EXHIBIT 10.85

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into by and between
Sam K. Srivastava, an individual, (“Employee”) and, Magellan Health
Services, Inc. on behalf of itself and its present and future subsidiaries and
affiliates (collectively referred to herein as “Employer”).

 

WHEREAS, Employer desires to continue to obtain the services of Employee and
Employee desires to continue to render services to Employer; and

 

WHEREAS, Employer and Employee desire to set forth the terms and conditions of
Employee’s employment with Employer under this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual
covenants and agreements contained in this Agreement, the parties agree as
follows:

 

STATEMENT OF AGREEMENT

 

1.                                      Employment.  Employer agrees to employ
Employee, and Employee accepts such employment in accordance with the terms of
this Agreement, for a term of one year commencing on September 23, 2013 (the
“Start Date”) and, unless terminated earlier in accordance with the terms of
this Agreement, ending on September 22, 2014.  Thereafter, this Agreement shall
automatically renew for subsequent twelve (12) month periods on each anniversary
of the Start Date, unless sooner terminated as provided herein.  If either party
desires not to renew the Agreement, they must provide the other party with
written notice of their intent not to renew the Agreement at least ninety (90)
days prior to the next upcoming anniversary of the Start Date.  Non-renewal of
the Agreement by either party will in all cases result in termination of
employment as of close of business on the applicable anniversary of the Start
Date.  Employer’s notice of intent not to renew the Agreement shall be deemed to
be a termination without Cause and the provisions of Section 6(c) shall apply.

 

2.                                      Position and Duties of Employee. 
Employee will serve as CEO, Magellan Plan Services, reporting to the Chief
Executive Officer of Employer (the “CEO”). Employee agrees to serve in such
position, or in such other positions as Employer determines from time to time,
and to perform the duties that Employer may assign from time to time to
Employee, at the same or greater Base Salary level and a similar location, until
the expiration of the term or such time as Employee’s employment with Employer
is terminated pursuant to this Agreement.

 

3.                                      Time Devoted.  Employee will devote his
full business time and energy to the business affairs and interests of Employer,
and will use his best efforts and abilities to promote Employer’s interests. 
Employee agrees that he or she will diligently endeavor to perform services
contemplated by this Agreement in a manner consistent with his position and in
accordance with the policies established by the Employer.

 

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4.                                      Compensation.

 

(a)                                 Base Salary.  Employer will pay Employee an
annual base salary in the amount of $485,000.00, which amount will be paid in
semi-monthly intervals less appropriate withholdings for federal and state taxes
and other deductions authorized by Employee.  Such salary will be subject to
review and potential increase by Employer not less than annually.  This base
salary, as from time to time increased, is referred to herein as the “Base
Salary”.

 

(b)                                 Benefits.  Employee will be eligible to
participate in Employer’s employee benefit plans and programs, as in effect from
time to time (such plans and programs, as so in effect, the “Benefit Plans”)
commensurate with his position.  Employee will receive separate information
detailing the terms of the Benefit Plans and the terms of those plans will
control.

 

(c)                                  Incentives.  Employee also will be eligible
to participate in any annual incentive bonus plan and long-term incentive plan
applicable to Employee by their terms respectively.  Employee’s target bonus
under any annual incentive cash bonus plan shall be not less than 65% of Base
Salary.  Employee will also be eligible for a pro-rated annual performance bonus
for 2013, payable in March of 2014, as determined in the discretion of the CEO. 
Annual and long-term incentive awards, if any, will be determined and paid or
granted (unless validly deferred if then permitted by Employer) between
January 1 and March 15 of the year following the performance year.  During the
term of this Agreement, Employee will be entitled to such other benefits of
employment with Employer as are now or may later be in effect for salaried
employees of Employer, and also will be eligible to participate in other
benefits adopted for employees at his level.

 

(d)                                 Stock Options.  On October 1, 2013, Employer
shall grant to Employee an option to purchase 60,000 shares of the common stock
of Employer at fair market value on the date of grant (the “Option”) pursuant to
Employer’s 2011 Management Incentive Plan.  One-third of the total number of
shares that are subject to the Option shall vest on each of the first three
anniversaries of the date of grant, provided that Employee is still employed by
Employer on each such vesting date.  The Option and all other options granted
Employee by Employer shall be subject to any applicable stock option plan,
option certificate and shareholder and/or option holder agreements and other
restrictions and limitations generally applicable to equity held by Employer
executives or otherwise required by law.

 

(e)                                  Paid Time Off.  Employee shall be entitled
to earn and take paid time off consistent with the policies of Employer
applicable to its senior executives generally, as in effect from time to time
(the “Paid Time Off”).

 

5.                                      Expenses.  During the term of this
Agreement, Employer will reimburse Employee promptly for all reasonable
expenditures for travel, entertainment, parking, business meetings and similar
expenditures in pursuance and furtherance of Employer’s business upon receipt of
reasonably supporting documentation as required by Employer’s policies
applicable to its employees generally, subject to Section 10(a).

 

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6.                                      Termination.

