-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GqNmbybeDPEwVhXk7nwKlb512FJH+KXlYpRke/jmUu4rNQWQATZmglfN5a9FwO18 MJ6YEE9/1vSmwNtxxO/txw== 0000912057-96-018050.txt : 19960816 0000912057-96-018050.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-018050 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19960815 SROS: AMEX SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MAGELLAN HEALTH SERVICES INC CENTRAL INDEX KEY: 0000019411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 581076937 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 SEC ACT: 1934 Act SEC FILE NUMBER: 005-05938 FILM NUMBER: 96616223 BUSINESS ADDRESS: STREET 1: 3414 PEACHTREE RD N E STREET 2: STE 1400 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 9127421161 FORMER COMPANY: FORMER CONFORMED NAME: CHARTER MEDICAL CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MAGELLAN HEALTH SERVICES INC CENTRAL INDEX KEY: 0000019411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 581076937 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13E4 BUSINESS ADDRESS: STREET 1: 3414 PEACHTREE RD N E STREET 2: STE 1400 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 9127421161 FORMER COMPANY: FORMER CONFORMED NAME: CHARTER MEDICAL CORP DATE OF NAME CHANGE: 19920703 SC 13E4 1 SC 13E4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) ------------------------ MAGELLAN HEALTH SERVICES, INC. (Name of Issuer and Person Filing Statement) COMMON STOCK, PAR VALUE $0.25 PER SHARE (Title of Class of Securities) 559079 10 8 (CUSIP Number of Class of Securities) ------------------------ STEVE J. DAVIS EXECUTIVE VICE PRESIDENT -- ADMINISTRATIVE SERVICES AND GENERAL COUNSEL MAGELLAN HEALTH SERVICES, INC. SUITE 1400 3414 PEACHTREE ROAD, N.E. ATLANTA, GEORGIA 30326 (404) 841-9200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person Filing Statement) ------------------------ COPY TO: ROBERT W. MILLER KING & SPALDING 191 PEACHTREE STREET ATLANTA, GEORGIA 30303 (404) 572-4600 ------------------------ August 15, 1996 (Date Tender Offer First Published, Sent or Given to Security Holders) ------------------------ CALCULATION OF FILING FEE Transaction Valuation $34,999,984* Amount of Filing Fee $7,000
*Based upon purchase of 1,891,891 shares at the maximum tender offer price of $18.50 per share. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form Or Registration No.: N/A Date Filed: N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER. (a) The name of the Issuer is Magellan Health Services, Inc., a Delaware corporation (the "Company"), which has its principal executive offices at Suite 1400, 3414 Peachtree Road, N.E., Atlanta, Georgia 30326. (b) This Schedule 13E-4 relates to the offer by the Company to purchase 1,891,891 shares (or such lesser number of shares as are properly tendered and not withdrawn) of its Common Stock, par value of $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agent named therein), at a price, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), to be selected by the Company, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow the Company to buy 1,891,891 Shares (or such lesser number as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 15, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached as Exhibits (a)(1) and (a)(2), respectively. No separate consideration will be paid for the Rights. The Offer is being made to all holders of Shares, including officers, directors, and affiliates of the Company. The information set forth in "Introduction," "Section 1. Number of Shares; Proration," "Section 10. Shares Outstanding and Significant Stockholders; Certain Effects of the Offer," "Section 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares" and "Section 15. Extension of the Offer; Termination; Amendments" of the Offer to Purchase is incorporated herein by reference. (c) The Shares are listed and principally traded on the American Stock Exchange (the "AMEX") under the symbol "MGL". The information set forth in the "Introduction" and "Section 7. Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. (d) This statement is being filed by the Issuer. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) - (b) The information set forth in "Section 9. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a) - (j) The information set forth in the "Introduction," "Section 8. Purpose of the Offer," "Section 10. Shares Outstanding and Significant Stockholders; Certain Effects of the Offer," "Section 11. Certain Information Concerning the Company" and "Section 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth in "Section 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth in the "Introduction," "Section 8. Purpose of the Offer," "Section 10. Shares Outstanding and Significant Stockholders; Certain Effects of the Offer" and "Section 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is incorporated herein by reference. 1 ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Section 16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a) - (b) The financial information set forth in "Section 11. Certain Information Concerning the Company" of the Offer to Purchase is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. Not applicable. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION - ------------- ---------------------------------------------------------------------------------------- (a) (1) -- Form of Offer to Purchase dated August 15, 1996. (a) (2) -- Form of Letter of Transmittal. (a) (3) -- Form of Notice of Guaranteed Delivery. (a) (4) -- Form of letter to brokers, dealers, commercial banks, trust companies and other nominees dated August 15, 1996. (a) (5) -- Form of letter to clients who are common stockholders for use by brokers, dealers, commercial banks, trust companies and other nominees dated August 15, 1996. (a) (6) -- Form of letter to stockholders from the Chairman and Chief Executive Officer of the Company dated August 15, 1996. *(a) (7) -- Form of letter to Participants for use by the Trustee of the Company's Employee Stock Ownership Plan. (a) (8) -- Form of Summary Advertisement dated August 15, 1996. (a) (9) -- Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(10) -- Form of Press Release dated August 15, 1996. (b) (1) -- Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, First Union National Bank of North Carolina, as Co-Agent, and the financial institutions listed in such credit agreement, which was filed as Exhibit 4(e) to the Company's Registration Statement on Form S-4 (No. 33-53701), filed May 18, 1994, and is incorporated herein by reference. (b) (2) -- Amendment No. 1, dated as of June 9, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(w) to the Company's Amendment No. 1 to Registration Statement on Form S-4 (No. 33-53701) filed July 1, 1994, and is incorporated herein by reference. (b) (3) -- Amendment No. 2, dated as of September 30, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, and is incorporated herein by reference.
2
EXHIBIT NO. DESCRIPTION - ------------- ---------------------------------------------------------------------------------------- (b) (4) -- Amendment No. 3, dated as of December 12, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1994, and is incorporated herein by reference. (b) (5) -- Amendment No. 4, dated as of January 11, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on 10-Q for the Quarterly Period ended December 31, 1994, and is incorporated herein by reference. (b) (6) -- Amendment No. 5, dated as of March 17, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 1995, and is incorporated herein by reference. (b) (7) -- Amendment No. 6, dated as of October 17, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference. (b) (8) -- Amendment No. 7, dated as of November 30, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference. (b) (9) -- Amendment No. 8, dated as of January 24, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference.
3
EXHIBIT NO. DESCRIPTION - ------------- ---------------------------------------------------------------------------------------- (b)(10) -- Amendment No. 9, dated as of June 30, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-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, 1996, and is incorporated herein by reference. (b)(11) -- Amendment No. 10, dated as of July 31, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 1996, and is incorporated herein by reference. (c) -- Not applicable. (d) -- Not applicable. (e) -- Not applicable. (f) -- Not applicable.
- ------------------------ *To be filed by amendment 4 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MAGELLAN HEALTH SERVICES, INC. By: /s/ STEVE J. DAVIS ----------------------------------- STEVE J. DAVIS EXECUTIVE VICE PRESIDENT -- ADMINISTRATIVE SERVICES AND GENERAL COUNSEL Dated: August 15, 1996 5 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - ------------- -------------------------------------------------------------------------------- ----------- (a) (1) -- Form of Offer to Purchase dated August 15, 1996. (a) (2) -- Form of Letter of Transmittal. (a) (3) -- Form of Notice of Guaranteed Delivery. (a) (4) -- Form of letter to brokers, dealers, commercial banks, trust companies and other nominees dated August 15, 1996. (a) (5) -- Form of letter to clients who are common stockholders for use by brokers, dealers, commercial banks, trust companies and other nominees dated August 15, 1996. (a) (6) -- Form of letter to stockholders from the Chairman and Chief Executive Officer of the Company dated August 15, 1996. *(a) (7) -- Form of letter to Participants for use by the Trustee of the Company's Employee Stock Ownership Plan. (a) (8) -- Form of Summary Advertisement dated August 15, 1996. (a) (9) -- Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(10) -- Form of Press Release dated August 15, 1996. (b) (1) -- Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, First Union National Bank of North Carolina, as Co-Agent, and the financial institutions listed in such credit agreement which was filed as Exhibit 4(e) to the Company's Registration Statement on Form S-4 (No. 33-53701), filed May 18, 1994, and is incorporated herein by reference. (b) (2) -- Amendment No. 1, dated as of June 9, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(w) to the Company's Amendment No. 1 to July 1, 1994, and is incorporated herein by reference. (b) (3) -- Amendment No. 2, dated as of September 30, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(s) to the Company's Annual Report on Form 10-K for the year ended September 30, 1994, and is incorporated herein by reference. (b) (4) -- Amendment No. 3, dated as of December 12, 1994, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1994, and is incorporated herein by reference.
EXHIBIT NO. DESCRIPTION PAGE - ------------- -------------------------------------------------------------------------------- ----------- (b) (5) -- Amendment No. 4, dated as of January 11, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on 10-Q for the Quarterly Period ended December 31, 1994, and is incorporated herein by reference. (b) (6) -- Amendment No. 5, dated as of March 17, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, the financial institutions listed therein, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31, 1995, and is incorporated herein by reference. (b) (7) -- Amendment No. 6, dated as of October 17, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference. (b) (8) -- Amendment No. 7, dated as of November 30, 1995, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference. (b) (9) -- Amendment No. 8, dated as of January 24, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended December 31, 1995, and is incorporated herein by reference. (b)(10) -- Amendment No. 9, dated as of June 30, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-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, 1996, and is incorporated herein by reference.
EXHIBIT NO. DESCRIPTION PAGE - ------------- -------------------------------------------------------------------------------- ----------- (b)(11) -- Amendment No. 10, dated as of July 31, 1996, to Second Amended and Restated Credit Agreement, dated as of May 2, 1994, among the Company, Bankers Trust Company, as Agent, and First Union National Bank of North Carolina, as Co-Agent, which was filed as Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 1996, and is incorporated herein by reference. (c) -- Not applicable. (d) -- Not applicable. (e) -- Not applicable. (f) -- Not applicable.
- ------------------------ *To be filed by amendment EX-20.1 2 EXHIBIT 20.1 MAGELLAN HEALTH SERVICES, INC. OFFER TO PURCHASE FOR CASH UP TO 1,891,891 SHARES OF ITS COMMON STOCK THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON THURSDAY, SEPTEMBER 12, 1996, UNLESS THE OFFER IS EXTENDED. Magellan Health Services, Inc., a Delaware corporation (the "Company"), invites its stockholders to tender shares of its Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agent named in the Rights Agreement), to the Company at a price, net to the seller in cash, not greater than $18.50 nor less than $16.50 per Share, as specified by stockholders tendering Shares upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), that it will pay for the Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions described below. -------------------------- THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. -------------------------- The Shares are listed and principally traded on the American Stock Exchange, Inc. (the "AMEX") under the symbol "MGL". On August 14, 1996, the last full trading day on the AMEX prior to the announcement and commencement of the Offer, the closing per Share sales price as reported on the AMEX Composite Tape was $15.50. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7. -------------------------- NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. -------------------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal, or a facsimile, in accordance with the instructions in the Letter of Transmittal, and mail or deliver it and all other required documents to First Union National Bank of North Carolina (the "Depositary"), and either mail or deliver the stock certificates for such Shares to the Depositary or follow the procedure for book-entry delivery set forth in Section 3, (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder or (3) if the stockholder desires to tender Shares beneficially owned in the Company's Employee Stock Ownership Plan (the "ESOP") such stockholder must follow the procedures for ESOP beneficiaries set forth in Section 3. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee should contact such broker, dealer, commercial bank, trust company, or other nominee if they desire to tender such Shares. Stockholders desiring to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply in a timely manner with the procedure for book-entry transfer by the expiration of the Offer must tender such Shares by following procedures for guaranteed delivery set forth in Section 3. STOCKHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL INCLUDING THE SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE TENDERING SHARES IN ORDER TO EFFECT A VALID TENDER OF THEIR SHARES. -------------------------- Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be obtained from the Information Agent. -------------------------- THE DEALER MANAGER FOR THE OFFER IS: [DEAN WITTER REYNOLDS LOGO] August 15, 1996 THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. ------------------------ TABLE OF CONTENTS
PAGE ----- INTRODUCTION.................................................................................................... 1 1. Number of Shares; Proration.......................................................................... 2 2. Tenders by Holders of Fewer Than 100 Shares.......................................................... 3 3. Procedure For Tendering Shares....................................................................... 4 4. Withdrawal Rights.................................................................................... 7 5. Acceptance for Payment and Payment for Shares........................................................ 7 6. Certain Conditions of the Offer...................................................................... 8 7. Price Range of Shares; Dividends..................................................................... 10 8. Purpose of the Offer................................................................................. 11 9. Source and Amount of Funds........................................................................... 11 10. Shares Outstanding And Significant Stockholders; Certain Effects of The Offer........................ 12 11. Certain Information Concerning the Company........................................................... 13 12. Interest of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares.... 16 13. Certain Legal Matters; Regulatory Approvals.......................................................... 16 14. Certain Federal Income Tax Consequences.............................................................. 17 15. Extension of the Offer; Termination; Amendments...................................................... 19 16. Fees and Expenses.................................................................................... 20 17. Miscellaneous........................................................................................ 21
