As filed with the Securities and Exchange Commission on February 26, 1996
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MAGELLAN HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1076937
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
(404) 841-9200
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
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STEVE J. DAVIS, ESQ.,
EXECUTIVE VICE PRESIDENT, ADMINISTRATIVE SERVICES
AND GENERAL COUNSEL
Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
(404) 841-9200
(Name , address, including zip code, and
telephone number, including area
code, of agent for service)
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Copy to:
CRAIG L. MCKNIGHT, EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
(404) 841-9200
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Approximate date of commencement of proposed sale to public:
From time to time after the effective date of the Registration Statement, as
determined by market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
Shares Amount offering aggregate Amount of
to be to be price offering registration
registered (1) registered per Unit (2) price (2) fee
- ----------------- ---------- ------------ ------------ -----------
Common Stock,
$.25 par value
per share......... 4,000,000 $23.0625 $92,250,000.00 $31,810.34
(1) This Registration Statement also covers an equal number of Common Stock
purchase rights issuable pursuant to Magellan Health Services, Inc.
Share Purchase Rights Plan, which rights will be transferable only with
related Shares of Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee.
In accordance with Rule 457(c) under the Securities Act of 1933, as
amended, such amounts are based on the average of the high and low
prices per share of Common Stock of Magellan Health Services, Inc. on
February 21, 1996, as reported on the American Stock Exchange.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS Subject to Completion
4,000,000 SHARES February 26, 1996
MAGELLAN HEALTH SERVICES, INC.
COMMON STOCK
($.25 Par Value)
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The 4,000,000 shares (the "Shares") of common stock, $.25 par value
("Common Stock"), of Magellan Health Services, Inc., formerly Charter Medical
Corporation ("Magellan" or the "Company"), may be offered for sale from time to
time by and for the account of Rainwater-Magellan Holdings, L.P. (the "Selling
Stockholder"). See "Selling Stockholder." The Selling Stockholder acquired the
Shares, along with a warrant to purchase an additional 2,000,000 shares of
Common Stock (the "Warrant") on January 25, 1996 in a private placement
transaction with the Company. Magellan will not receive any of the proceeds from
the sale of the Shares by the Selling Stockholder.
Magellan is registering the Shares as required by a Stock and Warrant
Purchase Agreement dated December 22, 1995, as amended, among Magellan and the
Selling Stockholder (the "Stock and Warrant Purchase Agreement"), to provide the
Selling Stockholder with freely tradeable securities. Magellan has also agreed
to pay all fees and expenses incident to such registration, other than any
underwriting discounts or any selling commissions payable in respect of sales of
the Shares, which will be paid by the Selling Stockholder. It is estimated that
the fees and expenses payable by the Company in connection with the registration
of the Shares will be approximately $55,000. Magellan has agreed to keep the
Registration Statement (as hereinafter defined) current and effective with
certain exceptions for so long as the Selling Stockholder and its affiliates
collectively own at least 25% of the Shares (including shares underlying the
Warrant). See "Plan of Distribution."
The Common Stock is listed on the American Stock Exchange under the
symbol "MGL." On February 23, 1996, the last reported sale price of the Common
Stock on the American Stock Exchange was $23.625 per share.
The Selling Stockholder from time to time may offer and sell the Shares
directly or through agents or broker-dealers on the American Stock Exchange or
otherwise on prices and terms related to the then current market price or in
privately negotiated transactions. To the extent required, the names of any
agent or broker-dealer and applicable commissions or discounts and any other
required information with respect to any particular offer will be set forth in
an accompanying Prospectus Supplement. See "Plan of Distribution." The Selling
Stockholder reserves the sole right to accept or reject, in whole or in part,
any proposed purchase of the Shares to be made directly or through agents.
Certain transfer restrictions have been placed on the Shares offered
hereby pursuant to the Stock and Warrant Purchase Agreement. As a result, no
more than 40,000 Shares may be sold by the Selling Stockholder or its affiliates
prior to January 25, 1997. Further, prior to January 25, 2000, the Selling
Stockholder or its affiliates may not sell or transfer in a privately negotiated
transaction to a single purchaser and its affiliates, or any "group" (as defined
in Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as amended)
Shares (including shares underlying the Warrant) which would equal or exceed
five percent (5%) of the Common Stock then outstanding on a fully-diluted basis.
Neither of these restrictions affect the free transferability of the Shares
among the Selling Stockholder and its affiliates.
The Selling Stockholder and any agents or broker-dealers that
participate with the Selling Stockholder in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "1933 Act"), and any commissions received by them and any profit
on the resale of the Shares may be deemed to be underwriting commissions or
discounts under the 1933 Act. See "Plan of Distribution" herein for
indemnification arrangements among Magellan and the Selling Stockholder.
THERE ARE CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN MAGELLAN
COMMON STOCK. FOR A DISCUSSION OF SUCH RISKS, SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is February_____, 1996.
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AVAILABLE INFORMATION
Magellan is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission by Magellan can be inspected and copied at
the office of the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its Regional Offices located at 7 World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Common Stock of
Magellan is listed on the American Stock Exchange, and such reports, proxy
statements and other information concerning Magellan can be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
Magellan has filed with the Commission a Registration Statement on Form
S-3 (together with any amendments, the "Registration Statement") under the 1933
Act, covering the shares of Common Stock being offered by this Prospectus. This
Prospectus, which is part of the Registration Statement, does not contain all of
the information and undertakings set forth in the Registration Statement and
reference is made to such Registration Statement, including exhibits, which may
be inspected and copied in the manner and at the locations specified above, for
further information with respect to Magellan and the Common Stock. Statements
contained in this Prospectus concerning the provisions of any documents are not
necessarily complete and, in each instance, reference is made to the copy of
such documents filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by
Magellan (Commission File No. 1-6639) are incorporated by reference into this
Prospectus:
(i) Magellan's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995, as amended on Form 10-K/A filed on
December 28, 1995;
(ii) Magellan's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995; and
(iii) The description of the Magellan Common Stock in Magellan's
registration statement on Form 8-A dated July 6, 1992.
In addition, all documents filed by Magellan pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made pursuant to the
Registration Statement shall be deemed to be incorporated by reference into and
to be a part of this Prospectus from the date of filing of such documents. Any
statement contained in a document so incorporated by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained in this Prospectus, or in any other subsequently filed
document which is also incorporated by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.
Magellan will provide, without charge, to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference (not including
exhibits to such documents unless such exhibits are specifically incorporated by
reference in such documents). Requests for copies of such documents should be
directed to Mr. Craig L. McKnight, Executive Vice President and Chief Financial
Officer, Magellan Health Services, Inc., 3414 Peachtree Road, N.E., Suite 1400,
Atlanta, Georgia 30326, telephone (404) 841-9200.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Magellan Common Stock.
Acquisitions; Potential Adverse Reaction to Green Spring Health
Services, Inc. Acquisition. The Company has historically grown through
acquisitions and internal growth. There can be no assurance that the Company
will be able to make successful acquisitions in the future or that any such
acquisitions, including the acquisition of Green Spring Health Services, Inc.
