UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
January 3, 2006
Magellan Health Services, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-6639 58-1076937
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
55 Nod Road
Avon, Connecticut 06001
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (860) 507-1900
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 -- ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On January 3, 2006, the Management Compensation Committee of the
Board of Directors of Magellan Health Services, Inc. (the "Company") approved
certain amendments of stock options outstanding under the Company's 2003
Management Incentive Plan, including options held by certain executive officers
of the Company. The amendments approved, as further described below, are
intended primarily to bring the features of the options into compliance with
certain requirements established by Section 409A of the Internal Revenue Code of
1986, as amended (the "Code"), which was added to the Code by the American Jobs
Creation Act of 2004 and governs as a general matter the federal income tax
treatment of deferred compensation. The options that have been amended were
originally issued in connection with the consummation of the Company's Third
Amended Plan of Reorganization, which occurred on January 5, 2004 (the "2004
Options"), and, because the exercise price of such 2004 Options may be
considered to have been less than the fair market value of the shares that may
be acquired upon exercise of such options as determined by the market trading in
such shares following the consummation of the Company's reorganization, such
options might be subject to the provisions of Section 409A, including certain
penalty tax provisions on the option holders.
Except for certain of the 2004 Options held by the Company's three
senior executive officers (Chief Executive Officer Stephen J. Shulman, Chief
Operating Officer Rene Lerer and Chief Financial Officer Mark S. Demilio), as
detailed below, the amendments in each case reduced the period in which the 2004
Options, once vested, could be exercised from the tenth anniversary of the date
of grant (or certain earlier times if the optionholder's employment with the
Company and its subsidiaries earlier terminated) to the end of the calendar year
in which the option vests. The vesting schedule of the options was not changed
but the option was made exercisable only in the year in which the option vested;
no change was made in the exercise price or other material terms. Thus, those of
the 2004 Options that would vest in early 2006, as amended, can only be
exercised until the end of 2006; those that would vest in early 2007 can only be
exercised until the end of 2007 and those that would vest in 2008 can only be
exercised until the end of 2008 (except where the exercise period will end
earlier because of an earlier termination of the optionholder's employment with
the Company or its subsidiaries). These amendments cover options for 1,002,428
shares of Ordinary Common Stock of the Company held by approximately 75 members
of the Company's management, including options held by three executive officers,
Jeffrey D. Emerson, Eric Reimer and Anthony M. Kotin covering, respectively,
45,832, 33,332 and 45,832 shares of the Company's Ordinary Common Stock. The
form of amendment to the Option Agreement previously entered into by such
optionholders that effectuates such amendments is attached hereto as Exhibit
10.1.
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In the case of the 2004 Options issued to the Company's three senior
executive officers (Messrs. Shulman, Lerer and Demilio), the amendments also
limited the time during which the options could be exercised but also included a
deferral of exercisability with respect to certain of the options. The vesting
schedule of the options was not changed -- the options will continue to vest in
January 2006 and January 2007 -- and no change was made in the exercise price or
other material terms except as described below. However, the period in which the
option, once vested, could be exercised was reduced from the tenth anniversary
of the date of grant (or certain earlier times if the optionholder's employment
with the Company and its subsidiaries terminated earlier) to the end of the
calendar year in which the option first becomes exercisable.
In addition, except for options for 68,834 shares in the case of Mr.
Shulman, 41,031 shares in the case of Mr. Lerer and 27,533 shares in the case of
Mr. Demilio, as to all of their 2004 Options that vest in January 2006, the time
when the options could first be exercised was deferred until January 5, 2007
(except in certain instances where, as already provided by such options, a
vested option by its terms would become exercisable earlier following a
termination of his employment). This deferral until January 5, 2007 of the time
when certain of these options would first become exercisable was agreed upon in
connection with the waiver by the Management Compensation Committee of the
restriction on sale before January 5, 2007 (the third anniversary of the
consummation of the Company's reorganization) of 206,501 shares in the case of
Mr. Shulman, 123,901 shares in the case of Mr. Lerer and 82,601 shares in the
case of Mr. Demilio, that they had previously acquired upon exercise of a
portion of their 2004 Options that vested in January 2005.
As a result of these amendments, of the 2004 Options, options for a
total of 68,834 shares in the case of Mr. Shulman, 41,031 shares in the case of
Mr. Lerer and 27,533 shares in the case of Mr. Demilio will be exercisable in
2006 (and will expire if not exercised before the end of 2006) and options for a
total of 894,841 shares in the case of Mr. Shulman, 537,175 shares in the case
of Mr. Lerer and 357,936 shares in the case of Mr. Demilio will be exercisable
starting on January 5, 2007 (and will expire if not exercised before the end of
2007).
In addition, Messrs. Shulman, Lerer and Demilio hold other options,
granted in 2005, that have or will become exercisable in 2006 and 2007 for
additional shares of the Company's Ordinary Common Stock (49,563 shares, 29,738
shares and 19,825 shares, respectively, in 2006 and 49,562 shares, 29,737 shares
and 19,825 shares, respectively, in 2007). These options were not amended.
The forms of amendment of the option grant awards for the three
senior executive officers that effectuate the amendments referred to above are
attached hereto as Exhibits 10.2, 10.3 and 10.4 (each form amending one of the
three different 2004 Options granted to all three executive officers). Because
the Company's employment agreements with the senior executive officers provide
for the 2004 Options as part of their compensation, each senior executive
officer and the Company also entered into an amendment of his employment
agreement approving the change in option terms for purposes of such employment
agreement and confirming that the employment agreements otherwise remain
unchanged. These employment agreement amendments are attached hereto as Exhibits
10.5, 10.6 and 10.7.
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ITEM 9.01 -- FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
10.1 Form of First Amendment to Stock Option Agreement.
10.2 First form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.3 Second form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.4 Third form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.5 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Steven J. Shulman.
10.6 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Rene Lerer.
10.7 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Mark S. Demilio.
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SIGNATURES
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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: January 9, 2006
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Exhibit Index
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Exhibit No. Exhibit
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10.1 Form of First Amendment to Stock Option Agreement.
10.2 First form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.3 Second form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.4 Third form of Notice of Amendment of Stock Option Grant,
dated as of January 3, 2006, between the Company and Steven
J. Shulman, Rene Lerer or Mark S. Demilio.
10.5 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Steven J. Shulman.
10.6 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Rene Lerer.
10.7 Amendment of Employment Agreement, dated as of January 3,
2006, between the Company and Mark S. Demilio.
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