i TO THE HOLDERS OF COMMON STOCK OF MAGELLAN HEALTH SERVICES, INC.: INTRODUCTION The Company invites its stockholders to tender shares of its Common Stock, par value $0.25 per share (the "Shares") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agent named in the Rights Agreement), to the Company at a price, net to the seller in cash, not greater than $18.50 nor less than $16.50 per Share, as specified by stockholders tendering Shares upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), that it will pay for the Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered and not withdrawn at prices at or below the Purchase Price prior to the Expiration Date (as defined in Section 1) will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration and odd lot tender provisions described below. See Section 1. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER. SEE SECTION 10. STOCKHOLDERS MUST MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED. If, at the Expiration Date, more than 1,891,891 Shares (or such greater number of Shares as the Company may elect to purchase) are properly tendered and not withdrawn, the Company will, upon the terms and subject to the conditions of the Offer, accept Shares for purchase first from Odd Lot Owners (as defined in Section 2) who properly tender their Shares at or below the Purchase Price and then on a PRO RATA basis from all other stockholders whose Shares are properly tendered at or below the Purchase Price and not withdrawn. The Company will return all Shares not purchased, including Shares not purchased because of proration. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 7 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company pursuant to the Offer. The Company will pay all fees and expenses of the Depositary, MacKenzie Partners, Inc. (the "Information Agent"), and Dean Witter Reynolds Inc. (the "Dealer Manager") in connection with the Offer. As of July 31, 1996, there were 33,002,826 Shares outstanding. The 1,891,891 Shares that the Company is offering to purchase represent approximately 5.73% of the outstanding Shares at July 31, 1996. The Shares are listed and principally traded on the AMEX under the symbol "MGL". On August 14, 1996, the last full trading day on the AMEX prior to the announcement and commencement of the Offer, the closing per Share sales price as reported on the AMEX Composite Tape was $15.50. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. See Section 7. 1 1. NUMBER OF SHARES; PRORATION. Upon the terms and subject to the conditions of the Offer, the Company will accept for payment and purchase 1,891,891 Shares or such lesser number of Shares as are properly tendered on or prior to the Expiration Date (and not withdrawn in accordance with Section 4) at a price (determined in the manner set forth below) not greater than $18.50 nor less than $16.50 per Share. The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, September 12, 1996, unless the Company, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Company, shall expire. For a description of the Company's right to extend the period of time during which the Offer is open, and to delay, terminate or amend the Offer, see Section 15. If the Offer is oversubscribed, Shares tendered at or below the Purchase Price on or prior to the Expiration Date will be subject to proration, except for Odd Lots as described below. In accordance with Instruction 5 of the Letter of Transmittal, each stockholder who wishes to tender Shares must specify the price (not greater than $18.50 nor less than $16.50 per Share) at which such stockholder is willing to have the Company purchase such Shares. The Company will, upon the terms and subject to the conditions of the Offer, determine a single Purchase Price that it will pay for the Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares purchased pursuant to the Offer will be purchased at the Purchase Price. All Shares tendered and not purchased pursuant to the Offer, including Shares tendered at a price greater than the Purchase Price and Shares not purchased because of proration or otherwise, will be returned to the tendering stockholders at the Company's expense promptly following the Expiration Date. If the number of Shares properly tendered on or prior to the Expiration Date (and not withdrawn in accordance with Section 4) is less than or equal to 1,891,891 Shares (or such greater number of Shares as the Company may elect to purchase pursuant to the Offer), the Company will, upon the terms and subject to the conditions of the Offer, purchase at the Purchase Price all Shares so tendered. Upon the terms and subject to the conditions of the Offer, if at the Expiration Date more than 1,891,891 Shares (or such greater number of Shares as the Company elects to purchase) are properly tendered and not withdrawn at or below the Purchase Price, the Company will accept Shares for purchase in the following order of priority: (a) FIRST, all Shares properly tendered at or below the Purchase Price prior to the Expiration Date (and not withdrawn) by an Odd Lot Owner (as defined in Section 2, including any Shares beneficially owned by such Odd Lot Owner in the Company's ESOP), who: (1) tenders all Shares beneficially owned by such Odd Lot Owner at or below the Purchase Price (partial tenders will not qualify for this preference); and (2) completes the Section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) SECOND, after purchase of all of the foregoing Shares, all other Shares properly tendered at or below the Purchase Price, on or prior to the Expiration Date (and not withdrawn), on a PRO RATA basis, if necessary (with adjustments to avoid purchases of fractional Shares). If proration of tendered Shares is required, the Company will determine the final proration factor promptly after the Expiration Date. Proration for each stockholder tendering Shares, other than Odd Lot Owners, will be based on the ratio of the number of Shares tendered by such stockholder to the total number of Shares tendered by all stockholders, other than Odd Lot Owners, at or below the 2 Purchase Price. Due to the difficulty in determining the number of Shares properly tendered (including Shares tendered by guaranteed delivery procedures, as described in Section 3) and not withdrawn, and because of the Odd Lot procedure, the Company does not expect to be able to announce the final results of such proration until approximately five AMEX trading days after the Expiration Date. The preliminary results of any proration will be announced by press release promptly after the Expiration Date. Stockholders may obtain such preliminary information from the Information Agent or the Dealer Manager and may be able to obtain such information from their brokers. As described in Section 14, the number of Shares that the Company will purchase from a stockholder may affect the federal income tax consequences to the stockholder of such purchase and therefore may be relevant to a stockholder's decision whether to tender Shares. Each stockholder will be afforded the opportunity to designate in the Letter of Transmittal the order of priority in which Shares are to be purchased. Pursuant to the provisions of a Rights Agreement, dated as of July 21, 1992, each share of Common Stock represents, in addition to Common Stock, one Right. Upon becoming exercisable, but prior to the occurrence of certain events, each Right entitles the registered holder to purchase one share of Common Stock at a price of $60 per share. The Rights are not presently exercisable and trade together with the associated share of Common Stock. The Rights will not become exercisable or separately tradeable as a result of the Offer. Absent circumstances causing the Rights to become exercisable or separately tradeable prior to the Expiration Date, the tender of any Shares pursuant to the Offer will include the tender of the associated Rights. No separate consideration will be paid for such Rights, and sellers of Shares pursuant to the Offer will no longer own the Rights associated with such Shares. The Company reserves the right, in its sole discretion, to purchase additional Shares pursuant to the Offer. If (i) the Company increases or decreases the price to be paid for Shares, increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares or decreases the number of Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner described in Section 15, the Offer will be extended until the expiration of ten business days from the date of publication of such notice. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m through 12:00 midnight, New York City time. 2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES. For purposes of the Offer, the term "Odd Lots" means all Shares properly tendered, in accordance with the procedures set forth in Section 3, on or prior to the Expiration Date and not withdrawn, by or on behalf of stockholders ("Odd Lot Owners") who owned, beneficially or of record, as of the close of business on August 12, 1996, fewer than 100 Shares (including any Shares beneficially owned by such Odd Lot Owner in the ESOP). As set forth above, Odd Lots will be accepted for purchase before proration. IN ORDER TO QUALIFY FOR THIS PREFERENCE, AN ODD LOT OWNER MUST PROPERLY TENDER ALL SHARES BENEFICIALLY OWNED BY SUCH STOCKHOLDER. PARTIAL TENDERS WILL NOT QUALIFY FOR THIS PREFERENCE. THE PREFERENCE IS NOT AVAILABLE TO HOLDERS OF 100 OR MORE SHARES. ANY ODD LOT OWNER WISHING TO TENDER ALL OF SUCH STOCKHOLDER'S SHARES BENEFICIALLY OWNED MUST COMPLETE THE SECTION ENTITLED "ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF APPLICABLE, ON THE NOTICE OF GUARANTEED DELIVERY. Stockholders owning an aggregate of less than 100 Shares whose Shares are purchased pursuant to the Offer not only will avoid the payment of brokerage commission, but also will avoid any applicable odd lot discounts payable on a sale of their Shares in an AMEX transaction. 3 3. PROCEDURE FOR TENDERING SHARES. PROPER TENDER OF SHARES. For Shares, other than Shares beneficially owned by a stockholder in the ESOP ("ESOP Shares"), to be properly tendered pursuant to the Offer, (a) a properly completed and duly executed Letter of Transmittal (or manually executed facsimile) with any required signature guarantees and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, and either certificates for the Shares to be tendered must be transmitted to and received by the Depositary at one of such addresses or such Shares must be tendered pursuant to the procedures for book-entry transfer described below (and a confirmation of such tender received by the Depositary), in each case on or prior to the Expiration Date, or (b) the guaranteed delivery procedure described below must be followed. As specified in Instruction 5 of the Letter of Transmittal, each stockholder desiring to tender Shares pursuant to the Offer must properly indicate in the section captioned "Price (In Dollars) Per Share of Common Stock At Which Shares of Common Stock are Being Tendered" on the Letter of Transmittal the price (in multiples of $.125) at which such stockholder's Shares are being tendered or may check the box on the Letter of Transmittal marked "Shares Tendered At Purchase Price Determined by Dutch Auction". In addition, an Odd Lot Owner may check the box in the section entitled "Odd Lots" indicating that such stockholder is tendering all of their Shares at the Purchase Price. STOCKHOLDERS DESIRING TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE AT WHICH SHARES ARE BEING TENDERED, EXCEPT THAT THE SAME SHARES CANNOT BE TENDERED (UNLESS PROPERLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE OFFER) AT MORE THAN ONE PRICE. IN ORDER TO PROPERLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL. In addition, Odd Lot Owners who tender all of their Shares must complete the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery, in order to qualify for the preferential treatment available to Odd Lot Owners as set forth in Section 1. Notwithstanding any other provision hereof, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities, as defined below), a properly completed and duly executed Letter of Transmittal (or manually executed facsimile) with any required signature guarantees and any other documents required by the Letter of Transmittal. BOOK-ENTRY DELIVERY. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company and the Philadelphia Depository Trust Company (collectively referred to as "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make delivery of Shares into the Depositary's account in accordance with the procedures of such Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book entry transfer into the Depositary's account at a Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal (or manually executed facsimile) with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Depositary at one of the addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, or the guaranteed delivery procedure described below must be complied with. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder of the Shares (which 4 term, for purposes of this Section 3 includes any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) exactly as the name of the registered holder appears on the certificate tendered, and payment is to be made directly to such registered holder, or (ii) if Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States (each such entity, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signer of a Letter of Transmittal, or if payment is to be made, or Shares not purchased or tendered are to be issued, to a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name of the registered holder appears on the certificate with the signature on the certificate or stock power guaranteed by an Eligible Institution. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF CERTIFICATES FOR SHARES ARE TO BE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BACKUP FEDERAL INCOME TAX WITHHOLDING AND WITHHOLDING ON FOREIGN STOCKHOLDERS. To prevent federal income tax backup withholding equal to 31% of the gross payments made to stockholders for Shares purchased pursuant to the Offer, each stockholder who does not otherwise establish an exemption from such withholding must provide the Depositary with such stockholder's correct taxpayer identification number (or certify that such taxpayer is awaiting a taxpayer identification number) and provide certain other information by completing a Substitute Form W-9 included with the Letter of Transmittal. Foreign stockholders may be required to submit Form W-8, certifying non-United States status, in order to avoid backup withholding. Even if a foreign stockholder has provided the required certification to avoid backup withholding, the Depositary will withhold federal income taxes equal to 30% of the gross payments payable to a foreign stockholder or his agent unless the Depositary determines that an exemption from or a reduced rate of withholding is available pursuant to a tax treaty or an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States. In order to obtain an exemption from or a reduced rate of withholding pursuant to a tax treaty, a foreign stockholder must deliver to the Depositary a properly completed Form 1001. For this purpose, a foreign stockholder is a stockholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, any State or any political subdivision thereof or (iii) any estate or trust the income of which is subject to United States federal income taxation regardless of the source of such income. In order to obtain an exemption from withholding on the grounds that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign stockholder must deliver to the Depositary a properly completed Form 4224. The Depositary will determine a stockholder's status as a foreign stockholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to any outstanding certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (E.G., Form 1001 or Form 4224), unless facts and circumstances indicate that such reliance is not warranted. A foreign stockholder may be eligible to obtain a refund of all or a portion of any tax withheld if such stockholder meets one of the three tests for sale treatment described in Section 14 or is otherwise able to establish that no tax or a reduced amount of tax is due. Backup withholding generally will not apply to amounts subject to the 30% or treaty-reduced rate of withholding. See Instructions 13 and 14 of the Letter of Transmittal. 5 EACH STOCKHOLDER SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO WHETHER SUCH STOCKHOLDER IS SUBJECT TO OR EXEMPT FROM FEDERAL INCOME TAX WITHHOLDING. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder cannot deliver certificates for such Shares (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date, such Shares may nevertheless be tendered if all of the following conditions are met: (a) such tender is made by or through an Eligible Institution; (b) the Notice of Guaranteed Delivery properly completed and duly executed, substantially in the form provided by the Company, is received by the Depositary on or prior to the Expiration Date; and (c) the certificates for all tendered Shares in proper form for transfer (or a confirmation of a book-entry transfer of Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), together with a properly completed and duly executed Letter of Transmittal (or a manually executed facsimile) and any required signature guarantees or other documents required by the Letter of Transmittal, are received by the Depositary within three AMEX trading days after the receipt by the Depositary of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. ESOP BENEFICIARIES. If a stockholder desires to tender such stockholder's ESOP Shares pursuant to the Offer, such stockholder must direct the trustee of the ESOP to tender such Shares by properly completing, duly executing and returning to the trustee the Direction Form sent to such stockholder by the trustee. The trustee will aggregate all such tenders and execute the requisite number of Letters of Transmittal on behalf of all beneficiaries. DELIVERY OF A LETTER OF TRANSMITTAL BY A STOCKHOLDER OF ESOP SHARES DOES NOT CONSTITUTE PROPER TENDER OF ESOP SHARES. PROPER TENDER OF ESOP SHARES CAN ONLY BE MADE BY THE TRUSTEE, WHO IS THE RECORD OWNER OF SUCH SHARES. If a stockholder desires to tender Shares, as well as ESOP Shares, such stockholder must properly complete and duly execute a Letter of Transmittal for such Shares and deliver such Letter of Transmittal to the Depositary as well as following the directions above for tendering ESOP Shares. The trustee can not include non-ESOP Shares in its Letter(s) of Transmittal. DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the Purchase Price, number of Shares to be accepted, the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of Shares determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in any tender of Shares, and the Company's interpretation of the terms of the Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. None of the Company, the Dealer Manager, the Information Agent, the Depositary, or any other person will be under any duty to give notification of any defect or irregularity in tenders or incur any liability for failure to give any such notice. 6 TENDER CONSTITUTES AN AGREEMENT. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer and a binding agreement between the tendering stockholder and the Company. It is a violation of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person, directly or indirectly, to tender Shares for such stockholder's own account unless, at the time of the tender and at the end of the proration period, the person so tendering (a) has a net long position equal to or greater than the amount of (i) Shares tendered or (ii) other securities immediately convertible into, or exercisable or exchangeable for the amount of Shares tendered and will acquire such Shares for tender by conversion, exercise or exchange of such other securities and (b) will cause such Shares to be delivered in accordance with the terms of the Offer. Rule 14e-4 promulgated under the Exchange Act provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer as well as the tendering stockholder's representation and warranty that (a) such stockholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 and (b) the tender of such Shares complies with Rule 14e-4. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares pursuant to the Offer will be irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for payment by the Company as provided in this Offer to Purchase, may also be withdrawn after 12:00 midnight, New York City time, on October 10, 1996. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the certificates have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering stockholder must submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Shares tendered by an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person shall be obligated to give any notice of any defects or irregularities in any notice of withdrawal and none of them shall incur any liability for failure to give any such notice. Any Shares properly withdrawn will thereafter be deemed not tendered for purposes of the Offer. However, withdrawn Shares may be retendered on or prior to the Expiration Date by again following any of the procedures described in Section 3. If the Company extends the Offer, is delayed in its purchase of Shares or is unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, subject to applicable law, retain on behalf of the Company all tendered Shares, and the Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in this Section 4. 5. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer, and promptly after the Expiration Date, the Company will determine a single Purchase Price that it will pay for the Shares properly tendered and not withdrawn, taking into account the number of Shares tendered and the prices specified by 7 stockholders tendering Shares, and will (subject to the proration terms and odd lot tender provisions of the Offer) accept for payment (and thereby purchase) and pay for Shares validly tendered at or below the Purchase Price and not withdrawn as permitted in Section 4. Promptly following the determination of the Purchase Price, the Company will announce the Purchase Price it will pay for tendered Shares. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made promptly (subject to possible delay in the event of proration) but only after timely receipt by the Depositary of certificates for Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), a properly completed and duly executed Letter of Transmittal (or manually executed facsimile thereof) and any other required documents. For purposes of the Offer, the Company will be deemed to have accepted for payment, subject to proration, Shares tendered at or below the Purchase Price and not withdrawn if, as and when the Company gives oral or written notice to the Depository of its acceptance of such Shares for payment pursuant to the Offer. Payment of Shares accepted for payment pursuant to the Offer will be made by depositing the aggregate Purchase Price for such Shares with the Depository, which will act as agent for the tendering stockholders for the purpose of receiving payment from the Company and transmitting such payments to tendering stockholders. In the event of proration, the Company will determine the proration factor and pay for those tendered Shares accepted for payment as soon as practicable after the Expiration Date; however, the Company does not expect to be able to announce the final results of any such proration until approximately five AMEX trading days after the Expiration Date. Certificates for all Shares not purchased, including Shares not purchased due to proration, will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to the account maintained within such Book Entry Transfer Facility by the participant who so delivered such Shares) as soon as practicable after the Expiration Date or termination of the Offer without expense to the tendering stockholder. Under no circumstances will interest be paid by the Company by reason of any delay in paying for any Shares or otherwise. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 6. The Company will pay all stock transfer taxes, if any, payable on the transfer to it of Shares purchased pursuant to the Offer, except if payment of the Purchase Price is to be made to, or (in the circumstances permitted by the Offer) Shares not tendered or not accepted for purchase are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person signing the Letter of Transmittal. In such circumstances, the amount of all stock transfer taxes, if any (whether imposed on the registered holder or such other person), payable on account of the transfer to such person will be deducted from the Purchase Price unless evidence satisfactory to the Company of the payment of such taxes or exemption therefrom is submitted. See Instruction 7 of the Letter of Transmittal. ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. 6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment, purchase or pay for any Shares tendered and may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered, if at any time on or after August 15, 1996 and at or before the payment for any such Shares, any of the following events shall have occurred (or shall have been determined by the Company to have occurred) which, in the 8 Company's sole judgment in any such case and regardless of the circumstances (including any action or omission to act by the Company), makes it inadvisable to proceed with the Offer or with such acceptance for purchase or payment: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental authority or regulatory or administrative agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or regulatory or administrative agency, domestic or foreign, (i) that challenges or seeks to make illegal, or delay or otherwise directly or indirectly restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some or all of the Shares by the Company or otherwise directly or indirectly relating in any manner to or affecting the Offer, or (ii) that otherwise, in the sole judgment of the Company, has or may have a material adverse effect on the business, financial condition, income, operations or prospects of the Company and its subsidiaries taken as a whole or has or may materially impair the contemplated benefits of the Offer to the Company; or (b) any action shall have been threatened, instituted, pending or taken or approval withheld or any statute, rule, regulation, judgment or order or injunction proposed, sought, enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer or the Company or any of its subsidiaries by any court, government or governmental authority or regulatory or administrative agency, domestic or foreign, that, in the sole judgment of the Company might, directly or indirectly, result in any of the consequences referred to in clauses (i) or (ii) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation by any governmental, regulatory or administrative authority or agency or any other event that, in the sole judgment of the Company, might affect the extension of credit by banks or other lending institutions, (v) any significant decrease in the market price of the Shares or any change in the general political, market, economic or financial conditions in the United States or abroad that has or may have a material adverse effect with respect to the Company's business, operations or prospects or the trading in the Shares, (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof, or (vii) any decline in either the Dow Jones Industrial Average (5666.89 at the close of business on August 14, 1996) or the Standard and Poor's Index of 500 Industrial Companies (622.05 at the close of business on August 14, 1996) by an amount in excess of 10%, measured from the close of business on August 14, 1996; or (d) a tender or exchange offer for some or all of the Shares (other than the Offer) or a proposal with respect to a merger, consolidation or other business combination with or involving the Company or any subsidiary shall have been proposed to be made or shall have been made by another person; or (e) (i) any entity, group (as that term is used in Section 13(d)(3) of the Exchange Act), or person (other than entities, groups or persons, if any, who have filed with the Securities and Exchange Commission (the "Commission") on or before August 15, 1996, a Schedule 13G or a Schedule 13D with respect to any of the Shares) shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding Shares; or (ii) such entity, group or person that has publicly disclosed any such beneficial ownership of more than 5% of the Shares prior to such date shall have acquired, or proposed to 9 acquire, beneficial ownership of additional Shares constituting more than 2% of the outstanding Shares or shall have been granted any option or right to acquire beneficial ownership of more than 2% of the outstanding Shares; or (iii) any person or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to acquire the Company or any of its Shares; or (f) any change or changes have occurred (or any development shall have occurred involving any prospective change or changes) in the business, assets, liabilities, condition (financial or otherwise), operations, results of operations or prospects of the Company or any of its subsidiaries that, in the sole judgment of the Company, have or may have a material effect with respect to the Company and its subsidiaries taken as a whole. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company in its sole discretion regardless of the circumstances (including any action or inaction by the Company) giving rise to any such conditions, or may be waived by the Company in its sole discretion, in whole or in part, at any time. The failure by the Company at any time to exercise its rights under any of the foregoing conditions shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right which may be asserted at any time or from time to time. Any determination by the Company concerning the events described in this Section 6 shall be final and binding on all parties. 7. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the AMEX under the symbol "MGL". The following table sets forth for the periods indicated the high and low sales prices per Share on the AMEX Composite Tape as compiled from published financial sources in each such fiscal quarter.
COMMON STOCK ------------------- HIGH LOW ------- ------- Fiscal 1994: First Quarter................................... $27 21 Second Quarter.................................. 28 21 3/8 Third Quarter................................... 26 1/8 21 3/4 Fourth Quarter.................................. 28 1/2 21 1/4 Fiscal 1995: First Quarter................................... $28 1/2 19 Second Quarter.................................. 21 1/4 13 7/8 Third Quarter................................... 19 5/8 15 5/8 Fourth Quarter.................................. 23 1/4 16 1/4 Fiscal 1996: First Quarter................................... $24 1/4 17 3/8 Second Quarter.................................. 25 21 3/8 Third Quarter................................... 24 7/8 21 Fourth Quarter (through August 14, 1996)........ 21 5/8 14 3/4
On August 14, 1996, the last full trading day on the AMEX prior to the announcement and commencement of the Offer, the closing per Share sales price on the AMEX Composite Tape was $15.50. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. The Company has not declared any cash dividends during fiscal 1994, 1995 or 1996. The Company is prohibited from paying dividends (other than dividends payable in shares of Common Stock) on its Common Stock under the terms of its Credit Agreement (as defined below), except for cash dividends 10 that, in the aggregate, from May 1994, do not exceed 6% of the net cash proceeds from issuances of capital stock, reduced by the aggregate cost of stock purchases since May 1994 and certain other limited circumstances. 8. PURPOSE OF THE OFFER. The Company believes that the purchase of the Shares is an attractive use of a portion of the Company's available capital on behalf of its stockholders and is consistent with the Company's long-term goal of increasing stockholder value. The Company believes it has adequate sources of capital to complete the Share repurchase and pursue acquisition and investment opportunities. Accordingly, the Company is providing stockholders with the opportunity to determine the price or prices (not greater than $18.50 nor less than $16.50 per Share at which they are willing to sell their Shares), subject to the terms and conditions of the Offer, and without the usual transaction costs associated with market sales. In addition, the Offer may give stockholders the opportunity to sell Shares at a price greater than market prices prevailing prior to announcement and commencement of the Offer. The Offer also allows stockholders to sell a portion of their Shares while retaining a continuing equity interest in the Company if they so desire. In addition, Odd Lot Owners whose Shares are purchased pursuant to the Offer not only will avoid the payment of brokerage commissions but also will avoid any applicable odd lot discounts payable on a sale of their Shares in an AMEX transaction. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH STOCKHOLDER'S SHARES AND NEITHER HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. STOCKHOLDERS ARE URGED TO EVALUATE FULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH TO TENDER. The Company may in the future purchase Shares on the open market, in privately negotiated transactions, through tender offers or otherwise. Any such purchases may be on the same terms as, or on terms which are more or less favorable to stockholders than, the terms of the Offer. However, Rule 13e-4(f)(6) under the Exchange Act prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the expiration or termination of the Offer. Any possible future purchases by the Company will depend on many factors, including the market price of the Shares, the results of the Offer, the Company's business and financial position and general economic and market conditions. 9. SOURCE AND AMOUNT OF FUNDS. If the Company were to purchase 1,891,891 Shares pursuant to the Offer at a Purchase Price of $18.50 per Share (the highest price in the range of possible purchase prices), the maximum aggregate cost of the Offer would be approximately $35.5 million (which includes $500,000 in transaction costs), which would be paid either from borrowings under the Company's Credit Agreement, cash and cash equivalents of the Company or a combination of the two. As of July 31, 1996, the Company had cash and cash equivalents of approximately $129 million and available borrowings of approximately $101 million under the Credit Agreement. The Company's credit agreement (as amended, the "Credit Agreement") is dated as of May 2, 1994, and is among the Company, Bankers Trust Company, as Agent, First Union National Bank of North Carolina, as Co-Agent, and a group of financial institutions. The Credit Agreement, as amended, is filed as Exhibits (b)(1) through (b)(11) to the Company's Schedule 13E-4 relating to the Offer and is incorporated by reference. The Credit Agreement is a five-year reducing, revolving credit facility for the Company and its subsidiaries in an aggregate committed amount of $300 million initially and of $241.8 million as of July 31, 1996. 11 The loans outstanding under the Credit Agreement bear interest (subject to certain potential adjustments) at a rate per-annum equal to (a) the sum of the base lending rate plus 3/4 of 1%, or (b) at the option of the Company, the sum of the maximum reserve-adjusted one, two, three or six-month LIBOR plus 1 3/4%. The base lending rate is the highest of (i) the rate announced from time to time as Bankers Trust Company's prime lending rate, (ii) the Federal Reserve's reported weekly average dealer offering rate for three-month certificates of deposit, adjusted for maximum reserves, plus 1/2 of 1%, and (iii) the federal funds rate plus 1/2 of 1%. As of July 31, 1996, the interest rate on Credit Agreement loans was 7.19% per annum. The Company is required to reduce the commitment under the Credit Agreement by $39.7 million in March 1997, by $27.1 million in March 1998 and by $175 million in March 1999. In addition to these scheduled reductions, the Company is obligated to reduce the commitment by an amount equal to 70% of the net proceeds of certain asset sales and by an amount equal to 25% of the net proceeds of certain issuances of equity by the Company. The obligations of the borrowers under the Credit Agreement are secured by a security interest in substantially all of the personal property and equipment of the Company and most of its subsidiaries, a pledge of the outstanding stock of most of the Company's subsidiaries and mortgages on a majority of the Company's hospitals. The Credit Agreement contains representations and warranties, affirmative and negative covenants, events of default and other terms customary to similar financings. If the Company were to use borrowings under the Credit Agreement, the Company would expect to repay such borrowings, depending on business and market conditions, through internally generated funds, other borrowings or a combination of the foregoing. 10. SHARES OUTSTANDING AND SIGNIFICANT STOCKHOLDERS; CERTAIN EFFECTS OF THE OFFER. As of July 31,1996, the Company had issued and outstanding 33,002,826 Shares. The 1,891,891 Shares that the Company is offering to purchase pursuant to the Offer represent approximately 5.73% of the Shares then outstanding. The Company has been advised that no director or executive officer of the Company intends to tender any Shares pursuant to the Offer. The purchase of Shares pursuant to the Offer will reduce the number of Shares that otherwise might trade publicly and may reduce the number of stockholders. Nonetheless, the Company anticipates that there will be a sufficient number of Shares outstanding and publicly traded following the Offer to ensure a continued trading market for the Shares. Based upon published guidelines of the AMEX, the Company does not believe that its purchase of Shares pursuant to the Offer will cause the Company's remaining Shares to be delisted from the AMEX. The Shares are registered under the Exchange Act which requires, among other things, that the Company furnish certain information to its stockholders and to the Commission and comply with the Commission's proxy rules in connection with meetings of the Company's stockholders. The Company has no reason to believe that the purchase of Shares pursuant to the Offer will result in the Shares becoming eligible for deregistration under the Exchange Act. The Shares are currently "margin securities" under the rule of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit to their customers using the Shares as collateral. Following the repurchase of Shares pursuant to the Offer, the Shares will continue to be margin securities for purposes of the Federal Reserve Board's margin regulations. Shares acquired by the Company pursuant to the Offer will be held in the Company's treasury and will be available for future issuance by the Company or may be retired by the Company in the future. 12 11. CERTAIN INFORMATION CONCERNING THE COMPANY. Magellan Health Services, Inc. is an integrated, national behavioral healthcare company. The Company operates through three principal subsidiaries engaging in (i) the provider business, (ii) the managed care business and (iii) the public sector business. Charter Behavioral Health Systems, Inc., the Company's wholly-owned subsidiary that engages in the provider business, operated 94 acute care psychiatric hospitals and two residential psychiatric treatment centers with an aggregate capacity of 8,657 licensed beds as of June 30, 1996. Eighty-nine of the Company's hospitals operate partial hospitalization programs and the Company operates 141 outpatient centers, staffed by mental health professionals. Approximately 91% of the Company's fiscal 1995 consolidated revenue was contributed by the provider business. Green Spring, the Company's 61% owned subsidiary that engages in the managed care business, provides managed behavioral healthcare services, which include (i) Enhanced Utilization Management, a utilization review process that employs clinical criteria designed to provide each patient with accessible, appropriate and affordable treatment across the entire continuum of care and services; (ii) Care Management, a fully integrated healthcare model that offers utilization review services and provides care to patients through the management of a national network of contract providers and Green Spring-owned staff model clinics; (iii) Employee Assistance Plans, employer-paid assessment, counseling and referral programs that help employees address personal and workplace problems; and (iv) Comprehensive Administrative Services, including member assistance, management reporting, claims processing, clinical management information and provider referral systems that are adaptable to customer circumstances and requirements through a network of more than 30,000 providers nationwide covering approximately 12.6 million members as of June 30, 1996. The Company had no significant managed care revenue in fiscal 1995. Magellan Public Solutions, Inc. the Company's wholly-owned subsidiary that engages in the public sector business, provides specialty home-based behavioral healthcare services, behavioral services in correctional facilities and troubled and delinquent adolescent facilities services pursuant to contractual arrangements with governmental agencies. Approximately 4% of the Company's fiscal 1995 consolidated revenue was provided by the public sector business. The Company's business strategy is to provide access to a full continuum of behavioral healthcare and managed care services and to perform such services in a cost effective manner with predictable results. The Company's integrated national behavioral healthcare system has the capability to deliver and to manage the delivery of behavioral healthcare services for large public and private payers who need assistance in managing the risk of behavioral healthcare costs. 13 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) Set forth below is certain summary historical consolidated financial information of the Company and its subsidiaries. The historical financial information (other than the ratio (deficiency) of earnings before fixed charges to fixed charges) has been derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995 (the "Company's 1995 Annual Report") and from the unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q for the quarterly periods ended December 31, 1995, March 31, 1996 and June 30, 1996 (the "Company's 1996 Quarterly Reports"), each of which is incorporated by reference herein, and other information and data contained in the Company's 1995 Annual Report and the Company's 1996 Quarterly Reports. More comprehensive financial information is included in such reports and the financial information which follows is qualified in its entirety by reference to such reports and all of the financial statements and related notes contained therein, copies of which may be obtained as set forth below under the caption "Additional Information."
