Exhibit 10.4

 

MAGELLAN HEALTH SERVICES, INC.

 

2011 MANAGEMENT INCENTIVE PLAN

 

NOTICE OF RESTRICTED STOCK UNIT AWARD

 

(REFERENCE NO. 2011-MARCH 5, 2012)

 

	
Name of Grantee:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date of Grant:
    	
 
    	
March 5, 2012
    
	
 
    	
 
    	
 
    
	
Type of Award:
    	
 
    	
Restricted Stock Units, each Restricted Stock Unit   representing the right to receive on the terms and conditions of the   Restricted Stock Unit Agreement between Grantee and the Company referenced   below and the terms and conditions of this notice a share of Ordinary Common   Stock, par value $0.01 per share (“Share”), of Magellan Health   Services, Inc. (the “Company”),   subject to adjustment thereto as provided in such Restricted Stock Unit   Agreement (a “Unit Share”), or at the election of the Company a cash   payment in lieu thereof.
    
	
 
    	
 
    	
 
    
	
Total Number of   Restricted Stock Units Awarded:
    	
 
    	
       Restricted   Stock Units.
    
	
 
    	
 
    	
 
    
	
Vesting :
    	
 
    	
This Award shall vest in accordance   with the vesting schedule set forth below, provided that the Grantee’s   Service with the Company, a Subsidiary or a Parent company has not terminated   prior to the vesting date and provided   that (i) 50% of the portion of the restricted stock unit awards which   vest on March 5, 2013 shall not vest unless the Company has earnings per   share for the year ended December 31, 2012 of at least $3.00 (“2012 EPS   Target”), if the Company does not achieve the 2012 EPS Target in 2012, this   tranche will vest if the Company achieves earnings per share of at least   $3.00 in any subsequent year up to and including 2017, and 50% of the portion   of the restricted stock units which vest on March 5, 2013 shall not vest   unless the Company’s return on equity for the year ended December 31,   2012 equals at least 8% (“2012 ROE Target”), if the ROE Target is not met in   2012, this tranche will vest if the Company achieves return on equity of at   least 8% in any subsequent year up to and including 2017; (ii) 50% of   the portion of the restricted stock unit awards which vest on March 5,   2014 shall not vest unless the Company has earnings per share for the year   ended December 31, 2013 of at least $3.15 per share (the “2013 EPS   Target”), if the Company does not achieve the 2013 EPS Target in 2013, this   tranche will vest if the Company achieves earnings per share of at least   $3.15 in any subsequent year up to and including 2018, and 50% of the portion   of the restricted stock units which vest on March 5, 2014 shall not vest   unless the Company’s return on equity for the year ended December 31,   2013 equals at least 8% (“2013 ROE Target”), if the 2013 ROE Target is not   met in 2013, this tranche will vest if the Company achieves return on equity   of at least 8% in any subsequent year up to and including 2018; and   (iii) 50% of the portion of the restricted stock unit awards which vest   on March 5, 2015 shall not vest unless the Company has earnings per   share for the year ended December 31, 2014 of at least $3.35 per share   (the “2014 EPS Target”), if the Company does not achieve the 2014 EPS Target   in 2014, this tranche will vest if the Company achieves at least $3.35 in   earnings per share in any subsequent year up to and including 2019, and 50%   of the portion of the restricted stock units which vest on March 5, 2015   shall not vest unless
    
	
 
	
 
    


 











 

	
 
    	
 
    	
 
    
	
 
	
the Company’s return on equity for the year ended   December 31, 2014 equals at least 8% (“2014 ROE Target”), if the 2014   ROE Target is not met in 2014, this tranche will vest if the Company achieves   return on equirty of at least 8% in any subsequent year up to and including   2019.
    
	
 
	
 
    
	
 
    	
 
    	
Vesting Date
    	
 
    	
Vesting Percentage
    
	
 
    	
 
    	
1st anniversary of the Date of   Grant
   (March 5, 2013)
    	
 
    	
33.4%
    
	
 
    	
 
    	
2nd anniversary of the Date of   Grant
   (March 5, 2014)
    	
 
    	
66.7%
   (i.e., an additional 33.3%)
    
	
 
    	
 
    	
3rd anniversary of the Date of   Grant
   (March 5, 2015)
    	
 
    	
100%
   (i.e., an additional 33.3%)
    
	
 
	
 
    
	
 
	
Notwithstanding the preceding paragraph, this   Restricted Stock Unit shall earlier vest immediately with respect to 100% of   the Unit Shares subject hereto in the event, after the date hereof, a Change   in Control of the Company (as defined below) shall have occurred and within   the period of eighteen months (or such other period as is provided by   Grantee’s employment agreement, if any, in effect at the time of the Change   of Control) following occurrence of the Change in Control, Grantee’s Service   with the Company shall be terminated by the Company without Cause (as defined   below) or by the Grantee with Good Reason (as defined below), provided that   the Grantee’s Service with the Company has not previously terminated after   the date hereof for any other reason. For purposes of this Restricted Stock   Unit, the terms “Change in Control,” “Cause” and “Good Reason” shall have the   same meanings as provided in any employment agreement between the Company and   Grantee in effect at the time of the Change in Control (including any terms   of substantially comparable significance in any such employment agreement   even if not of identical wording) or, if no such employment agreement is in   effect at such time or no such meanings are provided in such employment   agreement, shall have the meanings ascribed thereto below:
    
	
 
	
 
    
	
 
	
 
    	
(1) 
    	
A “Change in Control” of the Company shall mean the first to occur   after the date hereof of any of the following events:
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
a.
    	