("Green Spring"), will be successfully integrated into its operations. In
addition, future acquisitions could have an adverse effect upon the Company's
operating results, particularly in the fiscal quarters immediately following the
consummation of such transactions while the acquired operations are being
integrated into its operations. The Company's hospitals have contracts with
behavioral managed care companies other than Green Spring. Such other companies
could decide to terminate their contracts with the Company's hospitals in
reaction to the Company's acquisition of a majority interest in one of their
major competitors.
Historical Operating Losses. The Company has experienced losses from
continuing operations before reorganization items, extraordinary items and the
cumulative effect of a change in accounting principle in each fiscal year since
the completion of a management buyout in 1988. Such losses amounted to $167.2
million for the fiscal year ended September 30, 1991, $81.7 million for the
ten-month period ended July 31, 1992, $8.1 million for the two-month period
ended September 30, 1992 and $39.6 million, $47.0 million and $43.0 million for
the fiscal years ended September 30, 1993, 1994 and 1995, respectively. Although
the Company reported income from continuing operations of approximately $9.7
million in the quarter ended December 31, 1995, there can be no assurance that
such profitability will continue. The Company's history of losses could have an
adverse effect on its operations.
Reimbursement by Third-Party Payors. For the fiscal year ended September
30, 1995, the Company derived approximately 47% of its gross psychiatric patient
service revenue from private-pay sources (including HMOs, PPOs, commercial
insurance and Blue Cross), 26% from Medicare, 17% from Medicaid, 4% from the
Civilian Health and Medical Program for the Uniformed Services ("CHAMPUS") and
6% from other government programs. Changes in the mix of the Company's patients
among the private-pay, Medicare and Medicaid categories, and among different
types of private-pay sources, can significantly affect the profitability of the
Company's hospital operations. Various cost-containment mechanisms by both
governmental and private third-party payors have limited the scope and amount of
reimbursable healthcare expenses. Therefore, there can be no assurance that
payments under governmental and private third-party payor programs will remain
at levels comparable to present levels or will, in the future, be sufficient to
cover the costs of providing care to patients covered by such programs. In
addition, there can be no assurance that the Company's hospitals will continue
to meet the requirements for participation in such programs.
Previous Bankruptcy Reorganization. The Company was reorganized pursuant
to Chapter 11 of the United States Bankruptcy Code, effective on July 21, 1992
(the "Reorganization"). Prior to the Reorganization, the Company's total
indebtedness was approximately $1.8 billion; and from February 1991 until July
1992, the Company was in default in the payment of interest and principal, or
both, on substantially all such indebtedness. The indebtedness was incurred by
Magellan in connection with a management buy-out of the Company in 1988 and a
hospital-construction program. As a result of the Reorganization, the Company's
long-term debt was reduced by approximately $700 million and its redeemable
preferred stock of $233 million was eliminated. The holders of such debt and
preferred stock received approximately 97% of Magellan's Common Stock
outstanding on July 21, 1992.
Governmental Budgetary Constraints and Healthcare Reform. In the 1995 and
1996 sessions of the United States Congress, the focus of healthcare legislation
has been on budgetary and related funding mechanism issues. A number of reports,
including the 1995 Annual Report of the Board of Trustees of the Federal
Hospital Insurance Program (Medicare) have projected that the Medicare "trust
fund" is likely to become insolvent by the year 2002 if the current growth rate
of approximately 10% per annum in Medicare expenditures continues. Similarly,
federal and state expenditures under the Medicaid program are projected to
increase significantly during the same seven-year period. In response to these
projected expenditure increases, and as part of an effort to balance the federal
budget, both the Congress and the Clinton Administration have made proposals to
reduce the rate of increase in projected Medicare and Medicaid expenditures and
to change funding mechanisms and other aspects of both programs. Congress has
passed
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legislation that would reduce projected expenditure increases substantially and
would make significant changes in the Medicare and the Medicaid programs. The
Clinton Administration has proposed alternate measures to reduce, to a lesser
extent, projected increases in Medicare and Medicaid expenditures. As of the
date of this Prospectus, neither proposal has become law.
The Medicare legislation that has been adopted by Congress would, with
some differences, reduce projected expenditure increases by a variety of means,
including reduced payments to providers (including the Company), increased
beneficiary premiums for physician and certain other services, and creation of
incentives for Medicare beneficiaries to enroll in managed care plans or to
accept Medicare coverage with a substantially increased deductible. Changes in
the Medicaid program would reduce the number and extent of federal mandates
concerning how state Medicaid programs operate (including levels of benefits
provided and levels of payments to providers) and would change the funding
mechanism from a sharing formula between the federal government and a state to
"block grant" funding. The Company cannot predict the effect of any such
legislation, if adopted, on its operations; but the Company anticipates that,
although overall Medicare and Medicaid funding may be reduced from projected
levels, the changes in such programs may provide opportunities to the Company to
obtain increased Medicare and Medicaid business through risk-sharing or partial
risk-sharing contracts with managed care plans and state Medicaid programs.
Although the United States Congress, in 1995 and 1996, has not
considered healthcare reform proposals, the Company anticipates that numerous
healthcare reform proposals will continue to be introduced in future sessions of
Congress. The Company cannot predict whether any such proposal will be adopted
or the effect on the Company of any proposal that does become law.
A number of states in which the Company has operations have either
adopted or are considering the adoption of healthcare reform proposals of
general applicability or Medicaid reform proposals, partly in response to
possible changes in Medicaid law. Where adopted, these state reform laws have
often not yet been fully implemented. The Company cannot predict the effect of
these state healthcare reform and Medicaid reform laws on its operations.
Provider Business-Competition. Competition among hospitals and other
healthcare providers for patients has intensified in recent years. During this
period, hospital occupancy rates for inpatient behavioral care patients in the
United States have declined as a result of cost containment pressures, changing
technology, changes in reimbursement, changes in practice patterns from
inpatient to outpatient treatment and other factors. In areas in which the
Company operates, there are other hospitals or facilities that provide inpatient
or outpatient services comparable to those offered by Magellan's hospitals. In
recent years, the competitive position of hospitals has been affected by the
ability of such hospitals to obtain contracts with Preferred Provider
Organizations ("PPO's"), Health Maintenance Organizations ("HMO's") and other
managed care programs to provide inpatient and other services. Such contracts
normally involve a discount from the hospital's established charges, but provide
a base of patient referrals. These contracts also frequently provide for
pre-admission certification and for concurrent length of stay reviews. The
importance of obtaining contracts with HMO's, PPO's and other managed care
companies varies from market to market, depending on the individual market
strength of the managed care companies. In addition, hospitals owned by
governmental agencies or other tax-exempt entities benefit from endowments,
charitable contributions and tax-exemptions, the advantages of which are not
enjoyed by the Company's hospitals.
Managed Care Business - Competition. The Company, through its Green
Spring subsidiary, now operates in the managed healthcare industry. The managed
healthcare industry is being affected by various external factors including
rising healthcare costs, intense price competition, and market consolidation by
major managed care companies. Magellan faces competition from a number of
sources including other behavioral health managed care companies and traditional
full service managed care companies that contract to provide behavioral
healthcare benefits. Also, to a lesser extent, competition exists from fully
capitated multi-specialty medical groups and individual practice associations
that directly contract with managed care companies and other customers to
provide and manage all components of healthcare for the members including the
behavioral healthcare component. The Company believes that the most significant
factors in a customer's selection of a managed behavioral healthcare company
include price, the extent and depth of provider networks and quality of
services. Management believes that its managed care business competes
effectively with respect to these factors. However, there can be no assurance
that Magellan will be able to compete successfully in the managed care business
in the future.