NINE MONTHS ENDED JUNE YEAR ENDED SEPTEMBER 30, 30, -------------------------- ------------------------ 1994 1995 1995 1996 ----------- ------------- ----------- ----------- STATEMENT OF OPERATIONS DATA: Net Revenue................................................. $ 904,646 $ 1,151,736 $ 868,403 $ 996,997 Income (loss) before extraordinary items.................... (47,003) (42,963) (13,069) 24,095 Net income (loss)........................................... (59,619) (42,963) (13,069) 24,095 Income (loss) per common share before extraordinary item.... $ (1.78) $ (1.54) $ (0.47) $ 0.79 Extraordinary loss per common share......................... (0.48) -- -- -- Net income (loss) per common share.......................... $ (2.26) $ (1.54) $ (0.47) $ 0.79 Average number of shares outstanding........................ 26,394 27,870 27,833 30,559 Ratio (deficiency) of earnings before fixed charges to fixed charges (1)................................................ $ (57,539) $ (54,085) $ (6,199) 1.93
AS OF SEPTEMBER 30, -------------------------- 1994 1995 ----------- ------------- AS OF JUNE 30, ---------------------------- 1995 ------------- 1996 ------------- BALANCE SHEET DATA: Working capital........................................ $ 109,579 $ 91,413 $ 92,802 $ 115,029 Total assets........................................... 961,480 983,558 1,005,549 1,170,187 Total assets less goodwill and reorganization value in excess of amounts allocable to identifiable assets.... 931,567 943,564 960,145 1,041,319 Long-term debt and capital lease obligations........... 533,476 538,770 539,587 532,100 Stockholders' equity................................... 56,221 88,560 83,131 185,715 Book value per common share (2)........................ -- 3.17 -- 5.72
- ------------------------ NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (1) The ratio (deficiency) of earnings before fixed charges to fixed charges were computed by dividing pre-tax income before fixed charges by fixed charges. Fixed charges consist of interest expense and the interest component of operating leases. (2) Book value per common share is calculated as total stockholders' equity divided by the number of common shares outstanding, net of treasury shares, at the end of the period. 14 SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION The following summary unaudited consolidated pro forma financial information gives effect to the purchase of the Shares pursuant to the Offer based on certain assumptions described in the Notes to Summary Unaudited Consolidated Pro Forma Financial Information and gives effect to the purchase of the Shares pursuant to the Offer as if it had occurred on October 1, 1994 with respect to the statement of operations data and on September 30, 1995 and June 30, 1996 with respect to the balance sheet data. The summary unaudited consolidated pro forma financial information should be read in conjunction with the summary consolidated historical financial information and does not purport to be indicative of the results that would actually have been obtained had the purchase of the Shares pursuant to the Offer been completed at the dates indicated or that may be obtained in the future.
YEAR ENDED SEPTEMBER 30, 1995 NINE MONTHS ENDED JUNE 30, 1996 ------------------------------------------ ------------------------------------------- PRO FORMA PRO FORMA ------------------------------ ------------------------------ ASSUMED $18.50 ASSUMED $16.50 ASSUMED $18.50 ASSUMED $16.50 PER SHARE PER SHARE UNAUDITED PER SHARE PER SHARE HISTORICAL PURCHASE PRICE PURCHASE PRICE HISTORICAL PURCHASE PRICE PURCHASE PRICE ---------- -------------- -------------- ----------- -------------- -------------- (IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenue....................... $1,151,736 $1,151,736 $1,151,736 $ 996,997 $ 996,997 $ 996,997 Net income (loss)................. (42,963) (44,650) (44,471) 24,095 22,920 23,045 Net income (loss) per common share............................ $ (1.54) $ (1.72) $ (1.71) $ 0.79 $ 0.80 $ 0.80 Average number of shares outstanding...................... 27,870 25,978 25,978 30,559 28,667 28,667 Ratio (deficiency) of earnings before fixed charges to fixed charges.......................... $ (54,085) $ (56,897) $ (56,598) 1.93 1.86 1.87
AS OF SEPTEMBER 30, 1995 AS OF JUNE 30, 1996 ------------------------------------------- ------------------------------------------ PRO FORMA PRO FORMA ------------------------------ ------------------------------ ASSUMED $18.50 ASSUMED $16.50 ASSUMED $18.50 ASSUMED $16.50 PER SHARE PER SHARE UNAUDITED PER SHARE PER SHARE HISTORICAL PURCHASE PRICE PURCHASE PRICE HISTORICAL PURCHASE PRICE PURCHASE PRICE ----------- -------------- -------------- ---------- -------------- -------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA: Working Capital................... $ 91,413 $ 91,413 $ 91,413 $ 115,029 $ 115,029 $ 115,029 Total Assets...................... 983,558 983,558 983,558 1,170,187 1,170,187 1,170,187 Total assets less goodwill and reorganization value in excess of amounts allocable to identifiable assets........................... 943,564 943,564 943,564 1,041,319 1,041,319 1,041,319 Long-term debt and capital lease obligations...................... 538,770 574,270 570,486 532,100 567,600 563,816 Stockholders' equity.............. 88,560 53,060 56,844 185,715 150,215 153,999 Book value per common share....... 3.17 2.04 2.18 5.72 4.91 5.04
- ------------------------ NOTES TO SUMMARY UNAUDITED CONSOLIDATED PRO FORMA INFORMATION The following assumptions regarding the Offer were made in determining the pro forma financial information: (1) The information assumes 1,891,891 Shares are purchased at $16.50 per share and $18.50 per share with the purchase being financed under the Company's Credit Agreement bearing interest at 7.92% in fiscal 1995 and 7.48% for the nine months ended June 30, 1996. (2) Expenses directly related to the Offer are assumed to be $500,000 and are included as part of the cost of the Shares acquired. (3) The ratio (deficiency) of earnings before fixed charges to fixed charges were computed by dividing pre-tax income before fixed charges by fixed charges. Fixed charges consist of interest expense and the interest component of operating leases. (4) Book value per common share is calculated as total stockholders' equity divided by the number of common shares outstanding, net of treasury shares, at the end of the period. 15 ADDITIONAL INFORMATION. The Company is subject to the information requirements of the Exchange Act, and in accordance therewith, files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their compensation, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. The Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission. Such material and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and (except for the Issuer Tender Offer Statement) are also available for inspection and copying at the following regional offices of the Commission: Seven World Trade Center, Suite 1300, New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be obtained by mail, upon payment of the Commission's customary charges, by writing to the Public Reference Section at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission also maintains a web site at http://www.sec.gov which contains reports, proxy statements and other information regarding registrants that file electronically with the Commission. Such material (except for the Issuer Tender Offer Statement) is also available for inspection at the AMEX at 86 Trinity Place, New York, New York 10006. 12. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES. Neither the Company, nor any executive officer or director of the Company, any person controlling the Company, any executive officer and director of any person controlling the Company or any associate or subsidiary of any such person (including any executive officer or director of any such subsidiary), has engaged in any transaction involving Shares during the period of forty business days prior to the date hereof. Neither the Company nor, to the Company's knowledge, any of its executive officers, directors or affiliates is a party to any contract, arrangement, understanding or relationship relating, directly or indirectly, to the Offer with any other person with respect to Shares (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations). Except for the Offer, none of the Company or its executive officers or directors has current plans or proposals which relate to or would result in any extraordinary corporate transaction involving the Company, such as a merger, reorganization, sale or transfer of a material amount of its assets or the assets of any of its subsidiaries, taken as a whole, any change in its present Board of Directors or management, any material change in its present dividend policy or indebtedness or capitalization, any other material change in its business or corporate structure, any material change in its Restated Certificate of Incorporation or Bylaws, or any actions causing a class of its equity securities to become eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act, or the suspension of the Company's obligation to file reports pursuant to Section 15(d) of the Exchange Act, or any actions similar to any of the foregoing. 13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. The Company is not aware of any license or regulatory permit that it believes is material to the Company's business that might be adversely affected by the Company's acquisitions of Shares as contemplated herein or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Company as contemplated herein. Should any such approval or other action be required, the Company presently contemplates that such approval or other action will be sought. The Company is unable to predict whether it will be required to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such 16 matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to the Company's business. The Company's obligations under the Offer to accept for payment and pay for Shares are subject to certain conditions. See Section 6. 14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary under currently applicable law of certain federal income tax considerations generally applicable to the Offer. The discussion set forth below is for general information only and the tax treatment described herein may vary depending upon each stockholder's particular circumstances and tax position. Certain stockholders (including insurance companies, tax-exempt organizations, financial institutions or broker-dealers, foreign corporations, persons who are not citizens or residents of the United States, stockholders who do not hold their Shares as capital assets and stockholders who have acquired their Shares upon the exercise of options or otherwise as compensation) may be subject to special rules not discussed below. No ruling from the Internal Revenue Service ("IRS") will be applied for with respect to the federal income tax consequences discussed herein and, accordingly, there can be no assurance that the IRS will agree with the conclusions stated. The discussion does not consider the effect of any applicable foreign, state, local or other tax laws. EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FOREIGN, STATE, LOCAL OR OTHER TAX LAWS, ANY RECENT CHANGES IN APPLICABLE TAX LAWS AND ANY PROPOSED LEGISLATION. GENERAL. A stockholder's exchange of Shares for cash pursuant to the Offer will be a taxable transaction for federal income tax purposes, and may also be a taxable transaction under applicable state, local, foreign or other tax laws. The federal income tax consequences to a stockholder may vary depending upon the stockholder's particular facts and circumstances. TREATMENT AS A SALE OR EXCHANGE. Under Section 302 of the Internal Revenue Code of 1986, as amended (the "Code"), a transfer of Shares to the Company pursuant to the Offer will, as a general rule, be treated as a sale or exchange of the Shares if the receipt of cash upon the sale (a) is "substantially disproportionate" with respect to the stockholder, (b) results in a "complete redemption" of the stockholder's interest in the Company, or (c) is "not essentially equivalent to a dividend" with respect to the stockholder. These tests (the "Section 302 tests") are explained more fully below. If any of the Section 302 tests is satisfied, a tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer (less any portion thereof attributable to accrued but unpaid dividends which is taxable as a dividend) and the stockholder's basis in the Shares sold pursuant to the Offer. If the Shares are held as capital assets, the gain or loss will be capital gain or loss, which will be long-term capital gain or loss if the Shares have been held for more than one year. TREATMENT AS A DIVIDEND. If none of the Section 302 tests is satisfied and, as anticipated, the Company has sufficient earnings and profits, a tendering stockholder will be treated as having received a dividend taxable as ordinary income in an amount equal to the entire amount of cash received by the stockholder pursuant to the Offer. This amount will not be reduced by the stockholder's basis in the Shares sold pursuant to the Offer, and (except as described below for corporate stockholders eligible for the dividends-received deduction) the stockholder's basis in those Shares will be added to the stockholder's basis in his or her remaining Shares. No assurance can be given that any of the Section 302 tests will be satisfied as to any particular stockholder, and thus no assurance can be given that any particular stockholder will not be treated as having received a dividend taxable as ordinary income. CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the Section 302 tests is satisfied, a stockholder must take into account not only Shares actually owned by the stockholder, but also 17 Shares that are constructively owned within the meaning of Section 318 of the Code. Under Section 318, a stockholder may constructively own Shares actually owned, and in some cases constructively owned, by certain related individuals and certain entities in which the stockholder has an interest, as well as any Shares the stockholder has a right to acquire by exercise of an option or by the conversion or exchange of a security. THE SECTION 302 TESTS. One of the following tests must be satisfied in order for the sale of Shares pursuant to the Offer to be treated as a sale or exchange rather than as a dividend distribution. (a) SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash by a stockholder will be substantially disproportionate with respect to the stockholder if the percentage of the outstanding voting stock of the Company actually and constructively owned by the stockholder immediately following the sale of Shares pursuant to the Offer (treating Shares purchased pursuant to the Offer as not outstanding) is less than 80% of the percentage of the outstanding voting stock of the Company actually and constructively owned by the stockholder immediately before the exchange (treating Shares purchased to the Offer as outstanding). Stockholders should consult their tax advisors concerning the application of the substantially disproportionate test to their particular circumstances. (b) COMPLETE REDEMPTION TEST. The receipt of cash by a stockholder will be a complete redemption of the stockholder's interest if either (i) all of the Shares actually and constructively owned by the stockholder is sold pursuant to the Offer or (ii) all of the Shares actually owned by the stockholder is sold pursuant to the Offer and the stockholder is eligible to waive, and effectively waives, the attribution of all Shares constructively owned by the stockholder in accordance with the procedures described in Section 302(c)(2) of the Code. (c) NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. The receipt of cash by a stockholder will not be essentially equivalent to a dividend if the stockholder's exchange of Shares pursuant to the Offer results in a meaningful reduction of the stockholder's proportionate interest in the Company. Whether the receipt of cash by a stockholder will not be essentially equivalent to a dividend will depend on the stockholder's particular facts and circumstances. However, in certain circumstances, in the case of a small minority stockholder, even a small reduction may satisfy this test. For example, the IRS has indicated in a published ruling that in the case of a small minority stockholder of a publicly held corporation who exercises no control over corporate affairs, a reduction in the stockholder's proportionate interest in the corporation from .0001118% to .0001081% (which represented only a 3.3% reduction in the stockholder's percentage ownership of outstanding shares for purposes of the substantially disproportionate test) would constitute a meaningful reduction. Stockholders expecting to rely on the "not essentially equivalent to a dividend test" should consult their own tax advisors regarding its application in their particular circumstances. Under certain circumstances, it may be possible for a tendering stockholder to satisfy one of the Section 302 tests by contemporaneously selling or otherwise disposing of all or some of the Shares that are actually or constructively owned by the stockholder but that is not purchased pursuant to the Offer. Correspondingly, a stockholder may not be able to satisfy any of the Section 302 tests because of contemporaneous acquisitions of Shares by the stockholder or be a related party whose stock is constructively owned by the stockholder. Stockholders should consult their tax advisors regarding the consequences of such sales or acquisitions in their particular circumstances. In the event that the Offer is oversubscribed, the Company's purchase of Shares pursuant to the Offer will be prorated. Thus, even if all the Shares actually and constructively owned by a stockholder are tendered pursuant to the Offer, it is possible that not all of the Shares will be purchased by the Company, which in turn may affect the stockholder's ability to satisfy one of the Section 302 tests described above. 18 SPECIAL RULES FOR CORPORATE STOCKHOLDERS. If the exchange of Shares by a corporate stockholder does not satisfy any of the Section 302 tests and is therefore treated as a dividend, the stockholder may be entitled to a dividends-received deduction equal to 70% of the dividend. There are a number of limitations on the availability of the deduction, however, and the dividends-received deduction may not be available or could be limited if, for example, the corporation does not satisfy certain holding period requirements with respect to the Shares or the Shares are treated as "debt financed portfolio stock." Finally, it is expected that if a dividends-received deduction is available, the dividend will generally constitute an extraordinary dividend under Section 1059 of the Code. As a result, a corporate stockholder will be required to reduce its tax basis in its Shares (but not below zero) by the non- taxed portion of the dividend (that is, the portion of the dividend equal to the dividends-received deduction). If the non-taxed portion of the dividend exceeds the corporate stockholder's tax basis in its Shares, the excess must be treated as gain from the sale of the Shares for the taxable year in which a sale or disposition of the Shares occurs. EMPLOYEE STOCK OWNERSHIP PLAN. The exchange of Shares for cash by the ESOP, as directed by participants in such plan in accordance with the terms of such plan, will not be a taxable transaction for federal income tax purposes for either the employee stock ownership plan or the plan participants. A subsequent distribution in cash from the plan to a participant normally will be taxable in full as ordinary income to the participant. BACKUP WITHHOLDING. See Section 3 concerning the potential application of federal backup withholding. FOREIGN STOCKHOLDERS. The Company generally will assume that a foreign stockholder will be treated as having received a dividend and will therefore withhold federal income tax at a rate equal to 30% of the gross proceeds paid to a foreign stockholder or his or her agent pursuant to the Offer, unless the Depositary determines that an exemption from or a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because the gross proceeds are effectively connected with the conduct of a trade or business by the foreign stockholder within the United States. A foreign stockholder with respect to whom tax has been withheld may be eligible to obtain a refund from the IRS of all or a portion of the withheld tax if the stockholder satisfies one of the Section 302 tests for capital gain treatment or is otherwise able to establish that no tax or a reduced amount of tax is due. See Section 3 for more details concerning application of the withholding tax to foreign stockholders. FOREIGN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE DISPOSITION OF SHARES PURSUANT TO THE OFFER AND THE APPLICATION OF FEDERAL INCOME TAX WITHHOLDING, INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION AND THE REFUND PROCEDURE. 