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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