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Limitations Imposed by the Credit Agreement and Senior Note Indenture.
In May 1994, the Company entered into a Second Amended and Restated Credit
Agreement(the "Credit Agreement") with certain financial institutions and issued
$375 million of Senior Subordinated Notes (the "Senior Notes") to institutional
investors. The Credit Agreement and the indenture for the Senior Notes contain a
number of restrictive covenants which, among other things, limit the ability of
the Company and certain of its subsidiaries to incur other indebtedness, enter
into certain joint venture transactions, incur liens, make certain restricted
payments and investments, enter into certain business combination and asset sale
transactions and make capital expenditures. These restrictions could adversely
affect the Company's ability to conduct its operations, finance its capital
needs or to pursue attractive business combinations and joint ventures if such
opportunities arise. Under the Credit Agreement, the Company also is required to
maintain certain specified financial ratios. Failure by the Company to maintain
such financial ratios or to comply with the restrictions contained in the Credit
Agreement and the indenture for the Senior Notes could cause such indebtedness
(and by reason of cross-acceleration provisions, other indebtedness) to become
immediately due and payable and/or could cause the cessation of funding under
the Credit Agreement.
Regulation. The federal government and all states in which Magellan
operates healthcare facilities regulate various aspects of Magellan's business.
Healthcare facilities are subject to periodic inspection by governmental and
other authorities to ensure continued compliance with various standards, their
continued licensing under state law and certification under the Medicare and
Medicaid programs. Although Magellan has not failed to obtain necessary
approvals or licenses in the past, the failure to obtain or renew any required
regulatory approvals or licenses in the future could adversely affect the
operations of Magellan.
Magellan's managed care business operations, in some states, are
subject to utilization review, licensure and related state regulation
procedures. Green Spring provides managed behavioral healthcare services to
various Blue Cross/Blue Shield plans that operate Medicare and Medicaid health
maintenance organizations or other at-risk managed care programs and that
participate in the Blue Cross Federal Employees health program. As a contractor
to these Blue Cross/Blue Shield plans, Green Spring is indirectly subject to
federal and, with respect to the Medicaid program, state monitoring and
regulation of performance and financial reporting requirements. Although
Magellan believes that it is in compliance with all current state and federal
regulatory requirements applicable to the managed care business it conducts,
failure to do so could adversely affect its operations.
Dependence on Healthcare Professionals. Physicians traditionally have
been the source of a significant portion of the Company's hospital admissions.
Therefore, the success of the Company's hospitals is dependent in part on the
number and quality of the physicians on the medical staffs of its hospitals and
their admission practices. A small number of physicians account for a
significant portion of patient admissions at some of the Company's hospitals.
There can be no assurance that the Company can retain its current physicians on
staff or that additional physician relationships will be developed in the
future. Furthermore, hospital physicians generally are not employees of the
Company and in general Magellan does not have contractual arrangements with
hospital physicians restricting the ability of such physicians to practice
elsewhere.
Liability Insurance. Effective June 1, 1995, Plymouth Insurance Company,
Ltd. ("Plymouth"), a wholly-owned Bermuda subsidiary of the Company, provides
$25 million per occurrence general and hospital professional liability insurance
for the Company's hospitals. All of the risk of losses from $1.5 million to $25
million per occurrence has been reinsured with unaffiliated insurers. The
Company also insures with an unaffiliated insurer 100% of the risk of losses
between $25 million and $100 million per occurrence. The Company's general and
professional liability coverage is written on a "claims made or circumstances
reported" basis.
For the six years from June 1, 1989 through May 31, 1995, the Company
had a similar general and hospital professional liability insurance program. For
those years, the per occurrence deductible (with respect to which the Company
was self-insured) was $2.5 million for the years ended May 31, 1990 and 1991, $2
million for the years ended May 31, 1992 and 1993 and $1.5 million (relating to
the Company's general hospitals sold on September 30, 1993) for the year ended
May 31, 1994. For psychiatric hospitals, Plymouth's coverage did not contain a
per occurrence deductible for the years ended May 31, 1994 and 1995. In December
1994, the per occurrence deductible for the years ended May 31, 1989 and 1990
was eliminated. Plymouth provides coverage with no per occurrence deductible for
hospital system claims which had not been paid prior to December 31, 1994.
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The amount of expense relating to Magellan's malpractice insurance may
materially increase or decrease from year to year depending, among other things,
on the nature and number of new reported claims against Magellan and amounts of
settlements of previously reported claims. To date, Magellan has not experienced
a loss in excess of policy limits. Magellan believes that its coverage limits
are adequate.
Capitation Arrangements. The Company's managed care business has
contracts with companies holding state HMO or insurance company licenses on a
capitated or "at-risk" basis where the risk of patient care is assumed by the
Company in exchange for a monthly fee per member regardless of utilization
level. As of December 31, 1995, approximately 30% of Green Spring's managed care
members were under capitated arrangements. During 1995, approximately 70% of
Green Spring's revenues were from at-risk contracts. Increases in utilization
levels under capitated contractual arrangements could adversely effect the
operations of the managed care business.
Possible Volatility of Stock Price. The Company believes factors such as
announcements with respect to healthcare reform measures, reductions in
government healthcare programs projected expenditures, acquisitions and
quarter-to-quarter and year-to-year variations in financial results could cause
the market price of Magellan Common Stock to fluctuate substantially. Any
adverse announcement with respect to healthcare reform measures or program
expenditures, acquisitions or any shortfall in revenue or earnings from levels
expected by securities analysts could have an immediate and significant adverse
effect on the trading price of Magellan Common Stock in any given period. As a
result, the market for Magellan Common Stock may experience price and volume
fluctuations unrelated to the operating performance of Magellan.
THE COMPANY
Magellan 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 99 acute care
psychiatric hospitals and three residential treatment centers with an aggregate
capacity of 9,070 licensed beds as of December 31, 1995. Ninety-three of the
Company's hospitals operate partial hospitalization programs and the Company
operates 141 outpatient centers, staffed by mental health professionals.
Green Spring, the Company's majority-owned subsidiary that engages in
the managed care business, provides managed behavioral healthcare services,
which include utilization management, care management and employee assistance
programs through a network of more than 30,000 providers nationwide covering
approximately 12 million members as of December 31, 1995.
Magellan Public Solutions, Inc. ("Public Solutions"), 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.
Magellan'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 payors who need assistance in managing the risk of behavioral healthcare
costs.
Magellan was incorporated in 1969 under the laws of the State of
Delaware. Magellan Common Stock is traded on the American Stock Exchange under
the symbols "MGL." Unless the context otherwise requires, references to Magellan
include Magellan Health Services, Inc. and its subsidiaries. Magellan's
principal executive offices are located at 3414 Peachtree Road, N.E., Suite
1400, Atlanta, Georgia 30326, and its telephone number is (404) 841-9200.