15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS. The Company expressly reserves the right, in its sole discretion, and regardless of whether or not any of the conditions specified in Section 6 shall have occurred, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary, followed by a public announcement thereof no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. There can be no assurance that the Company will exercise its right to extend the Offer for the Shares. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer. The Company also expressly reserves the right, in its sole discretion, (a) to delay payment for any Shares not theretofore paid for or to terminate the Offer and not to accept for payment any Shares not theretofore accepted for payment, upon the occurrence of any of the conditions specified in Section 6, or (b) at any time or from time to time to amend the Offer in any respect, including increasing or decreasing the number of Shares the Company may purchase or the range of prices it may pay pursuant to the Offer. The Company confirms that its reservation of the right to delay payment for 19 Shares which it has accepted for payment is limited by Rule 13e-4(f)(5) under the Exchange Act, which requires that an issuer pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer. Any such extension, delay, termination or amendment will be followed promptly by a public announcement thereof. Any public announcement made pursuant to the Offer will be disseminated promptly to stockholders in a manner reasonably designed to inform stockholders of such change. Without limiting the manner in which the Company may choose to make any public announcement, except as provided by applicable law (including Rule 13e-4(e)(2) under the Exchange Act), the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Company makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the Exchange Act, which require that the minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer (other than a change in price or a change in percentage of securities sought) will depend upon the facts and circumstances, including the relative materiality of such terms or information. The Company reserves the right, in its sole discretion, to purchase additional Shares pursuant to the Offer. If (a) the Company increases or decreases the price to be paid for the Shares, or the Company increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares or the Company decreases the number of Shares being sought and (b) the Offer for the Shares is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given, the Offer will be extended until the expiration of such period of ten business days. 16. FEES AND EXPENSES. DEALER MANAGER. Dean Witter Reynolds Inc. has been retained by the Company to act as Dealer Manager and financial advisor in connection with the Offer. The Dealer Manager will receive a fee for its services as Dealer Manager of $0.125 for each Share purchased by the Company pursuant to the Offer. The Company has also agreed to reimburse the Dealer Manager for certain reasonable out-of-pocket expenses incurred in connection with the Offer, including fees and disbursements of counsel, and to indemnify the Dealer Manager against certain liabilities, including certain liabilities under the federal securities laws. The Dealer Manager has rendered various investment banking and other advisory services to the Company in the past, for which it has received customary compensation, and can be expected to continue to render similar services to the Company in the future. INFORMATION AGENT AND DEPOSITARY. The Company has retained MacKenzie Partners, Inc. to act as Information Agent and First Union National Bank of North Carolina to act as Depositary in connection with the Offer. The Information Agent and the Dealer Manager may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary will each receive reasonable and customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the Federal securities laws. The Information Agent and the Depositary have rendered information and stock transfer services, respectively, to the Company in the past for which they have received customary compensation, and can be expected to continue to render similar services to the Company in the future. Neither the Depositary, the Information Agent nor the Dealer Manager has been retained to, or is authorized to, make recommendations in connection with the Offer. The Company will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager, the Information Agent and the Depositary) for soliciting tenders of 20 Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Company for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. 17. MISCELLANEOUS. The Company will not accept tenders by or on behalf of holders of Shares in any jurisdiction, foreign or domestic, in which the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Company is not aware of any jurisdiction in which the making of the Offer or the acceptance for payment of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Company becomes aware of any jurisdiction where the making of the Offer would not be in compliance with such laws, the Company will make a good faith effort to comply with such laws or seek to have such laws declared inapplicable to the Offer. If after such good faith effort the Company cannot comply with any such laws, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in any such jurisdictions. In those jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by the Dealer Manager as Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdictions. MAGELLAN HEALTH SERVICES, INC. August 15, 1996 21 Manually executed facsimile copies of the Letter of Transmittal will be accepted from Eligible Institutions. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered to each tendering stockholder or his or her broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. THE DEPOSITARY FOR THE OFFER IS: FIRST UNION NATIONAL BANK OF NORTH CAROLINA BY MAIL: BY HAND: IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company P.O. Box 84 One State Street Bowling Green Station New York, New York 10004 New York, New York 10274-0084 Attn.: Securities Processing Window, Attn.: Reorganization Operations Subcellar One, (SC-1) Department BY FACSIMILE TRANSMISSION: TELEPHONE: BY OVERNIGHT COURIER: (212) 858-2611 (212) 858-2103 IBJ Schroder Bank & Trust Company (for Eligible Institutions Only) One State Street Confirm by Telephone New York, New York 10004 Attn.: Securities Processing Window, Subcellar One, (SC-1)
Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE PARTNERS LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) OR CALL TOLL-FREE (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: [DEAN WITTER REYNOLDS LOGO] Two World Trade Center 65th Floor New York, New York 10048 (212) 392-3232 or Call Toll-Free (800) 488-4490 EX-20.2 3 EXHIBIT 20.2 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF MAGELLAN HEALTH SERVICES, INC. PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 15, 1996 THIS OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 12, 1996, UNLESS THE OFFER IS EXTENDED. TO: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, DEPOSITARY BY MAIL: BY HAND: IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company P.O. Box 84 One State Street Bowling Green Station New York, New York 10004 New York, New York 10274-0084 Attn.: Securities Processing Window, Attn.: Reorganization Operations Department Subcellar One, (SC-1)
BY FACSIMILE TRANSMISSION: TELEPHONE: BY OVERNIGHT COURIER: (212) 858-2611 (212) 858-2103 IBJ Schroder Bank & Trust Company (for Eligible Institutions One State Street Only) New York, New York 10004 Confirm by Telephone Attn.: Securities Processing Window, Subcellar One, (SC-1)
Any questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. ------------------------ DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE OF THOSE SHOWN ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE OF THOSE LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Letter of Transmittal is to be used only if (a) certificates for Shares (as defined below) are to be forwarded with it or (b) a tender of Shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company ("DTC"), or the Philadelphia Depository Trust Company ("PDTC" and together with DTC, the "Book-Entry Transfer Facilities") pursuant to Section 3 of the Offer to Purchase. Stockholders who desire to tender Shares pursuant to the Offer and who cannot deliver their Common Stock certificates (or who are unable to comply with the procedures for book-entry transfer on a timely basis) and all other documents required by this Letter of Transmittal to the Depositary at or before the Expiration Date (as defined in the Offer to Purchase) may tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents to one of the Book-Entry Transfer Facilities does not constitute delivery to the Depositary.
DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 3 AND 4) NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS NAME(S) APPEAR ON CERTIFICATE(S) TENDERED CERTIFICATE(S)) (ATTACH SIGNED LIST IF NECESSARY) NUMBER OF SHARES CERTIFICATE REPRESENTED BY NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** TOTAL SHARES TENDERED Indicate in this box the order (by certificate number) in which Shares are to be purchased in the event of proration. (Attach additional signed list if necessary):*** See Instruction 9. 1st: ; 2nd: ; 3rd: ; 4th: ; 5th: * Need not be completed if shares are delivered by book-entry transfer. See Instruction 2. ** If you desire to tender fewer than all shares evidenced by any certificates listed above, please indicate in this column the number of shares of Common Stock you wish to tender. If you fail to indicate the number of shares of Common Stock tendered, all shares of Common Stock evidenced by such certificates will be deemed to have been tendered. See Instruction 4. *** If you do not designate an order, in the event less than all shares of Common Stock tendered are purchased due to proration, shares of Common Stock will be selected for purchase by the Depositary.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: Check Box of Applicable Book-Entry Transfer Facility: DTC / / PDTC / / Account Number: Transaction Code Number: / / CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): Date of Execution of Notice of Guaranteed Delivery: Name of Institution that Guaranteed Delivery: Window ticket number (if available): If Delivery is by Book-Entry Transfer, Check Box of Applicable Book-Entry Transfer Facility: DTC / / PDTC / / Account Number: Transaction Code Number:
ODD LOTS (SEE INSTRUCTION 8) To be completed ONLY if Shares are being tendered by or on behalf of a Person owning beneficially, as of the close of business on August 12, 1996, an aggregate of fewer than 100 shares of Common Stock, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan. The undersigned either (check one box): / / was the beneficial or record owner as of the close of business on August 12, 1996, of an aggregate of fewer than 100 Shares of Common Stock, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan, or / / is a broker, dealer, commercial bank, trust company or other nominee that: (a)is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (b)believes, based upon representations made to it by such beneficial owners, that each such Person will be the beneficial owner as of the close of business on August 12, 1996, of an aggregate of fewer than 100 Shares, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan. In addition, the undersigned is tendering Shares either (check one box): / / at the Purchase Price (defined below), as the same shall be determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share below); or / / at the price per Share indicated below under "Price (in Dollars) Per Share of Common Stock at Which Shares of Common Stock Are Being Tendered" in this Letter of Transmittal. TO FIRST UNION NATIONAL BANK OF NORTH CAROLINA: The undersigned hereby tenders to Magellan Health Services, Inc., a Delaware corporation (the "Company"), the above-described shares of the Company's Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to a Rights Agreement dated as of July 21, 1992 between the Company and the Rights Agent named in the Rights Agreement), at the price per Share indicated in this Letter of Transmittal, net to the seller in cash, upon the terms and subject to the conditions set forth in the Company's Offer to Purchase, dated August 15, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). Absent circumstances causing the Rights to become exercisable or separately tradeable prior to the Expiration Date (as defined in the Offer to Purchase), the tender of any Shares pursuant to the Offer will include the tender of associated Rights. Unless the context otherwise requires, all reference to Shares shall include the associated Rights. Subject to and effective upon acceptance for payment of the Shares tendered hereby in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Company all right, title and interest in and to all Shares tendered hereby and orders the registration of such Shares if tendered by book-entry transfer that are purchased pursuant to the Offer to or upon the order of the Company and hereby irrevocably constitutes and appoints the Depositary as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), to: (a) deliver certificates for Shares or transfer ownership of such Shares on the account books maintained by a Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Company, upon receipt by the Depositary, as the undersigned's agent, of the Purchase Price (as defined below) with respect to such Shares; (b) present certificates for such Shares for cancellation and transfer on the Company's books; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, subject to the next paragraph, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants to the Company that: (a) the undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (i) the undersigned has a net long position in Shares or equivalent securities at least equal to the Shares tendered within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and (ii) such tender of Shares complies with Rule 14e-4; (b) when and to the extent the Company accepts the Shares for purchase, the Company will acquire good, marketable and unencumbered title to them, free and clear of all security interests, liens, charges, encumbrances, conditional sales agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim; (c) on request, the undersigned will execute and deliver any additional documents the Depositary or the Company deems necessary or desirable to complete the assignment, transfer and purchase of the Shares tendered hereby; and (d) the undersigned has read, understands and agrees with, all of the terms of the Offer. With respect to holders of certificates representing Shares tendered hereby, the names and addresses of the registered holders should be printed, if they are not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificate numbers, the number of Shares represented by such certificates, and the number of Shares that the undersigned wishes to tender, should be set forth in the appropriate boxes above. The price at which such Shares are being tendered should be indicated in the box below. The undersigned understands that the Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50, net to the seller in cash (the "Purchase Price"), that it will pay for Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The undersigned understands that the Company will select the lowest Purchase Price that will allow it to purchase 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. The undersigned understands that all Shares properly tendered at prices at or below the Purchase Price and not withdrawn prior to the Expiration Date will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions, and that the Company will return all other Shares, including Shares tendered and not withdrawn at prices greater than the Purchase Price and Shares not purchased because of proration. The undersigned understands that the Company will not pay any separate consideration for the Rights associated with such Shares. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Company may terminate or amend the Offer or may postpone the acceptance for payment of, or the payment for, Shares tendered or may accept for payment fewer than all of the Shares tendered hereby. In either event, the undersigned understands that certificate(s) for any Shares not tendered or not purchased will be returned to the undersigned at the address indicated above, unless otherwise indicated under the "Special Payment Instructions" or "Special Delivery Instructions" below. The undersigned recognizes that the Company has no obligation, pursuant to the Special Payment Instructions, to transfer any certificate for Shares from the name of their registered holder, or to order the registration or transfer of such Shares tendered by book-entry transfer, if the Company purchases none of the Shares represented by such certificate or tendered by such book-entry transfer. The undersigned understands that acceptance of Shares by the Company for payment will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The check for the aggregate Purchase Price for such of the tendered Shares as are purchased will be issued to the order of the undersigned and mailed to the address indicated above unless otherwise indicated under the Special Payment Instructions or the Special Delivery Instructions below. All authority conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligations of the undersigned under this Letter of Transmittal shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT WHICH SHARES OF COMMON STOCK ARE BEING TENDERED - -------------------------------------------------------------------------------- CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES OF COMMON STOCK. SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / By checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares and will accept the Purchase Price resulting from the Dutch auction tender process. This action could result in receiving a price per Share as low as $16.50 or as high as $18.50. OR SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER - -------------------------------------------------------------------------------- / / $16.500 / / $16.875 / / $17.250 / / $17.625 / / $18.000 / / $18.375 / / $16.625 / / $17.000 / / $17.375 / / $17.750 / / $18.125 / / $18.500 / / $16.750 / / $17.125 / / $17.500 / / $17.875 / / $18.250