 

(a)                                 Termination Due to Resignation.  Employee
may resign his employment at any time by giving 90 days written notice of
resignation to Employer.  Except as otherwise set forth in this Agreement,
Employee’s employment, and Employee’s right to receive compensation and benefits
from Employer, will terminate upon the effective date of Employee’s termination.

 

If Employee resigns pursuant to this Section 6(a), Employer’s only remaining
financial obligation to Employee under this Agreement will be to pay, subject to
Section 10: (i) any earned but unpaid Base Salary and accrued Paid Time Off
through the effective date of Employee’s termination; (ii) reimbursement of
expenses incurred by Employee through the effective date of termination which
are reimbursable pursuant to this Agreement; and (iii) the Employee’s vested
benefits under any Magellan Health Services retirement, deferred compensation or
other Benefit Plan, including but not limited to, the vested portion of any
equity or long-term incentive awards (as determined in accordance with the terms
of those awards) (all of the foregoing, “Final Compensation”).

 

(b)                                 Termination with Cause.  Except as otherwise
set forth in this Agreement, Employee’s employment, and Employee’s right to
receive compensation and benefits from Employer, will be terminated for Cause at
the discretion of Employer.  For all purposes under this Agreement, “Cause”
means:

 

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

 

(ii)                                  Employee’s willful failure or refusal to
faithfully and diligently perform duties lawfully assigned to Employee as an
officer or employee of Employer or other willful breach of any material term of
this Agreement;

 

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

 

(iv)                              Employee’s commission of an act of fraud or
dishonesty involving his duties on behalf of Employer.

 

If Employee is terminated pursuant to this Section 6(b), Employer’s only
remaining financial obligation to Employee under this Agreement will be for
Final Compensation.

 

For the events described in Sections 6(b) (ii) and (iii), Employer will give
Employee written notice of such deficiency and a reasonable opportunity to cure
such situation, but in no event more than thirty days.

 

(c)                                  Termination Without Cause.  Employer may
terminate this Agreement without Cause at any time.  In addition, a termination
of employment by Employee during the Specified Time as a result of any of the
following shall be deemed a “without Cause” termination

 

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for the purposes of this Section 6(c):  (i) Employer’s delivery of notice to
Employee of its intent not to renew this Agreement in accordance with the
provisions of Section 1 hereof; (ii) the relocation of Employee’s reporting
location to an office which is greater than 50 miles from Employee’s prior
office location; (iii) a material diminution in Employee’s position, duties or
responsibilities or the assignment to Employee of duties that are materially
inconsistent with such position, duties and authority, (iv) Employee no longer
reporting to the CEO; or (v) Employer’s material reduction of Employee’s Base
Salary to an amount less than the initial Base Salary identified in
Section 4(a) of this Agreement (provided, that any reduction with an annualized
value of $10,000 or less shall not be deemed material); and further provided,
however, that Employee must have given notice to Employer that an event under
clause (ii), (iii), (iv) or (v) has occurred and the circumstance must remain
uncorrected by Employer after the expiration of 30 days after receipt of such
notice.  For purposes of this Section 6(c), the “Specified Time” means 60 days
with respect to clauses (ii), (iii), (iv) and (v) and, with respect to clause
(i), means the period between delivery of notice of non-renewal by Employer and
ending on the date of expiration of this Agreement.  Following a termination of
employment without Cause pursuant to this Section 6(c), in addition to Final
Compensation, Employer shall continue to pay, in accordance with Employer’s
normal payroll practices, but subject to Section 10 hereof, Employee his Base
Salary, as in effect at the time of termination, for a period of time equal to
twelve (12) months.  Such pay continuation is contingent upon Employee executing
Employer’s standard severance agreement, which incorporates a general release,
at the time of termination.  If Employee participates in any incentive bonus
plan(s), including but not limited to, any long term incentive plan(s), then
Employer may pay Employee, on a pro-rata basis, the amount of money that would
have been payable to Employee under such plan(s) if Employee had been employed
for the full calendar year. The pro-ration will be determined by the fraction of
the number of months in the calendar year in which the Employee worked (rounded
to the nearest whole month) divided by 12 months. In determining whether a
pro-rata amount shall be paid to Employee, the Employer may consider factors
that include but are not limited to (i) the Employee’s target bonus (percentage
of Base Salary), (ii) Employer’s financial performance and (iii) the Employee’s
achievement of his specific performance objectives. At the time of termination,
Employer shall determine the amount of Employee’s pro-rata payment, if any.
Notwithstanding the foregoing, any payout of such bonus amount shall be
contingent upon Employer satisfying the financial targets established by
Employer’s Board of Directors (the “Board”).  Payment of any bonus shall be made
at the time of the annual bonus payout for all employees, subject to
Section 4(b). If Employee or his eligible dependents elect continuation coverage
pursuant to the federal law known as “COBRA,” Employer will pay the differences
between the full COBRA premium cost and the employee contribution rate for the
health insurance portion of the COBRA coverage during the Severance Period. 
Dental and vision coverage under COBRA will be billed at the full COBRA rate.