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RECENT DEVELOPMENTS
Green Spring Acquisition. On December 13, 1995, the Company acquired a
51% ownership interest in Green Spring for approximately $73.2 million in cash
and Common Stock and the contribution of Group Practice Affiliates, a
wholly-owned Magellan subsidiary, which became a wholly-owned subsidiary of
Green Spring. On December 20, 1995, the Company acquired an additional 10%
ownership interest in Green Spring for approximately $16.7 million in cash as a
result of an exercise by a minority stockholder of its Exchange Option (as
hereinafter defined) for a portion of the stockholders' interest in Green
Spring. The Company currently has a 61% ownership interest in Green Spring.
The Green Spring acquisition created the first fully integrated
national behavioral healthcare system and gives the Company the capability to
provide case management and delivery services to large private organizations and
a public sector marketplace seeking increased privatization of services. The
Company changed its name to Magellan Health Services, Inc. on December 21, 1995
to reflect the broader range of services it expects to provide as a result of
the Green Spring acquisition and the creation of Public Solutions.
The minority stockholders of Green Spring consist of four Blue
Cross/Blue Shield organizations (the "Blues") that are key customers of Green
Spring. In addition, two other Blues organizations that formerly owned a portion
of Green Spring will continue as customers of Green Spring. As of December 31,
1995, the minority stockholders of Green Spring have the option, under certain
circumstances, to exchange their ownership interests ("Exchange Option")in Green
Spring for approximately 2.8 million shares of Magellan Common Stock or $65.1
million in subordinated notes. The Company may elect to pay cash in lieu of
issuing the subordinated notes. The Exchange Option expires December 13, 1998.
Sale of Common Stock and Warrant. On January 25, 1996, the Company
completed the sale to the Selling Stockholder of the Shares, along with a
warrant to purchase an additional 2,000,000 shares of Common Stock, pursuant to
the Stock and Warrant Purchase Agreement. The Warrant, which expires in January,
2000, entitles the Selling Stockholder to purchase such additional shares of
Common Stock at a per share price of $26.15, subject to adjustment for certain
dilutive events. The aggregate purchase price for the Shares and the Warrant was
$69,732,000. Upon completion of the acquisition of the Shares (and prior to
exercise of the Warrant), the Selling Stockholder owned approximately 12.2% of
the outstanding voting securities of Magellan.
The Stock and Warrant Purchase Agreement places certain restrictions on
the sale or transfer of the Shares. As a result, no more than 40,000 Shares may
be sold by the Selling Stockholder or its affiliates prior to January 25,
1997. Further, prior to January 25, 2000, the Selling Stockholder or its
affiliates may not sell or transfer in a privately negotiated transaction to a
single purchaser and its affiliates or a "group" ( as defined in Rule
13d-5(b)(1) under the Exchange Act) Shares (including shares underlying the
Warrant) which would equal or exceed five percent (5%) of the Common Stock then
outstanding on a fully-diluted basis. Neither of these restrictions affect the
free transferability of the Shares among the Selling Stockholder and its
affiliates. In addition, the Stock and Warrant Purchase Agreement contains
certain standstill covenants on the part of the Selling Stockholder which, among
other things, prohibit the Selling Stockholder and its affiliates from
purchasing additional shares of Common Stock so that they collectively own in
excess of 20% of the outstanding shares of Common Stock prior to January, 1998.
The Stock and Warrant Purchase Agreement also grants the Selling Stockholder
certain board representation rights. See "Selling Stockholder".
The Company used $68.0 million of the proceeds from the sale of the
Shares and the Warrant to the Selling Stockholder to repay indebtedness incurred
under the Company's Credit Agreement, which indebtedness was incurred in
connection with the investments in Green Spring during the first quarter of
fiscal 1996.
9
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All of the proceeds from the sale of the Shares will be received by the
Selling Stockholder.
DILUTION
No dilution will occur from sales of the Shares under this Registration
Statement. At December 31, 1995, the net tangible book value of the Company's
Common Stock was a deficit of $72.0 million or $2.51 per share. "Net tangible
book value" per share represents stockholders' equity less intangible assets of
the Company, divided by the number of shares of Common Stock outstanding. Giving
effect to the sale by the Company of the Shares and the Warrant to the Selling
Stockholder at the offering price of $17.43 per share, the pro forma net
tangible book value of the Common Stock at December 31, 1995 was a deficit of
$3.4 million or $0.10 per share. This represented an immediate increase in net
tangible book value of $2.41 per share to existing stockholders and an immediate
dilution of $17.53 per share book value to the Selling Stockholder.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed for trading on the American Stock Exchange
(ticker symbol "MGL"). As of January 31, 1996, there were 12,221 holders of
record of the Company's Common Stock. The following table sets forth the high
and low sales prices of the Company's Common Stock as reported by the American
Stock Exchange for the periods indicated:
<TABLE>
<CAPTION>
Common Stock Sales Prices
------------------------------------------
Calendar Year High Low
- -------------------------------------------------- ---------------- ----------------
<S> <C> <C> <C>
1993
Fourth Quarter............................. $ 27 $ 21
1994
First Quarter.............................. $ 28 $ 21 3/8
Second Quarter............................. 26 1/8 21 3/4
Third Quarter.............................. 28 1/2 21 1/4
Fourth Quarter............................. 28 1/2 19
1995
First Quarter.............................. $ 21 1/4 $ 13 7/8
Second Quarter............................. 19 5/8 15 5/8
Third Quarter.............................. 23 1/4 16 1/4
Fourth Quarter............................. 24 1/4 17 3/8
1996
First Quarter (through February 23, 1996).. $ 24 7/8 $ 21 3/8
</TABLE>
The Company has not declared any cash dividends during the past three
fiscal years. The Company is prohibited from paying dividends (other than
dividends payable in shares of Common Stock) on its Common Stock under the terms
of the Credit Agreement, except for cash dividends 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.
10
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of
Magellan as of December 31, 1995 and as adjusted to reflect the sale by the
Company of the Shares and the Warrant on January 25, 1996 to the Selling
Stockholder.
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------
Actual As Adjusted
-------------- ---------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revolving Credit Agreement................................. $ 148,593 $ 80,593
11.25% Senior Subordinated Notes due 2004.................. 375,000 375,000
Other long-term debt....................................... 97,528 97,528
Stockholders' equity:
Preferred stock, without par value;
10,000 authorized; none issued and outstanding.... -- --
Common Stock, $.25 par value; 80,000
authorized; 28,664 issued and outstanding;
32,664 issued and outstanding, as adjusted........ 7,166 8,166
Additional paid-in capital.......................... 259,370 326,993
Accumulated deficit................................. (152,092) (152,092)
Warrants outstanding................................ 64 64
Common Stock in Treasury, 462 shares............... (9,238 (9,238)
Cumulative foreign currency adjustments............. (1,090 (1,090)
-------------- ------------
Total stockholders' equity.................... 104,180 172,803
-------------- ------------
Total capitalization........................... $ 725,301 $ 725,924
============== ============
</TABLE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected historical financial data and
selected pro forma financial data for Magellan for the year ended September 30,
1995 and the three months ended December 31, 1995. The selected historical
financial data for the year ended September 30, 1995 has been derived from the
historical financial statements of Magellan audited by Arthur Andersen LLP,
independent public accountants. The selected historical financial data for the
three months ended December 31, 1995 has been derived from unaudited interim
statements of operations of Magellan. In the opinion of management, the
unaudited interim financial information includes all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the
information set forth therein. The selected pro forma financial data gives
effect to the January 25, 1996 sale of the Shares to the Selling Stockholder, as
if such sale had occurred on October 1, 1994.
