION 6.08.	Collection Suit by Trustee	37
SECTION 6.09.	Trustee May File Proofs of Claim	37
SECTION 6.10.	Priorities	37
SECTION 6.11.	Undertaking for Costs	37
SECTION 6.12.	Waiver of Stay or Extension Laws	37
ARTICLE 7 Trustee
SECTION 7.01.	Duties of Trustee	38
SECTION 7.02.	Rights of Trustee	39
SECTION 7.03.	Individual Rights of Trustee	39
SECTION 7.04.	Trustee's Disclaimer	39
SECTION 7.05.	Notice of Defaults	39
SECTION 7.06.	Reports by Trustee to Holders	40
SECTION 7.07.	Compensation and Indemnity	40
SECTION 7.08.	Replacement of Trustee	40
SECTION 7.09.	Successor Trustee by Merger	41
SECTION 7.10.	Eligibility; Disqualification	41
SECTION 7.11.	Preferential Collection of Claims Against Company	41
ARTICLE 8 Discharge of Indenture; Defeasance
SECTION 8.01.	Discharge of Liability on Securities; Defeasance	42
SECTION 8.02.	Conditions to Defeasance	42
SECTION 8.03.	Application of Trust Money	43
SECTION 8.04.	Repayment to Company	43
SECTION 8.05.	Indemnity for Government Obligations	43
SECTION 8.06.	Reinstatement	43

ii

ARTICLE 9 Amendments
SECTION 9.01.	Without Consent of Holders	44
SECTION 9.02.	With Consent of Holders	44
SECTION 9.03.	Compliance with Trust Indenture Act	45
SECTION 9.04.	Revocation and Effect of Consents and Waivers	45
SECTION 9.05.	Notation on or Exchange of Securities	45
SECTION 9.06.	Trustee to Sign Amendments	45
SECTION 9.07.	Payment for Consent	46
ARTICLE 10 Miscellaneous
SECTION 10.01.	Trust Indenture Act Controls	46
SECTION 10.02.	Notices	46
SECTION 10.03.	Communication by Holders with Other Holders	47
SECTION 10.04.	Certificate and Opinion as to Conditions Precedent	47
SECTION 10.05.	Statements Required in Certificate or Opinion	47
SECTION 10.06.	When Securities Disregarded	47
SECTION 10.07.	Rules by Trustee, Paying Agent and Registrar	47
SECTION 10.08.	Legal Holidays	48
SECTION 10.09.	Governing Law	48
SECTION 10.10.	No Personal Liability of Directors, Officers, Employees and Stockholders	48
SECTION 10.11.	Successors	48
SECTION 10.12.	Multiple Originals	48
SECTION 10.13.	Table of Contents; Headings	48

Appendix A–Provisions Relating to Initial Securities, Private Exchange Securities and Exchange Securities

Exhibit A–Form of Initial Security

Exhibit B–Form of Exchange Security

Exhibit C–Form of Transferee Letter of Representation

iii

CROSS-REFERENCE TABLE

TIA Section	Indenture Section
310(a)(1)
7.10 (a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(b)	7.08; 7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.05
(b)	10.03
(c)	10.03
313(a)	7.06
(b)(1)	N.A.
(b)(2)	7.06
(c)	10.02
(d)	7.06
314(a)	4.02; 4.09
(b)	N.A.
(c)(1)	10.04
(c)(2)	10.04
(c)(3)	N.A.
(d)	N.A.
(e)	10.05
(f)	N.A.
315(a)	7.01
(b)	7.05; 10.02
(c)	7.01
(d)	7.01
(e)	6.11
316(a)(last sentence)	10.06
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	N.A.
(b)	6.07
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.04
318(a)	10.01

    N.A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

iv

    INDENTURE dated as of May 31, 2001, between MAGELLAN HEALTH SERVICES, INC., a Delaware corporation (the "Company"), and HSBC Bank USA, a New York banking corporation and trust company, as trustee (the "Trustee").

    Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Company's 9-³/8% Senior Notes due 2007 issued on the date hereof (the "Initial Securities"), (ii) if and when issued as provided in the Exchange and Registration Rights Agreement of even date herewith (the "Registration Agreement"), the Company's 9-³/8% Senior Notes due 2007 issued in the Registered Exchange Offer (as defined in Appendix A hereto (the "Appendix")) in exchange for any Initial Securities (the "Exchange Securities") and (iii) if and when issued as provided in the Registration Agreement, the Private Exchange Securities (as defined in the Appendix, and together with the Initial Securities and any Exchange Securities issued hereunder, the "Securities") issued in the Private Exchange (as defined in the Appendix). Except as otherwise provided herein, the Securities will be limited to $250,000,000 in aggregate principal amount outstanding.

ARTICLE 1

Definitions and Incorporation by Reference

    SECTION 1.01.  Definitions.

    "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling", "controlled by", and "under common control with") another Person if the controlling Person (a) possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise, or (b) owns, directly or indirectly, 10% or more of any class of the issued and outstanding equity securities of the controlled Person.

    "Asset Sale" means, with respect to any Person, the sale, lease, conveyance, disposition or other transfer by such Person of any of its assets (including by way of a sale-and-leaseback and including the sale or other transfer of any Equity Interests in any Restricted Subsidiary) which results in proceeds with a fair market value of $1 million or more. However, the following shall not constitute an Asset Sale: (i) unless part of a disposition including other assets or operations, (A) dispositions of Cash, Cash Equivalents and Investment Grade Securities, (B) payments on or in respect of non-Cash proceeds of Asset Sales, and (C) dispositions of Investments by foreign subsidiaries of the Company in Cash and instruments or securities or in certificates of deposit (or comparable instruments) with banks or similar institutions; (ii) the lease of space in the ordinary course of business and in a manner consistent with either past practices or the healthcare industry generally; or (iii) the issuance or sale by the Company of any Equity Interests in the Company.

    "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined without duplication in accordance with the definition of Capital Lease Obligation.

1

    "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment (assuming the exercise by the obligor of such Indebtedness of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such principal payment by (ii) the sum of all such principal payments.

    "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement (and any substitutes, refundings, refinancings and replacements thereof, in whole or in part) and all related documentation, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees and all other amounts payable thereunder or in respect thereof.

    "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.

    "Business Day" means each day which is not a Legal Holiday.

    "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease which would at such time be so required to be capitalized on the balance sheet in accordance with GAAP.

    "Capital Stock" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock (including, without limitation, common and preferred stock), excluding warrants, options or similar instruments or other rights to acquire Capital Stock.

    "Cash" means money or currency or a credit balance in a Deposit Account.

2

    "Cash Equivalents" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency, instrumentality or sponsored corporation thereof which are rated at least A or the equivalent thereof by Standard and Poor's Ratings Services ("S&P") or at least A-2 or the equivalent thereof by Moody's Investor Services, Inc. ("Moody's") (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), and in each case having maturities of not more than one year from the date of acquisition, (ii) time deposits, certificates of deposit, Eurodollar time deposits, and overnight bank deposits with any commercial bank of recognized standing, having capital and surplus in excess of $250 million and the commercial paper of the holding company of which is rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), or, if no such commercial paper rating is available, a long-term debt rating of at least A or the equivalent thereof by S&P or at least A-2 or the equivalent thereof by Moody's (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (iii) repurchase obligations with a term of not more than 92 days for underlying securities of the types described in clause (i) above entered into with any commercial bank meeting the qualifications specified in clause (ii) above, (iv) other investment instruments offered or sponsored by financial institutions having capital and surplus in excess of $250 million and the commercial paper of the holding company of which is rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), or, if no such commercial paper rating is available, a long-term debt rating of at least A or the equivalent thereof by S&P or at least A-2 or the equivalent thereof by Moody's (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (v) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody's or S&P (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (vi) commercial paper rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), in each case maturing within one year after the date of acquisition and (vii) other money market investments with a weighted average maturity of less than one year in an aggregate amount not to exceed $10 million at any time outstanding.

    "Change of Control" means (a) the sale, lease, transfer or other disposition in one or more related transactions of all or substantially all of the Company's assets, or the sale of substantially all of the Capital Stock or assets of the Company's Subsidiaries that constitutes a sale of substantially all of the Company's assets, to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), (b) the merger or consolidation of the Company with or into another corporation, or the merger of another corporation into the Company or any other transaction, with the effect, in any such case, that the stockholders of the Company immediately prior to such transaction hold 50% or less of the total voting power entitled to vote in the election of directors, managers or trustees of the surviving corporation or, in the case of a triangular merger, the parent corporation of the surviving corporation resulting from such merger, consolidation or such other transaction, (c) any Person (except for the parent corporation of the surviving corporation in a triangular merger) or group acquires beneficial ownership of a majority in interest of the voting power or voting Capital Stock of the Company, or (d) the liquidation or dissolution of the Company.

    "Closing Date" means the date of this Indenture.

    "Code" means the Internal Revenue Code of 1986, as amended.

3

    "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities.

    "Consolidated Cash Interest Coverage Ratio" means the ratio of (i) Consolidated Net Income plus the sum of Consolidated Interest Expense, income tax expense, depreciation expense, amortization expense and other non-cash charges of the Company and its Restricted Subsidiaries (to the extent such items were deducted in computing Consolidated Net Income of the Company) (collectively, "EBITDA") for the preceding four fiscal quarters to (ii) the Consolidated Cash Interest Expense of the Company and its Restricted Subsidiaries for the preceding four fiscal quarters; provided that (without duplication): (A) if the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays or redeems any Indebtedness subsequent to the commencement of the period for which the Consolidated Cash Interest Coverage Ratio is being calculated but prior to the event for which the calculation of the Consolidated Cash Interest Coverage Ratio is made or if the transaction giving rise to the need to calculate the Consolidated Cash Interest Coverage Ratio is an incurrence, assumption, Guarantee, repayment or redemption of Indebtedness, then the Consolidated Cash Interest Coverage Ratio will be calculated giving pro forma effect to any such incurrence, assumption, Guarantee, repayment or redemption of Indebtedness, as if the same had occurred at the beginning of the applicable period, (B) if the Company or any Restricted Subsidiary shall have made any Material Asset Sale subsequent to the commencement of the period for which the Consolidated Cash Interest Coverage Ratio is being calculated but prior to the event for which the calculation of the Consolidated Cash Interest Coverage Ratio is made, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Material Asset Sale for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense for such period directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Material Asset Sale (or, if the Equity Interests of any Restricted Subsidiary are sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (C) if the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which Investment or acquisition of assets constitutes all or substantially all of an operating unit of a business subsequent to the commencement of the period for which the Consolidated Cash Interest Coverage Ratio is being calculated but prior to the event for which the calculation of the Consolidated Cash Interest Coverage Ratio is made, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the incurrence, assumption, Guarantee, repayment or redemption of any Indebtedness and any pro forma expense and cost reductions that are directly attributable to such transaction), as if such Investment or acquisition occurred at the beginning of the applicable period and (D) if subsequent to the commencement of the period for which the Consolidated Cash Interest Coverage Ratio is being calculated but prior to the event for which the calculation of the Consolidated Cash Interest Coverage Ratio is made any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Material Asset Sale or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (B) or (C) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Material Asset Sale, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is given for a transaction, the pro forma calculation shall be made in good faith by a responsible financial or accounting officer of the Company. In making such calculations on a pro forma basis, interest attributable to Indebtedness bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period.

4

    "Consolidated Cash Interest Expense" of any Person means, for any period for which the determination thereof is to be made, the Consolidated Interest Expense of such Person less, to the extent incurred, assumed or Guaranteed by such Person and its Subsidiaries in such period and included in such Consolidated Interest Expense, (i) deferred financing costs and (ii) other noncash interest expense; provided, however, that amortization of original issue discount shall be included in Consolidated Cash Interest Expense.

    "Consolidated Interest Expense" of any Person means, for any period for which the determination thereof is to be made, the total interest expense of such Person and its consolidated Restricted Subsidiaries, plus, without duplication, to the extent incurred, assumed or Guaranteed by such Person and its Subsidiaries in such period but not included in such interest expense, (A)(i) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (ii) all but the principal component of rentals in respect of Capital Lease Obligations, paid, accrued or scheduled to be paid or accrued by such Person during such period, (iii) capitalized interest, (iv) amortization of original issue discount and deferred financing costs, (v) noncash interest expense, (vi) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by such Person or any of its Restricted Subsidiaries; provided that payment of such amounts by the Company or any Restricted Subsidiary is being made to, or is sought by, the holders of such Indebtedness pursuant to such guarantee, (vii) net costs (benefits) associated with Hedging Obligations relating to interest rate protection (including amortization of fees), (viii) Preferred Stock dividends in respect of all Preferred Stock of the Subsidiaries of such Person and Redeemable Stock of such Person held by Persons other than such Person or a Wholly-owned Subsidiary of such Person, and (ix) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than such Person) in connection with Indebtedness incurred, assumed or Guaranteed by such plan or trust, all as determined in accordance with GAAP, less (B) interest expense of the type described in clause (A) above attributable to Unrestricted Subsidiaries of such Person to the extent the related Indebtedness is not Guaranteed or paid by such Person or any Restricted Subsidiary of such Person.

    "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP, plus the sum of the amount allocated to excess reorganization value, employee stock ownership plan expense and consolidated stock option expense (to the extent such items were taken into account in computing the Net Income of such Person and its Subsidiaries); provided, however, that:

    (i)  the Net Income of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions actually paid in Cash to the referent Person or its Restricted Subsidiaries;

    (ii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded;

    (iii) the cumulative effect of a change in accounting principles shall be excluded; and

5

    (iv) any net income (loss) of any Restricted Subsidiary of such Person if such Restricted Subsidiary of such Person is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to such Person that violate Section 4.05 (without giving effect to clause (6) thereof with respect to any Indebtedness) shall be excluded, except that (A) such Person's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of Cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or otherwise (subject, in the case of a dividend or distribution that could have been made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income.