 

(d)                                 Automatic Termination.  This Agreement will
terminate automatically upon the death or Disability of Employee.  Employee will
be deemed to be “Disabled” or to suffer from a “Disability” within the meaning
of this Agreement if, because of a physical or mental impairment, Employee has
been unable to perform the essential functions of his position, with or without
reasonable accommodation, for a period of 180 consecutive days, or if Employee
can reasonably be expected to be unable to perform the essential functions of
his position for such period.  If Employee is terminated pursuant to this
Section 6(d), Employee will receive the Final Compensation.  If Employee
participates in any incentive bonus plan(s), including but not

 

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limited to, any long term incentive plan(s), Employer may pay Employee, on a
pro-rata basis, the amount of such plan(s) as Employee would have earned if
Employee had been employed for the full calendar year. The pro-ration will be
determined by the fraction of the number of months in the calendar year in which
the Employee worked (rounded to the nearest whole month) divided by 12 months. 
In determining whether a pro-rata amount shall be paid to Employee, the Employer
may consider factors that include but are not limited to (i) the Employee’s
target bonus (percentage of Base Salary); (ii) Employer’s financial performance;
and (iii) the Employee’s achievement of his specific performance objectives. At
the time of termination, Employer shall determine the Employee’s pro-rata
amount, if any. Notwithstanding the foregoing, any payout of such bonus amount
shall be contingent upon Employer satisfying the financial targets established
by the Board. Payment of any bonus shall be made at the time of the annual bonus
payout for all employees, subject to Section 4(b).

 

(e)                                  I.  Termination Without Cause by Employer
or With Good Reason By Executive In connection With, Or Within Two Years After,
A Change In Control:  If (A) Employer terminates this Agreement and Employee’s
employment without Cause or (B) if Employee terminates this Agreement and
Employee’s employment with Good Reason, in either case in connection with a
Change in Control (as defined below) or within two years after a Change in
Control, in addition to the Final Compensation, Employee shall receive the
following, in lieu of the amounts and benefits described in Section 6(c) and
subject to Section 10:

 

(i)                                     Final Compensation;

 

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

 

(iii)                               2 times the sum of (a) Base Salary plus
(b) 100% of the Employee’s target bonus for the year in which termination
occurs, payable in a single cash installment immediately after termination;

 

(iv)                              if Employee or his eligible dependents elect
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 Employee but not yet paid; and

 

(vi)                              other payments, entitlements or benefits, if
any, that are payable in accordance with applicable plans, programs,
arrangements or other agreements of Employer or any affiliate.

 

II.                                   Definitions pertaining to Section 6(e):

 

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

 

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(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 Employer;

 

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

 

(iv)                              all or substantially all of the assets of
Employer are disposed of pursuant to a merger, consolidation, share exchange,
reorganization or other transaction unless the shareholders of 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 Employer, 51% of the Voting Stock or other ownership interests of
the entity or entities, if any, that succeed to the business of Employer; or

 

(v)                                 Employer merges or combines with another
company and, immediately after the merger or combination, the shareholders of
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 Stock
of the successor company, any shares owned by Affiliates of such other company
who were not also Affiliates of Employer prior to such merger or combination.

 

B.                                    “Good Reason” shall mean:

 

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(i)                                     a 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 Employer
of comparable rank, or a 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 Employer or any bonus plan of 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);

 

(ii)                                  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 that are materially
inconsistent with such position, duties and authority, unless in either case
such change is made with the consent of the Employee; or

 

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

 

(iv)                              provided that, in each such case, such event
or condition continues uncured for a period of more than 30 days after Employee
gives notice thereof to Employer.

 

C.                                    “Employer” shall include Employer and its
current or future subsidiaries and affiliates and any entity that succeeds to
all or substantially all of the business of Employer,

 

D.                                    “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,

 

E.                                     “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.

 

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(f)                                   Effect of Termination.  Except as
otherwise provided for in this Section 6, upon termination of this Agreement,
all rights and obligations under this Agreement will cease except for (i) the
rights and obligations under Sections 4 and 5 and the payment of Final
Compensation; (ii) the rights and obligations under Sections 7, 8 and 9; and
(iii) all procedural and remedial provisions of this Agreement.

 

7.                                      Protection of Confidential
Information/Non-Competition/Non-Solicitation.  Employee covenants and agrees as
follows:

 

(a)                                 Confidential Information.  During Employer’s
employment of Employee and following the termination of Employee’s employment
for any reason, Employee will not use or disclose, directly or indirectly, for
any reason whatsoever or in any way, except at the direction of Employer during
the course of Employee’s employment or after receipt of the prior written
consent of Employer, any confidential information of Employer or its controlled
subsidiaries or affiliates, that comes into his knowledge during his employment
by Employer (the “Confidential Information” as hereinafter defined).  The
obligation not to use or disclose any Confidential Information will not apply to
any Confidential Information that is or becomes public knowledge through no
fault of Employee, and that may be utilized by the public without any direct or
indirect obligation to Employer, but the termination of the obligation for
non-use or nondisclosure by reason of such information becoming public will
extend only from the date such information becomes public knowledge.  The above
will be without prejudice to any additional rights or remedies of Employer under
any state or federal law protecting Trade Secrets or other information.