<TABLE>
<CAPTION>
Fiscal year ended Three months ended
September 30, 1995 December 31, 1995
------------------------------ -------------------------------
Actual Pro Forma (1) Actual Pro Forma (1)
----------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C>
Net income (loss)............................. $ (42,963) $ (39,731) $ 9,748 $ 10,493
Average number of common shares outstanding... 27,870 31,870 27,994 31,994
Income (loss) per common share................ (1.54) (1.25) 0.35 0.33
</TABLE>
(1) The adjustments to pro forma net income (loss), income (loss) per
common share and average number of common shares outstanding result
from the issuance of the 4,000,000 shares to the Selling Stockholder
and a related adjustment to reduce interest expense, net of tax, for
the use of $68.0 million of the proceeds from the issuance of such
shares to reduce outstanding borrowings under the Credit Agreement for
the fiscal year ended September 30, 1995 and the three months ended
December 31, 1995.
11
<PAGE>
SELLING STOCKHOLDER
The following table sets forth certain information with respect to the
ownership of the Shares as of December 22, 1995, and as adjusted to reflect the
sale of the Shares offered hereby, by the Selling Stockholder. The Selling
Stockholder has sole voting and investment power with respect to the Shares.
<TABLE>
<CAPTION>
Ownership of Number of Ownership of
Common Stock Before Shares Being Common Stock After
the Offering Offered (1) the Offering (2)
------------ ----------- ----------------
Number of Number of
Name Shares Percent Shares Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Rainwater-Magellan
Holdings, L.P. (3) 4,000,000 12.25% 4,000,000 (4) None --
</TABLE>
- ------------------------------------
(1) The Shares being offered hereby were acquired by the Selling
Stockholder pursuant to the terms of the Stock and Warrant Purchase
Agreement. Under the terms of the Stock and Warrant Purchase Agreement,
the Selling Stockholder obtained registration rights with respect to
the Shares. Magellan has registered the Shares for sale pursuant to
this Prospectus as required by the Stock and Warrant Purchase
Agreement.
(2) Assumes that all Shares being offered are sold.
(3) Under the rules of the Securities and Exchange Commission, Rainwater,
Inc., the general partner of the Selling Stockholder, and Richard
E. Rainwater, the sole shareholder and a director of Rainwater, Inc.
are also deemed to be beneficial owners of the Shares. Darla Moore,
Vice President and Director of Rainwater, Inc. was appointed to the
Board of Directors of Magellan on February 22, 1996 pursuant to the
Stock and Warrant Purchase Agreement.
(4) No more than 40,000 Shares may be sold by the Selling Stockholder or
its affiliates prior to January 25, 1997. Further, prior to January 25,
2000, the Selling Stockholder or its affiliates may not sell or
transfer in a privately negotiated transaction to a single purchaser
and its affiliates or any "group" (as defined in Rule 13d-5(b)(1) under
the Exchange Act) Shares (including shares underlying the Warrant)
which would equal or exceed five percent (5%) of the Common Stock then
outstanding on a fully-diluted basis.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Stockholder on
the American Stock Exchange or any national securities exchange or automated
interdealer quotation system on which shares of Common Stock are then listed,
through negotiated transactions or otherwise. Certain transfer restrictions have
been placed on the Shares offered hereby pursuant to the Stock and Warrant
Purchase Agreement, which in general restrict the sale of the Shares prior to
January 25, 1997. See "Recent Developments -- Sale of Common Stock and Warrant".
The Shares will be sold at prices and on terms then prevailing, at prices
related to the then current market price or at negotiated prices. The Selling
Stockholder may effect sales of the Shares directly or by or through agents,
brokers, dealers or underwriters and the Shares may be sold by one or more of
the following methods: (a) underwritten public offerings, (b) ordinary brokerage
transactions, (c) purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this Prospectus, (d) in "block"
sales, and (e) privately negotiated transactions. At the time a particular offer
is made, a Prospectus Supplement, if required, will be distributed that sets
forth the name or names of agents, broker-dealers or underwriters, any
commissions and other terms constituting compensation and any other required
information. In effecting sales, broker-dealers engaged by any Selling
Stockholder and/or the purchasers of the Shares may arrange for other
broker-dealers to participate. Broker-dealers will receive commissions,
concessions or discounts from the Selling Stockholder and/or the purchasers of
the Shares in amounts to be negotiated prior to the sale. Sales will be made
only through broker-dealers registered as such in a subject jurisdiction or in
transactions exempt from such registration. As of the date of this Prospectus,
there are no selling arrangements between the Selling Stockholder and any broker
or dealer.
12
<PAGE>
In offering the Shares covered by this Prospectus, the Selling
Stockholder and any brokers, dealers or agents who participate in a sale of the
Shares by the Selling Stockholder may be considered "underwriters" within the
meaning of Section 2(11) of the 1933 Act, and any profits realized by the
Selling Stockholder and the compensation of any broker/dealers may be deemed to
be underwriting discounts and commissions.
As required by the Stock and Warrant Purchase Agreement, Magellan has
filed the Registration Statement, of which this Prospectus forms a part, with
respect to the sale of the Shares. Magellan has agreed to keep the Registration
Statement current and effective, with certain exceptions, for so long as the
Selling Stockholder and its affiliates collectively own at least 25% of the
Shares (including shares underlying the Warrant) issued pursuant to the Stock
and Warrant Purchase Agreement.
Magellan will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholder. Magellan will bear the costs of registering
the Shares under the 1933 Act, including the registration fee under the 1933
Act, its legal and accounting fees and any printing fees. The Selling
Stockholder will bear the cost of underwriting commissions and/or discounts, if
any, and selling commissions.
Pursuant to the terms of the Stock and Warrant Purchase Agreement,
Magellan and the Selling Stockholder have agreed to indemnify each other and
certain other related parties for certain liabilities, including liabilities
under the 1933 Act, in connection with the registration of the Shares.
LEGAL MATTERS
The legality of the Shares will be passed upon for the Selling
Stockholder by Steve J. Davis, Esq., Executive Vice President, Administrative
Services and General Counsel of the Company, 3414 Peachtree Road, N.E., Atlanta,
Georgia 30326.
EXPERTS
The audited, consolidated financial statements and schedule of Magellan
Health Services, Inc. and subsidiaries included in the Magellan Annual Report on
Form 10-K for the year ended September 30, 1995 incorporated by reference in
this Prospectus and elsewhere in this Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports thereto, and are incorporated by reference herein in reliance upon the
authority of said firm, as experts in giving said reports.
Future consolidated financial statements and schedules of Magellan
Health Services, Inc. and subsidiaries and the reports thereon of Arthur
Andersen LLP also will be incorporated by reference in this Registration
Statement of which this Prospectus is a part in reliance upon the authority of
that firm as experts in giving those reports to the extent said firm has audited
those financial statements and consented to the use of their reports thereon.
