Exhibit 10.11

 

MAGELLAN HEALTH SERVICES

Management Bonus Plan

2004

 

PURPOSE

 

The purpose of Magellan Health Services’ Management Bonus Plan is to reward
employees for achieving specific performance objectives contributing to the
overall results of the Company.  Business units with function specific plans,
such as sales, and recovery functions, are covered under separate plans.

 

Eligible Participants

•                   Must be full time employees not participating in any other
incentive program.

•                   Must be currently meeting or exceeding performance
standards.

•                   Must have received a minimum performance review score of
3.0.

•                   Must not have submitted a verbal or written resignation of
employment.

•                   Must have been hired on or before January 31, 2004 to be
eligible to receive 100% of bonus award.

•                   Must have been hired between February 1 through April 30,
2004 to be eligible to receive 75% of bonus award.

•                   Must have been hired between May 1 through June 30, 2004 to
be eligible to receive 50% of the bonus award.

 

PLAN FUNDING

 

The plan is funded based on the company meeting or exceeding its EBITDA*
targets.

 

EBITDA Target

 

Funding Percentage

 

$ 144.8 Million

 

100%

 

 

•                  EBITDA is the Company’s consolidated net revenues, less
salaries, cost of care and other operating expenses (including amounts accrued
for payments under this plan) plus equity in earnings (or minus equity in
losses) of unconsolidated subsidiaries, less special charges, all as reported by
the Company.

 

The Target Funding Pool will equal the total of the Target Bonuses (salary times
Target Bonus Percentage, see below) of the eligible employees.  The Funding
Percentage is the portion or increment of the Target Funding Pool that will
determine the Funding Pool.

 

If the EBITDA Target is met, the Funding Percentage will equal 100%.

 

If the EBITDA Target is not met, the Target Funding Pool for incentives will be
reduced dollar for dollar until the EBITDA Target can be met, or the Target
Funding Pool is exhausted, whichever comes first. Any funds remaining after the
EBITDA Target is met will be the Maximum Funding Pool for incentives under the
Plan.  In such case, the Funding Percentage will equal the percentage of the
Maximum Funding Pool to the Target Funding Pool.

 

If the EBITDA target is exceeded, the Funding Pool will be increased by
increasing the Funding Percentage by an amount determined by the Compensation
Committee in its discretion.

 

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PERFORMANCE FACTORS

 

In addition to the Funding Percentage, there are two other factors that
determine the bonus amount for each employee.  The first is the Business Unit
Performance Factor and the second is the Individual Performance Factor.

 

Business Unit Performance Percentage

 

Each SBU, CMC and Corporate Support Area has Performance Goals that include
financial performance as well as other corporate strategic goals.  Based on the
achievement of these Business Unit Performance Goals, each business unit will be
assigned a Business Unit Performance Percentage by the CEO, for those units
reporting directly to the CEO; or the COO, with the approval of the CEO, for
those units reporting up to the COO.  Generally, the Business Unit Performance
Percentage can range from 0% to 200%.

 

Individual Performance Percentage

 

In order to receive an incentive bonus, individuals must be recommended by their
immediate supervisor, based on the achievement of their Individual Performance
Goals. The Individual Performance Percentage will be determined by each
employee’s immediate supervisor based on the extent to which the employee met
and exceeded their personal Individual Performance Goals.   Generally,
percentages can range from 0% to 200% of target bonus with a percentage of 100%
assigned to an employee whose score is between consistently meets to
consistently exceeds expectations with respect to their Individual Performance
Goals.  In general, employees with a performance rating lower than 3.0 will not
be eligible to receive a bonus.  All recommendations for incentive awards will
be substantiated by appropriate documentation of performance goals and
assessment, and will be reviewed and approved by each level of management above
the immediate supervisor, up to and including the CEO.

 

TARGET BONUS PERCENTAGE

 

EACH EMPLOYEE IN GRADES 37 AND ABOVE HAS A TARGET BONUS PERCENTAGE.  THE TARGET
BONUS PERCENTAGES BY GRADE ARE AS FOLLOWS:

 

GRADES 37 AND ABOVE TARGET BONUS PERCENTAGE LEVELS

 

Level in Organization

 

Target Bonus
% of Base Salary

Chairman and CEO

 

100%

President & Chief Operating Officer

 

75%

Chief Officers

 

40 to 60%

SVPs

 

25 to 40%

CCO & Grades 42 to 44

 

20 to 25%

Grades 39 to 41

 

15%

Assoc MD, Medical Directors, and Vice President of Medical Services

 

10%

Grades 37 and 38

 

8%

 

Payout Formula

 

An employee’s bonus under the Management Bonus Plan will be determined pursuant
to the following formula:

 

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Salary  X  Target Bonus Percentage  X  Individual Performance

Percentage  X  Business Unit Performance Percentage X

Funding Percentage.

 

For example, if the EBITDA target was met but not exceeded, an employee in Grade
42 with a salary of $110,000 and a 20% Bonus Target whose Business Unit received
a Performance Percentage of 110% and who received an Individual Performance
Percentage of 105% would receive a Bonus of $25,410, determined as follows:

 

$110,000 X 20% X 105% X 110% X 100% = $25,410.

 

Condition of Payout

 

No bonus will be paid to any employee if employment is terminated, whether
voluntary or involuntary, prior to the actual payment date.

 

PAYOUT APPROVAL

 

The Compensation Committee of the Board must separately approve any payout for
officers of the Company for whom the Compensation Committee must approve salary
and/or benefits under the Compensation Committee approval policy.

 

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