 

(b)                                 Trade Secrets.  Employee shall hold in
confidence all Trade Secrets of Employer, its direct and indirect subsidiaries,
and/or its customers that came into his knowledge during his employment by
Employer and shall not disclose, publish or make use of at any time after the
date hereof such Trade Secrets, other than at the direction of Employer, for as
long as the information remains a Trade Secret.

 

For purposes of this Agreement, the following definitions apply:  “Confidential
Information” means any data or information, other than Trade Secrets, that is
valuable to Employer and not generally known to the public or to competitors of
Employer.  It is understood that the term “Confidential Information” does not
mean and shall not include information which:

 

(i)                                     is or subsequently becomes publicly
available without the breach of any obligation owed to the Employer;

 

(ii)                                  is disclosed with the prior written
approval of the Employer; or

 

(iii)                               is obligated to be produced by Employee
under order of a court of competent jurisdiction or a valid administrative,
congressional, or other subpoena, civil investigative demand or similar process;
provided, however, that upon issuance of any such order, subpoena, demand or
other process, the Employee shall promptly

 

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notify the Employer and shall provide the Employer with an opportunity (if then
available) to contest, at the Employer’s expense, the propriety of such order or
subpoena (or to arrange for appropriate safeguards against any further
disclosure by the court or administrative or congressional body seeking to
compel disclosure of such Confidential Information).

 

“Trade Secret” means information including, but not limited to, any technical or
non-technical data, formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial plan, product plan, list
of actual or potential customers or suppliers or other information similar to
any of the foregoing, which (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can derive economic value from its disclosure or
use; and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.

 

(c)                                  Interpretation.  The restrictions stated in
paragraphs 7(a)(i) and 7(a)(ii) are in addition to and not in lieu of
protections afforded to trade secrets and confidential information of Employer
under applicable state law.  Nothing in this Agreement is intended to or shall
be interpreted as diminishing or otherwise limiting Employer’s right under
applicable state law to protect its trade secrets and confidential information.

 

(d)                                 Non-Competition.

 

(i)                                     Employee covenants and agrees that
during the term of his employment with Employer and for a period of one year (or
such longer period specified in Section 6(e) for which Employee is entitled to
receive severance in the event of termination of Employee’s employment by
Employer without Cause or by Employee for Good Reason following a Change in
Control of Employer, all as defined in such Section 6(e)) immediately following
the termination of said employment for any reason, he or she will not, on his
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 developing, providing or selling products or services in the
United States that are products or services developed, provided or offered by
Employer or its subsidiaries and affiliates at the time of the termination of
this Agreement (whether such products or services are developed, provided or
offered by such other person or entity individually or on an integrated basis
with other products or services developed, provided or offered directly by such
person or entity or through affiliated persons or entities) 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 controlled subsidiaries and affiliates.

 

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(ii)                                  During the one year period immediately
following Employee’s termination from his employment with Employer, Employee may
submit a written request to Employer outlining a proposed employment or other
employment opportunity that Employee is considering. Employer will review such
request, and make a determination within ten (10) business days following
receipt of such request, in its sole discretion, as to whether the opportunity
would constitute a breach of the non-competition covenant.

 

(e)                                  Non-Solicitation.  To protect the goodwill
of Employer and its controlled subsidiaries and affiliates, or the customers of
Employer and its subsidiaries and affiliates, Employee agrees that, for a period
of one year (or such longer period specified in Section 6 (e) for which Employee
is entitled to receive severance in the event of termination of Employee’s
employment by Employer without Cause or by Employee for Good Reason following a
Change in Control of Employer, all as defined in such Section 6(e)) immediately
following the termination of his employment with Employer, he or she will not,
without the prior written permission of Employer, directly or indirectly, for
himself or herself or on behalf of any other person or entity, solicit, divert
away, take away or attempt to solicit or take away any Customer of Employer for
purposes of providing or selling services that are offered by Employer, if
Employer, or the particular controlled subsidiary or affiliate of Employer, is
then still engaged in the sale or provision of such services at the time of the
solicitation.  For purposes of this Section 7(c), “Customer” means any
individual or entity to whom Employer or its controlled subsidiaries or
affiliates has provided, or contracted to provide, services and with whom
Employee had, alone or in conjunction with others, contact with or knowledge of,
during the twelve months prior to the termination of his employment.  For
purposes of this Section 7(c), Employee had contact with or knowledge of a
customer if (i) Employee had business dealings with the customer on behalf of
Employer or its controlled subsidiaries or affiliates; (ii) Employee was
responsible for supervising or coordinating the dealings between the customer
and Employer or its controlled subsidiaries or affiliates; or (iii) Employee
obtained or had access to Trade Secrets or Confidential Information about the
customer as a result of Employee’s association with Employer or its controlled
subsidiaries or affiliates.