13
<PAGE>
- ---------------------------------------- -----------------------------------
No person has been authorized in
connection with the offering made hereby
to give any information or to make any
representation not contained in this
Prospectus and, if given or made, such 4,000,000 SHARES
information or representation must not
be relied upon as having been authorized
by Magellan, or the Selling Stockholder.
This Prospectus does not constitute an MAGELLAN HEALTH
offer to sell or a solicitation of an SERVICES, INC.
offer to buy any of the securities
offered hereby in any jurisdiction in
which it is unlawful to make such offer
or solicitation. Neither the delivery of COMMON STOCK
this Prospectus nor any sale made
hereunder shall, under any
circumstances, create any implication
that the information contained herein is
correct as of any time subsequent to the
date hereof.
--------------------------- ---------------------------
PROSPECTUS
---------------------------
TABLE OF CONTENTS
Available Information.................4
Incorporation of Certain Documents
by Reference........................4
Risk Factors..........................5
The Company...........................8
Recent Developments...................9
Use of Proceeds......................10
Dilution ............................10
Price Range of Common Stock
and Dividend Policy................10
Capitalization.......................11
Selected Financial Information.......11
Selling Stockholder..................12
Plan of Distribution.................12
Legal Matters........................13
Experts ............................13
February , 1996
- ---------------------------------------- -----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 31,810.34
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 4,000.00
Blue Sky Fees and Expenses (including legal fees and expenses) 1,000.00
Printing 5,000.00
Miscellaneous 3,189.66
------------------
Total $ 55,000.00
=================
</TABLE>
All of the above items, except for registration fee, are estimates.
Although the Selling Stockholder will not bear any of the expenses set forth
above, the Selling Stockholder will bear the cost of underwriting commissions
and/or discounts, if any, and selling commissions.
Item 15. Indemnification of Directors and Officers
The Company is a Delaware corporation. Section 145 of the Delaware
General Corporation Law (the "DGCL") provides that a Delaware corporation has
the power to indemnify its officers and directors in certain circumstances.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action or suit provided that such director or officer acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such director or officer shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such director or officer is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) or (b) or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith; provided that indemnification provided for by Section 145 or granted
pursuant thereto shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled. Section 145 also empowers the corporation to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
Article VII of the Bylaws of Magellan provide, in substance, that
Magellan shall indemnify directors and officers against all liability and
related expenses incurred in connection with the affairs of Magellan if: (a) in
the case of actions not by or in the right of Magellan, the director or officer
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Magellan, and (with respect to a criminal
proceeding) had no
15
<PAGE>
reasonable cause to believe his conduct was unlawful; and (b) in the case of
actions by or in the right of Magellan, the director or officer acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of Magellan, provided that no indemnification shall be made for a
claim as to which the director or officer is adjudged liable to Magellan unless
(and only to the extent that) an appropriate court determines that, in view of
all the circumstances, such person is fairly and reasonably entitled to
indemnity.
In addition, Section 102(b)(8) of the DGCL permits Delaware
corporations to include a provision in their certificates of incorporation
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary as a director,
provided that such provisions shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of the law, (iii) for
unlawful payment of dividends or other unlawful distributions, or (iv) for any
transactions from which the director derived an improper personal benefit.
Article Twelve of Magellan's Certificate of Incorporation sets forth such a
provision.
Magellan maintains directors' and officers' liability insurance with
various providers in the aggregate amount of $60 million.
The Selling Stockholder has agreed to indemnify the Company, its
directors and officers (who sign the Registration Statement, and certain
controlling persons against certain liabilities, including liabilities under the
1933 Act subject to such limitations as set forth in the Stock and Warrant
Purchase Agreement.
The foregoing summaries are necessarily subject to the complete text of
the statutes, Certificate of Incorporation, Bylaws, insurance policies and
agreements referred to above and are qualified in their entirety by reference
thereto.
For the undertaking with respect to indemnification, see Item 17.
Item 16. Exhibits
4.1 Restated Certificate of Incorporation of the Company, as filed
in Delaware on October 16, 1992, which was filed as Exhibit
3(a) to the Company's Annual Report on Form 10-K for the year
ended September 30, 1992, and is incorporated herein by
reference.
4.2 Certificate of Ownership and Merger merging Magellan Health
Services, Inc. (a Delaware corporation) into Charter Medical
Corporation (a Delaware corporation), as filed in Delaware on
December 21, 1995, which was filed as Exhibit 3(c) to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1995, and is incorporated herein by reference.
4.3 Form of Share Purchase Rights Plan among the Company and First
Union National Bank of North Carolina, N.A., which was filed
as Exhibit 2.5 to the Company's Registration Statement on Form
8-A dated July 6, 1992, and is incorporated herein by
reference.
4.4 Stockholders' Agreement, dated December 13, 1995, among Green
Spring Health Services, Inc., Blue Cross and Blue Shield of
New Jersey, Inc., Health Care Service Corporation,
Independence Blue Cross, Pierce County Medical Bureau, Inc.
and the Company, which was filed as Exhibit 4(d) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended December 31, 1995, and is incorporated herein by
reference.
4.5 Exchange Agreement, dated December 13, 1995, among Blue Cross
and Blue Shield of New Jersey, Inc., Health Care Service
Corporation, Independence Blue Cross, Pierce County Medical
Bureau, Inc. and the Company, which was filed as Exhibit 4(e)
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1995, and is incorporated
herein by reference.
16
<PAGE>
4.6 Stock and Warrant Purchase Agreement, dated December 22, 1995,
between the Company and Richard E. Rainwater, which was filed
as Exhibit 4(f) to the Company's quarterly report on Form 10-
Q for the quarterly period ended December 31, 1995, and is
incorporated herein by reference.
4.7 Amendment No. 1 to Stock and Warrant Purchase Agreement, dated
January 25, 1996, between the
Company and Rainwater-Magellan Holdings, L.P.
5.1 Opinion of Steve J. Davis as to the legality of the Common
Stock to be registered.
23.1 Consent of Steve J. Davis (included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of securities registered hereby, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)3
of the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
Provided, however, that the undertakings set forth in
paragraphs (i) and (ii) above not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
17
<PAGE>
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling persons of the
registrant in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on the 26th day of
February, 1996.
MAGELLAN HEALTH SERVICES, INC.
By:/s/ Howard A. McLure
---------------------------------------
Howard A. McLure
Vice President and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on February
26th, 1996 in the capacities and on the date indicated.
Each person whose signature appears below constitutes and appoints
Howard A. McLure as his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities to sign on his behalf individually and in each
capacity stated below any amendment, including post-effective amendments, to
this Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent and either of them, or his
substitute, may lawfully do or cause to be done by virtue hereof.
/s/ E. Mac Crawford Date: February 26, 1996
- ------------------------------------- ---------------------------
E. Mac Crawford
President and Chairman of the Board
(Principal Executive Officer)
/s/ Craig L. McKnight
- ------------------------------------- Date: February 26, 1996
Craig L. McKnight ---------------------------
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
19
<PAGE>
/s/ Howard A. McLure
- ------------------------------------- Date: February 26, 1996
Howard A. McLure ---------------------------
Vice President and Controller
(Principal Accounting Officer)
/s/ Edwin M. Banks
- ------------------------------------- Date: February 26, 1996
Edwin M. Banks ---------------------------
Director
/s/ G. Fred DiBona, Jr.