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 50% or more of the Voting Stock (as   defined below) of the Company;
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
b.
    	
the majority of the Board of Directors of the Company consists of   individuals other than “Continuing Directors,” which shall mean the members   of the Board on the date hereof;
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
c.
    	
the Board of Directors of the Company adopts and, if required by law   or the certificate of incorporation of the Corporation, the shareholders   approve the dissolution of the Company or a plan of liquidation or comparable   plan providing for the disposition of all or substantially all of the   Company’s assets;
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
d.
    	
all or substantially all of the assets of the Company are disposed of   pursuant to a merger, consolidation, share exchange,
    
								


 

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reorganization or other transaction unless the shareholders of the   Company 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 Company, a majority of the Voting   Stock or other ownership interests of the entity or entities, if any, that   succeed to the business of the Company; or
    
	
 
	
 
    
	
 
	
 
    	
e. 
    	
the Company merges or combines with another company and, immediately   after the merger or combination, the shareholders of the Company 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 being 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 the Company prior to such merger or combination.
    
	
 
	
 
    
	
 
	
 
    	
(2) 
    	
“Cause” shall mean:
    
	
 
	
 
    
	
 
	
 
    	
a.
    	
Grantee is convicted of (or pleads guilty or nolo contendere to) a   felony or a crime involving moral turpitude;
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
b.
    	
Grantee’s commission of an act of fraud or dishonesty involving his   or her duties on behalf of the Company;
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
c.
    	
Grantee’s willful failure or refusal to faithfully and diligently   perform duties lawfully assigned to Grantee as an officer or employee of the   Company or other willful breach of any material term of any employment   agreement at the time in effect between the Company and Grantee; or
    
	
 
	
 
    	
 
    	
 
    
	
 
	
 
    	
d.
    	
Grantee’s willful failure or refusal to abide by the Company’s   policies, rules, procedures or directives, including any material violation   of the Company’s Code of Ethics.
    
	
 
	
 
    
	
 
	
 
    	
(3) 
    	
“Good Reason” shall mean:
    
	
 
	
 
    
	
 
	
 
    	
a.
    	
a material reduction in Grantee’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 Company of   comparable rank (for which purpose any person who is an executive officer of   the Company (as determined for purposes of the Exchange Act shall be   considered of comparable rank) or a material reduction in Grantee’s target   bonus opportunity for the year in which or any year after the year in which   the Change of Control occurs from Grantee’s target bonus opportunity for the   year in which the Change in Control occurs (if any) as established under any   employment agreement Grantee has with the Company or any bonus plan of the   Company applicable to Grantee (or, if no such target bonus opportunity has   yet been
    


 

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established for Grantee under a bonus plan applicable to Grantee for   the year in which the Change of Control has occurred, the target bonus   opportunity so established for Grantee for the immediately preceding year (if   any)). For purposes of this provision, an action or actions of the Company   will be deemed “material” if, individually or in the aggregate, the action or   actions result(s) or potentially result(s) in a reduction in   compensation in the current year or a future year having a present value to   Grantee of at least one and one half percent (1.5%) of Grantee’s then current   base salary, provided that Grantee will have a legal right to claim damages   for a breach of contract for any action by the Company or event having an   effect described under those paragraphs that does not meet this objective   materiality test, and actions may be material in a given case at levels less   than the specified level.
    
	
 
    	
 
    	
 
    
	
 
    	
b.
    	
a material diminution in Grantee’s position, duties or   responsibilities as in effect at the time of a Change in Control or the   assignment to Grantee 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 Grantee; or
    
	
 
    	
 
    	
 
    
	
 
    	
c.
    	
the relocation by more than 50 miles of the offices of the Company   which constitute at the time of the Change in Control Grantee’s principal   location for the performance of his or her services to the Company;
    
	
 
    	
 
    	
 
    
	
 
    	
provided that, in each such case, Grantee provides   notice to the Company within 90 days that such event or condition   constituting Good Reason has arisen, and such event or condition continues   uncured for a period of more than 30 days after Grantee gives notice thereof   to the Company, and Grantee terminates Service within eighteen months after   such event or condition has arisen.
    
	
 
    	
 
    
	
 
    	
For purposes of the foregoing definitions,   (A) “the Company” shall include any entity that succeeds to all or   substantially all of the business of the Company, (B) “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, and (C) “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.
    
	
 
    	
 
    
	
Settlement of   Award:
    	
Unit Shares in settlement of this Award (or, at the   Company’s election, cash in lieu thereof) shall be delivered to Grantee on   the Vesting Date (such date, the “Settlement Date”) as further   provided in Grantee’s Restricted Stock Unit Agreement with the Company.
    
	
 
    	
 
    
	
Dividend   Equivalent Rights
    	
NONE.
    
						


 

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Transfer   Restrictions
    	
 
    	
Unit Shares issued in settlement of this Award shall   not be subject to any additional transfer restrictions, other than those   provided by Grantee’s Restricted Stock Unit Agreement.
    
	
 
    	
 
    	
 
    
	
Other Terms
    	
 
    	
 
    


 

By signing your name below, you acknowledge and agree that this Award is governed by the terms and conditions of the Magellan Health Services, Inc. 2011 Management Incentive Plan (“Plan”) and the Restricted Stock Unit Agreement, reference number 2011-March 5, 2012 (“Agreement”), both of which are hereby made a part of this document.  Capitalized terms used but not defined in this Notice of Restricted Stock Unit Award shall have the meanings assigned to them in the Plan and Agreement.

 

 

	
 
    	
 
    	
MAGELLAN HEALTH SERVICES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
René Lerer
    
	
 
    	
 
    	
Title:
    	
Chairman and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
GRANTEE:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    


 

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