 

(f)                                   Non-Solicitation/Hiring of Employees. 
During Employer’s employment of Employee and for a period of one year (or such
longer period specified in Section 6(e) for which Employee is entitled to
receive severance in the event of termination of Employee’s employment by
Employer without Cause or by Employee for Good Reason following a Change in
Control of Employer, all as defined in such Section 6(e)) following the
termination of Employee’s employment with Employer for any reason, Employee will
not solicit for employment or hire, directly or indirectly, any employee of
Employer or any of its subsidiaries or affiliates who was employed with Employer
or its controlled subsidiaries or affiliates within the one year period
immediately prior to Employee’s termination.

 

8.                                      Work Made for Hire.  Employee agrees
that any written program materials, protocols, research papers, other writings,
as well as improvements, inventions, new techniques, programs or products (the
“Work”) made or developed by Employee within or after normal working hours
relating to the business or activities of Employer or any of its subsidiaries or
affiliates, shall be deemed to have been made or developed by Employee solely
for the benefit of

 

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Employer and will be considered “work made for hire” within the meaning of the
United States Copyright Act, Title 17, United States Code, which vests all
copyright interest in and to the Work in the Employer.  In the event, however,
that any court of competent jurisdiction finally declares that the Work is not
or was not a work made for hire as agreed, Employee agrees to assign, convey,
and transfer to the Employer all right, title and interest Employee may
presently have or may have or be deemed to have in and to any such Work and in
the copyright of such work, including but not limited to, all rights of
reproduction, distribution, publication, public performance, public display and
preparation of derivative works, and all rights of ownership and possession of
the original fixation of the Work and any and all copies. Additionally, Employee
agrees to execute any documents necessary for Employer to record and/or perfect
its ownership of the Work and the applicable copyright.

 

9.                                      Property of Employer.  Employee agrees
that, upon the termination of Employee’s employment with Employer, Employee will
immediately surrender to Employer all property, equipment, funds, lists, books,
records and other materials of Employer or its controlled subsidiaries or
affiliates in the possession of or provided to Employee.

 

10.                               Special Rules for Compliance with Code
Section 409A.  This Section 10 serves to ensure compliance with applicable
requirements of Section 409A of the Internal Revenue Code (the “Code”) and the
regulations and guidance promulgated thereunder (such Section and such
regulations and guidance, collectively, “Section 409A”).  Certain provisions of
this Section 10 modify other provisions of this Agreement.  If the terms of this
Section 10 conflict with other terms of the Agreement, the terms of this
Section 10 control.

 

(a)                                 Timing of Certain Payments.  Payments and
benefits specified under this Agreement shall be paid at the times specified as
follows:

 

(i)                                     Accrued Payments at Termination. 
Sections 6(a) — (e) of this Agreement require payment of amounts earned but
unpaid or accrued at the date of Employee’s termination.  Unless the amount is
payable under an applicable plan, program or arrangement on explicit terms
providing for a delay in payment compliant with Section 409A, these amounts
shall be payable at the date the amounts otherwise would have been payable under
the applicable plans, programs and arrangements but in no event more than 30
days after Employee’s termination of employment (subject to Section 10(d)). 
Notwithstanding the foregoing, amounts payable under any plan, program or
arrangement that is exempt from Section 409A shall be payable in accordance with
the terms of such plan, program or arrangement.

 

(ii)                                  Expense Reimbursements.  Any payment under
Section 5 or otherwise as an expense reimbursement hereunder must be paid no
later than the end of Employee’s taxable year next following the taxable year in
which Employee incurred the reimbursable expense.

 

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(iii)                               Other Payments.  Any other payment or
benefit required under this Agreement to be paid in a lump sum or otherwise to
be paid promptly at or following a date or event shall be paid within five days
after the due date, subject to Section 10(b), (c) and (d) below.

 

(iv)                              No Influence on Year of Payment.  In the case
of any payment under the Agreement payable during a specified period of time
following a termination or other event (including any payment for which the
permitted payment period begins in one calendar year and ends in a subsequent
calendar year), Employee shall have no right to elect in which year the payment
will be made, and Employer’s determination of when to make the payment shall not
be influenced in any way by Employee.

 

(b)                                 Special Rules for Severance Payments.  In
the case of payments in the nature of salary continuation required under
Section 6(c) (“Pre-CiC Severance Payments”) and severance payable under
Section 6(e) I. (iii) (the “CiC Severance Payments” and, with the “Pre-CiC
Severance Payment, the “Severance Payments”), the following rules will apply:

 

(i)                                     Separate Payments.  Each monthly
installment of the Pre-CiC Severance Payments shall be deemed to be a separate
payment for all purposes, including for purposes of Section 409A.  The portion
of the CiC Severance Payments that exceeds the Pre-CiC Severance Payments (or
the present value thereof, if such present valuing is required to comply with
Section 409A), including the part attributable to inclusion of Target Bonus in
the calculation of CiC Severance Payments as compared to Pre-CiC Severance
Payments, shall be deemed to be a separate payment for all purposes, including
for purposes of Section 409A (such excess, the “Separate Lump Sum”).