- ------------------------------------- Date: February 26, 1996
G. Fred DiBona, Jr. ---------------------------
Director
/s/ Andre C. Dimitriadis
- ------------------------------------- Date: February 26, 1996
Andre C. Dimitriadis ---------------------------
Director
/s/ A. D. Frazier, Jr.
- ------------------------------------- Date: February 26, 1996
A. D. Frazier, Jr. ---------------------------
Director
/s/ Raymond H. Kiefer
- ------------------------------------- Date: February 26, 1996
Raymond H. Kiefer ---------------------------
Director
/s/ Gerald L. McManis
- ------------------------------------- Date: February 26, 1996
Gerald L. McManis ---------------------------
Director
/s/ Darla Moore
- ------------------------------------- Date: February 26, 1996
Darla Moore ---------------------------
Director
20
<PAGE>
INDEX TO EXHIBITS
Exhibit
4.1 Restated Certificate of Incorporation of the Company, as filed in Delaware
on October 16, 1992, which was filed as Exhibit 3(a) to the Company's
Annual Report on Form 10-K for the year ended September 30, 1992, and is
incorporated herein by reference. IBR
4.2 Certificate of Ownership and Merger merging Magellan Health Services, Inc.
(a Delaware corporation) into Charter Medical Corporation (a Delaware
corporation), as filed in Delaware on December 21, 1995, which was filed as
Exhibit 3(c) to the Company's Annual Report on Form 10-K for the year ended
September 30, 1995, and is incorporated herein by reference. IBR
4.3 Form of Share Purchase Rights Plan among the Company and First Union
National Bank of North Carolina, N.A., which was filed as Exhibit 2.5 to
the Company's Registration Statement on Form 8-A dated July 6, 1992, and is
incorporated herein by reference. IBR
4.4 Stockholders' Agreement, dated December 13, 1995, among Green Spring Health
Services, Inc., Blue Cross and Blue Shield of New Jersey, Inc., Health Care
Service Corporation, Independence Blue Cross, Pierce County Medical Bureau,
Inc. and the Company, which was filed as Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended December 31,
1995, and is incorporated herein by reference. IBR
4.5 Exchange Agreement, dated December 13, 1995, among Blue Cross and Blue
Shield of New Jersey, Inc., Health Care Service Corporation, Independence
Blue Cross, Pierce County Medical Bureau, Inc. and the Company, which was
filed as Exhibit 4(e) to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 1995, and is incorporated herein by
reference. IBR
4.6 Stock and Warrant Purchase Agreement, dated December 22, 1995, between the
Company and Richard E. Rainwater, which was filed as Exhibit 4(f) to the
Company's quarterly report on Form 10-Q for the quarterly period ended
December 31, 1995, and is incorporated herein by reference. IBR
4.7 Amendment No. 1 to Stock and Warrant Purchase Agreement, dated January 25,
1996, between the Company and Rainwater-Magellan Holdings, L.P.
5.1 Opinion of Steve J. Davis as to the legality of the Common Stock to be
registered.
23.1 Consent of Steve J. Davis (included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
21
<PAGE>
AMENDMENT NO. 1 TO STOCK AND WARRANT PURCHASE AGREEMENT
-------------------------------------------------------
THIS AMENDMENT NO. 1 TO STOCK AND WARRANT PURCHASE AGREEMENT (this
"Amendment") dated as of January 25, 1996, is executed, agreed to and adopted
for good and valuable consideration by MAGELLAN HEALTH SERVICES, INC. (f/k/a
Charter Medical Corporation), a Delaware corporation (the "Company") and
RAINWATER-MAGELLAN HOLDINGS, L.P., a limited partnership formed pursuant to the
provisions of the Texas Revised Limited Partnership Act ("Buyer");
W I T N E S S E T H:
--------------------
WHEREAS, the Company and Richard E. Rainwater (the "Initial Buyer") have
previously entered into that certain Stock and Warrant Purchase Agreement dated
as of December 22, 1995 (the "Purchase Agreement"); and
WHEREAS, in accordance with Section 10.3 of the Purchase Agreement and
pursuant to that certain Assignment and Assumption Agreement of even date
herewith (the "Assignment"), the Initial Buyer assigned its rights, interests
and obligations under the Purchase Agreement to Buyer, and Buyer assumed the
Initial Buyer's liabilities, covenants and obligations thereunder; and
WHEREAS, the Assignment provides that the Purchase Agreement shall be
amended to reflect the substitution of Buyer under the Purchase Agreement; and
WHEREAS, the parties hereto desire to further amend the Purchase
Agreement to make certain clarifications therein; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment and not
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
2. Amendments to the Purchase Agreement.
(a) Annex I to the Purchase Agreement shall be amended to replace the
Initial Buyer with Buyer under the column headed "Name of Buyer." The term
"Buyer" wherever referred to in the Purchase Agreement or in any Exhibit, Annex
or Schedule thereto is amended to refer to Rainwater-Magellan Holdings, L.P.,
and the term "party" or "parties" shall, in addition to referring to the
Company, refer to Rainwater-Magellan Holdings, L.P.
(b) Section 1.3 of the Purchase Agreement is hereby amended to read
in its entirety as follows:
"The parties hereto acknowledge that the allocation of the Purchase
Price between the Shares and the Warrants was made by them in arm's
length negotiation and agree that as of the date hereof the aggregate
Purchase Price for the Securities shall be allocated $2,000,000 for the
Warrants and $67,732,000 for the Shares."
<PAGE>
(c) The first sentence of Section 5.4 of the Purchase Agreement is
amended by adding the following at the end:
"or the Company's Board of Directors will elect an Initial Designee
acceptable to the Company to fill a vacancy in the Board of Directors."
(d) Section 5.5 of the Purchase Agreement is hereby amended to (i)
correct the reference to "March 31, 1995" appearing in the thirteenth line of
such Section, to "March 31, 1996" and (ii) to delete the period at the end of
such section and insert the following proviso:
"; provided that, if Buyer shall have incurred only one HSR Act filing
fee as of the Closing, then the Company's obligation to reimburse
Rainwater, Inc. for a second HSR filing fee and related expenses
pursuant to clause (ii)(A) above, shall survive such Closing so that if
Buyer is required to make an additional filing for HSR Act approval in
connection with an exercise of the Warrants, the Company shall reimburse
Buyer or Rainwater, Inc. (as applicable) for such filing fee together
with all other fees and expenses (including fees and expenses of
counsel) incurred in connection with such filing."
(e) Section 10.2 of the Purchase Agreement is hereby amended to delete
the period at the end of such section and insert the following:
", including, but not limited to, that certain letter of intent (and
attached term sheet) by and between the Company and Rainwater, Inc.
dated December 15, 1995, and that certain Confidentiality Agreement by
and between the Company and Rainwater, Inc. dated as of November 20,
1995."