- -------------------------------------------------------------------------------- IF PORTIONS OF SHARE HOLDINGS ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE SPECIFIED. (SEE INSTRUCTION 5) - -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 4, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 4, 6, 7 AND 10) To be completed ONLY if certificate(s) for To be completed ONLY if certificate(s) for Shares not tendered or not purchased and/or any Shares not tendered or not purchased and/or any check for the Purchase Price of Shares purchased check for the Purchase Price of Shares purchased are to be issued in the name of someone other are to be sent to someone other than the than the undersigned, or if Shares delivered by undersigned or to the undersigned at an address book-entry transfer that are not purchased are other than that shown above. to be returned by credit to an account Deliver / / Check / / Certificate(s) to: maintained by a Book-Entry Transfer Facility. Issue / / Check / / Certificate(s) Name: to: (PLEASE PRINT) Name: Address: (PLEASE PRINT) (INCLUDE ZIP CODE) Address: (INCLUDE ZIP CODE) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) / / Credit Shares tendered by book-entry transfer and not purchased to the account set forth below: Name of account party: Account number: Check box of Applicable Book-Entry Transfer Facility: DTC / / PDTC / /
STOCKHOLDER(S) SIGN HERE (SEE INSTRUCTIONS 1 AND 6) Must be signed by the registered holder(s) exactly as name(s) appear(s) on certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted with this Letter of Transmittal. If signature is by attorney in fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the full title. See Instruction 6. X ...................................................................................................... X ...................................................................................................... (SIGNATURE(S) OF OWNER(S)) Name(s): ............................................................................................... (PLEASE PRINT) Capacity (full title): ................................................................................. Address: ............................................................................................... ........................................................................................................ Area Code and Telephone Number: ........................................................................ Tax ID Number or Social Security Number: ............................................................... Dated:............................................................................................, 1996 GUARANTEE OF SIGNATURES (SEE INSTRUCTIONS 1 AND 6) Authorized Signature: .................................................................................. Name(s): ............................................................................................... (PLEASE PRINT) Title: ................................................................................................. Name of Firm: .......................................................................................... Address: ............................................................................................... (INCLUDING ZIP CODE) Area Code and Telephone Number: ........................................................................ Tax ID Number or Social Security Number: ............................................................... Dated:............................................................................................, 1996
(PLEASE COMPLETE ENCLOSED SUBSTITUTE FORM W-9) PAYER'S NAME: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS DEPOSITARY SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN Social Security Number FORM W-9 THE BOX AT THE RIGHT AND CERTIFY BY or DEPARTMENT OF THE TREASURY INTERNAL SIGNING AND DATING BELOW. Employer Identification Number REVENUE SERVICE PAYER'S REQUEST FOR TAXPAYER -------------------------- IDENTIFICATION NUMBER ("TIN") PART 2 -- CERTIFICATES -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me); and (2) I am not subject to backup withholding because either (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGNATURE: DATE: , 1996 NAME --------------------------------------------------------------- PART 3 -- AWAITING TIN / / ADDRESS ------------------------------------------------------------ ---------------------------------------------------------------------- (CITY, STATE AND ZIP CODE)
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature ------------------------------------------ Date --------------------------------, 1996 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either: (a) this Letter of Transmittal is signed by the registered holder of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) exactly as the name of the registered holder appears on the certificate tendered with this Letter of Transmittal and payment and delivery are to be made directly to such owner unless such owner has completed either the box entitled "Special Payment Instructions" or "Special Delivery Instructions" above; or (b) such Shares are tendered for the account of a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company (not a savings bank or savings and loan association) having an office, branch or agency in the United States (each such entity, an "Eligible Institution"). In all other cases, an Eligible Institution must guarantee all signatures on this Letter of Transmittal. See Instruction 6. 2. DELIVER OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be used only if certificates are delivered with it to the Depositary (or such certificates will be delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary) or if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Certificates for all physically tendered Shares or confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of Shares tendered electronically, together in each case with a properly and duly executed Letter of Transmittal or properly and duly executed facsimile of it, and any other documents required by this Letter of Transmittal, should be mailed or delivered to the Depositary at the appropriate address set forth in this Letter of Transmittal and must be delivered to the Depositary on or before the Expiration Date (as defined in the Offer to Purchase). Delivery of documents to one of the Book-Entry Transfer Facilities does not constitute delivery to the Depositary. Holders of Shares whose certificates are not immediately available or who cannot deliver certificates for their Shares and all other required documents to the Depositary before the Expiration Date, or whose Shares cannot be delivered on a timely basis pursuant to the procedures for book-entry transfer, must, in any such case, tender their Shares by or through any Eligible Institution by properly completing and by duly executing and delivering a Notice of Guaranteed Delivery (or facsimile of it) and by otherwise complying with the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, the certificates for all physically tendered Shares or book-entry confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually executed facsimile) and all other documents required by this Letter of Transmittal, must be received by the Depositary within three American Stock Exchange trading days after receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice. For Shares to be validly tendered pursuant to the guaranteed delivery procedure, the Depositary must receive the Notice of Guaranteed Delivery on or before the Expiration Date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY. The Company will not accept any alternative or contingent tenders, nor will it purchase any fractional Shares, except as expressly provided in the Offer to Purchase. All tendering stockholders, by execution of this Letter of Transmittal (or a photocopy of it), waive any right to receive any notice of the acceptance of the tender. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Shares of Tendered" is inadequate, the certificate numbers and/or number of Shares should be listed on a separate signed schedule and attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders who tender by book-entry transfer). If fewer than all of the Shares evidenced by any certificate are to be tendered, fill in the number of Shares which are to be tendered in the column entitled "Number of Shares Tendered" in the box captioned "Description of Shares Tendered." In such case, if any tendered Shares are purchased, a new certificate for the remainder of the Shares (including, any Shares not purchased) evidenced by the old certificate(s) will be issued and sent to the registered holder(s), unless otherwise specified in either the "Special Payment Instructions" or "Special Delivery Instructions" box on this Letter of Transmittal, as soon as practicable after the Expiration Date. Unless otherwise indicated, all Shares represented by the certificates listed and delivered to the Depositary will be deemed to have been tendered. 5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be properly tendered, the stockholder MUST check the box indicating the price per share at which he or she is tendering Shares under "Price (In Dollars) Per Share of Common Stock at Which Shares of Common Stock Are Being Tendered" on this Letter of Transmittal, provided however, that an Odd Lot Owner (as defined in Instruction 8) may check the box above in the section entitled "Odd Lots" indicating that he or she is tendering all of his or her Shares at the Purchase Price. ONLY ONE BOX MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES. A stockholder wishing to tender portions of Share holdings at different prices must complete a separate Letter of Transmittal for each price at which he or she wishes to tender each such portion of his or her Shares. The same Shares cannot be tendered (unless previously properly withdrawn as provided in Section 4 of the Offer to Purchase) at more than one price. 6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. (a)If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered by this Letter of Transmittal, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without any change whatsoever. (b)If the Shares are registered in the names of two or more joint holders, each such holder must sign this Letter of Transmittal. (c)If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles of it) as there are different registrations of certificates. (d)When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsement(s) or certificate(s) representing such Shares or separate stock powers are required unless payment is to be made, or the certificate(s) for Shares not tendered or not purchased are to be issued to a person other than the registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. If this Letter of Transmittal is signed by any person other than the registered holder(s) of the certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificate(s), and the signature(s) or such certificate(s) or stock power(s) must be guaranteed by an Eligible Institution. See Instruction 1. (e)If this Letter of Transmittal or any certificate(s) or stock power(s) are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such person(s) should so indicate when signing and must submit proper evidence satisfactory to the Company of their authority to so act. 7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no stock transfer tax stamps or funds to cover such stamps need accompany this Letter of Transmittal. The Company will pay or cause to be paid any stock transfer taxes payable on the transfer to it of Shares purchased pursuant to the Offer. If, however: (a) payment of the aggregate Purchase Price for Shares tendered hereby and accepted for purchase is to be made to any person other than the registered holder(s); (b) Shares not tendered or not accepted for purchase are to be registered in the name(s) of any person(s) other than the registered holder(s); or (c) tendered certificates are registered in the name(s) of any person(s) other than the person(s) signing the Letter of Transmittal; then the Depositary will deduct from the Purchase Price the amount of any stock transfer taxes (whether imposed on the registered holder, such other person or otherwise) payable on account of the transfer to such person unless satisfactory evidence of the payment of such taxes or an exemption from them is submitted. 8. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the Company is to purchase fewer than all Shares tendered before the Expiration Date and not withdrawn, the Shares purchased first will consist of all Shares tendered by or on behalf of stockholders ("Odd Lot Owners") who beneficially hold, as of the close of business on August 12, 1996, an aggregate of fewer than 100 Shares, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan, and who tender all such Shares at or below the Purchase Price. This preference will not be available unless the box captioned "Odd Lots" is completed. 9. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of the Offer to Purchase, stockholders may designate the order in which their Shares are to be purchased in the event of proration. If a stockholder is entitled to capital gain or loss treatment as described in Section 14 of the Offer to Purchase, the order of purchase may have an effect on the amount of any taxable gain or loss on the Shares purchased, depending on the stockholder's basis in the Shares. See Sections 1 and 14 of the Offer to Purchase. 10. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares not tendered or not purchased and/or check(s) are to be issued in the name of a person other than the signer of the Letter of Transmittal or if such certificate(s) and/or check(s) are to be sent to someone other than the person signing the Letter of Transmittal or to the signer at a different address, the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed as applicable and signatures must be guaranteed as described in Instruction 1. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions". If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 11. IRREGULARITIES. All questions as to the number of Shares to be accepted, the price to be paid for the Shares and the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company in its sole discretion, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any or all tenders of Shares it determines not to be in proper form or the acceptance of which or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares, and the Company's interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. None of the Company, the Dealer Manager, the Depositary, the Information Agent (as defined in the Offer to Purchase) or any other Person is or will be obligated to give notice to any defects or irregularities in tenders and none of them will incur any liability for failure to give any such notice. 12. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to, or additional copies of the Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of Transmittal may be obtained from, the Information Agent or the Dealer Manager at their addresses and telephone numbers set forth at the end of this Letter of Transmittal or from your broker, dealer, commercial bank or trust company. 13. SUBSTITUTE FORM W-9 AND FORM W-8. Under U.S. Federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 may be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 14. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder has provided the required certification to avoid back-up withholding, the Depositary will withhold federal income tax equal to 30% of the gross proceeds payable to a foreign stockholder or his agent unless the Depositary determines that an exemption from or a reduced rate of withholding is available pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business in the United States. For this purpose, a foreign stockholder is any stockholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or (iii) an estate or trust the income of which is subject to United States, federal income taxation regardless of the source of such income. In order to apply for a reduced rate of withholding pursuant to a tax treaty, a foreign stockholder must deliver to the Depositary a properly completed Form 1001. In order to apply for exemption from withholding on the basis that the gross proceeds are effectively connected with the conduct of a trade or business in the United States, a foreign stockholder must deliver to the Depositary a properly completed Form 4224. These forms can be obtained from the Depositary, Information Agent or Dealer Manager. The Depositary will determine a stockholder's status as a foreign stockholder and eligibility for a reduced rate of, or an exemption from, withholding by reference to the stockholder's address and to any submitted certificates or statements concerning eligibility for a reduced rate of, or exemption from, withholding (e.g. Form 1001 or Form 4224), unless facts and circumstances indicate that reliance is not warranted or applicable law requires some other method for determining eligibility for determining whether a reduced rate or withholding is applicable. A foreign stockholder with respect to whom tax has been withheld may be eligible to obtain a refund of all or a portion of the withheld tax if such stockholder meets one of the exceptions for capital gain or loss treatment described in Section 14 of the Offer to Purchase or is otherwise able to establish that no tax or a reduced amount of tax was due. Backup withholding generally will not apply to amounts subject to the 30% or treaty-reduced rate of withholding. Foreign stockholders are urged to consult their tax advisors regarding the application of federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedures. FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE ACCEPTED FROM ELIGIBLE INSTITUTIONS. THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH TENDERING STOCKHOLDER OR HIS OR HER BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW. THE DEPOSITARY FOR THE OFFER IS: FIRST UNION NATIONAL BANK OF NORTH CAROLINA BY MAIL: BY HAND: IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company P.O. Box 84 One State Street Bowling Green Station New York, New York 10004 New York, New York 10274-0084 Attn.: Securities Processing Window, Attn.: Reorganization Operations Subcellar One, (SC-1) Department BY FACSIMILE TRANSMISSION: TELEPHONE: BY OVERNIGHT COURIER: (212) 858-2611 (212) 858-2103 IBJ Schroder Bank & Trust Company (for Eligible Institutions Only) One State Street Confirm by Telephone New York, New York 10004 Attn.: Securities Processing Window, Subcellar One, (SC-1)