    Notwithstanding the foregoing, for the purposes of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets or other amounts from or in respect of Unrestricted Subsidiaries to such Person or a Restricted Subsidiary of such Person to the extent such dividends, repayments or transfers or other amounts increase the amount of Restricted Payments permitted pursuant to Section 4.04(a)(2)(F).

    "Credit Agreement" means (a) the Credit Agreement, dated as of the Subordinated Notes Closing Date, among the Company, the banks and other financial institutions named therein and The Chase Manhattan Bank, as Administrative Agent, and (b) each note, guaranty, mortgage, pledge agreement, security agreement, indemnity, subrogation and contribution agreement, and other instruments and documents from time to time entered into pursuant to or in respect of either such credit agreement or any such guaranty, as each such credit agreement and other documents may be amended, restated, supplemented, extended, renewed, increased, replaced, substituted, refunded, refinanced or otherwise modified from time to time, in whole or in part.

    "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.

    "Deposit Account" means a demand, savings, passbook, money market or like account with or sponsored by a commercial bank, financial institution, investment bank or brokerage firm, savings and loan association or like organization or a government securities dealer, other than an account evidenced by a negotiable certificate of deposit.

    "Disinterested Director" means, with respect to any specific transaction, any director of the Company that does not have a direct or indirect interest (other than any interest resulting solely from such director's ownership of Equity Interests in the Company) in such transaction.

    "Domestic Subsidiary" means a Restricted Subsidiary of the Company incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.

    "Equity Interests" means (a) Capital Stock, warrants, options or similar instruments or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock), and (b) limited and general partnership interests, interests in limited liability companies, joint venture interests and other ownership interests in any Person.

    "Equity Offering" means an underwritten primary public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act or a private primary offering of common stock of the Company.

6

    "ESOP" means the Employee Stock Ownership Plan of the Company as established on September 1, 1988, and effective as of January 1, 1988, as from time to time amended, and/or the trust created in accordance with such plan pursuant to the Trust Agreement between the Company and the trustee named therein, executed as of September 1, 1988, as amended, as the context in which the term "ESOP" is used permits.

    "Exchange Act" means the Securities Exchange Act of 1934, as amended.

    "Foreign Subsidiary" means a Restricted Subsidiary of the Company that is not a Domestic Subsidiary.

    "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, as in effect on the Closing Date.

    "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by arrangements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.

    "Healthcare Service Business" means a business, the majority of whose revenues are derived from providing or arranging to provide or administering, managing or monitoring healthcare services or any business or activity that is reasonably similar thereto or a reasonable extension, development or expansion thereof or ancillary thereto.

    "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange or interest rates.

    "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Registrar's books.

    "Incur" means to create, issue, assume, guarantee, incur or otherwise become directly or indirectly liable with respect to any Indebtedness. The term "Incurrence" when used as a noun shall have a correlative meaning.

    "Indebtedness" of any Person means, without duplication at the date of determination thereof:

    (i)  the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money (including in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments) or for the deferred purchase price of property or services (other than (a) trade payables on terms of 365 days or less incurred in the ordinary course of business and (b) deferred earn-out and other performance-based payment obligations incurred in connection with acquisitions of Healthcare Service Businesses), all as determined in accordance with GAAP;

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    (ii) all Capital Lease Obligations and Attributable Debt of such Person;

    (iii) all Guarantees of such Person in respect of Indebtedness of others;

    (iv) the aggregate amount of all unreimbursed drawings in respect of letters of credit or other similar instruments issued for the account of such Person (less the amount of Cash, Cash Equivalents or Investment Grade Securities on deposit securing reimbursement obligations in respect of such letters of credit or similar instruments);

    (v) all indebtedness, obligations or other liabilities of such Person or of others for borrowed money secured by a Lien on any property of such Person, whether or not such indebtedness, obligations or liabilities are assumed by such Person;

    (vi) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Redeemable Stock and, with respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any accrued dividends); and

    (vii) to the extent not otherwise included in this definition actual (rather than notional) liabilities under Hedging Obligations of such Person;

provided, however, that all or any portion of Indebtedness that becomes the subject of a defeasance (whether a "legal" defeasance or a "covenant" or "in substance" defeasance) shall, at all times that such defeasance remains in effect, cease to be treated as Indebtedness for purposes of this Indenture.

    "Indenture" means this Indenture as amended or supplemented from time to time.

    "Insurance Subsidiary" means, with respect to the Company, (a) so long as they are Restricted Subsidiaries of the Company, Golden Isle Assurance Company and Plymouth Insurance Company, Ltd., each a corporation organized under the laws of Bermuda, and their respective successors and assigns, and (b) any other Restricted Subsidiaries of the Company that are authorized or admitted to carry on or transact one or more aspects of the business of selling, issuing or underwriting insurance in any jurisdiction and are regulated by the insurance departments or similar regulatory authorities of such jurisdiction or of the jurisdictions where they are domiciled or primarily doing business.

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    "Investment" means, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of cash or property (other than Equity Interests in the Company) to others or payments for property or services for the account or use of others, or otherwise) to any other Person, or any direct or indirect purchase or other acquisition by such Person of a beneficial interest in capital stock, bonds, notes, debentures or other securities issued by any other Person, or any Guarantee by such Person of the Indebtedness of any other Person (in which case such Guarantee shall be deemed an Investment in such other Person in an amount equal to the aggregate amount of Indebtedness so guaranteed). For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in the case of property with a fair market value of up to $15 million, as determined in good faith by a responsible financial officer of the Company, and in the case of property with a fair market value in excess of $15 million, as determined in good faith by the Board of Directors.

    "Investment Grade Securities" means: (i) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents), (ii) debt securities or debt instruments with a rating of BBB- or higher by S&P, Baa3 or higher by Moody's or Class (2) or higher by NAIC or the equivalent of such rating by such rating organization, or, if no rating of S&P, Moody's or NAIC then exists, the equivalent of such rating by any other nationally recognized securities rating agency, but excluding any debt securities or instruments constituting loans or advances among the Company and its Subsidiaries, and (iii) investments in any fund that invests exclusively in investments of the type described in clauses (i) and (ii) which fund may also hold immaterial amounts of Cash or Cash Equivalents pending investment and/or distribution.

    "Issue Date" means the date on which the Initial Securities are originally issued.

    "Lien" means any mortgage, pledge, security interest, charge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), or security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement, other than notice or precautionary filings not perfecting a security interest, under the Uniform Commercial Code or comparable law of any jurisdiction, domestic or foreign, in respect of any of the foregoing).

    "Material Asset Sale" means any Asset Sale exceeding $25 million of all or substantially all of an operating unit of a business.

    "NAIC" means National Association of Insurance Commissioners.

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    "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of Cash or Cash Equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not the interest, component thereof) when received in the form of Cash or Cash Equivalents (except to the extent such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary of the Company), casualty loss insurance proceeds, condemnation awards and proceeds from the conversion of other property received when converted to Cash or Cash Equivalents, net of: (i) brokerage commissions and other fees and expenses related to such Asset Sale, (ii) provision for all taxes as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either, (A) in the case of a sale of all of the Equity Interests in any Restricted Subsidiary, is a direct obligation of such Restricted Subsidiary or (B) is secured by the asset subject to such sale or was incurred to finance the acquisition or construction of, improvements on, or operations related to, the assets subject to such sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary of the Company as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP.

    "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, excluding, however, any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with any Asset Sale (including, without limitation, dispositions pursuant to Sale/Leaseback Transactions) not in the ordinary course of business, and excluding any extraordinary, unusual, non-recurring or similar type of gain or loss, together with any related provision for taxes.

    "Non-Recourse Indebtedness" shall mean any Indebtedness of the Company or any of its Restricted Subsidiaries if the holder of such Indebtedness has no recourse, direct or indirect, absolute or contingent, to the general assets of the Company or any of its Restricted Subsidiaries.

    "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company.

    "Officers' Certificate" means a certificate signed by two Officers.

    "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

    "Permitted Asset Swap" means any one or more transactions in which the Company or any of its Restricted Subsidiaries exchanges assets for consideration consisting of Equity Interests in or assets of a Person engaged in a Healthcare Service Business, or assets of a Person the Company or any of its Restricted Subsidiaries intends to use in a Healthcare Service Business, and, to the extent necessary to equalize the value of the assets being exchanged, cash; provided that cash does not exceed 30% of the sum of the amount of the cash and the fair market value of the Equity Interests or assets received or given by the Company and its Restricted Subsidiaries in such transaction.

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    "Permitted Investments" means (a) any Investment in the Company, any Restricted Subsidiary or any Permitted Joint Venture of the Company or of a Restricted Subsidiary that in each case is a Healthcare Service Business; (b) any Investment in Cash and Cash Equivalents or Investment Grade Securities; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person that is engaged in the Healthcare Service Business if as a result of such Investment (i) such Person becomes a Restricted Subsidiary or a Permitted Joint Venture of the Company or of a Restricted Subsidiary or (ii) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary or a Permitted Joint Venture of the Company or of a Restricted Subsidiary; (d) any Investment in securities or other assets not constituting Cash or Cash Equivalents and received in connection with an Asset Sale made pursuant to Section 4.06 or any other disposition of assets not constituting an Asset Sale; (e) any Investment existing on the Closing Date; (f) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with Section 4.07(b)(ii); (g) any Investment in Healthcare Service Businesses having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (g) that are at that time outstanding (and not including any Investments outstanding on the Subordinated Notes Closing Date), not to exceed 5% of Total Assets of the Company at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (h) any Investment by Restricted Subsidiaries in other Restricted Subsidiaries and Investments by Subsidiaries of the Company that are not Restricted Subsidiaries in Subsidiaries of the Company that are not Restricted Subsidiaries; (i) advances to employees in the ordinary course of business not in excess of $7.5 million outstanding at any one time; (j) any Investment acquired by the Company or any of its Restricted Subsidiaries (i) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (ii) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (k) Hedging Obligations; (l) Investments the payment for which consists exclusively of Equity Interests (other than Redeemable Stock) of the Company; (m) Investments made in connection with Permitted Asset Swaps; and (n) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (n) that are at that time outstanding, not to exceed $30 million at the time of such Investment (with fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value).

    "Permitted Joint Venture" means, with respect to any Person: (i) any corporation, association, limited liability company or other business entity (other than a partnership) (A) of which 50% or more of the total voting power of shares of Capital Stock or other Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the Restricted Subsidiaries of that Person or a combination thereof and (B) which is either managed or controlled by such Person or any of its Restricted Subsidiaries and (ii) any partnership of which (x) 50% or more of the general or limited partnership interests are owned or controlled, directly or indirectly, by such Person or one or more of the Restricted Subsidiaries of that Person or a combination thereof and (y) which is either managed or controlled by such Person or any of its Restricted Subsidiaries, and which in the case of each of clauses (i) and (ii) is engaged in a Healthcare Service Business.

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    "Permitted Liens" means, with respect to the Company or any Restricted Subsidiary: (i) Liens on property or assets of the Company and its Restricted Subsidiaries existing on the Closing Date (excluding Liens permitted by clause (ii) hereof); (ii) any Lien created pursuant to any loan document under the Credit Agreement and Liens to secure any other Indebtedness permitted pursuant to clauses (i) and (xi) of Section 4.03(b) (to the extent incurred under the Credit Agreement), and with respect to both such clauses (i) and (xi) of Section 4.03(b) replacements, refinancings, refundings, and substitute facility or facilities thereof, in whole or in part, and additional facility or facilities); (iii) any Lien existing on any property or asset prior to the acquisition thereof by the Company or any of its Subsidiaries (including any acquisition by means of a merger or consolidation with or into the Company or any of its Subsidiaries), provided that (A) such Lien is not created in contemplation of or in connection with such acquisition and (B) such Lien does not apply or extend to any other property or assets of the Company or any of its Subsidiaries (other than assets and property affixed or appurtenant thereto); (iv) Liens for taxes not yet due or which are being contested in good faith or Liens for unpaid local or state taxes that are not in the aggregate material; (v) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not in the aggregate material; (vi) pledges and deposits made in the ordinary course of business in compliance with workmen's compensation, unemployment insurance or other social security laws or regulations; (vii) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (viii) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company and its Restricted Subsidiaries taken as a whole; (ix) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Company or any of its Restricted Subsidiaries, provided that (A) such security interests secure Indebtedness permitted by Section 4.03, (B) such security interests and the Indebtedness secured thereby is created within 270 days after such acquisition (or construction), (C) the Indebtedness secured thereby does not exceed the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and (D) such security interests do not apply to any other property or assets of the Company or any of its Subsidiaries; (x) Liens securing Indebtedness or other obligations of a Subsidiary of the Company owing to the Company or a Subsidiary of the Company; (xi) any Lien incurred in connection with any Indebtedness permitted to be incurred pursuant to Section 4.03(b)(vii); (xii) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (i), (iii), (ix) and (xi); provided, however, that: (A) such new Lien shall be limited to all or part of the same property that secured the prior Lien (plus improvements or additions to or on such property) at the time of such Refinancing and (B) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of: (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness secured by Liens described under clauses (i), (iii), (ix) or (xi) at the time the prior Lien became a Permitted Lien under this Indenture and (y) an amount necessary to pay any fees and expenses, including premiums, related to such Refinancings; (xiii) bankers' liens and Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business consistent with past practices in connection with title insurance, purchase agreements, judgment liens (if released, bonded or stayed within 60 days) and leases and subleases; (xiv) prejudgment liens in respect of property of a Foreign Subsidiary of the Company that are incurred in connection with a claim or action against such Foreign Subsidiary before a court or tribunal outside of the United States, provided that such liens do not, individually or in the aggregate, have a material adverse effect on the business, assets, operations, prospects or condition, financial or otherwise, of the Company and its Restricted Subsidiaries taken as a whole; (xv) Liens on the assets of the Insurance Subsidiaries securing self insurance and reinsurance obligations and letters of credit or bonds issued in support of such self insurance and reinsurance obligations, provided that the assets subject to such Liens shall only be assets of the Insurance Subsidiaries; (xvi) Liens securing Hedging Obligations so long as such Hedging Obligations relate to Indebtedness that is, and is permitted under the Indenture to be, secured; (xvii) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the request of and for the account of the Company or any of its Restricted Subsidiaries in the ordinary course of its business; (xviii) Liens not otherwise permitted by the foregoing clauses (i) through (xvii) securing any Indebtedness or other obligations, provided that the aggregate principal amount of such Indebtedness and other obligations secured by Liens permitted by this clause (xviii) shall not exceed $35 million at any time outstanding.