 

(ii)                                  Severance Payment Timing Rules.  Each
installment of Pre-CiC Severance Payments shall be treated as follows for
purposes of Section 409A:

 

(A)                               Installments payable during the year of
termination and by March 15 of the year following the year in which termination
occurs shall, to the maximum extent possible, be deemed to constitute a
short-term deferral under Treasury Regulation § 1.409A-1(b)(4);

 

(B)                               Installments payable during the period within
six months after termination, to the extent not covered by Section 10(b)(ii)(A),
shall, to the maximum extent possible, be deemed to constitute amounts payable
under the “two-year/two-times” exclusion from being a deferral of

 

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compensation under Treasury Regulation § 1.409A-1(b)(9)(iii);

 

(C)                               To the extent that the “two-year/two-times”
exclusion from being a deferral of compensation under Treasury Regulation §
1.409A-1(b)(9)(iii) has not been fully applied by virtue of
Section 10(b)(ii)(B), installments payable as Pre-CiC Severance Payments shall
be excluded, to the maximum extent possible, by such “two-years/two-times”
exclusion (applied, to the extent consistent with Section 409A, in the reverse
order of payment of the installments, that is, to the latest installments
first); and

 

(D)                               All installments of the Pre-CiC Severance
Payment not covered by Section 10(b)(ii)(A), (B) or (C) shall be paid at the
applicable installment payment date in compliance with Section 409A, except that
any such payment shall be subject to the six-month delay rule of Section 10(d).

 

The portions of the CiC Severance Payments that correspond to the Pre-CiC
Severance Payments (that is, deemed to be the same payment for purposes of
Section 409A) shall be governed by Section 10(b)(ii)(A) — (D) above, provided
that amounts of the CiC Severance Payments corresponding to Pre-CiC Severance
Payments covered by Section 10(b)(ii)(A), (B), and (C) above shall be payable as
a lump sum within five days after termination of employment.   The Separate Lump
Sum shall be treated as follows for purposes of Section 409A:

 

(E)                                The Separate Lump Sum shall, to the maximum
extent possible, be deemed to constitute a short-term deferral under Treasury
Regulation § 1.409A-1(b)(4);

 

(F)                                 To the extent that the “two-year/two-times”
exclusion from being a deferral of compensation under Treasury Regulation §
1.409A-1(b)(9)(iii) has not been fully applied by virtue of
Section 10(b)(ii)(B) and (C), the Separate Lump Sum, to the extent not covered
by Section 10(b)(ii)(E), shall, to the maximum extent possible, be deemed to
constitute amounts payable under the “two-year/two-times” exclusion; and

 

(G)                               Any portion of the Separate Lump Sum not
covered by Section 10(b)(ii)(E) and (F) shall be paid within five days after the
qualifying termination of employment in compliance with Section 409A, except
that any such payment shall be subject to the six-month delay rule and other
provisions of Section 10(d).

 

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Any portions of the CiC Severance Payments corresponding to Pre-CiC Severance
Payments governed by Section 10(b)(ii)(D) shall be payable in a lump sum within
five days after the qualifying termination of employment if such termination has
occurred within two years following a change in the ownership of Employer, a
change in effective control of Employer, or a change in the ownership of a
substantial portion of the assets of Employer as defined in Treasury Regulation
§ 1.409A-3(i)(10) (a “409A Change in Control”), and in any other case shall be
payable at the applicable time under Section 10(b)(ii)(D).

 

(c)                                  Special Rules for Other Payments.  With
respect to amounts payable under Section 6(e) I.1 (ii) of this Agreement
(incentive awards), the following rules will apply:

 

(i)                                     Separate Payments.  The amount payable
thereunder shall be deemed to be a separate payment for all purposes, including
for purposes of Section 409A (subject to any further designation of separate
payments explicitly made in any separately identifiable plan or arrangement for
purposes of Section 409A).

 

(ii)                                  Payment Timing Rules.  A payment
referenced in Section 10(c)(i) shall be payable as a lump-sum payment within
five days after termination of employment if and to the extent that (A) the
separate payment constitutes a short-term deferral under Treasury Regulation §
1.409A-1(b)(4), (B) the amount of the separate payment not covered by
Section 10(c)(ii)(A) can be paid under the “two-year/two-times” exclusion from
being a deferral of compensation under Treasury Regulation §
1.409A-1(b)(9)(iii), after first applying such exclusion under
Section 10(b)(ii), (C) the separate payment is covered by any other applicable
exclusion or exemption under Treasury Regulation § 1.409A-1(b)(9) (provided that
the exclusion under subsection (b)(9)(v)(D) shall be used only to the extent not
relied upon for other payments or benefits), and (D) the six-month delay rule in
Section 10(d) does not apply to the separate payment (except as otherwise
provided in Section 10(c)(iii)).  Any other such separate payment (i.e., amounts
subject to the six-month delay rule) shall be subject to the six-month delay
rule of Section 10(d), subject to Section 10(c)(iii).  Any delay in payment
under the six-month delay rule shall not limit Employee’s rights under this
Agreement to not forfeit a specified item of compensation as a result of
Employee’s termination.

