Exhibit 10.2

 

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

 

This Amendment to Employment Agreement between Magellan Health Services, Inc.
(“Employer”) and Jonathan Rubin entered into as of this 11th day of August, 2008
(“Employee”).

 

WHEREAS, Employer and Employee desire to amend the terms of the Employment
Agreement currently in effect between Employer and Employee (the “Employment
Agreement”).

 

NOW THEREFORE, Employer or Employee agree that the Employment Agreement is
hereby amended as follows:

 

I.  New Change in Control Provisions – Add the following new paragraphs:

 

1.                                      Termination Without Cause by the
Employer or With Good Reason By Executive In connection With, Or Within Two
Years After, A Change In Control:  If Employer terminates this Agreement and
Employee’s employment without cause, or if Employee terminates this Agreement
and Employee’s employment with Good Reason, in connection with a Change in
Control (as defined below) (whether before or at the time of such Change in
control) or within two years after a change in Control, Employee shall receive
the following, in lieu of the amounts and benefits described in Section 6:

 

(i)                                     Base Salary through the date of
termination, payable at the next payroll date at or after termination (subject
to Section 10);

 

(ii)                                 pro-rata target bonus for the year in which
termination occurs, payable in a single installment immediately after
termination (subject to Section 10);

 

(iii)                              2 times the sum of (a) Base Salary plus
(b) Target bonus, payable in a single cash installment immediately after
termination (subject to Section 10);

 

(iv)                             if employee elects COBRA coverage for health,
dental and vision benefits, Employer shall pay Employer’s contributions for
health insurance and Employee shall pay Employee’s contributions rate for
health, dental and vision insurance for up to eighteen (18) months after
termination;.

 

(v)                                any other amounts earned, accrued or owing to
Executive but not yet paid (subject to Section 10);;  and

 

(vi)                             other payments, entitlements or benefits, if
any, that are payable in accordance with applicable plans, programs,
arrangements or other agreements of the Employer or any affiliate (subject to
Section 10);

 

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2.                           Definitions:

 

A.  Change in Control:

 

A “Change in Control” of the Employer shall mean the first to occur after the
date hereof of any of the following events:

 

(i)                                    any “person,” as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), becomes a “beneficial owner,” as such term is used in
Rule 13d-3 promulgated under the Exchange Act, of 51% or more of the Voting
Stock (as defined below) of the Employer;

 

(ii)                                 the majority of the Board of Directors of
the Employer consists of individuals other than “Continuing Directors,” which
shall mean the members of the Board on the date hereof, provided that any person
becoming a director subsequent to the date hereof whose election or nomination
for election was supported by a vote of the directors who then comprised the
Continuing Directors, shall be considered to be a Continuing Director;

 

(iii)                              the Board of Directors of the Employer adopts
and, if required by law or the certificate of incorporation of the Corporation,
the shareholders approve the dissolution of the Employer or a plan of
liquidation or comparable plan providing for the disposition of all or
substantially all of the Employer’s assets;

 

(iv)                              all or substantially all of the assets of the
Employer are disposed of pursuant to a merger, consolidation, share exchange,
reorganization or other transaction unless the shareholders of the Employer
immediately prior to such merger, consolidation, share exchange, reorganization
or other transaction beneficially own, directly or indirectly, in substantially
the same proportion as they previously owned the Voting Stock or other ownership
interests of the Employer,  51% of the Voting Stock or other ownership interests
of the entity or entities, if any, that succeed to the business of the Employer;
or

 

(v)                                 the Employer merges or combines with another
company and, immediately after the merger or combination, the shareholders of
the Employer immediately prior to the merger or combination own, directly or
indirectly, 50% or less of the Voting Stock of the successor company, provided
that in making such determination there shall be excluded from the number of
shares of Voting Stock held by such shareholders, but not from the Voting

 

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Stock of the successor company, any shares owned by Affiliates of such other
company who were not also Affiliates of the Employer prior to such merger or
combination.

 

B. “Cause” in connection with a Change in Control shall mean:

 

(i)                                    Employee is convicted of (or pleads
guilty or nolo contendere to) a felony or a crime involving moral turpitude;

 

(ii)                                 Employee’s commission of an act of fraud or
dishonesty involving his or her duties on behalf of the Employer;

 

(iii)                              Employee’s willful failure or refusal to
faithfully and diligently perform duties lawfully assigned to Employee as an
officer or employee of the Employer or other willful breach of any material term
of any employment agreement at the time in effect between the Employer and
Employee; or

 

(iv)                             Employee’s willful failure or refusal to abide
by the Employer’s policies, rules, procedures or directives, including any
material violation of the Employer’s Code of Ethics.