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    "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, limited liability company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.

    "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

    "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security that is due or overdue at the relevant time.

    "Prior Purchase Money Obligations" means purchase money obligations relating to property acquired by the Company or any of its Restricted Subsidiaries in the ordinary course of business that existed prior to the acquisition of such property by the Company or any of its Restricted Subsidiaries and that impose restrictions of the nature described in Section 4.05 on the property so acquired.

    "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), or upon the happening of any event: (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Redeemable Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to four months after the stated maturity of the Securities.

    "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, replace, substitute, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, in whole or in part, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings.

    "Restricted Subsidiary" means each of the Subsidiaries of the Company that has not been designated an Unrestricted Subsidiary.

    "Rights Plan" means the Company's Share Purchase Rights Plan, dated July 21, 1992, as amended, restated, supplemented or otherwise modified from time to time.

    "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person, other than leases between the Company and a Wholly-owned Subsidiary or between Wholly-owned Subsidiaries.

    "SEC" means the Securities and Exchange Commission.

    "Secured Indebtedness" means any Indebtedness secured by a Lien.

    "Securities Act" means the Securities Act of 1933, as amended.

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    "Senior Indebtedness" means the principal of and premium, if any, and interest on (such interest on Senior Indebtedness, wherever referred to in this Indenture, is deemed to include interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in any document evidencing the Senior Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such bankruptcy law) and other amounts (including, but not limited to, fees, expenses, reimbursement obligations in respect of letters of credit and indemnities) due or payable from time to time on or in connection with any Indebtedness of the Company unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall be junior in right of payment to the Securities. Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness shall not include (a) any Indebtedness or obligation that is contractually subordinated in right of payment to any other Indebtedness or obligation of the Company, (b) any obligations with respect to any Capital Stock, (c) any Indebtedness Incurred in violation of this Indenture, except where at the time of such Incurrence, a responsible financial officer of the Company has delivered a certification as to its compliance at such time with Section 4.03(a), and the holder of such Indebtedness or its trustee, agent or representative is not aware of facts or circumstances such that such Person could not rely in good faith on such certification, (d) any obligation of the Company to any Subsidiary, (e) any liability for Federal, state, local or other taxes owed or owing by the Company or (f) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities).

    "Stated Maturity" means, with respect to any Indebtedness, the date or dates specified in such Indebtedness as the fixed date or dates on which the payment of principal of such Indebtedness is due and payable, including pursuant to any mandatory redemption provision, it being understood that if an issue of Indebtedness has more than one fixed date on which the payment of principal is due and payable, each such fixed date shall be a separate Stated Maturity with respect to the principal amount of Indebtedness due on such date.

    "Subordinated Notes" means the Company's 9% Senior Subordinated Notes due 2008 issued under the Subordinated Notes Indenture and any of the Company's 9% Series A Senior Subordinated Notes due 2008 exchanged therefor.

    "Subordinated Notes Closing Date" means the date of issuance of the Subordinated Notes, February 12, 1998.

    "Subordinated Notes Indenture" means the Indenture dated as of the Subordinated Notes Closing Date, between the Company and Marine Midland Bank (now known as HSBC Bank USA), as trustee, as amended, under which the Subordinated Notes were issued.

    "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter incurred, assumed or Guaranteed) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement, including the Subordinated Notes.

    "Subsidiary" means with respect to any Person, (i) any corporation, association, limited liability company or other business entity (other than a partnership) of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, (ii) any partnership of which more than 50% of the general or limited partnership interests are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof and (iii) any Permitted Joint Venture of such Person.

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    "Total Assets" means, with respect to any Person, the total consolidated assets of such Person and its Restricted Subsidiaries, as shown on the most recent balance sheet of such Person.

    "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of this Indenture.

    "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

    "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

    "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time.

    "Unrestricted Subsidiary" means: (i) any Subsidiary of the Company which at the time of determination is an Unrestricted Subsidiary (as designated by the Board of Directors of the Company, as provided below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company (including any Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Equity Interests or Indebtedness (other than any Indebtedness incurred in connection with services performed in the ordinary course of business by such Subsidiary for the Company or any of its Restricted Subsidiaries) of, or owns, or holds any Lien on, any property of, the Company or any Restricted Subsidiary of the Company, provided that (a) any Unrestricted Subsidiary must be an entity of which shares of the Capital Stock or other Equity Interests (including partnership interests) entitled to cast at least a majority of the votes that may be cast by all shares or Equity Interests having ordinary voting power for the election of directors or other governing body are owned, directly or indirectly, by the Company, (b) such designation complies with Section 4.04 and (c) each of (I) the Subsidiary to be designated and (II) its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions.

    "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option.

    "Voting Stock" means, with respect to any Person, any class or series of Capital Stock of such Person that is ordinarily entitled to vote in the election of directors thereof at a meeting of stockholders called for such purpose, without the occurrence of any additional event or contingency.

    "Wholly-owned Subsidiary" of any Person means any Restricted Subsidiary of such Person of which 95% or more of the outstanding Equity Interests of such Restricted Subsidiary are owned by such Person (either directly or indirectly through Wholly-owned Subsidiaries).

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    SECTION 1.02.  Other Definitions.

Term	Defined in Section
"Acceleration Notice"	6.02
"Affiliate Transaction"	4.07(a)
"Bankruptcy Law"	6.01
"Change of Control Offer"	4.08(a)
"Change of Control Payment Date"	4.08(b)
"covenant defeasance option"	8.01(b)
"Custodian"	6.01
"Event of Default"	6.01
"Excess Proceeds"	4.06(a)
"Excess Proceeds Offer"	4.06(a)
"Excess Proceeds Offer Payment Date"	4.06(b)
"Excess Proceeds Purchase Price"	4.06(a)
"legal defeasance option"	8.01(b)
"Legal Holiday"	10.08
"Paying Agent"	2.03
"protected purchaser"	2.07
"Refinancing Indebtedness"	4.03(b)
"Registrar"	2.03
"Restricted Payments"	4.04(a)
"Successor Company"	5.01(a)

    SECTION 1.03.  Incorporation by Reference of Trust Indenture Act.  This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

    "Commission" means the SEC.

    "indenture securities" means the Securities.

    "indenture security holder" means a Holder or Securityholder.

    "indenture to be qualified" means this Indenture.

    "indenture trustee" or "institutional trustee" means the Trustee.

    "obligor" on the indenture securities means the Company and any other obligor on the indenture securities.

    All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

    SECTION 1.04.  Rules of Construction.  Unless the context otherwise requires:

    (1) a term has the meaning assigned to it;

    (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

    (3) "or" is not exclusive;

    (4) "including" means including without limitation;

    (5) words in the singular include the plural and words in the plural include the singular;

    (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

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    (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;

    (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater.

ARTICLE 2

The Securities

    SECTION 2.01.  Form and Dating.  Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The (i) Initial Securities and the Trustee's certificate of authentication and (ii) Private Exchange Securities and the Trustee's certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement shall be in a form acceptable to the Company). Each Security shall be dated the date of its authentication.

    SECTION 2.02.  Execution and Authentication.  One or more Officers shall sign the Securities for the Company by manual or facsimile signature.

    If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

    A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

    The Trustee shall authenticate and make available for delivery Securities as set forth in the Appendix.

    The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

    SECTION 2.03.  Registrar and Paying Agent.  The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent, and the term "Registrar" includes any co-registrars. The Company initially appoints the Trustee as (i) Registrar and Paying Agent in connection with the Securities, and (ii) the Securities Custodian (as defined in the Appendix) with respect to the Global Securities (as defined in the Appendix).

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    The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically organized Wholly-owned Subsidiaries may act as Paying Agent or Registrar.

    The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (1) above. The Registrar or Paying Agent may resign at any time upon written notice; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08.

    SECTION 2.04.  Paying Agent To Hold Money in Trust.  Prior to 11:00 a.m. on each due date of the principal of and interest and liquidated damages (if any) on any Security, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest and liquidated damages (if any) on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

    SECTION 2.05.  Securityholder Lists.  The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

    SECTION 2.06.  Transfer and Exchange.  The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(a)(l) of the Uniform Commercial Code are met. When Securities are presented to the Registrar with a request to exchange them for an equal aggregate principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by this Indenture.

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    The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed.

    Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent or the Registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

    Any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by (i) the Holder of such Global Security (or its agent) or (ii) any Holder of a beneficial interest in such Global Security, and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry.

    All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

    SECTION 2.07.  Replacement Securities.  If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Holder (i) notifies the Company or the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar has not registered a transfer prior to receiving such notification, (ii) makes such request to the Company or the Trustee prior to the Security being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (iii) satisfies any other reasonable requirements of the Trustee and the Company including, without limitation, the requirements of Section 8-405 of the Uniform Commercial Code. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the reasonable judgment of the Trustee and the Company to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof.

    Every replacement Security is an additional obligation of the Company.

    The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities.

    SECTION 2.08.  Outstanding Securities.  Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

    If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser.

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    If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal, interest and liquidated damages, if any, payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

    SECTION 2.09.  Temporary Securities.  In the event that Definitive Securities (as defined in the Appendix) are to be issued under the terms of this Indenture, until such Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Company, without charge to the Holder.

    SECTION 2.10.  Cancelation.  The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancelation and shall dispose of canceled Securities in accordance with its customary procedures or deliver canceled Securities to the Company pursuant to written direction by an Officer. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture.

    SECTION 2.11.  Defaulted Interest.  If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the Persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

    SECTION 2.12.  CUSIP Numbers.  The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

ARTICLE 3

Redemption

    SECTION 3.01.  Notices to Trustee.  If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur.

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    The Company shall give each notice to the Trustee provided for in this Section at least 35 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not fewer than 15 days after the date of notice to the Trustee. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

    SECTION 3.02.  Selection of Securities To Be Redeemed.  If less than all of the Securities are to be redeemed at any time, selection of the Securities for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed or, if the Securities are not listed on a national securities exchange, on a pro rata basis. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.

    SECTION 3.03.  Notice of Redemption.  At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address.

    The notice shall identify the Securities to be redeemed and shall state:

    (1) the redemption date;

    (2) the redemption price;

    (3) the name and address of the Paying Agent;

    (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;

    (5) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed;

    (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date;

    (7) the paragraph of the Securities pursuant to which the Securities called for redemption are being redeemed;

    (8) the CUSIP number, if any, printed on the Securities being redeemed; and

    (9) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities.

    At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section.

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    SECTION 3.04.  Effect of Notice of Redemption.  Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest and liquidated damages, if any, to the redemption date; provided, however, that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest and liquidated damages, if any, shall be payable to the Securityholder of the redeemed Securities registered on the relevant record date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

    SECTION 3.05.  Deposit of Redemption Price.  Prior to 11:00 a.m. on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest and liquidated damages, if any, on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancelation. On and after the redemption date, interest shall cease to accrue on Securities or portions thereof called for redemption so long as the Company has deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on the Securities to be redeemed.

    SECTION 3.06.  Securities Redeemed in Part.  Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered.

ARTICLE 4

Covenants

    SECTION 4.01.  Payment of Securities.  The Company shall promptly pay the principal of and interest and liquidated damages, if any, on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, interest and liquidated damages, if any, shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture.

    The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

    SECTION 4.02.  Provisions of Reports and Other Information.  At all times while any Security is outstanding, the Company shall timely file with the SEC and provide a copy to the Trustee and to each Securityholder all such reports and other information as required by Section 13 or 15(d) of the Exchange Act, including, without limitation, Forms 10-K, 10-Q and 8-K. At such time as the Company is not subject to the reporting requirements of the Exchange Act, promptly after the same would be required to be filed with the SEC if the Company then were subject to Section 13 or 15(d) of the Exchange Act, the Company shall file with the Trustee and supply to each Holder and, upon request, to any prospective purchaser of Securities, without cost, copies of its financial statements and certain other reports or information comparable to that which the Company would have been required to report pursuant to Sections 13 and 15(d) of the Exchange Act, including, without limitation, the information that would be required by Forms 10-K, 10-Q and 8-K. The Company also shall comply with the other provisions of TIA § 314(a).

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    SECTION 4.03.  Limitation on Additional Indebtedness.  (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to create or Incur any Indebtedness; provided, however, the Company may Incur Indebtedness if, after giving pro forma effect to the Incurrence of such Indebtedness and the application of any of the proceeds therefrom to repay Indebtedness, the Consolidated Cash Interest Coverage Ratio of the Company for the four most recent consecutive fiscal quarters for which financial statements are available prior to the date such additional Indebtedness is Incurred shall be at least 2.25 to 1.00x. Any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary of the Company (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary of the Company.