3. Effect of Amendment. Except as heretofore expressly set forth
in this Amendment, all terms and provisions of the Purchase Agreement shall
remain in full force and effect as originally executed.
4. Counterparts. This Amendment may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
[Remainder of this page intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
MAGELLAN HEALTH SERVICES, INC.
By: /s/ Craig L. McKnight
----------------------------------------
Craig L. McKnight, Executive Vice President
and Chief Financial Officer
RAINWATER-MAGELLAN HOLDINGS, L.P.
By: Rainwater, Inc., General Partner
By: /s/ Kenneth A. Hersh
-----------------------------------------
Kenneth A. Hersh, Vice President
40334 00002 CORP 106126
-3-
<PAGE>
February 22, 1996
Magellan Health Services, Inc.
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326
Re: Form S-3 Registration Statement relating to 4,000,000 shares of Common
Stock, par value $.25 per share, of Magellan Health Services, Inc.
Ladies and Gentlemen:
I have acted as counsel for Magellan Health Services, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to the offering from time to time of up to 4,000,000 shares (the
"Shares") of Common Stock, par value $.25 per share, of the Company, by
Rainwater-Magellan Holdings, L.P.
As such counsel, I have examined and relied upon such records,
documents, certificates and other instruments as in my judgment are necessary or
appropriate to form the basis for the opinions hereinafter set forth. In all
such examinations, I have assumed the genuineness of signatures on original
documents and the conformity to such original documents of all copies submitted
to me as certified, conformed or photographic copies, and as to certificates of
public officials, I have assumed the same to have been properly given and to be
accurate.
Based upon the foregoing, I am of the opinion that the Shares have been
duly authorized and validly issued and are fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus that forms a part of the Registration Statement.
Very truly yours,
/s/ Steve J. Davis
----------------------------------------
Steve J. Davis
Executive Vice President, Administrative
Services and General Counsel
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our reports dated
November 9, 1995 (except with respect to the matters discussed in Note 13, as to
which the date is December 20, 1995) included in Magellan Health Services,
Inc.'s Annual Report on Form 10-K for the fiscal year ended September 30,1995
and to all references to our firm included in this Registration Statement.
/s/ Arthur Andersen LLP
-----------------------
Atlanta, Georgia
February 23, 1996
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, E. MAC CRAWFORD, President, Chief
Executive Officer, and Chairman of the Board of Magellan Health Services, Inc.
(the "Company"), do hereby appoint Howard A. McLure, Vice President and
Controller of the Company and Steve J. Davis, Executive Vice President,
Administrative Services and General Counsel of the Company, or any one of them,
my true and lawful attorney-in-fact for me and in my name for the purpose of
executing on my behalf (i) the Company's Registration Statement on Form S-3, or
any amendments or supplements thereto, for the registration of shares of Common
Stock of the Company to be issued in connection with the investment in Common
Stock of the Company by Rainwater-Magellan Holdings, L.P.; (ii) any application
for registration or qualification (or exemption therefrom) of such shares under
the Blue Sky or other federal or state securities laws and regulations; and
(iii) any other document or instrument deemed necessary or appropriate by any of
them in connection with such application for registration or qualification (or
exemption therefrom); and for the purpose of causing any such registration
statement or any subsequent amendment or supplement to such registration
statement to be filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ E. Mac Crawford
-----------------------------------
E. MAC CRAWFORD
President, Chief Executive Officer,
and Chairman of the Board
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, CRAIG L. McKNIGHT, Executive Vice
President and Chief Financial Officer of Magellan Health Services, Inc. (the
"Company"), do hereby appoint Howard A. McLure, Vice President and Controller of
the Company and Steve J. Davis, Executive Vice President, Administrative
Services and General Counsel of the Company, or any one of them, my true and
lawful attorney-in-fact for me and in my name for the purpose of executing on my
behalf (i) the Company's Registration Statement on Form S-3, or any amendments
or supplements thereto, for the registration of shares of Common Stock of the
Company to be issued in connection with the investment in Common Stock of the
Company by Rainwater-Magellan Holdings, L.P.; (ii) any application for
registration or qualification (or exemption therefrom) of such shares under the
Blue Sky or other federal or state securities laws and regulations; and (iii)
any other document or instrument deemed necessary or appropriate by any of them
in connection with such application for registration or qualification (or
exemption therefrom); and for the purpose of causing any such registration
statement or any subsequent amendment or supplement to such registration
statement to be filed with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Craig L. McKnight
---------------------
CRAIG L. McKNIGHT
Executive Vice President and Chief
Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, EDWIN M. BANKS, a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Edwin M. Banks
----------------------------------
EDWIN M. BANKS
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, G. FRED DiBONA, JR., a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ G. Fred DiBona, Jr.
----------------------------------
G. FRED DiBONA, JR.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, ANDRE C. DIMITRIADIS, a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Andre C. Dimitriadis
----------------------------------
ANDRE C. DIMITRIADIS
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, A. D. FRAZIER, JR., a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ A. D. Frazier, Jr.
----------------------------------
A. D. FRAZIER, JR.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, RAYMOND H. KIEFER, a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Raymond H. Kiefer
----------------------------------
RAYMOND H. KIEFER
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, GERALD L. McMANIS, a Director of
Magellan Health Services, Inc. (the "Company"), do hereby appoint Howard A.
McLure, Vice President and Controller of the Company and Steve J. Davis,
Executive Vice President, Administrative Services and General Counsel of the
Company, or any one of them, my true and lawful attorney-in-fact for me and in
my name for the purpose of executing on my behalf (i) the Company's Registration
Statement on Form S-3, or any amendments or supplements thereto, for the
registration of shares of Common Stock of the Company to be issued in connection
with the investment in Common Stock of the Company by Rainwater-Magellan
Holdings, L.P.; (ii) any application for registration or qualification (or
exemption therefrom) of such shares under the Blue Sky or other federal or state
securities laws and regulations; and (iii) any other document or instrument
deemed necessary or appropriate by any of them in connection with such
application for registration or qualification (or exemption therefrom); and for
the purpose of causing any such registration statement or any subsequent
amendment or supplement to such registration statement to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Gerald L. McManis
----------------------------------
GERALD L. McMANIS
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS THAT I, DARLA MOORE, a Director of Magellan
Health Services, Inc. (the "Company"), do hereby appoint Howard A. McLure, Vice
President and Controller of the Company and Steve J. Davis, Executive Vice
President, Administrative Services and General Counsel of the Company, or any
one of them, my true and lawful attorney-in-fact for me and in my name for the
purpose of executing on my behalf (i) the Company's Registration Statement on
Form S-3, or any amendments or supplements thereto, for the registration of
shares of Common Stock of the Company to be issued in connection with the
investment in Common Stock of the Company by Rainwater-Magellan Holdings, L.P.;
(ii) any application for registration or qualification (or exemption therefrom)
of such shares under the Blue Sky or other federal or state securities laws and
regulations; and (iii) any other document or instrument deemed necessary or
appropriate by any of them in connection with such application for registration
or qualification (or exemption therefrom); and for the purpose of causing any
such registration statement or any subsequent amendment or supplement to such
registration statement to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 22nd day of
February, 1996.
/s/ Darla Moore
----------------------------------
DARLA MOORE
Director
<PAGE>
