<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<TABLE>
<S> <C>
Transaction Valuation $34,999,984* Amount of Filing Fee $7,000
</TABLE>
*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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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not withdrawn) of its Common Stock, par value of $0.25 per share (the "Shares"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
<PAGE>
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.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------------------------------
<C> <C> <S>
(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.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
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.
<C> <C> <S>
(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.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
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.
<C> <C> <S>
(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.
</TABLE>
- ------------------------
*To be filed by amendment
4
<PAGE>
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
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------------------- -----------
<C> <C> <S> <C>
(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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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.
<C> <C> <S> <C>
(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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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> <C> <S> <C>
(c) -- Not applicable.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
</TABLE>
- ------------------------
*To be filed by amendment
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
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
</TABLE>
i
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
HIGH LOW
------- -------
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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."
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE
YEAR ENDED SEPTEMBER 30, 30,
-------------------------- ------------------------
1994 1995 1995 1996
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
--------------------------
1994 1995
----------- ------------- AS OF JUNE 30,
----------------------------
1995
------------- 1996
-------------
<S> <C> <C> <C> <C>
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
</TABLE>
- ------------------------
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
<PAGE>
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.
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------------------
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<S> <C> <C>
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)
</TABLE>
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
<PAGE>
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
<TABLE>
<S> <C>
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)
</TABLE>
<TABLE>
<S> <C> <C> <C>
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)
</TABLE>
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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<CAPTION>
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)
<S> <C> <C> <C>
NUMBER OF SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<CAPTION>
TOTAL SHARES
TENDERED
<S> <C> <C> <C>
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.
<CAPTION>
</TABLE>
<TABLE>
<S> <C>
/ / 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:
</TABLE>
<PAGE>
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;
<PAGE>
(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.
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
/ / $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
</TABLE>
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
/ /
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
(PLEASE COMPLETE ENCLOSED SUBSTITUTE FORM W-9)
<PAGE>
PAYER'S NAME: FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS DEPOSITARY
<TABLE>
<S> <C> <C>
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)
</TABLE>
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.
<PAGE>
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.
<PAGE>
(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
<PAGE>
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.
<PAGE>
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
<TABLE>
<S> <C> <C>
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)
</TABLE>
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
<PAGE>
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
<TABLE>
<S> <C> <C>
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)
</TABLE>
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.
<PAGE>
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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
/ / $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
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
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)
- --------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
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;
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
/ / $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
</TABLE>
- --------------------------------------------------------------------------------
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 ______________________________
------------------------------------
<PAGE>
[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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------
<C> <S> <C>
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
<CAPTION>
- ----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------
<C> <S> <C>
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
</TABLE>
- -------------------------------------------------
- -------------------------------------------------
(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.
<PAGE>
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
<PAGE>
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.