    (b) Notwithstanding Section 4.03(a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness:

    (i)  Indebtedness (including Guarantees) under the Credit Agreement and any replacements, refundings, refinancings and substitute facility or facilities thereof, in whole or in part, and additional facility or facilities; provided such Indebtedness shall not at any time exceed $700 million in aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued under the Credit Agreement and any such replacements, refundings, refinancings, and substitute and additional facility or facilities));

    (ii) Indebtedness of the Company and its Restricted Subsidiaries, which Indebtedness was in existence on the Subordinated Notes Closing Date (excluding Indebtedness permitted by clause (i) above) and Indebtedness Incurred under Section 4.03(a) of the Subordinated Notes Indenture prior to the Closing Date;

    (iii) Indebtedness represented by the Subordinated Notes and the Securities;

    (iv) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(iv) of the Subordinated Notes Indenture and (B) Indebtedness of the Company and its Restricted Subsidiaries Incurred in exchange for, or the proceeds of which are used to Refinance, in whole or in part, Indebtedness (subject to the following proviso, "Refinancing Indebtedness") permitted by clauses (ii) and (iii) of this Section 4.03(b); provided, however, that: (A) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness (including unused commitments) so Refinanced (plus costs of issuance), (B) such Refinancing Indebtedness ranks, relative to the Securities, no more senior than the Indebtedness being Refinanced thereby, (C) such Refinancing Indebtedness bears interest at a market rate, (D) such Refinancing Indebtedness: (1) shall have an Average Life equal to or greater than the Average Life of the Indebtedness being Refinanced and (2) shall not have a Stated Maturity prior to the Stated Maturity of the Indebtedness being Refinanced, (E) such Refinancing Indebtedness shall not include: (x) Indebtedness of a Restricted Subsidiary (other than Refinancing Indebtedness the proceeds of which are used to Refinance Indebtedness that was Guaranteed by such Restricted Subsidiary) that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary;

    (v) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(v) of the Subordinated Notes Indenture and (B) Indebtedness of the Company or any Restricted Subsidiary to any Restricted Subsidiary or to the Company; provided, however, that, with respect to clauses (A) and (B), any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof;

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    (vi) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(vi) of the Subordinated Notes Indenture and (B) Indebtedness arising from Guarantees, letters of credit, and bid, performance or surety bonds or similar bonds or instruments securing any obligations of the Company or any Restricted Subsidiary Incurred in the ordinary course of business, which Guarantees, letters of credit, bonds or similar instruments do not secure other Indebtedness;

    (vii) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(vii) of the Subordinated Notes Indenture, (B) Indebtedness (including Capital Lease Obligations) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) (whether through the direct purchase, lease or improvement of assets or purchase of the Equity Interests of any Person owning such assets), and (C) Attributable Debt of the Company or any of its Restricted Subsidiaries; provided that the aggregate principal amount of Indebtedness outstanding under clauses (A), (B) and (C) does not exceed 5% of Total Assets of the Company at the time of any Incurrence thereof (including any Refinancing Indebtedness with respect thereto);

    (viii)(A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(viii) of the Subordinated Notes Indenture and (B) Non-Recourse Indebtedness Incurred in connection with the acquisition of real and/or personal property by the Company or its Restricted Subsidiaries; provided that such Indebtedness was in existence prior to the time of such acquisition and was not Incurred by the Person from whom such property was acquired in contemplation of such acquisition or in order to provide all or any portion of the funds or credit support utilized to consummate such acquisition;

    (ix) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(ix) of the Subordinated Notes Indenture and (B) Guarantees of any Indebtedness of a Restricted Subsidiary otherwise permitted under this Section 4.03;

    (x) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(x) of the Subordinated Notes Indenture and (B) Indebtedness under Hedging Obligations entered into for bona fide hedging purposes of the Company and not for speculative purposes; provided, however, that such Hedging Obligations do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates, as applicable, or by reason of fees, indemnities and compensation payable thereunder; and

    (xi) (A) Indebtedness Incurred after the Subordinated Notes Closing Date and prior to the Closing Date pursuant to Section 4.03(b)(xi) of the Subordinated Notes Indenture and (B) Indebtedness other than that permitted pursuant to clauses (i) through (x) of this Section 4.03(b) provided that the aggregate outstanding amount of the Indebtedness permitted pursuant to clauses (A) and (B) does not at any time exceed $50 million, all or any portion of which Indebtedness, notwithstanding clause (i) above, may be Incurred pursuant to the Credit Agreement and any replacements, refinancings, refundings, and substitute facility or facilities thereof, in whole or in part, and additional facility or facilities, including any Guarantees given under such Indebtedness Incurred pursuant to the Credit Agreement and any replacements, refinancings, refundings, and substitute facility or facilities thereof, in whole or in part, and additional facility or facilities.

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    SECTION 4.04.  Limitation on Restricted Payments.  (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to: (i) declare or pay any dividend or make any distribution on or in respect of the Company's or any of its Restricted Subsidiaries' Capital Stock or other Equity Interests, including any such payment in connection with any merger or consolidation (other than dividends or distributions payable to the Company or any of its Restricted Subsidiaries or payable in shares of Capital Stock or other Equity Interests of the Company other than Redeemable Stock); (ii) purchase, repurchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any of its Subsidiaries from any Person (other than from the Company or any of its Restricted Subsidiaries); (iii) purchase, repurchase, redeem, prepay, defease or otherwise acquire or retire for value (A) any Subordinated Obligations prior to scheduled maturity, repayment or sinking fund payment or (B) any Indebtedness of any Unrestricted Subsidiary; or (iv) make any Investment other than a Permitted Investment (the foregoing actions set forth in clauses (i) through (iv) being referred to as "Restricted Payments"), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:

    (1) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof; or

    (2) such Restricted Payment (the amount so expended, if other than in cash and if greater than $20 million, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors), together with the aggregate of all other Restricted Payments made on or after the Subordinated Notes Closing Date, exceeds the sum of:

    (A) $15 million;

    (B) 50% of the Consolidated Net Income of the Company accrued on a cumulative basis for the period beginning on the first day of the first month following the Subordinated Notes Closing Date and ending on the last day of the last month immediately preceding the month in which such Restricted Payment occurs (or, if aggregate cumulative Consolidated Net Income for such period is a deficit, minus 100% of such deficit);

    (C) 100% of the aggregate net cash proceeds received by the Company after the Subordinated Notes Closing Date from the issuance or sale of Capital Stock or other Equity Interests of the Company (other than such Capital Stock or other Equity Interests issued or sold to a Subsidiary of the Company or an employee stock ownership plan or similar trust established by the Company or any of its Subsidiaries and other than Redeemable Stock);

    (D) the aggregate net cash proceeds received on or after the Subordinated Notes Closing Date by the Company from the issuance or sale of debt securities of the Company that have subsequently been converted into or exchanged for Capital Stock or other Equity Interests of the Company (other than Redeemable Stock) plus the aggregate net cash proceeds received by the Company at the time of such conversion or exchange less the amount of any cash or other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange;

    (E) 100% of the aggregate net cash proceeds received by the Company after the Subordinated Notes Closing Date upon the exercise of options, warrants or similar instruments or rights (whether issued prior to or after the Subordinated Notes Closing Date) to purchase the Company's Capital Stock (other than Redeemable Stock); and

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    (F) 100% of the aggregate net cash proceeds received by the Company or any Restricted Subsidiary after the Subordinated Notes Closing Date from (i) the sale or other disposition of Investments (other than Permitted Investments) made by the Company and its Restricted Subsidiaries in an Unrestricted Subsidiary or (ii) a dividend from, or the sale of the stock of, an Unrestricted Subsidiary; or

    (3) the Company would not be permitted to Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a).

    (b) The provisions of Section 4.04(a) shall not prohibit:

    (i)  so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture;

    (ii) to the extent required under applicable law, rule, order or regulation or if the failure to do so would create a material risk of disqualification of the ESOP under the Internal Revenue Code, the acquisition by the Company of its common stock from the ESOP or from participants and beneficiaries of the ESOP;

    (iii) the acquisition or retirement of Capital Stock of the Company held by any future, present or former employee, director or consultant of the Company or any Subsidiary of the Company pursuant to any management or employee equity, stock option or other benefit plan or any other agreement in an amount not to exceed $5 million in any fiscal year;

    (iv) the acquisition by the Company or any of its Restricted Subsidiaries of Equity Interests of the Company or such Restricted Subsidiary, if the exclusive consideration for such acquisition is the issuance by the Company or such Restricted Subsidiary of its Equity Interests (other than Redeemable Stock);

    (v) the purchase, redemption or acquisition by the Company of rights under the Rights Plan prior to such time as such rights have become exercisable not to exceed $2 million in the aggregate since the Subordinated Notes Closing Date;

    (vi) the redemption, repurchase, acquisition or retirement of Indebtedness of the Company or its Restricted Subsidiaries being concurrently Refinanced by Refinancing Indebtedness permitted under Section 4.03;

    (vii) the purchase, repayment, redemption, prepayment, defeasance, acquisition or retirement of any Indebtedness, if the exclusive consideration therefor is the issuance by the Company of its Equity Interests (other than Redeemable Stock);

    (viii) the redemption, repurchase, acquisition or retirement of Equity Interests in a Permitted Joint Venture of the Company or of a Restricted Subsidiary, provided that (A) if the Company or any of its Restricted Subsidiaries incurs Indebtedness in connection with such redemption, repurchase, acquisition or retirement, after giving effect to such incurrence and such redemption, repurchase, acquisition or retirement, the Company could Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a) and (B) no Default or Event of Default has occurred and is continuing or would result therefrom;

    (ix) dividend payments to the holders of interests in Permitted Joint Ventures of the Company or of a Restricted Subsidiary, ratably in accordance with their respective Equity Interests or, if not ratably, then in accordance with the priorities set forth in the respective organizational documents for, and agreements among holders of Equity Interests in, such Permitted Joint Ventures;

    (x) the acquisition or retirement of options, warrants and similar instruments and rights upon the exercise thereof;

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    (xi) any purchase, redemption or other acquisition of Equity Interests of a Healthcare Service Business which is required by applicable law, regulation, rule, order, approval, license, permit or similar restriction (in each case issued by a governmental authority) to be purchased, redeemed or otherwise acquired by the Company or one of its Restricted Subsidiaries;

    (xii) the acquisition or retirement for value of any Equity Interests of the Company, or the making of any Investments in any Subsidiaries or joint ventures of the Company which previously constituted a part of the Company's provider and healthcare franchising segment, consisting of loans, advances or other extensions of credit, in any case as acquired, retired or made as part of the consideration for the sale by the Company of Equity Interests in any such Subsidiaries or joint ventures and related transactions, where the aggregate value of such Equity Interests of the Company and the aggregate amount of such Investments made after the Subordinated Notes Closing Date do not collectively exceed a total of $40 million; or

    (xiii) other Restricted Payments (excluding Investments that were Restricted Payments when made but are no longer outstanding at the time of determination of Restricted Payments permitted by this clause (xiii), but not excluding Investments made in accordance with this clause (xiii) that are subsequently sold or otherwise disposed of, to the extent such sale or other disposition increases the amount of Restricted Payments permitted to be made in accordance with Section 4.04(a)(2)(F)) made after the Subordinated Notes Closing Date in an aggregate amount not to exceed $25 million.

    (c) The Company shall deliver to the Trustee within 60 days after the end of each of the Company's first three fiscal quarters (and 120 days after the end of the Company's fiscal year) in which a Restricted Payment is made under Section 4.04(a), an Officers' Certificate setting forth each Restricted Payment made in such fiscal quarter, stating that each such Restricted Payment is permitted and setting forth the basis upon which the calculations required by Section 4.04 were computed, which calculations may be based on the Company's financial statements included in filings required under the Exchange Act for such quarter or such year. For purposes of calculating the aggregate amount of Restricted Payments that are permitted under Section 4.04(a)(2), the amounts expended for Restricted Payments permitted under clauses (ii) through (xiii) of Section 4.04(b) shall be excluded.

    SECTION 4.05.  Limitation on Payment Restrictions Affecting Restricted Subsidiaries.  The Company shall not, and shall not permit any of its Restricted Subsidiaries to, from and after the Closing Date, directly or indirectly, create or otherwise cause or permit to exist or become effective or enter into any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to: (i) pay dividends or make any other distributions on its Equity Interests, the Equity Interests of any of its Restricted Subsidiaries or on any other interest or participation in, or measured by, its profits, which interest or participation is owned by the Company or any of its Restricted Subsidiaries; (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (iii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iv) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries except, in each case, for such encumbrances or restrictions existing under or by reason of:

    (1) applicable law, regulation, rule, order, approval, license, permit or similar restriction, in each case issued by a governmental authority;

    (2) this Indenture and the Securities and the Subordinated Notes Indenture and the Subordinated Notes;

    (3) contractual encumbrances or restrictions in effect on the Subordinated Notes Closing Date, including, without limitation, pursuant to the Credit Agreement and any replacements, refundings, refinancings and substitute facility or facilities thereof, in whole or in part, and additional facility or facilities thereof and their related documentation;

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    (4) in the case of clause (iv) of this Section 4.05, by reason of customary non-assignment or subletting provisions in leases entered into in the ordinary course of business;

    (5) Prior Purchase Money Obligations;

    (6) Indebtedness or Capital Stock of Restricted Subsidiaries that have been or are acquired by or merged with or into the Company or any of its Restricted Subsidiaries after the Subordinated Notes Closing Date; provided that such Indebtedness or Capital Stock was or is in existence prior to the time of such acquisition or merger and was not incurred, assumed or issued by the Person so acquired or merged in contemplation of such acquisition or merger or to provide all or any portion of the funds or credit support utilized to consummate such acquisition or merger; provided further that such restrictions only apply to such Restricted Subsidiary and its Subsidiaries;

    (7) contracts for the sale of assets not otherwise prohibited by this Indenture, including without limitation customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

    (8) in the case of clause (iv) of this Section 4.05, Secured Indebtedness otherwise permitted to be Incurred pursuant to Section 4.03 and Section 4.11 that limits the right of the debtor to sell, lease, transfer or otherwise dispose of the assets securing such Indebtedness;