Any questions or requests for assistance or for additional copies of the Offer to Purchase or the Letter of Transmittal may be directed to the Information Agent or Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE PARTNERS LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-Free (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: [DEAN WITTER REYNOLDS LOGO] Two World Trade Center 65th Floor New York, New York 10048 (212) 392-3232 or Call Toll-Free (800) 488-4490 EX-20.3 4 EXHIBIT 20.3 NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF MAGELLAN HEALTH SERVICES, INC. AS SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE THIS FORM OR A FACSIMILE OF IT MUST BE USED TO ACCEPT THE OFFER (AS DEFINED BELOW) IF: (a)certificates for Common Stock, par value $0.25 per share (the "Shares" or "Common Stock") of Magellan Health Services, Inc., a Delaware corporation (the "Company"), are not immediately available; or (b)the procedure for book-entry transfer cannot be completed on a timely basis; or (c)time will not permit the Letter of Transmittal or other required documents to reach the Depositary referred to below before the Expiration Date (as defined in Section 1 of the Offer to Purchase referred to below). This form or a facsimile of it, signed and properly completed, may be delivered by hand or transmitted by telegram, facsimile transmission or mail, to the Depositary by the Expiration Date. See Section 3 of the Offer to Purchase. TO: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, DEPOSITARY BY MAIL: BY HAND: IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company P.O. Box 84 One State Street Bowling Green Station New York, New York 10004 New York, New York 10274-0084 Attn.: Securities Processing Window, Attn.: Reorganization Operations Subcellar One, (SC-1) Department BY FACSIMILE TRANSMISSION: TELEPHONE: BY OVERNIGHT COURIER: (212) 858-2611 (212) 858-2103 IBJ Schroder Bank & Trust Company (for Eligible Institutions Only) One State Street Confirm by Telephone New York, New York 10004 Attn.:Securities Processing Window, Subcellar One, (SC-1)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN ONE OF THOSE SHOWN ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE OF THOSE LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. LADIES AND GENTLEMEN: The undersigned hereby tenders to Magellan Health Services, Inc., a Delaware corporation, at the price per Share indicated below, net to the seller in cash, upon the terms and subject to conditions set forth in the Company's Offer to Purchase, dated August 15, 1996, (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, _______ Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. - -------------------------------------------------------------------------------- PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT WHICH SHARES OF COMMON STOCK ARE BEING TENDERED - -------------------------------------------------------------------------------- IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE NOTICE OF GUARANTEED DELIVERY FOR EACH PRICE SPECIFIED - -------------------------------------------------------------------------------- CHECK ONLY ONE BOX, IF MORE THAN ONE BOX OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES OF COMMON STOCK - -------------------------------------------------------------------------------- SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / By checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares and is willing to accept the Purchase Price resulting from the Dutch auction tender process. This action could result in receiving a price per Share as low as $16.50 or as high as $18.50. OR SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER - -------------------------------------------------------------------------------- / / $16.500 / / $16.625 / / $17.125 / / $17.625 / / $18.125 / / $16.750 / / $17.250 / / $17.750 / / $18.250 / / $16.875 / / $17.375 / / $17.875 / / $18.375 / / $17.000 / / $17.500 / / $18.000 / / $18.500
- -------------------------------------------------------------------------------- ODD LOTS (SEE INSTRUCTION 8 OF THE LETTER OF TRANSMITTAL) To be completed ONLY if Shares are being tendered by or on behalf of a Person owning beneficially, as of the close of business on August 12, 1996, an aggregate of fewer than 100 Shares, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan. The undersigned either (check one box): / / will be the beneficial owner as of the close of business on August 12, 1996, of an aggregate of fewer than 100 Shares, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan, all of which are being tendered; or / / is a broker, dealer, commercial bank, trust company or other nominee that: (a)is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (b)believes, based upon representations made to it by such beneficial owners, that each such Person will be the beneficial owner as of the close of business on August 12, 1996, of an aggregate of fewer than 100 Shares, including Shares beneficially owned by such Person in the Company's Employee Stock Ownership Plan and is tendering all of such Shares. In addition, the undersigned is tendering Shares either (check one box): / / at the Purchase Price (as defined in the Offer), as the same shall be determined by the Company in accordance with the terms of the Offer (person checking this box need not indicate the price per Share above); or / / at the price per share of Common Stock indicated above under "Price (in Dollars) Per Share of Common Stock at Which Shares of Common Stock Are Being Tendered" on this Notice of Guaranteed Delivery. Number of Shares:____________ Certificate Nos. (if available):________________________________________________ If Shares will be delivered by book-entry transfer:_____________________________ Name of Tendering Institution:__________________________________________________ Account No. ____________________________________________________________________ at: ____________________________________________________________________________ / / The Depository Trust Company / / Philadelphia Depository Trust Company ------------------------------------ SIGN HERE __________________________________ __________________________________ (SIGNATURE(S)) (NAME(S)) (PLEASE PRINT) __________________________________ __________________________________ (SIGNATURE(S)) (NAME(S)) (PLEASE PRINT) __________________________________ __________________________________ (ADDRESS) (AREA CODE AND TELEPHONE NO.) __________________________________ __________________________________ (ADDRESS) (ZIP CODE) - -------------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or which is a commercial bank or trust company having an office or correspondent in the United States, guarantees (i) that the above named person(s) own(s) the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (ii) that such tender of Shares complies with Rule 14e-4, and (iii) to deliver to the Depositary, at one of its addresses set forth above, Share certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company; in each case with delivery of a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, and any other required documents, all within three American Stock Exchange trading days of the date hereof. _________________________________ Name of Firm _________________________________ Authorized Signature _________________________________ Name _________________________________ Title _________________________________ Address _________________________________ Zip Code Dated:________________________, 1996 ____________________________ (Area Code and Telephone No.) ________________________________________ DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL EX-20.4 5 EXHIBIT 20.4 DEAN WITTER REYNOLDS INC. TWO WORLD TRADE CENTER 65TH FLOOR NEW YORK, NEW YORK 10048 MAGELLAN HEALTH SERVICES, INC. OFFER TO PURCHASE FOR CASH UP TO 1,891,891 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) AT A PURCHASE PRICE NOT GREATER THAN $18.50 NOR LESS THAN $16.50 PER SHARE THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON SEPTEMBER 12, 1996, UNLESS THE OFFER IS EXTENDED. To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Magellan Health Services, Inc., a Delaware corporation (the "Company"), has appointed us to act as Dealer Manager in connection with its offer to purchase up to 1,891,891 shares of its Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights"), issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agreement named in the Rights Agreement), to the Company at a price, not greater than $18.50 nor less than $16.50 per Share, upon the terms and subject to the conditions set forth in the Company's Offer to Purchase, dated August 15, 1996, and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), that it will pay for Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered and not withdrawn at prices at or below the Purchase Price prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions. See Section 1 of the Offer to Purchase. If, at the Expiration Date, more than 1,891,891 Shares (or such greater number of Shares as the Company elects to purchase) are properly tendered and not withdrawn at or below the Purchase Price, the Company will, upon the terms and subject to the conditions of the Offer, accept Shares for purchase first from Odd Lot Owners (as defined in Section 2 of the Offer to Purchase) whose Shares were properly tendered at or below the Purchase Price (and not withdrawn) and then on a pro rata basis from other stockholders whose Shares are properly tendered at or below the Purchase Price (and not withdrawn). See Introduction and Section 1 of the Offer to Purchase. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6 OF THE OFFER TO PURCHASE. For your information and forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase, dated August 15, 1996; 2. Letter to Clients who are holders of Common Stock which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 3. Letter to stockholders of the Company, dated August 15, 1996, from E. Mac Crawford, Chairman of the Board and Chief Executive Officer; 4. Letter of Transmittal for your use and for the information of your clients (together with accompanying Substitute Form W-9 and guidelines); 5. Notice of Guaranteed Delivery to be used to accept the Offer if the Share certificates and all other required documents cannot be delivered to the Depositary by the Expiration Date or if the procedure for book-entry transfer cannot be completed on a timely basis; and 6. Return envelope addressed to First Union Bank of North Carolina, as Depositary for the Shares. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON SEPTEMBER 12, 1996, UNLESS THE OFFER IS EXTENDED. No fees or commissions will be payable to brokers, dealers or any person for soliciting tenders of Shares pursuant to the Offer other than fees paid to the Dealer Manager, the Information Agent or the Depositary as described in Section 16 of the Offer to Purchase. The Company will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to the beneficial owners of shares of Common Stock held by you as a nominee or in a fiduciary capacity. The Company will pay or cause to be paid any stock transfer taxes applicable to its purchase of Shares, except as otherwise provided in Instruction 7 of the Letter of Transmittal. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal and any other required documents should be sent to the Depositary with either certificate(s) representing the tendered Shares or confirmation of the book-entry transfer of the tendered Shares, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. As described in Section 3 of the Offer to Purchase, tenders may be made without the concurrent deposit of stock certificates or concurrent compliance with the procedure for book-entry transfer if such tenders are made by or through a broker or dealer which is a member firm of a registered national securities exchange, a member of the National Association of Security Dealers, Inc. or a commercial bank or trust company having an office, branch or agency in the United States. Certificates for Shares so tendered (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the "Book-Entry Transfer Facilities" described in Section 3 of the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal must be received by the Depositary within three American Stock Exchange trading days after timely receipt by the Depositary of a properly completed and duly executed Notice of Guaranteed Delivery. Any inquiries you may have with respect to the Offer should be addressed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent, MacKenzie Partners, Inc., telephone: (212) 929-5500 (collect) or (800) 322-2885 (toll-free). Very truly yours, DEAN WITTER REYNOLDS INC. Enclosures NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-20.5 6 EXHIBIT 20.5 MAGELLAN HEALTH SERVICES, INC. OFFER TO PURCHASE FOR CASH UP TO 1,891,891 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT GREATER THAN $18.50 NOR LESS THAN $16.50 PER SHARE To Our Clients: Enclosed for your consideration are the Offer to Purchase dated August 15, 1996 and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Magellan Health Services, Inc., a Delaware corporation (the "Company"), to purchase up to 1,891,891 shares of its Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agent named in the Rights Agreement), to the Company at a price, not greater than $18.50 nor less than $16.50 per Share, upon the terms and subject to the conditions set forth in the Offer. The Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), that it will pay for the Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions described in the Offer to Purchase. The Company will return all other Shares, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration. See Section 1 of the Offer to Purchase. Upon the terms and subject to the conditions of the Offer, if at the Expiration Date, more than 1,891,891 Shares (or such greater number of Shares as the Company elects to purchase) are properly tendered and not withdrawn at or below the Purchase Price, the Company will accept Shares for purchase first from Odd Lot Owners (as defined in Section 2 of the Offer to Purchase) whose Shares are properly tendered at or below the Purchase Price (and not withdrawn) and then on a pro rata basis from all other stockholders whose Shares are properly tendered at or below the Purchase Price (and not withdrawn). See Introduction and Section 1 of the Offer to Purchase. WE ARE THE OWNER OF RECORD OF SHARES OF COMMON STOCK HELD FOR YOUR ACCOUNT. AS SUCH, WE ARE THE ONLY ONES WHO CAN TENDER YOUR SHARES OF COMMON STOCK, AND THEN ONLY PURSUANT TO YOUR INSTRUCTIONS. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER SHARES OF COMMON STOCK WE HOLD FOR YOUR ACCOUNT. Please instruct us as to whether you wish us to tender any or all of the Shares we hold for your account on the terms and subject to the conditions of the Offer. We call your attention to the following: 1. You may tender Shares at prices not greater than $18.50 nor less than $16.50 per Share, as indicated in the attached Instruction Form, net to you in cash. 2. You may designate the priority in which your Shares shall be purchased in the event of proration. 3. The Offer is not conditioned upon any minimum number of Shares being tendered. 4. The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on September 12, 1996, unless the Company extends the Offer. 5. The Offer is for 1,891,891 Shares, constituting approximately 5.73% of the Company's outstanding Shares as of July 31, 1996. 6. Tendering stockholders will not be obligated to pay any brokerage commissions, solicitation fees or, subject to Instruction 7 of the Letter of Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant to the Offer. 7. If you beneficially hold, as of the close of business on August 12, 1996, an aggregate of fewer than 100 Shares, including any Shares beneficially owned by you in the Company's Employee Stock Ownership Plan and you instruct us to tender on your behalf all such Shares at or below the Purchase Price before the Expiration Date and check the box captioned "Odd Lots" in the attached Instruction Form, the Company, upon the terms and subject to the conditions of the Offer, will accept all such Shares for purchase before proration, if any, of the purchase of other Shares properly tendered at or below the Purchase Price. 8. If you wish to tender portions of your Shares at different prices you must complete a separate Instruction Form for each price at which you wish to tender each such portion of your Shares. We must submit separate Letters of Transmittal on your behalf for each price you will accept. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the attached Instruction Form. An envelope to return your Instruction Form to us is enclosed. If you authorize us to tender your Shares, we will tender all such Shares unless you specify otherwise on the attached Instruction Form. YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON SEPTEMBER 12, 1996, UNLESS THE COMPANY EXTENDS THE OFFER. As described in Section 1 of the Offer to Purchase, if at the Expiration Date more than 1,891,891 Shares (or such greater number of Shares as the Company elects to purchase) are properly tendered and not withdrawn at or below the Purchase Price, the Company will accept Shares for purchase at the Purchase Price in the following order of priority: a. FIRST, all Shares properly tendered at or below the Purchase Price prior to the Expiration Date (and not withdrawn) by any Odd Lot Owner (as defined in the Offer to Purchase) who: i. tenders all Shares beneficially owned by such Odd Lot Owner at or below the Purchase Price (partial tenders will not qualify for this preference); and ii. completes the section entitled Odd Lots on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and b. SECOND, after purchase of all the foregoing Shares, all other Shares properly tendered at or below the Purchase Price, before the Expiration Date (and not withdrawn) on a PRO RATA basis, if necessary (with adjustments to avoid purchases of fractional Shares). The Company will not accept tenders by, or on behalf of, holders of Shares in any jurisdiction in which the acceptance of the Offer would not comply with the laws of such jurisdiction. In any jurisdiction in which the securities or Blue Sky laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Dean Witter Reynolds Inc. as Dealer Manager or one or more registered brokers or dealers licensed under the law of such jurisdiction. INSTRUCTION FORM WITH RESPECT TO THE MAGELLAN HEALTH SERVICES, INC. OFFER TO PURCHASE FOR CASH UP TO 1,891,891 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT GREATER THAN $18.50 NOR LESS THAN $16.50 PER SHARE The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated August 15, 1996, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Magellan Health Services, Inc., a Delaware corporation (the "Company"), to purchase up to 1,891,891 shares of its Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agreement named therein), to the Company at a price not greater than $18.50 nor less than $16.50 per Share, upon the terms and subject to the conditions of the Offer. No separate consideration will be paid for the Rights. The undersigned understands that the Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price"), that it will pay for the Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered at prices at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions described in the Offer to Purchase. The Company will return all other Shares, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration. See Section 1 of the Offer to Purchase. The undersigned hereby instruct(s) you to tender to the Company the number of Shares indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. / / By checking this box, all Shares held by us for your account, including fractional Shares, will be tendered. If fewer than all Shares are to be tendered, please check the box and indicate the aggregate number of Shares to be tendered by us. _____________ Shares* ODD LOTS (SEE INSTRUCTION 8 OF THE LETTER OF TRANSMITTAL) / / By checking this box, the undersigned represents that the undersigned was the beneficial or record owner as of the close of business on August 12, 1996, of an aggregate of fewer than 100 Shares, including any Shares beneficially owned by the undersigned in the Company's Employee Stock Ownership Plan and is instructing the holder to tender all such Shares. In addition, the undersigned is tendering Shares either (check one box): / / at the Purchase Price, as the same shall be determined by the Company in accordance with the terms of the Offer (persons checking this box need not indicate the price per Share below); or / / at the price per Share indicated below under Price (in Dollars) Per Share of Common Stock at Which Shares of Common Stock Are Being Tendered on this Instruction Form. - ------------------------ * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. - -------------------------------------------------------------------------------- PRICE (IN DOLLARS) PER SHARE OF COMMON STOCK AT WHICH SHARES OF COMMON STOCK ARE BEING TENDERED - -------------------------------------------------------------------------------- IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE INSTRUCTION FORM FOR EACH PRICE SPECIFIED - -------------------------------------------------------------------------------- CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO PROPER TENDER OF SHARES OF COMMON STOCK SHARES TENDERED AT PRICE DETERMINED BY DUTCH AUCTION / / By checking this one box INSTEAD OF ONE OF THE PRICE BOXES BELOW, the undersigned hereby tenders Shares and is willing to accept the Purchase Price resulting from the Dutch auction tender process. This action could result in receiving a price per Share as low as $16.50 or as high as $18.50. OR SHARES TENDERED AT PRICE DETERMINED BY STOCKHOLDER - -------------------------------------------------------------------------------- / / $16.500 / / $16.625 / / $17.125 / / $17.625 / / $18.125 / / $16.750 / / $17.250 / / $17.750 / / $18.250 / / $16.875 / / $17.375 / / $17.875 / / $18.375 / / $17.000 / / $17.500 / / $18.000 / / $18.500