 

C.  “Good Reason” shall mean:

 

(i)                                    a material reduction in Employee’s salary
in effect at the time of a Change in Control, unless such reduction is
comparable in degree to the reduction that takes place for all other employees
of the Employer of comparable rank, or a material reduction in Employee’s target
bonus opportunity for the year in which or any year after the year in which the
Change of Control occurs from Employee’s target bonus opportunity for the year
in which the Change in Control occurs (if any) as established under any
employment agreement Employee has with the Employer or any bonus plan of the
Employer applicable to Employee (or, if no such target bonus opportunity has yet
been established for Employee under a bonus plan applicable to Employee for the
year in which the Change of Control has occurred, the  target bonus opportunity
so established for Employee for the immediately preceding year, if any);
provided, however, that a reduction in salary and/or target bonus with an
annualized value of $10,000 or more in the aggregate, taking into account any
related effect a salary reduction has on target bonus and other components of
compensation, shall be deemed material;

 

(iii)                              a material diminution in Employee’s position,
duties or responsibilities as in effect at the time of a Change in Control, or
the assignment to Employee of duties which are materially inconsistent with such
position, duties and authority, unless in either case such change is made with
the consent of the Employee; or

 

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(iv)                              the relocation by more than 50 miles of the
offices of the Employer which constitute at the time of the Change in Control
Employee’s principal location for the performance of his or her services to the
Employer;

 

provided that, in each such case, Employee shall have given notice to the
Employer that such event or condition has arisen within 90 days after such event
or condition has arisen, and the event or condition has continued uncured for a
period of more than 30 days after Employee has given such notice thereof to the
Employer, and Employee has terminated employment for Good Reason within 18
months after such uncured event or condition has arisen.

 

D.                                    “Employer” shall include any entity that
succeeds to all or substantially all of the business of the Employer,

 

E.                                      “Affiliate” of a person or other entity
shall mean a person or other entity that directly or indirectly controls, is
controlled by, or is under common control with the person or other entity
specified,

 

F.                                      “Voting Stock” shall mean any capital
stock of any class or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation and reference to a percentage of Voting Stock shall refer to such
percentage of the votes that all such Voting Stock is entitled to cast.

 

3                  Tax Gross-Up.  The following provisions shall apply with
respect to any excise tax imposed under Section 4999 of the Internal Revenue
Code as amended (the “Code”), (the “Excise Tax):

 

a.                           If any of the payments or benefits received or to
be received by Employee in connection with a Change in Control or Employee’s
termination of employee (whether pursuant to the terms of this Agreement or any
other plan, arrangement of agreement with the Employer, any person whose actions
result in a Change on Control of the Employer or any person affiliated with the
Employer or such person (the “Total Payments”)) will be subject to the Excise
Tax, the Employer shall pay to Employee an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Employee after payment of (a) the
Excise Tax, if any, on the Total Payments and (b) any Excise Tax and income tax
due in respect of the Gross-Up Payment, shall equal the Total Payments.  Such
payment shall be made in a single lump sum within 10 days following the date of
a determination that only such payment is required.

 

b.                          For purposes of determining whether any of the Total
payments will be subject to Excise Tax and the amount of such Excise Tax,
(i) any Total Payments shall be treated as “parachute payments” (within the
meaning of Section280G(b) (2) of the

 

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Code) unless, in the opinion of tax counsel selected by the Employer and
reasonably acceptable to Employee, such payments or benefits (in whole or in
part) should not constitute parachute payments, including by reason of
Section 280G (b) (4) (A) of the Code, and all “excess parachute payments”
(within the meeting of Section 280G(b) (1) of the Code) shall be treated as
subject to the Excise Tax unless, in the opinion of such tax counsel, such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of
Section 280G(b) (4) (B) of the Code), or are otherwise not subject to the Excise
Tax, and (ii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Employer’s independent auditors in accordance
with the principles of Section 280G(d) (3) of the Code.  For purposes of
determining the amount of the Gross-Up payment, Employee shall be deemed to pay
federal income and employment taxes at the highest marginal rate of federal
income and employment taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income and employment taxes at the
highest marginal rate of taxation in the state and locality of Employee’s
residence on the date of termination of employment (or such other time as
hereinafter described), net of the maximum reduction in federal income or
employment taxes which could be obtained from deduction of such state and local
taxes.

 

In the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of Employee’s
employment (or such other time as is hereinafter described), Employee shall
repay to the Employer, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction plus interest on the amount of such repayment at the applicable
federal rate, as defined in Section 1274(b) (2) (B) of the Code.  In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Employee’s employment (or such other
time as is hereinafter described) (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Employer shall make an additional Gross-Up Payment in respect of
such excess (plus any interest at the applicable federal rate, penalties or
additions payable by Employee with respect to such excess) at the time that the
amount of such excess is finally determined.  Employee and the Employer shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total payments.

 

II.  Other Changes

 

1.                                       Amendment to Section 7(b)(i):

 

Section 7(b)(i) is hereby amended to delete it and insert the following in place
thereof:

 

(i)                                     Employee covenants and agrees that
during any period in which Base Salary is continued after termination of this
Agreement (or in respect of which Base Salary is paid in a lump sum) or for one
year after Employee’s voluntary termination of employment without Good Reason or
termination of Employee’s employment for

 

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cause, he or she will not, on his or her own behalf or as a partner, officer,
director, employee, agent, or consultant of any other person or entity, directly
or indirectly, engage or attempt to engage in the business of providing or
selling services in the United States that are services offered by Employer at
the time of the termination of this Agreement, unless waived in writing by
Employer in its sole discretion.  Employee recognizes that the above restriction
is reasonable and necessary to protect the interest of the Employer and its
controller subsidiaries and affiliates.

 

IN WITNESS WHEREOF, Employer and Employee have executed this Amendment to
Employment Agreement as of the date first above written.

 

 

Magellan Health Services, Inc.

 

 

By

 /s/ René Lerer

 

 

 

Duly Authorized

 

 

 

 

 

 

 

 

 

/s/ Jonathan Rubin

 

 

 

Jonathan Rubin, Employee

 

 

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