    (9) customary provisions contained in leases or other agreements entered into in the ordinary course of business or in Indebtedness permitted to be I4lurred pursuant to Section 4.03, in each case which do not limit the ability of any Restricted Subsidiary to take any of the actions described in clauses (i) through (iv) of this Section 4.05 with respect to a material amount of dividends, distributions, Indebtedness, loans, advances or sales, leases or transfers of properties or assets, as applicable;

    (10) provisions in joint venture agreements and other similar agreements in each case related to Permitted Joint Ventures of the Company or of a Restricted Subsidiary that are materially similar to customary provisions entered into by parties to joint ventures in the Healthcare Service Business at the time of such joint venture or similar agreement;

    (11) restrictions on cash or other deposits or net worth or similar type restrictions imposed by customers under contracts entered into in the ordinary course of business; and

    (12) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (11) of this Section 4.05, in whole or in part, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

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    SECTION 4.06.  Limitation on Use of Proceeds from Asset Sales.  (a) The Company and its Restricted Subsidiaries shall not, directly or indirectly, consummate any Asset Sale with or to any Person other than the Company or a Restricted Subsidiary, unless: (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale at least equal to the fair market value of the asset sold or otherwise disposed of, (ii) at least 70% of the net proceeds from such Asset Sale are received in Cash at closing (unless (A) such Asset Sale is a lease, or (B) such Asset Sale is in connection with the creation of, Investment in, or issuance or sale of Equity Interests by, a Permitted Joint Venture of the Company or of a Restricted Subsidiary or other Permitted Investment) and (iii) with respect to any Asset Sale involving the Equity Interest of any Restricted Subsidiary (unless such Restricted Subsidiary is, or as a result of such Asset Sale would be, a Permitted Joint Venture of the Company or of a Restricted Subsidiary or other Permitted Investment), the Company shall sell all of the Equity Interests of such Restricted Subsidiary it owns. Within 365 days after the receipt of Net Cash Proceeds in respect of any Asset Sale, the Company must use all such Net Cash Proceeds either to invest in properties and assets used in a Healthcare Service Business (including, without limitation, a capital investment in any Person which becomes a Restricted Subsidiary) or to reduce Bank Indebtedness or Indebtedness of a Restricted Subsidiary; provided that when any non-Cash proceeds are liquidated, such proceeds (to the extent they are Net Cash Proceeds) will be deemed to be Net Cash Proceeds at that time. When the aggregate amount of Excess Proceeds (as defined below) exceeds $20 million, the Company shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to repurchase the Securities at a purchase price equal to 100% of the principal amount of such Securities, plus accrued and unpaid interest to the date of purchase (the "Excess Proceeds Purchase Price"), in accordance with the terms contemplated in Section 4.06(b). If the Company is required to do so by the terms of any other Senior Indebtedness, the Excess Proceeds Offer may be made ratably to purchase the Securities and other Senior Indebtedness of the Company on the terms contemplated by such other Senior Indebtedness. To the extent that the aggregate principal amount of the Securities (plus accrued interest thereon) (and, if applicable, other Senior Indebtedness) tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Company may use such deficiency, or a portion thereof, for general corporate purposes. If the aggregate principal amount of the Securities surrendered by Holders thereof (and, if applicable, other Senior Indebtedness surrendered by holders thereof) exceeds the amount of Excess Proceeds, the Company shall select the Securities to be purchased in accordance with the procedures (including prorating in the event of oversubscription) described under Sections 4.06(b), 4.06(c) and 4.06(d). "Excess Proceeds" shall mean any Net Cash Proceeds from an Asset Sale that is not invested or used to reduce Bank Indebtedness or Indebtedness of a Restricted Subsidiary as provided in the second sentence of this paragraph. Notwithstanding the foregoing, any Asset Sale which results in Net Cash Proceeds of less than $5 million and all Asset Sales (including any Asset Sale which results in Net Cash Proceeds of less than $5 million) in any twelve consecutive-month period which result in Net Cash Proceeds of less than $10 million in the aggregate shall not be subject to the requirement of Section 4.06(a)(ii).

    (b) Within 10 days following the occurrence of an event which mandates an Excess Proceeds Offer under Section 4.06(a), the Company shall mail a notice (along with any other instructions determined by the Company, consistent with this Section 4.06, that a Holder must follow in order to have its Securities purchased) to the Trustee and to each Holder stating:

    (1) that the Excess Proceeds Offer is being made pursuant to this Section 4.06 and that all Securities tendered and not subsequently withdrawn will be accepted for payment and paid for by the Company;

    (2) the Excess Proceeds Purchase Price and the purchase date (which shall not be less than 30 days nor more than 60 days after the date such notice is mailed) (the "Excess Proceeds Offer Payment Date");

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    (3) that any Security not tendered shall continue to accrue interest and shall continue to be governed by the terms of this Indenture in all respects;

    (4) that, unless the Company defaults in the payment thereof, all Securities accepted for payment pursuant to the Excess Proceeds Offer shall cease to accrue interest on and after the Excess Proceeds Offer Payment Date;

    (5) that Holders electing to have any Securities purchased pursuant to an Excess Proceeds Offer will be required to surrender the Securities to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day next preceding the respective Excess Proceeds Offer Payment Date;

    (6) that Holders will be entitled to withdraw their election on the terms and conditions set forth in such notice; and

    (7) that Holders whose Securities are being purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided that each Security purchased and each such new Security issued shall be in a principal amount of $1,000 or integral multiples thereof.

    (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day next preceding the Excess Proceeds Offer Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If on the Excess Proceeds Offer Payment Date the aggregate principal amount of Securities and, if applicable, any other Senior Indebtedness included in the Excess Proceeds Offer surrendered by holders thereof exceeds the Exceeds Proceeds, the Company shall select the Securities and, if applicable, other Senior Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and other Senior Indebtedness in denominations of $1,000, or integral multiples thereof, shall be purchased).

    (d) On (or, in the case of clause (ii) of this Section 4.06(d), at the Company's election, before) the Excess Proceeds Offer Payment Date, the Company shall (i) accept for payment all Securities or portions thereof tendered and not theretofore withdrawn and which are selected for repurchase pursuant to the Excess Proceeds Offer, (ii) deposit with the Paying Agent immediately available funds sufficient to pay the Excess Proceeds Purchase Price of all Securities or portions thereof accepted for payment, and (iii) deliver or cause to be delivered to the Trustee all Securities so tendered, together with an Officers' Certificate specifying the Securities or portions thereof tendered to the Company or the Paying Agent. The Paying Agent shall promptly mail or deliver to each holder of Securities so tendered payment in an amount equal to the Excess Proceeds Purchase Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holder one or more certificates evidencing new Securities equal in aggregate principal amount to any unpurchased portion of the Securities surrendered; provided that each such new Security shall be in a principal amount of $1,000 or integral multiples thereof.

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    (e) The Company shall comply with the requirements of Regulation 14E and Rule 13e-4 (other than the filing requirements of such rule) under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Securities pursuant to an Excess Proceeds Offer. To the extent that the provisions of any such securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof.

    SECTION 4.07.  Limitation on Transactions with Affiliates.  (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction"): (i) on terms that are materially less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate and (ii) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $15 million, is not in writing and has not been approved by a majority of the Disinterested Directors. In addition, if such Affiliate Transaction involves an amount in excess of $30 million, a fairness opinion must be provided by a nationally recognized appraisal or investment banking firm.

    (b) The provisions of Section 4.07(a) shall not prohibit: (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iii) loans or advances to employees in the ordinary course of business in accordance with past practices of the Company, but in any event not to exceed $7.5 million in the aggregate outstanding at any one time, (iv) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries, (v) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or (vi) arrangements in existence as of the Closing Date with Persons that employ staff providers and which provide service exclusively on behalf of the Company and its Subsidiaries, which arrangements are not material to the Company and its Subsidiaries taken as a whole.

    SECTION 4.08.  Change of Control.  (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities (the "Change of Control Offer") at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date), in accordance with the terms contemplated in Section 4.08(b); provided, however, that notwithstanding the occurrence of a Change in Control, the Company shall not be obligated to purchase the Securities pursuant to this Section 4.08 in the event that it has exercised its right to redeem all the Securities under paragraph 5 of the Securities. In the event that at the time of such Change of Control the terms of the Bank Indebtedness restrict or prohibit the repurchase of Securities pursuant to this Section 4.08, then prior to the mailing of the notice to Holders provided for in Section 4.08(b), the Company shall (i) repay in full all Bank Indebtedness or offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or, (ii) (x) obtain any requisite consent under the agreements governing the Bank Indebtedness to permit the repurchase of Securities as provided for in this Section 4.08 or (y) deliver to the Trustee an Officers' Certificate stating that no such consent is required.

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    (b) Within 10 days following any Change of Control (except as provided in the proviso to the first sentence of Section 4.08(a)), the Company shall mail a notice (along with any other instructions determined by the Company, consistent with this Section 4.08, that a Holder must follow in order to have its Securities purchased) to the Trustee and to each Holder stating:

    (1) that the Change of Control Offer is being made pursuant to Section 4.08 of this Indenture and that all Securities tendered and not subsequently withdrawn shall be accepted for payment and paid for by the Company;

    (2) the purchase price and the purchase date (which shall not be less than 30 days nor more than 60 days after the date such notice is mailed) (the "Change of Control Payment Date");

    (3) that any Security not tendered shall continue to accrue interest and shall continue to be governed by the terms of this Indenture in all respects;

    (4) that, unless the Company defaults in the payment thereof, all Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest on and after the Change of Control Payment Date;

    (5) that Holders electing to have any Securities purchased pursuant to a Change of Control Offer will be required to surrender the Securities to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day next preceding the Change of Control Payment Date;

    (6) that Holders shall be entitled to withdraw their election on the terms and conditions set forth in such notice;

    (7) that Holders whose Securities are being purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided that each Security purchased and each such new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; and

    (8) the circumstances and relevant facts as determined by the Company regarding such Change of Control.

    (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day next preceding the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased.

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    (d) On (or, in the case of clause (ii) of this Section 4.08(d), at the Company's election, before) the Change of Control Payment Date, the Company shall (i) accept for payment all Securities or portions thereof tendered and not theretofore withdrawn, pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent immediately available funds sufficient to pay the purchase price of all Securities or portions thereof accepted for payment, and (iii) deliver or cause to be delivered to the Trustee all Securities so tendered, together with an Officers' Certificate specifying the Securities or portions thereof tendered to the Company or the Paying Agent. The Paying Agent shall promptly mail or deliver to each Holder of Securities so tendered payment in an amount equal to the purchase price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holder one or more certificates evidencing new Securities equal in aggregate principal amount to any unpurchased portion of the Securities surrendered; provided that each such new Security shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

    (e) Notwithstanding the foregoing provisions of this Section, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in Section 4.08(b) applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer.

    (f) The Company shall comply with the requirements of Regulation 14E and Rule 13e-4 (other than the filing requirements of such rule) under the Exchange Act, and any other securities laws and regulations thereunder that are applicable in connection with the repurchase of the Securities resulting from a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof.

    SECTION 4.09.  Compliance Certificate.  The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Section 314(a)(4) of the TIA.

    SECTION 4.10.  Further Instruments and Acts.  Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

    SECTION 4.11.  Limitation on Liens.  The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien, other than Permitted Liens, on any of their respective assets, now owned or hereafter acquired, securing any Indebtedness, unless the Securities are equally and ratably secured; provided that if the Indebtedness which is secured is by its terms expressly subordinate or junior in right of payment to the Securities, the Lien securing such subordinate or junior Indebtedness shall be subordinate and junior to the Lien securing the Securities with the same relative priority as such subordinated or junior Indebtedness shall have with respect to the Securities.

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    SECTION 4.12.  Limitation on Sale/Leaseback Transactions.  The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property unless: (i) the Company or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to Section 4.03 and (B) create a Lien on such property securing such Attributable Debt without equally and ratably securing the Securities pursuant to Section 4.11, (ii) the net proceeds received by the Company or such Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at least equal to the fair market value of such property and (iii) the transfer of such property is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.06.

ARTICLE 5

Successor Company

    SECTION 5.01.  Merger, Consolidation or Sale of Assets.  (a) The Company shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (in one transaction or a series of related transactions) to, any Person or permit any party to merge with or into it unless:

    (i)  the Company shall be the continuing Person, or the Person (if other than the Company) (the "Successor Company") formed by such consolidation or into or with which the Company is merged or to which the properties and assets of the Company are transferred shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture and this Indenture remains in full force and effect;

    (ii) immediately before and immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Company, the Successor Company or any Restricted Subsidiary as a result of such transaction as having been incurred by the Company, the Successor Company or such Restricted Subsidiary at the time of such transaction), no Event of Default or Default shall have occurred and be continuing;

    (iii) except in the case of a merger of the Company with a Wholly-owned Subsidiary (which does not have assets or liabilities in excess of $1 million) of a newly-formed holding company for the sole purpose of forming a holding company structure, the Company or the Successor Company, as applicable, could, after giving pro forma effect to such transaction, Incur $1.00 of Indebtedness pursuant to Section 4.03(a); and

    (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture (provided that the Opinion of Counsel will not be required to cover compliance with any financial tests or financial covenants).

    (b) Notwithstanding clauses (ii) and (iii) of Section 5.01(a), (a) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or another Restricted Subsidiary and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction.

    (c) The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets shall be released from all obligations under this Indenture, including, without limitation, any obligation to pay the principal of and interest on the Securities.