- -------------------------------------------------------------------------------- SIGNATURE BOX Signature(s) ___________________________________________________________________ Dated __________________________________________________________________________ Name(s) and Address(es) ________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT) Account Number _________________________________________________________________ Area Code and Telephone No. ____________________________________________________ Taxpayer Identification or Social Security Number ______________________________ ------------------------------------ EX-20.6 7 EXHIBIT 20.6 [MAGELLAN HEALTH SERVICES LOGO] August 15, 1996 Dear Fellow Stockholders: We are pleased to inform you that the Board of Directors of Magellan Health Services, Inc. (the "Company") has approved an offer to purchase up to 1,891,891 shares of the Company's Common Stock, representing approximately 5.73% of the Company's outstanding Common Stock as of July 31, 1996. This offer provides stockholders with an opportunity to sell some or all of their shares without the payment of any brokerage commissions or fees. Under the terms of the offer, the price paid for your shares will be between $16.50 and $18.50 per share. The Offer to Purchase is being made by means of a so-called "Dutch Auction," which permits you to select the cash price within the specified range at which you are willing to sell shares to the Company. The Company will determine the lowest single purchase price within that range that will enable it to buy 1,891,891 shares, assuming at least that many shares have been properly tendered. The Company will then pay that price for all shares properly tendered at or below that price, subject to possible proration. Any shares tendered by you which the Company does not purchase will be returned to you. The Board of Directors believes that the purchase of shares is an attractive use of a portion of the Company's available capital on behalf of its stockholders, and is consistent with our long-term goal of increasing stockholder value. The Company believes it has adequate sources of capital to complete the Share repurchase and pursue acquisition and investment opportunities. The maximum aggregate cost of the Share repurchase would be approximately $35.5 million, which would be paid either from borrowings, cash and cash equivalents of the Company or a combination of the two. The Company, as of July 31, 1996, had cash and cash equivalents of approximately $129 million and available borrowings of approximately $101 million under its credit agreement. Stockholders who own fewer than 100 shares should note that the offer represents an opportunity for them to sell their shares without having to pay brokerage commissions or odd lot discounts. Neither the Company nor its Board of Directors is making any recommendation to stockholders as to whether to tender or refrain from tendering shares. No director or executive officer of the Company intends to tender any shares under the offer. Unless extended by the Company, the offer will expire at 12:00 midnight, New York City time, on Thursday, September 12, 1996. The offer is explained in detail in the enclosed Offer to Purchase and related Letter of Transmittal. We encourage you to read these materials carefully before making any decision with respect to the offer. Should you have any questions regarding the offer or need assistance in tendering your shares, please call MacKenzie Partners, Inc., the Information Agent for the offer, toll-free at (800) 322-2885. /s/ MAC CRAWFORD E. Mac Crawford CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER EX-20.8 8 EXHIBIT 20.8 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated August 15, 1996, and the related Letter of Transmittal that are being mailed to stockholders of Magellan Health Services, Inc. on or about August 15, 1996. While the Offer is being made to all stockholders of the Company, tenders will not be accepted from or on behalf of the stockholders in any jurisdiction in which the acceptance thereof would not be in compliance with the laws of such jurisdiction. In those jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Dean Witter Reynolds Inc. as Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH BY MAGELLAN HEALTH SERVICES, INC. UP TO 1,891,891 SHARES OF ITS COMMON STOCK AT A PURCHASE PRICE NOT GREATER THAN $18.50 NOR LESS THAN $16.50 PER SHARE Magellan Health Services, Inc., a Delaware corporation (the "Company"), invites its stockholders to tender shares of its Common Stock, par value $0.25 per share (the "Shares" or the "Common Stock") (including the associated common stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 21, 1992, between the Company and the Rights Agent named therein), to the Company at a price, net to the seller in cash, not greater than $18.50 nor less than $16.50 per Share, as specified by stockholders tendering Shares, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 15, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). The information contained in the Offer to Purchase and the Letter of Transmittal is incorporated by reference herein in its entirety. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THE OFFER. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, SEPTEMBER 12, 1996, UNLESS THE OFFER IS EXTENDED. Neither the Company nor its Board of Directors makes any recommendation to stockholders as to whether to tender or refrain from tendering their Shares. As explained in more detail in the Offer to Purchase, the Company has been advised that no director or executive officer of the Company intends to tender any Shares pursuant to the Offer. Stockholders must make their own decision whether to tender Shares and, if so, how many Shares to tender and the price or prices at which Shares should be tendered. The Company will, upon the terms and subject to the conditions of the Offer, determine a single price per Share, not greater than $18.50 nor less than $16.50 per Share, net to the seller in cash (the "Purchase Price") that it will pay for Shares properly tendered and not withdrawn pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by stockholders tendering Shares. The Company will select the lowest Purchase Price that will allow it to buy 1,891,891 Shares (or such lesser number of Shares as are properly tendered and not withdrawn) at a price not greater than $18.50 nor less than $16.50 per Share pursuant to the Offer. No separate consideration will be paid for the Rights. All Shares properly tendered at a price at or below the Purchase Price and not withdrawn will be purchased at the Purchase Price, upon the terms and subject to the conditions of the Offer, including the proration terms and odd lot tender provisions of the Offer. For purposes of the Offer, the Company will be deemed to have accepted for payment, subject to proration, Shares tendered at or below the Purchase Price and not withdrawn if, as and when the Company gives oral or written notice to the Depositary of its acceptance of such Shares for purchase pursuant to the Offer. Payment for Shares accepted for purchase pursuant to the Offer will be made by depositing the aggregate Purchase Price for such Shares with the Depositary, which will act as agent for the tendering stockholders for the purpose of receiving payment from the Company and transmitting such payments to tendering stockholders. Upon the terms and subject to the conditions of the Offer, in the event that at the Expiration Date (as defined below) more than 1,891,891 Shares (or such greater number of Shares as the Company elects to purchase) are properly tendered and not withdrawn at or below the Purchase Price, the Company will accept Shares for purchase in the following order of priority: (a) FIRST, all Shares properly tendered at or below the Purchase Price prior to the Expiration Date (and not withdrawn) by any Odd Lot Owner, who: (1) tenders all Shares beneficially owned by such Odd Lot Owner at or below the Purchase Price (as defined in the Offer to Purchase) (partial tenders will not qualify for this preference); and (2) completes the section entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b) SECOND, after purchase of all of the foregoing Shares, all other Shares properly tendered at or below the Purchase Price, on or prior to the Expiration Date (and not withdrawn), on a PRO RATA basis, if necessary (with adjustments to avoid purchases of fractional Shares). The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, September 12, 1996, unless and until the Company, in its sole discretion, shall have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by the Company, shall expire. Each stockholder will be afforded the opportunity to designate in the Letter of Transmittal the order of priority in which Shares owned by such stockholder are to be purchased in the event less than all of the Shares tendered by such stockholder are purchased as a result of proration. The Company believes that the purchase of Shares is an attractive use of a portion of the Company's available capital on behalf of its stockholders, and is consistent with the Company's long-term goal of increasing stockholder value. The Company believes it has adequate sources of capital to complete the Share repurchase and to pursue acquisition and investment opportunities. The Company expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary, followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. There can be no assurance that the Company will exercise its right to extend the Offer. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer. Subject to certain conditions, the Company also expressly reserves the right, in its sole discretion, to delay payment for any Shares not theretofore paid for or to terminate the Offer and not accept for payment any Shares not theretofore accepted for payment or, at any time or from time to time, to amend the Offer in any respect, including increasing or decreasing the number of Shares the Company may purchase or the range of prices it may pay pursuant to the Offer. Except as otherwise provided in the Offer, tenders of Shares pursuant to the Offer will be irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Company as provided in the Offer to Purchase, may also be withdrawn after 12:00 midnight, New York City time, on October 10, 1996. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses as set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If the certificates have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the tendering stockholder must submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Shares tendered by an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase, the notice of withdrawal must specify the name and the number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the procedures of such facility. THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE STOCKHOLDERS DECIDE WHETHER TO ACCEPT OR REJECT THE OFFER AND, IF ACCEPTED, AT WHAT PRICE OR PRICES TO TENDER THEIR SHARES. These materials are being mailed to all record owners of Shares and are being furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list as of August 15, 1996 (or, if applicable, who are listed as participants in a clearing agency's security position listing) for transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 13e-4(d)(1) of The Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated in this notice by reference. Copies of the Offer to Purchase and the Letter of Transmittal may be obtained from the Information Agent or the Dealer Manager at the addresses set forth below and will be furnished promptly at the Company's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll-Free (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: DEAN WITTER REYNOLDS INC. Two World Trade Center 65th Floor New York, New York 10048 (212) 392-3232 or Call Toll-Free (800) 488-4490 August 15, 1996 EX-20.9 9 EXHIBIT 20.9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.-- SOCIAL SECURITY NUMBERS HAVE NINE DIGITS SEPARATED BY TWO HYPHENS: I.E. 000-00-0000. EMPLOYER IDENTIFICATION NUMBERS HAVE NINE DIGITS SEPARATED BY ONLY ONE HYPHEN: I.E. 00-0000000. THE TABLE BELOW WILL HELP DETERMINE THE NUMBER TO GIVE THE PAYER.
- ---------------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ---------------------------------------------------------- 1. AN INDIVIDUAL'S ACCOUNT THE INDIVIDUAL 2. TWO OR MORE INDIVIDUALS THE ACTUAL OWNER OF (JOINT ACCOUNT) THE ACCOUNT OR, IF COMBINED FUNDS, ANY ONE OF THE INDIVIDUALS(1) 3. HUSBAND AND WIFE (JOINT THE ACTUAL OWNER OF ACCOUNT) THE ACCOUNT OR, IF JOINT FUNDS, EITHER PERSON(1) 4. CUSTODIAN ACCOUNT OF A THE MINOR(2) MINOR (UNIFORM GIFT TO MINORS ACT) 5. ADULT AND MINOR (JOINT THE ADULT OR, IF THE ACCOUNT) MINOR IS THE ONLY CONTRIBUTOR, THE MINOR(1) 6. ACCOUNT IN THE NAME OF THE WARD, MINOR, OR GUARDIAN OR COMMITTEE FOR INCOMPETENT A DESIGNATED WARD, MINOR, PERSON(3) OR INCOMPETENT PERSON 7. A. THE USUAL REVOCABLE THE SAVINGS TRUST ACCOUNT GRANTOR-TRUSTEE(1) (GRANTOR IS ALSO TRUSTEE) B. SO-CALLED TRUST THE ACTUAL OWNER(1) ACCOUNT THAT IS NOT A LEGAL OR VALID TRUST UNDER STATE LAW 8. SOLE PROPRIETORSHIP THE OWNER(4) ACCOUNT - ---------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ---------------------------------------------------------- 9. A VALID TRUST, ESTATE OR THE LEGAL ENTITY (DO PENSION TRUST NOT FURNISH THE IDENTIFYING NUMBER OF THE PERSONAL REPRESENTATIVE OR TRUSTEE UNLESS THE LEGAL ENTITY ITSELF IS NOT DESIGNATED IN THE ACCOUNT TITLE.)(5) 10. CORPORATE ACCOUNT THE CORPORATION 11. RELIGIOUS, CHARITABLE, OR THE ORGANIZATION EDUCATIONAL ORGANIZATION ACCOUNT 12. PARTNERSHIP ACCOUNT HELD THE PARTNERSHIP IN THE NAME OF THE BUSINESS 13. ASSOCIATION, CLUB, OR THE ORGANIZATION OTHER TAX-EXEMPT ORGANIZATION 14. A BROKER OR REGISTERED THE BROKER OR NOMINEE NOMINEE 15. ACCOUNT WITH THE THE PUBLIC ENTITY DEPARTMENT OF AGRICULTURE IN THE NAME OF A PUBLIC ENTITY (SUCH AS A STATE OR LOCAL GOVERNMENT, SCHOOL DISTRICT, OR PRISON) THAT RECEIVED AGRICULTURAL PROGRAM PAYMENTS
- ------------------------------------------------- - ------------------------------------------------- (1) LIST FIRST AND CIRCLE THE NAME OF THE PERSON WHOSE NUMBER YOU FURNISH. (2) CIRCLE THE MINOR'S NAME AND FURNISH THE MINOR'S SOCIAL SECURITY NUMBER. (3) CIRCLE THE WARD'S, MINOR'S OR INCOMPETENT PERSON'S NAME AND FURNISH SUCH PERSON'S SOCIAL SECURITY NUMBER. (4) SHOW THE NAME OF THE OWNER. (5) LIST FIRST AND CIRCLE THE NAME OF THE LEGAL TRUST, ESTATE, OR PENSION TRUST. NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - - A corporation. - - A financial institution. - - An organization exempt from tax under section 501(a), or an individual retirement plan. - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - - An international organization or any agency, or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - An exempt, charitable remainder trust, or a nonexempt trust described in section 4947(a)(1). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends whether the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - - Payments described in section 6049(b)(5) to non-resident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041(a), 6045, and 6050A. PRIVACY ACT NOTICE. - Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. - If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. - If you fail to include any portion of an includable payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under- payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. - If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. - Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-20.10 10 EXHIBIT 20.10 Contact: Robert Mead (212) 484-6701 MAGELLAN HEALTH SERVICES, INC. ANNOUNCES "DUTCH AUCTION" SELF-TENDER OFFER FOR UP TO 1,891,891 SHARES - -------------------------------------------------------------------------------- ATLANTA, GA, AUGUST 15, 1996 -- Magellan Health Services, Inc. (ASE: MGL) announced today that its Board of Directors has authorized a "Dutch Auction" self-tender offer for up to 1,891,891 shares of the Company's Common Stock. The tender price range will be from $16.50 up to $18.50 per share. The offer will commence on Thursday, August 15, 1996, and expire at midnight on Thursday, September 12, 1996, unless otherwise extended. Magellan Health Services said that if the Company were to purchase 1,891,891 shares pursuant to the offer at a purchase price of $18.50 per share (the highest price in the range of possible purchase prices), the maximum aggregate cost of the offer would be approximately $35.5 million, which would be paid from borrowings under its existing bank agreements, cash and cash equivalents, or some combination thereof. As of July 31, 1996, the Company had cash and cash equivalents of approximately $129 million. Under the terms of the Dutch Auction offer, Magellan stockholders will be given the opportunity to specify prices within the Company's stated price range at which they are willing to tender their shares. Upon receipt of the tenders, Magellan will determine a single per share price that will enable it to purchase up to the stated amount of shares from those stockholders who agreed to sell at or below the Company-selected purchase price. If more than 1,891,891 shares are tendered at or below the purchase price, there will be a proration. The offer will not be contingent upon any minimum number of shares being tendered. The Dutch Auction tender offer will be subject to various terms and conditions, which are described more fully in the Offer to Purchase and Letter of Transmittal, which will be distributed to stockholders next week. On Wednesday, August 14, 1996, the last full trading day on the American Stock Exchange prior to the announcement and commencement of the tender offer, the closing price of Common Stock was $15.50. As of July 31, 1996, the Company had 33,002,826 shares of Common Stock issued and outstanding. "We believe that the purchase of Magellan shares is an attractive use of a portion of the Company's available capital on behalf of its stockholders and is consistent with the long-term goal of increasing stockholder value," said Mac Crawford, chairman and chief executive officer of Magellan Health Services. The Company believes that it has adequate sources of capital to complete the share repurchase and pursue acquisition and investment opportunities. None of the Company's executive officers and board members plan to sell any shares pursuant to the offer. Participants in the offer will avoid the transaction costs typically associated with market sales. Magellan Health Services is making no recommendation to its stockholders regarding their participation in this tender offer. Dean Witter Reynolds Inc. will be the Dealer Manager, and First Union National Bank of North Carolina will be the Depositary for the offer. MacKenzie Partners, Inc. will serve as the Information Agent. Magellan Health Services, Inc., a Fortune 1000 company, is the country's largest integrated behavioral healthcare company. Its three business units include: Charter Behavioral Health Systems, the nation's largest and most comprehensive behavioral healthcare delivery system, with nearly 100 facilities delivering a broad continuum of inpatient and outpatient care; majority-owned Green Spring Health Services, a leader in behavioral managed care services; and Magellan Public Solutions, serving the public sector with privatized behavioral health services. -----END PRIVACY-ENHANCED MESSAGE-----