Exhibit 10.2


 


AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT


 


This
Amendment to Employment Agreement
between Magellan Health Services, Inc. (“Employer”) and Karen S. Rohan
entered into on this 28th day of July, 2009 effective as of the 1st day
of August, 2009 (“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); provided, however,
that, for any termination in 2010 or later, if (i) Employee was, for the
Company’s fiscal year before the year of termination, an executive officer
(other than the chief financial officer) for whom disclosure of compensation
information was required in the Company’s proxy statement or Form 10-K
under Item 402 of Regulation S-K (i.e., whose compensation for the previous
fiscal year was potentially subject to the limitation on deductibility under
Code Section 162(m)), and (ii) the payment required hereunder would
otherwise be payable before the occurrence of a “change of ownership or control”
within the meaning of Treasury Regulation § 1.162-27(e)(2)(v) (a “162(m) Control
Change”), then the amount payable hereunder shall equal the pro rata bonus
Employee would have become entitled to receive for the year of termination
assuming his employment had not terminated (with no exercise of downward
discretion permitted), payable at the time annual bonuses for such year
otherwise are payable, provided that if a 162(m) Control Change occurs
within one year after such termination, payment shall then be made based on
Employee’s pro-rata target bonus amount as provided in the first clause of this
Section 1(ii) (subject to Section 10


 

















 


and net of any amount previously paid under this proviso, but without
any forfeiture by Employee if such amount previously paid under this proviso
exceeds the pro-rata target bonus), with such further payment payable on the
date of such 162(m) Control Change;


 


(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);


 


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 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 1.5 % of Employee’s Base Salary in effect immediately
preceding the Change of Control 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


 


(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.                           For the three (3) year
period beginning on the date hereof and ending on July 31, 2012, 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 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 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/
  Karen S. Rohan

  	
   

  
	
       Karen
  S. Rohan, Employee