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ARTICLE 6

Defaults and Remedies

    SECTION 6.01.  Events of Default.  An "Event of Default" occurs if:

    (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable or in any payment of liquidated damages, and such default continues for a period of 30 days;

    (2) the Company (i) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon acceleration or otherwise or (ii) fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities;

    (3) the Company fails to comply with Section 5.01;

    (4) the Company fails to comply in any respect with any of its agreements in the Securities or this Indenture (other than those referred to in (1), (2) or (3) above) and such failure continues for 30 days after receipt of the notice specified in the penultimate paragraph of this Section 6.01;

    (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness is now existing or hereafter created, which default results from the failure to pay any such Indebtedness at its stated final maturity or results in the acceleration of such Indebtedness prior to its stated final maturity and the aggregate principal amount of such Indebtedness is at least $20 million, or the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been accelerated, aggregates $35 million or more;

    (6) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

    (A) commences a voluntary case;

    (B) consents to the entry of an order for relief against it in an involuntary case;

    (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or

    (D) makes a general assignment for the benefit of its creditors;

    or takes any comparable action under any foreign laws relating to insolvency;

    (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

    (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case;

    (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; or

    (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary;

    or any similar relief is granted under any foreign laws, and in each case the order or decree remains unstayed and in effect for 60 days;

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    (8) the Company or any Restricted Subsidiary fails to pay final judgments aggregating in excess of $20 million which judgments are not paid, discharged or stayed within 60 days after their entry.

    The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

    The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

    A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must be in writing and specify the Default, demand that it be remedied and state that such notice is a "Notice of Default".

    The Company shall deliver to the Trustee, within 30 days after becoming aware of the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event which with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto.

    SECTION 6.02.  Acceleration.  If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% of the principal amount of the Securities then outstanding, by written notice to the Company (and to the Trustee if such notice is given by such Holders) (the "Acceleration Notice"), may, and the Trustee at the request of such Holders shall, declare all unpaid principal of, and accrued interest on, such Securities to be due and payable immediately. Upon a declaration of acceleration, such principal and accrued interest shall be due and payable. If an Event of Default specified in Section 6.01(6) or (7) with respect to the Company occurs, all unpaid principal of and accrued interest on the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Company, the Trustee or any Holder. The Holders of a majority of the aggregate principal amount of the Securities outstanding by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

    SECTION 6.03.  Other Remedies.  If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

    The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

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    SECTION 6.04.  Waiver of Past Defaults.  The Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default or Event of Default is waived, it is cured and ceases to exist, but no waiver shall extend to any subsequent or other Default or impair any consequent right.

    SECTION 6.05.  Control by Majority.  The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification by the Securityholders satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

    SECTION 6.06.  Limitation on Suits.  Except to enforce the right to receive payment of principal or interest when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless:

    (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

    (2) the Holders of at least 25% in principal amount of the Securities outstanding make a written request to the Trustee to pursue the remedy;

    (3) such Holder or Holders offer to the Trustee security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense;

    (4) the Trustee does not comply with the request within 30 days after receipt thereof and the offer of security or indemnity; and

    (5) during such 30-day period the Holders of a majority of the aggregate principal amount of the outstanding Securities do not give the Trustee a direction which is inconsistent with the request.

    A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder.

    SECTION 6.07.  Rights of Holders to Receive Payment.  Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and liquidated damages and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

    SECTION 6.08.  Collection Suit by Trustee.  If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

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    SECTION 6.09.  Trustee May File Proofs of Claim.  The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, any Subsidiary, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and may become a member, voting or nonvoting, of any committee of creditors appointed in any such judicial proceedings. Any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

    SECTION 6.10.  Priorities.  If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

    FIRST: to the Trustee for amounts due under Section 7.07;

    SECOND: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, and any liquidated damages without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, any liquidated damages and interest, respectively; and

    THIRD: to the Company.

    The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and amount to be paid.

    SECTION 6.11.  Undertaking for Costs.  In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities.

    SECTION 6.12.  Waiver of Stay or Extension Laws.  The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 7

Trustee

    SECTION 7.01.  Duties of Trustee.  (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs.

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    (b) Except during the continuance of an Event of Default:

    (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

    (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

    (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that:

    (1) this paragraph does not limit the effect of paragraph (b) of this Section;

    (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

    (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

    (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

    (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

    (f)  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

    (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

    (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA.

    SECTION 7.02.  Rights of Trustee.  (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

    (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel (provided that the Opinion of Counsel will not be required to cover compliance with any financial tests or financial covenants). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel.

    (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

    (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence.

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    (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

    (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Securities at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney, upon reasonable notice to the Company and during normal business hours.

    SECTION 7.03.  Individual Rights of Trustee.  The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

    SECTION 7.04.  Trustee's Disclaimer.  The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication.

    SECTION 7.05.  Notice of Defaults.  If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it becomes known to the Trustee, unless such Default or Event of Default has been cured or waived. Except in the case of a Default or an Event of Default in the payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of the Securityholders.

    SECTION 7.06.  Reports by Trustee to Holders.  As promptly as practicable after each February 1 beginning with the February 1 following the date of this Indenture, and in any event prior to April 1 in each year, the Trustee shall mail to each Securityholder a brief report dated as of February 1 that complies with Section 313(a) of the TIA. The Trustee shall also comply with Section 313(b) of the TIA.

    A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.

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    SECTION 7.07.  Compensation and Indemnity.  The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by or in connection with the acceptance or administration of this trust and the performance of its duties hereunder including the reasonable costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of the powers or duties hereunder. The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Company shall not relieve the Company of its indemnity obligations hereunder. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided, however, that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and such parties in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith.

    To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest and any liquidated damages on particular Securities.

    The Company's payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(6) or (7) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

    SECTION 7.08.  Replacement of Trustee.  The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

    (1) the Trustee fails to comply with Section 7.10;

    (2) the Trustee is adjudged bankrupt or insolvent;

    (3) a receiver or other public officer takes charge of the Trustee or its property; or

    (4) the Trustee otherwise becomes incapable of acting.

    If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

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    A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

    If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

    If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

    Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

    SECTION 7.09.  Successor Trustee by Merger.  If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

    In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force that certificates of the Trustee are provided anywhere in the Securities or in this Indenture.

    SECTION 7.10.  Eligibility; Disqualification.  The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

    SECTION 7.11.  Preferential Collection of Claims Against Company.  The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated.

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ARTICLE 8

Discharge of Indenture; Defeasance

    SECTION 8.01.  Discharge of Liability on Securities; Defeasance.  (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds or U.S. Government Obligations on which payment of principal and interest when due will be sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07) and liquidated damages, if any, and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel that the conditions precedent to satisfaction and discharge have been satisfied (provided that the Opinion of Counsel will not be required to cover compliance with any financial tests or financial covenants) and at the cost and expense of the Company.

    (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 5.01 and the operation of Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6) (with respect only to Restricted Subsidiaries of the Company), 6.01(7) (with respect only to Restricted Subsidiaries of the Company) and 6.01(8) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

    If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.01(3), 6.01(4), 6.01(5), 6.01(6) (with respect to Restricted Subsidiaries of the Company only), 6.01(7) (with respect to Restricted Subsidiaries of the Company only) or 6.01(8).

    Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates.

    (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.

    SECTION 8.02.  Conditions to Defeasance.  The Company may exercise its legal defeasance option or its covenant defeasance option only if:

    (1) the Company irrevocably deposits in trust with the Trustee, for the benefit of the Holders, cash in U.S. Dollars, U.S. Government Obligations, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and interest and liquidated damages (if any), on the outstanding Securities on the stated maturity of such principal or installment of interest or upon redemption;

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    (2) the Company shall have delivered to the Trustee an Opinion of Counsel stating that the Holders of the outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and shall be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred, which such opinion, in the case of legal defeasance, shall also state that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling to such effect or (B) since the Closing Date there has been a change in the applicable Federal income tax laws or regulations to such effect or (C) there exists controlling precedent to such effect;

    (3) no Default or Event of Default shall have occurred and be continuing on the date of such deposit;

    (4) such defeasance shall not result in a breach or violation of or constitute a default under any material agreement or instrument to which the Company is a party or by which it is bound; and

    (5) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to such defeasance have been satisfied.

    Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3.

    SECTION 8.03.  Application of Trust Money.  The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest and liquidated damages, if any, on the Securities.

    SECTION 8.04.  Repayment to Company.  The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time.

    Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal, interest or liquidated damages that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.

    SECTION 8.05.  Indemnity for Government Obligations.  The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations.

    SECTION 8.06.  Reinstatement.  If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of or liquidated damages on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

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ARTICLE 9

Amendments

    SECTION 9.01.  Without Consent of Holders.  The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder:

    (1) to cure any ambiguity, defect or inconsistency;

    (2) to comply with Article 5;

    (3) to provide for certificated or uncertificated Securities (provided that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code);

    (4) to add guarantees with respect to the Securities or to secure the Securities;

    (5) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company;

    (6) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA;

    (7) to make any change that does not adversely affect the rights of any Securityholder; or

    (8) to provide for the issuance of the Exchange Securities or Private Exchange Securities, which shall have terms substantially identical in all material respects to the Initial Securities (except that the transfer restrictions contained in the Initial Securities shall be modified or eliminated, as appropriate), and which shall be treated, together with any outstanding Initial Securities, as a single issue of securities.

    After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

    SECTION 9.02.  With Consent of Holders.  The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Securityholder affected, an amendment may not:

    (1) reduce the percentage of the principal amount of the Securities whose Holders must consent to an amendment, supplement or waiver;

    (2) change the stated maturity or the time or currency of payment of the principal, or any interest on or any liquidated damages on, or reduce the rate of interest on or principal of any Security or alter the redemption provisions with respect thereto;

    (3) impair the right of any Holder to institute suit for the enforcement of any payment on or with respect to such Holder's Securities;

    (4) waive a default in the payment of the principal of or interest on any Security;

    (5) make any change to the provisions of this Indenture relating to the Excess Proceeds Offer;

    (6) make any change to Section 9.07 of this Indenture; or

    (7) make any change in Section 6.04 or 6.07 or the second sentence of this Section 9.02.

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    It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

    After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

    SECTION 9.03.  Compliance with Trust Indenture Act.  Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect.

    SECTION 9.04.  Revocation and Effect of Consents and Waivers.  A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective once both (i) the requisite number of consents have been received by the Company or the Trustee and (ii) such amendment or waiver has been executed by the Company and the Trustee.

    The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

    SECTION 9.05.  Notation on or Exchange of Securities.  If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

    SECTION 9.06.  Trustee to Sign Amendments.  The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03).

46

    SECTION 9.07.  Payment for Consent.  Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to obtaining any consent, waiver or amendment of, or direction in respect of, any of the terms or provisions of this Indenture or the Securities, unless such consideration is offered or agreed to be paid, and paid, to all Holders which so consent, waive, agree or direct in the time frame set forth in solicitation documents relating to such consent, waiver, agreement or direction.

ARTICLE 10

Miscellaneous

    SECTION 10.01.  Trust Indenture Act Controls.  If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

    SECTION 10.02.  Notices.  Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows:

if to the Company:

Magellan Health Services, Inc.
6950 Columbia Gateway Drive
Columbia, MD 21046
Attention of: Treasurer

with a copy to:

Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention of: Stephen H. Shalen

if to the Trustee:

HSBC Bank USA
Issuer Services
452 Fifth Avenue
New York, NY 10018-2706
Attention of: Frank Godino

    The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

    Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

    Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it; except that notices or communications to the Trustee shall be effective only upon receipt.

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    SECTION 10.03.  Communication by Holders with Other Holders.  Securityholders may communicate pursuant to TIA § 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

    SECTION 10.04.  Certificate and Opinion as to Conditions Precedent.  Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

    (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

    (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent (provided that the Opinion of Counsel will not be required to cover compliance with any financial tests or financial covenants) have been complied with.

    SECTION 10.05.  Statements Required in Certificate or Opinion.  Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

    (1) a statement that the individual making such certificate or opinion has read such covenant or condition;

    (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

    (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

    (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

    SECTION 10.06.  When Securities Disregarded.  In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

    SECTION 10.07.  Rules by Trustee, Paying Agent and Registrar.  The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions.

    SECTION 10.08.  Legal Holidays.  A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

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    SECTION 10.09.GOVERNING LAW.THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

    SECTION 10.10.  No Personal Liability of Directors, Officers, Employees and Stockholders.  No director, officer, employee or stockholder of the Company shall have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities.

    SECTION 10.11.  Successors.  All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

    SECTION 10.12.  Multiple Originals.  The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

    SECTION 10.13.  Table of Contents; Headings.  The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

49

    IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

MAGELLAN HEALTH SERVICES, INC.,
by	Name: James R. Bedenbaugh Title: Senior Vice President & Treasurer
HSBC BANK USA, as Trustee,
by	Name: Title:

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APPENDIX A

PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES

    1.  Definitions

1.1  Definitions

    For the purposes of this Appendix A capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. In addition, the following terms shall have the meanings indicated below:

    "Applicable Procedures" means, with respect to any transfer or transaction involving a Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Global Security, Euroclear and Clearstream, in each case to the extent applicable to such transaction and as in effect from time to time.

    "Clearstream" means Clearstream Banking, société anonyme, or any successor securities clearing agency.

    "Definitive Security" means a certificated Initial Security or Exchange Security (bearing the Restricted Securities Legend if the transfer of such Security is restricted by applicable law) that does not include the Global Securities Legend.

    "Depositary" means The Depository Trust Company, its nominees and their respective successors.

    "Euroclear" means the Euroclear Clearance System or any successor securities clearing agency.

    "Global Securities Legend" means the legend set forth under that caption in Exhibit A to this Indenture.

    "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

    "Initial Purchasers" means J.P. Morgan Securities Inc., Credit Suisse First Boston Corporation and UBS Warburg LLC.

    "Private Exchange" means an offer by the Company, pursuant to the Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Securities.