 

(iii)                               Payments of 409A Deferrals For a Termination
Not Within Two Years After a 409A Change in Control.  If a payment referenced in
Section 10(c)(ii) is a direct payment or a substitute or replacement for a right
to payment (the “Original Payment Right”) that constitutes a deferral of
compensation under Section 409A, and if either (A) the Change in Control does
not involve a 409A Change

 

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in Control, or (B) Employee’s termination triggering payments hereunder did not
occur within the two-year period following a 409A Change in Control, then such
payments (i.e., payments that constitute deferrals under Section 409A) must be
paid at the times and in the form applicable to a separation from service under
the terms of the Original Payment Right, subject to Section 10(d).   If in no
circumstances was such payment payable upon a separation from service under the
Original Payment Right, then this Section 10(c)(iii) shall not apply.

 

(d)                                 Six-Month Delay Rule.

 

(i)                                     General Rule.  The six-month delay
rule will apply to certain payments and benefits under the Agreement if all of
the following conditions are met:

 

(A)                               Employee is a “key employee” (as defined in
Code Section 416(i) without regard to paragraph (10) thereof) for the year in
which the termination occurs.  Employer will determine status of “key employees”
annually, under administrative procedures applicable to all Section 409A plans
and arrangements and applied in accordance with Treasury Regulation
§ 1.409A-1(i).

 

(B)                               Employer’s stock is publicly traded on an
established securities market or otherwise.

 

(C)                               The payment or benefit in question is a
deferral of compensation and not excepted, exempted or excluded from being such
by the short-term deferral rule, or the “two-years/two-times” rule in Treasury
Regulation § 1.409A-1(b)(9)(iii), or any other applicable exception, exemption
or exclusion; provided, however, that the exclusion under Treasury Regulation
§ 1.409A-1(b)(9)(v)(D) shall apply only if and to the extent that it is not
necessary to apply to any other payment or benefit payable within six months
after Employee’s termination.

 

(ii)                                  Effect of Rule.  If it applies, the
six-month delay rule will delay a payment or benefit which otherwise would be
payable under this Agreement within six months after Employee’s separation from
service.

 

(A)                               Any delayed payment or benefit shall be paid
on the date that is six months and one day after Employee’s separation from
service.

 

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(B)                               During the six-month delay period, accelerated
payment will occur in the event of the Employee’s death but not for any other
reason (including no acceleration upon a Change in Control), except for
accelerations expressly permitted under Treasury Regulation § 1.409A-1 — A-6.

 

(C)                               Any payment that is not triggered by a
termination, or is triggered by a termination but would be made more than six
months after the termination (without applying this six-month delay rule), or
would be payable at a fixed date not tied to termination that is earlier than
the expiration of the six-month delay period, shall be unaffected by the
six-month delay rule.

 

(iii)                               Limit to Application of Six-Month Delay
Rule.  If the terms of this Agreement or other plan or arrangement or document
relating to this Agreement or payments hereunder impose this six-month delay
rule in circumstances in which it is not required for compliance with
Section 409A, those terms shall not be given effect.

 

(e)                                  Other Provisions.

 

(i)                                     Interest on Delayed Payments.  If any
payment is delayed by application of the six-month delay rule under
Section 10(d) or a delay resulting from the application of Section 10(b)(iii) or
10(c)(iii), interest will accrue on such unpaid amount at a rate equal to the
short-term applicable federal rate (with semiannual compounding) established by
the Internal Revenue Service under Section 1274(b)(2)(B) of the Internal Revenue
Code and in effect at the date the amount would have been paid but for the
six-month delay rule hereunder.

 

(ii)                                  Good Reason.  The definition of “Good
Reason” under the Agreement, and related rules governing constructive
termination not for Cause, is intended to qualify as an “involuntary separation”
within the meaning of Treasury Regulation § 1.409A-1(n)(2)(i), and shall be so
construed and interpreted.

 

(iii)                               Non-transferability.  No right to any
payment or benefit under this Agreement shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by Employee’s creditors or of any of Employee’s beneficiaries.

 

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(iv)                              No Acceleration.  The timing of payments and
benefits under the Agreement may not be accelerated to occur before the time
specified for payment hereunder, except to the extent permitted under Treasury
Regulation § 1.409A-3(j)(4) or as otherwise permitted under Section 409A without
Employee incurring a tax penalty.

 

(v)                                 Timing Relating to Release.  Other
provisions of this Agreement (including this Section 10) notwithstanding, if
Employee is obligated to execute a release, non-competition, or other agreement
as a condition to receipt of a payment hereunder, Employer will supply to
Employee a form of such release or other document not later than the date of
Employee’s termination, which must be returned within the time period required
by law and must not be revoked by Employee within the applicable time period in
order for Employee to satisfy any such condition.  If any amount payable during
a fixed period following Employee’s termination is subject to such a requirement
and the fixed period would begin in one year and end in the next, Employer, in
determining the time of payment of any such amount, will not be influenced by
the timing of any action by Employee including execution of such a release or
other document and expiration of any revocation period.  In particular, Employer
will be entitled in its discretion to deposit any payment hereunder in escrow
during either year comprising such fixed period, so that such deposited amount
is constructively received and taxable income to Employee upon deposit but with
distribution from such escrow remaining subject to Employee’s execution and
non-revocation of such release or other document.

