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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - September 29, 2003
(Date of Earliest Event Reported)
MAGELLAN HEALTH SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Commission File No. 1-6639
Delaware 58-1076937
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(State of Incorporation) (I.R.S. Employer
Identification No.)
6950 Columbia Gateway Drive Suite 400 Columbia, Maryland 21046
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (410) 953-1000
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS AND REQUIRED REGULATION FD DISCLOSURE.
On September 30, 2003, Magellan Health Services, Inc. ("Magellan" or
the "Company") issued a press release announcing that it had reached a
settlement with its largest unsecured creditor, R2 Investments LDC ("R2"), with
respect to the Company's Third Amended Plan of Reorganization as modified (the
"Plan"). Under the terms of the settlement, R2 will withdraw the objections it
has raised to the Plan and has indicated that it will vote in favor of the Plan.
The settlement, together with proposed modifications to the Plan which were
filed by Magellan on Thursday, September 25, 2003 with the U.S. Bankruptcy Court
for the Southern District of New York (the "Court") (the "Plan Modifications"),
as described below, provide for a larger board of directors for reorganized
Magellan, for an additional designee of the Official Committee of Unsecured
Creditors of Magellan, who is acceptable to R2, to be a member of the
reorganized Company's initial board of directors and for certain additional
rights for Magellan and other shareholders relating to the post-reorganization
circumstances of Magellan. The settlement was signed and filed with the Court
late on September 29, 2003. A copy of the Plan and the Disclosure Statement with
respect to the Plan, each as filed with the Court, were filed with the U.S.
Securities and Exchange Commission as Exhibits 2(a) and 2(b), respectively, to
Magellan's Quarterly Report on Form 10-Q dated August 19, 2003.
The Plan Modifications will, among other things:
o expand the initial Board of Directors of the reorganized
Company from seven members to nine, of whom (i) three will
be designated by the Official Committee of Unsecured
Creditors (of which designees two acceptable to R2 have
been named); (ii) four will be appointed by Onex
Corporation and affiliated entities ("Onex") (which are
investing or backstopping a $150 million equity investment
in Magellan as part of the Plan), and (iii) two will be
members of Magellan's management;
o afford stockholders of reorganized Magellan certain
tag-along rights with respect to sales by Onex or R2 of
more than 15% of the outstanding shares of reorganized
Magellan; and
o grant R2 co-investment rights with Onex in the event Onex
makes a tender offer for reorganized Magellan shares, and
grants like co-investment rights to Onex in the event R2
makes a tender offer for reorganized Magellan shares.
The first two of these modifications were reflected in the forms of Amended and
Restated Certificate of incorporation and Amended and Restated By-Laws of
reorganized Magellan filed with the Court on September 25, 2003 and with the
U.S. Securities and Exchange Commission as Exhibits 99.1 and 99.2, respectively,
to Magellan's Current Report on Form 8-K dated September 26, 2003. The third of
the modifications will be reflected in the definitive agreement to be entered
into by R2 and Onex. The Plan Modifications also include a modification of the
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management incentive plan to be adopted in connection with the Plan to authorize
the issuance of stock option or other stock awards, for a period of not more
than 10 years after consummation of the Plan, for not more than 15% of the
shares outstanding upon consummation of the Plan, and also provide for certain
stock awards to be issued at the time of consummation of the Plan.
A copy of the press release announcing the Plan Modifications is
attached hereto as Exhibit 99.1. A copy of the Plan Modifications is attached
hereto as Exhibit 99.2. Certain of the statements made in the press release,
including those concerning the success of the company's reorganization plan,
constitute forward looking statements as contemplated under the Private
Securities Litigation Reform Act of 1995. These forward looking statements are
subject to known and unknown uncertainties and risks which could cause actual
results to differ materially from those contemplated or implied by such forward
looking statements including: the ability of the Company to obtain the consent
of the Court for the transactions referred to above, service issues arising with
certain customers, terminations by customers, operating results or cash flows
differing from those contemplated or implied by such forward looking statements,
the impact of new or amended laws or regulations, governmental inquiries,
outcome of ongoing litigation, interest rate increases, unanticipated increases
in the costs of care and other factors. Any forward looking statements made in
this release are also qualified in their entirety by these risks and the
complete discussion of risks set forth under the caption "Cautionary Statements"
in Magellan's Annual Report on Form 10-K/A for the year ended September 30, 2002
filed with the Securities and Exchange Commission on January 23, 2003.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information
Not applicable
(c) Exhibits.
Exhibit No. Description
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99.1 Press Release issued August 1, 2003 by Magellan Health
Services, Inc.
99.2 Modifications to Debtors' Third Amended Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, as
filed with the U.S. Bankruptcy Court for the Southern
District of New York on September 25, 2003
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MAGELLAN HEALTH SERVICES, INC.
By: /s/ Mark S. Demilio
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Name: Mark S. Demilio
Title: Executive Vice President and
Chief Financial Officer
Dated: September 30, 2003
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release issued August 1, 2003 by Magellan Health
Services, Inc.
99.2 Modifications to Debtors' Third Amended Joint Plan of
Reorganization under Chapter 11 of the Bankruptcy Code, as
filed with the U.S. Bankruptcy Court for the Southern
District of New York on September 25, 2003
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