    "Private Exchange Securities" means the Securities of the Company issued in exchange for Initial Securities pursuant to this Indenture in connection with the Private Exchange pursuant to the Registration Agreement.

    "Purchase Agreement" means the Purchase Agreement dated May 23, 2001, among the Company and the Initial Purchasers.

    "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

    "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for their Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act.

    "Regulation S" means Regulation S under the Securities Act.

    "Regulation S Securities" means all Initial Securities offered and sold outside the United States in reliance on Regulation S.

    "Restricted Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Company to the Trustee, and (ii) the Issue Date with respect to such Securities.

    "Restricted Securities Legend" means the legend set forth in Section 2.3(e)(i) herein.

    "Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

    "Rule 144A" means Rule 144A under the Securities Act.

    "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A.

    "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depositary) or any successor person thereto, who shall initially be the Trustee.

    "Shelf Registration Statement" means a registration statement filed by the Company in connection with the offer and sale of Initial Securities pursuant to the Registration Agreement.

    "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the Restricted Securities Legend.

    1.2  Other Definitions

Term	Defined in Section:
"Agent Members"	2.1(b)
"IAI Global Security	2.1(a)
"Global Security"	2.1(a)
"Regulation S Global Security	2.1(a)
"Rule 144A Global Security"	2.1(a)

    2.  The Securities

    2.1  Form and Dating

    The Initial Securities issued on the date hereof will be (i) offered and sold by the Company pursuant to the Purchase Agreement and (ii) resold, initially only to (A) QIBs in reliance on Rule 144A and (B) persons other than U.S. persons (as defined in Regulation S) in reliance on Regulation S. Such Initial Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs pursuant to Rule 501.

    (a)  Global Securities.  Rule 144A Securities shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security") and Regulation S Securities shall be issued initially in the form of one or more permanent global Securities (collectively, the "Regulation S Global Security"), in each case without interest coupons and bearing the Global Securities Legend and Restricted Securities Legend, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. One or more global securities in definitive, fully registered form without interest coupons and bearing the Global Securities Legend and the Restricted Securities Legend (collectively, the "IAI Global Security") shall also be issued on the Closing Date, deposited with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture to accommodate transfers of beneficial interests in the Securities to IAIs subsequent to the initial distribution. Beneficial ownership interests in the Regulation S Global Security will not be exchangeable for interests in the Rule 144A Global Security, the IAI Global Security or any other Security without a Restricted Securities Legend until the expiration of the Restricted Period. The Rule 144A Global Security, the IAI Global Security and the Regulation S Global Security are each referred to herein as a "Global Security" and are collectively referred to herein as "Global Securities." The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided.

    (b)  Book-Entry Provisions.  This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depositary.

    The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company, authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as Securities Custodian.

    Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as Securities Custodian or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security.

    (c)  Definitive Securities.  Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities.

    2.2  Authentication.  The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by two Officers (1) Initial Securities for original issue on the date hereof in an aggregate principal amount of $250,000,000 and (2) the (A) Exchange Securities for issue only in a Registered Exchange Offer and (B) Private Exchange Securities for issue only in the Private Exchange, in the case of each of (A) and (B) pursuant to the Registration Agreement and for a like principal amount of Initial Securities exchanged pursuant thereto. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $250,000,000 except as provided in Section 2.07 of this Indenture.

    2.3  Transfer and Exchange.  (a)  Transfer and Exchange of Definitive Securities.  When Definitive Securities are presented to the Registrar with a request:

    (x) to register the transfer of such Definitive Securities; or

    (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange:

    (i)  shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and

    (ii) are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:

    (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Initial Security); or

    (B) if such Definitive Securities are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Initial Security); or

    (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (i) a certification to that effect (in the form set forth on the reverse side of the Initial Security) and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i).

    (b)  Restrictions on Transfer of a Definitive Security for a Beneficial Interest in a Global Security.  A Definitive Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, together with:

    (i)  certification (in the form set forth on the reverse side of the Initial Security) that such Definitive Security is being transferred (A) to a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the Trustee a signed letter substantially in the form of Exhibit C or (C) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and

    (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase,

then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the principal amount of the Definitive Security so canceled. If no Global Securities are then outstanding and the Global Security has not been previously exchanged for certificated securities pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount.

    (c)  Transfer and Exchange of Global Securities.  (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Security or another Global Security and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. Transfers of beneficial interests in the Rule 144A Global Security or the IAI Global Security to a transferee who takes delivery of such interest through the Regulation S Global Security will be made only upon receipt by the Trustee of a certification from the transferor to the effect that such transfer is being made in accordance with Regulation S or Rule 144 under the Securities Act and that, if such transfer is being made prior to the expiration of the Restricted Period, the interest shall be held immediately thereafter through Euroclear or Clearstream, if available. In the case of a transfer of a beneficial interest in either the Regulation S Global Security or the Rule 144A Global Security for an interest in the IAI Global Security, the transferee must furnish a signed letter substantially in the form of Exhibit C to the Trustee.

    (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred.

    (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

    (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company.

    (d)  Restrictions on Transfer of Regulation S Global Security.  (i) Prior to the expiration of the Restricted Period, interests in the Regulation S Global Security may only be held through Euroclear or Clearstream. During the Restricted Period, beneficial ownership interests in the Regulation S Global Security may only be sold, pledged or transferred through Euroclear or Clearstream in accordance with the Applicable Procedures and only (A) to the Company, (B) so long as such security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore transaction in accordance with Regulation S, (D) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act, (E) to an IAI purchasing for its own account, or for the account of such an IAI, in a minimum principal amount of Securities of $250,000 or (F) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. Prior to the expiration of the Restricted Period, transfers by an owner of a beneficial interest in the Regulation S Global Security to a transferee who takes delivery of such interest through the Rule 144A Global Security or the IAI Global Security will be made only in accordance with Applicable Procedures and upon receipt by the Trustee of a written certification from the transferor of the beneficial interest in the form provided on the reverse of the Initial Security to the effect that such transfer is being made to (i) a person whom the transferor reasonably believes is a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or (ii) an IAI purchasing for its own account, or for the account of such an IAI, a minimum principal amount of the Securities of $250,000. Such written certification will no longer be required after the expiration of the Restricted Period. In the case of a transfer of a beneficial interest in the Regulation S Global Security for an interest in the IAI Global Security, the transferee must furnish a signed letter substantially in the form of Exhibit C to the Trustee.

    (ii) Upon the expiration of the Restricted Period, beneficial ownership interests in the Regulation S Global Security will be transferable in accordance with applicable law and the other terms of this Indenture.

    (e)  Legend.

    (i)  Except as permitted by the following paragraphs (ii), (iii) or (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

    THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

    Each Definitive Security will also bear the following additional legend:

"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."

    (ii) Upon any sale or transfer of a Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security).

    (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to the Restricted Securities Legend on such Initial Securities or such Private Exchange Securities will cease to apply and the requirements that any such Initial Securities or such Private Exchange Securities be issued in global form will continue to apply.

    (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to Initial Securities that Initial Securities be issued in global form will continue to apply, and Exchange Securities in global form without the Restricted Securities Legend will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer.

    (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to Initial Securities that Initial Securities be issued in global form will continue to apply, and Private Exchange Securities in global form with the Restricted Securities Legend will be available to Holders that exchange such Initial Securities in such Private Exchange.

    (vi) Upon a sale or transfer after the expiration of the Restricted Period of any Initial Security acquired pursuant to Regulation S, all requirements that such Initial Security bear the Restricted Securities Legend will cease to apply and the requirements requiring any such Initial Security be issued in global form will continue to apply.

    (f)  Cancelation or Adjustment of Global Security.  At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, transferred, redeemed, repurchased or canceled, such Global Security shall be returned by the Depositary to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, transferred in exchange for an interest in another Global Security, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction.

    (g)  Obligations with Respect to Transfers and Exchanges of Securities.

    (i)  To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, Definitive Securities and Global Securities at the Registrar's request.

    (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Section 3.06, 4.06, 4.08 and 9.05 of the Indenture).

    (iii) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent or the Registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

    (iv) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

    (h)  No Obligation of the Trustee.

    (i)  The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

    (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

    2.4  Definitive Securities

    (a) A Global Security deposited with the Depositary or with the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice or after the Company becomes aware of such cessation, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture.

    (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security in the form of a Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(e), bear the Restricted Securities Legend.

    (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

    (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Securities in fully registered form without interest coupons.

EXHIBIT A

[FORM OF FACE OF INITIAL SECURITY]

     [Global Securities Legend]

    UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

    TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

    THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

    THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]¹

¹

Include this additional legend for each Definitive Security.

No.		$
	9-3/8% Senior Note due 2007
		CUSIP No.

    MAGELLAN HEALTH SERVICES, INC., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum [of            Dollars] [listed on the Schedule of Increases or Decreases in Global Security attached hereto]² on November 15, 2007.

    Interest Payment Dates: May 15 and November 15.

    Record Dates: May 1 and November 1.

²

Use the second set of bracketed language for a Global Security.

    Additional provisions of this Security are set forth on the other side of this Security.

    IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

MAGELLAN HEALTH SERVICES, INC.,
by	Name: James R. Bedenbaugh Title: Senior Vice President & Treasurer

[CORPORATE SEAL]

Dated:

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
HSBC BANK USA,
	as Trustee, certifies that this is one of the Securities referred to in the Indenture.
	by ________________________________ Authorized Signatory

[FORM OF REVERSE SIDE OF SECURITY]
9-³/8% Senior Note due 2007

    Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture (as defined).

    1.  Interest

    (a)  MAGELLAN HEALTH SERVICES, INC.,  a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year, commencing on November 15, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 31, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

    (b)  Liquidated Damages.  The Holder of this Security is entitled to the benefits of the Exchange and Registration Rights Agreement, dated as of May 31, 2001, between the Company and the Initial Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. If (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Registration Agreement is not filed with the SEC on or prior to 90 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 210 days after the Issue Date, (iii) the Registered Exchange Offer is not consummated on or prior to 240 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 240 days after the Issue Date but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company shall pay liquidated damages to each Holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such Holder until the applicable Registration Statement is filed or declared effective, the Registered Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to Holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means (i) each Initial Security until the date on which such Initial Security has been exchanged for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) each Initial Security or Private Exchange Security until the date on which such Initial Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement or (iii) each Initial Security or Private Exchange Security until the date on which such Initial Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

    2.  Method of Payment

    The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the May 1 or November 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, liquidated damages, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, liquidated damages, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company, through the Paying Agent, will make all payments in respect of a certificated Security (including principal, premium, if any, liquidated damages, if any, and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

    3.  Paying Agent and Registrar

    Initially, HSBC Bank USA, a New York banking corporation and trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly-owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

    4.  Indenture

    The Company issued the Securities under an Indenture dated as of May 31, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Capitalized terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Securityholders are referred to the Indenture and the TIA for a statement of those terms.

    The Securities are senior unsecured obligations of the Company limited to $250,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture issued in an aggregate principal amount of $250,000,000. The Securities include the Initial Securities and any Exchange Securities and Private Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities, the Private Exchange Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens, enter into sale and leaseback transactions and make asset sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of the property of the Company.

    5.  Optional Redemption

    Except as set forth in the following paragraph, the Securities will not be redeemable at the option of the Company prior to November 15, 2005. The Securities will be redeemable at the option of the Company on or after such date, in whole or in part, upon not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest (if any) to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on November 15 of the years set forth below:

Year	Redemption Prices
2005	104.688	%
2006	102.344	%

    In addition, at any time and from time to time prior to November 15, 2004, the Company may, at its option, redeem up to 35% of the original aggregate principal amount of Securities at a redemption price (expressed as a percentage of the principal amount) of 109.375%, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of such original aggregate principal amount of Securities remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of the closing of any such Equity Offering. Any such redemption shall be made upon not less than 30 nor more than 60 days notice mailed to each Holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture.

    6.  Sinking Fund

    The Securities are not subject to any sinking fund.

    7.  Notice of Redemption

    Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest and liquidated damages, if any, on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption.

    8.  Repurchase of Securities at the Option of Holders upon Change of Control

    Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

    9.  Denominations; Transfer; Exchange

    The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed.

    10.  Persons Deemed Owners

    The registered Holder of this Security may be treated as the owner of it for all purposes.

    11.  Unclaimed Money

    If money for the payment of principal, interest or liquidated damages, if any, remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

    12.  Discharge and Defeasance

    Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest and liquidated damages, if any, on the Securities to redemption or maturity, as the case may be.

    13.  Amendment, Waiver

    Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended or supplemented without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities and (ii) any default or compliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend or supplement the Indenture or the Securities (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for certificated or uncertificated Securities (provided that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code); (iv) to add Guarantees with respect to the Securities or to secure the Securities; (v) to add additional covenants for the benefit of the Holders or to surrender rights and powers conferred on the Company; (vi) to comply with the requirements of the SEC in connection with the qualification of the Indenture or the Trustee under the TIA; (vii) to make any change that does not adversely affect the rights of any Securityholder or (viii) to provide for the issuance of the Exchange Securities or Private Exchange Securities.

    14.  Defaults and Remedies

    If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder.

    Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities, by written notice to the Trustee and the Company, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration.

    15.  Trustee Dealings with the Company

    Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

    16.  No Personal Liability of Directors, Officers, Employees and Stockholders

    No director, officer, employee or stockholder of the Company shall have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities.

    17.  Authentication

    This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

    18.  Abbreviations

    Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

    19.  Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

    20.  CUSIP Numbers

    Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security.

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

    (Print or type assignee's name, address and zip code)

    (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint            agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

___________________________________________________________________________________________

Date: _____________________________________ Your Signature: ____________________________

___________________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES

This certificate relates to $             principal amount of Securities held in (check applicable space)        book-entry or        definitive form by the undersigned.