 

(vi)                              Definition of Termination of Employment.  For
purposes of this Agreement, references to “termination of employment” and all
correlative terms shall mean a separation from service as defined in Treasury
Regulation § 1.409A-1(h).

 

11.                               Remedies.  An actual or threatened violation
by Employee of the covenants and obligations set forth in Sections 7, 8 and 9
will cause irreparable harm to Employer or its controlled subsidiaries or
affiliates and the remedy at law for any such violation will be inadequate.
Employee agrees, therefore, that Employer or its controlled subsidiaries or
affiliates will be entitled to appropriate equitable relief to remedy any breach
by Employee of such covenants and obligations, including, but not limited to, a
temporary restraining order and a preliminary injunction, without the necessity
of posting a bond.  Employee will also be entitled to seek equitable relief
against Employer in connection with enforcement of the covenants and obligations
set forth in Sections 7, 8 and 9.   The provisions of Sections 4, 5, 6, 7, 8 and
9 will survive the termination of this Agreement in accordance with the terms
set forth in each Section.

 

12.                               Arbitration.  Except for an action for
injunctive relief as described in Section 11, any disputes or controversies
arising under this Agreement will be settled by arbitration in Avon,

 

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Connecticut in accordance with the rules of the American Arbitration Association
relating to the arbitration of employment disputes.  The determination and
findings of such arbitrators will be final and binding on all parties and may be
enforced, if necessary, in any court of competent jurisdiction.  The costs and
expenses of the arbitration shall be paid for by Employer, but each party shall
pay its own attorney’s fees and other litigation costs.

 

13.                               Notices.  Any notice or request required or
permitted to be given to any party will be given in writing by hand, by US mail,
by facsimile, by e-mail, or by national overnight delivery service, and,
excepting delivery by hand, will be given at the address set forth below or at
such other address as such party may designate by written notice to the other
party to this Agreement:

 

To Employee:

Sam K. Srivastava

 

210 Silver Spring Road

 

Wilton, CT 06897

 

 

To Employer:

Magellan Health Services, Inc.

 

55 Nod Road

 

Avon, CT 06001

 

Attention: General Counsel

 

Each notice given in accordance with this Section will be deemed to have been
given, if personally delivered, on the date personally delivered; if mailed, on
the third day following the day on which it is deposited in the US mail,
certified or registered mail, return receipt requested, with postage prepaid, to
the address above or last given in accordance with this Section, by facsimile
when sent and a confirmation of receipt is received, by e-mail when sent, or
upon delivery by a national overnight delivery service to the address above or
last given in accordance with this Section.

 

14.                               Headings.  The headings of the sections of
this Agreement have been inserted for convenience of reference only and should
not be construed or interpreted to restrict or modify any of the terms or
provisions of this Agreement.

 

15.                               Severability.  If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision will be
fully severable and this Agreement and each separate provision will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.  In addition, in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically, as a part of this Agreement, a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable, to the extent
such reformation is allowable under applicable law.

 

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16.                               Governing Law.  This Agreement and all issues
relating to the validity, interpretation, and performance will be governed by,
interpreted, and enforced under the laws of the State of Connecticut.

 

17.                               Binding Effect.  This Agreement will be
binding upon and shall inure to the benefit of each party and each party’s
respective successors, heirs and legal representatives.  This Agreement may not
be assigned by Employee to any other person or entity but may be assigned by
Employer to any subsidiary or affiliate of Employer or to any successor to or
transferee of all, or any part, of the stock or assets of Employer.

 

18.                               Employer Policies, Regulations, and Guidelines
for Employees.  Employer may issue policies, rules, regulations, guidelines,
procedures or other material, whether in the form of handbooks, memoranda, or
otherwise, relating to its Employees.  These materials are general guidelines
for Employee’s information and will not be construed to alter, modify, or amend
this Agreement for any purpose whatsoever.

 

19.                               Entire Agreement.  This Agreement embodies the
entire agreement and understanding between the parties with respect to its
subject matter and supersedes all prior agreements and understandings, whether
written or oral, relating to its subject matter, unless expressly provided
otherwise within this Agreement.  No amendment or modification of this Agreement
will be valid unless made in writing and signed by each of the parties.  No
representations, inducements, or agreements have been made to induce either
Employee or Employer to enter into this Agreement, which are not expressly set
forth within this Agreement. Employee and Employer acknowledge and agree that
Employer’s controlled subsidiaries and affiliates are express third party
beneficiaries of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the 18th
day of September 2013.

 

 

 

 

MAGELLAN HEALTH SERVICES, INC.

“Employee”

 

“Employer”

 

 

 

 

 

 

/s/ SAM K. SRIVASTAVA

 

By:

/s/ CASKIE LEWIS-CLAPPER

Name: Sam K. Srivastava

 

 

 

 

 

Name:

Caskie Lewis-Clapper

 

 

 

 

 

 

Title:

Chief Human Resources Officer

 

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