The undersigned (check one box below):

/ /	has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depositary a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above);
/ /	has requested the Trustee by written order to exchange or register the transfer of a Security or Securities.

In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	/ /	to the Company; or
(2)	/ /	to the Registrar for registration in the name of the Securityholder, without transfer; or
(3)	/ /	pursuant to an effective registration statement under the Securities Act; or
(4)	/ /	inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act; or
(5)	/ /	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act and such Security shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in Appendix A to the Indenture); or
(6)	/ /	to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements; or
(7)	/ /	pursuant to another available exemption from registration provided by Rule 144 under the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered Holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

	Your Signature
Signature Guarantee:
Date: _____________________________________
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee		Signature of Signature Guarantee

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

    The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated: _____________________________________ _____________________________________________
NOTICE: To be executed by an executive officer

[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

    The initial principal amount of this Global Security is $[      ]. The following increases or decreases in this Global Security have been made:

Date of
Exchange
Amount of decrease in
Amount of Principal this
Global Security Amount of increase in
Principal Amount of this
Global Security Principal amount of this Global
Security following such
decrease or increase Signature of authorized
signatory of Trustee or
Securities Custodian

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box:

/ /

If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:

$

Date: ____________________________	Your Signature: ____________________________
	(Sign exactly as your name appears on the other side of the Security)

Signature Guarantee: ____________________________________________________________
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

EXHIBIT B

[FORM OF FACE OF EXCHANGE SECURITY]

    UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

    TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

No.		$
	9-3/8% Senior Note due 2007
		CUSIP No.

    MAGELLAN HEALTH SERVICES, INC., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum [of            Dollars] [listed on the Schedule of Increases or Decreases in Global Security attached hereto]³ on November 15, 2007.

    Interest Payment Dates: May 15 and November 15.

    Record Dates: May 1 and November 1.

³

Use the second set of bracketed language for a Global Security.

    Additional provisions of this Security are set forth on the other side of this Security.

    IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed.

MAGELLAN HEALTH SERVICES, INC.,
by	Name: Title:

    [CORPORATE SEAL]

Dated:

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
HSBC BANK USA,
	as Trustee, certifies that this is one of the Securities referred to in the Indenture.
	by ________________________________ Authorized Signatory

*/

If the Security is to be issued in global form, add the Global Securities Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL SECURITIES—SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".

[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
9-³/8% Senior Note due 2007

    Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture (as defined).

    1.  Interest

    MAGELLAN HEALTH SERVICES, INC., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year, commencing on November 15, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 31, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

    2.  Method of Payment

    The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Securityholders at the close of business on the May 1 or November 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, liquidated damages, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, liquidated damages, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company, through the Paying Agent, will make all payments in respect of a certificated Security (including principal, premium, if any, liquidated damages, if any, and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

    3.  Paying Agent and Registrar

    Initially, HSBC Bank USA, a New York banking corporation and trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly-owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

    4.  Indenture

    The Company issued the Securities under an Indenture dated as of May 31, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Capitalized terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Securityholders are referred to the Indenture and the TIA for a statement of those terms.

    The Securities are senior unsecured obligations of the Company limited to $250,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities and Private Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities, the Exchange Securities and the Private Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens, enter into sale and leaseback transactions and make asset sales. The Indenture also imposes limitations on the ability of the Company to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of the property of the Company.

    5.  Optional Redemption

    Except as set forth in the following paragraph, the Securities will not be redeemable at the option of the Company prior to November 15, 2005. The Securities will be redeemable at the option of the Company on or after such date, in whole or in part, upon not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest (if any) to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on November 15 of the years set forth below:

Year	Redemption Prices
2005	104.688	%
2006	102.344	%

    In addition, at any time and from time to time prior to November 15, 2004, the Company may, at its option, redeem up to 35% of the original aggregate principal amount of Securities at a redemption price (expressed as a percentage of the principal amount) of 109.375%, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of such original aggregate principal amount of Securities remains outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 60 days of the date of the closing of any such Equity Offering. Any such redemption shall be made upon not less than 30 nor more than 60 days notice mailed to each Holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture.

    6.  Sinking Fund

    The Securities are not subject to any sinking fund.

    7.  Notice of Redemption

    Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption.

    8.  Repurchase of Securities at the Option of Holders upon Change of Control

    Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due and liquidated damages, if any, on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture.

    9.  Denominations; Transfer; Exchange

    The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed.

    10.  Persons Deemed Owners

    The registered Holder of this Security may be treated as the owner of it for all purposes.

    11.  Unclaimed Money

    If money for the payment of principal, interest or liquidated damages, if any, remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

    12.  Discharge and Defeasance

    Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest and liquidated damages, if any, on the Securities to redemption or maturity, as the case may be.

    13.  Amendment, Waiver

    Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended or supplemented without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities and (ii) any default or compliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Securities, the Company and the Trustee may amend or supplement the Indenture or the Securities (i) to cure any ambiguity, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for certificated or uncertificated Securities (provided that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code); (iv) to add Guarantees with respect to the Securities or to secure the Securities; (v) to add additional covenants for the benefit of the Holders or to surrender rights and powers conferred on the Company; (vi) to comply with the requirements of the SEC in connection with the qualification of the Indenture or the Trustee under the TIA; (vii) to make any change that does not adversely affect the rights of any Securityholder or (viii) to provide for the issuance of the Exchange Securities or Private Exchange Securities.

    14.  Defaults and Remedies

    If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities then outstanding, subject to certain limitations, may declare all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Securities being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder.

    Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Securities, by written notice to the Trustee and the Company, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration.

    15.  Trustee Dealings with the Company

    Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

    16.  No Personal Liability of Directors, Officers, Employees and Stockholders

    No director, officer, employee or stockholder of the Company shall have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities.

    17.  Authentication

    This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

    18.  Abbreviations

    Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

    19.  Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

    20.  CUSIP Numbers

    Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Company will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security.

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

    (Print or type assignee's name, address and zip code)

    (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint            agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

___________________________________________________________________________________________

Date: ____________________________________ Your Signature:________________________________________________

___________________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee.

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, check the box:

/ /

If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:

$

Date: ____________________________	Your Signature: ____________________________
	(Sign exactly as your name appears on the other side of the Security)

Signature Guarantee: ____________________________________________________________
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee

EXHIBIT C

[Form of
Transferee Letter of Representation]

Ladies and Gentlemen:

    This certificate is delivered to request a transfer of $             principal amount of the 9-³/8% Senior Notes due 2007 (the "Securities") of Magellan Health Services, Inc. (the "Company").

    Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows:

Name: ____________________________________________________________

Address: __________________________________________________________

Taxpayer ID Number: _______________________________________________

    The undersigned represents and warrants to you that:

    1. We are an institutional "accredited investor" (as defined in rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")) purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.

    2. We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of, and in compliance with, Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Securities of $250,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee.

TRANSFEREE: ________________________________________,

by: _______________________________________________________________________________________

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Exhibit 4(p)

TABLE OF CONTENTS
CROSS-REFERENCE TABLE
ARTICLE 1 Definitions and Incorporation by Reference
ARTICLE 2 The Securities
ARTICLE 3 Redemption
ARTICLE 4 Covenants
ARTICLE 5 Successor Company
ARTICLE 6 Defaults and Remedies
ARTICLE 7 Trustee
ARTICLE 8 Discharge of Indenture; Defeasance
ARTICLE 9 Amendments
ARTICLE 10 Miscellaneous

APPENDIX A

PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES

EXHIBIT A

[FORM OF FACE OF INITIAL SECURITY]
FORM OF REVERSE SIDE OF SECURITY 9–3/8% Senior Note due 2007
ASSIGNMENT FORM
OPTION OF HOLDER TO ELECT PURCHASE

EXHIBIT B

[FORM OF FACE OF EXCHANGE SECURITY]
FORM OF REVERSE SIDE OF EXCHANGE SECURITY 9–3/8% Senior Note due 2007
ASSIGNMENT FORM
OPTION OF HOLDER TO ELECT PURCHASE

EXHIBIT C

EX-5

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Exhibit 5

June 29, 2000

Magellan Health Services, Inc.
6950 Columbia Gateway Drive
Columbia, Maryland 21046

Re: Magellan Health Services, Inc.
Registration Statement on Form S-3
Registration No. 333-

Gentlemen:

    We have acted as counsel to Magellan Health Services, Inc., a Delaware corporation ("Magellan"), in connection with the registration statement (the "Registration Statement"), of its (i) 6.5% Series A Junior Subordinated Convertible Debentures due 2009 (the "Debentures"); (ii) Series A Cumulative Convertible Preferred Stock, no par value per share (the "Preferred Stock"; and (iii) Common Stock, par value $.25 per share. The Debentures are to be issued in exchange for shares of the Preferred Stock pursuant to the terms of an Indenture (the "Indenture"), between Magellan and a national bank or trust company to be identified at the time of the issuance of the Debentures, as Trustee. The Indenture will be in substantially the form filed as Exhibit 4(i) to the Registration Statement. The shares of Common Stock being registered are to be issued upon conversion of the Preferred Stock. The shares of Preferred Stock being registered are to be issued upon the exercise of an option (the "Option" that was granted to the holders of the outstanding shares of Preferred Stock.

    In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the form of the Indenture, such records of Magellan and all such agreements, certificates of officers or representatives of Magellan, and others, and such other documents, certificates and corporate or other records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination we have assumed the genuineness of all signatures, the legal capacity of natural persons, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of representatives of Magellan and of public officials, We have no reason to believe that such statements and representations are untrue.

    Based upon and subject to the foregoing, it is our opinion that

1.

The Debentures, when executed by duly authorized officers of Magellan, authenticated by duly authorized officers of the Trustee and delivered in exchange for shares of the Preferred Stock in accordance with the terms of the Indenture, will constitute the legal, valid and binding obligations of Magellan, enforceable against Magellan in accordance with their respective terms.

Magellan Health Services, Inc.
June 29, 2000
Page 2

2.

The shares of Preferred Stock, when issued for the consideration provided for in the Option and otherwise in accordance with the terms of the Option, will be duly authorized and validly issued and will be full paid and non-assessable



3.

The shares of Common Stock, when delivered upon the conversion of the shares of Preferred Stock, will be duly authorized and validly issued and will be fully paid and non-assessable.

    Our opinion is subject to the following qualifications:

    (a) The enforceability of the Indenture and the Debentures against Magellan may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in law or at equity) and (iii) limitations on the enforceability of rights to indemnification or contribution thereunder by federal or state securities laws or regulations or the public policy relating thereto. Such principles of equity are of general application, and in applying such principles, a court, among other things, might not allow a creditor to accelerate maturity of a debt upon the occuence of a default deemed immaterial or for non-credit reasons or might include a requirement that a creditor act with reasonableness and in good faith. Furthermore, a court may refuse to enforce a covenant where a court deems such covenant to be violative of applicable public policy.

    (b) Certain of the remedial provisions of the Indenture may be unenforceable in whole or in part under the laws of the State of New York, but such provisions do not, in our opinion, make the remedies available inadequate for the practical realization of the rights and benefits afforded by the Indenture.

    We hereby consent to the reference to our firm under the caption "Validity of the Securities" in the prospectus included in the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

KING & SPALDING

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Exhibit 5

EX-12

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MAGELLAN HEALTH SERVICES, INC AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS
(Dollars in thousands)

			1996			1997			1998			1999			2000			Six months ended 3/31/2001
EARNINGS:
Income (loss) from continuing operations before income taxes, minority interest, and extraordinary items			$	(71,645	)	$	(56,163	)	$	(8,931	)	$	37,457		$	17,698		$	49,753
Less:
	Equity in (earnings) / loss from unconsolidated subsidiaries			2,005			5,567			(12,795	)		(20,442	)		(9,792	)		(28,223	)
Income (loss) from continuing operations before income taxes, minority interest, extraordinary items and equity in (earnings) / loss of unconsolidated subsidiaries				(69,640	)		(50,596	)		(21,726	)		17,015			7,906			21,530
Add:
	Interest expense			58,548			55,482			87,290			104,156			106,711			55,532
	Portion of rents representative of interest factor			1,797			2,586			7,859			10,765			11,349			5,275
	Cash distributions from unconsolidated subsidiaries			—			—			11,441			21,970			14,324			9,468
													—			—			—
		Total fixed charges		60,345			58,068			106,590			136,891			132,384			70,275
Total earnings			$	(9,295	)	$	7,472		$	84,864		$	153,906		$	140,290		$	91,805
FIXED CHARGES AND PREFERENCE DIVIDENDS:
Interest expense			$	58,548		$	55,482		$	87,290		$	104,156		$	106,711		$	55,532
Portion of rents representative of interest factor				1,797			2,586			7,859			10,765			11,349			5,275
Capitalized interest				—			—			513			673			—			—
Less:
	Fixed charges of certain unconsolidated subsidiaries												—			—			—
Total fixed charges before preference dividends				60,345			58,068			95,662			115,594			118,060			60,807
Preferred dividend requirement				—			—			—			—			3,802			2,481
	Effective tax rate (1)			N/A			N/A			N/A			N/A			50.8	%		49.0	%
Preferred dividend factor on pre-tax basis				—			—			—			—			7,731			4,864
Combined fixed charges and preference dividends			$	60,345		$	58,068		$	95,662		$	115,594		$	125,790		$	65,671
Ratio of earnings (dollar amount of deficiency) to fixed charges			$	(69,640	)	$	(50,596	)	$	(10,798	)		1.3			1.1			1.4

(1)

Represents income from continuing operations before provision for income taxes divided by income from continuing operations, which adjusts dividends on preferred stock to a pre-tax basis.

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MAGELLAN HEALTH SERVICES, INC AND CONSOLIDATED SUBSIDIARIES COMBINED WITH UNCONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS (Dollars in thousands)