Document:

Exhibit
10.3

 

MAGELLAN
HEALTH SERVICES, INC.

 

2008
MANAGEMENT INCENTIVE PLAN

 

RESTRICTED
STOCK UNIT AGREEMENT

 

REFERENCE NUMBER:  2008- MARCH 4, 2009 (Name)

As of MARCH 4, 2009

 

SECTION 1.   GRANT OF
RESTRICTED STOCK UNITS.

 

(a)                                  Restricted Stock Units. 
On the terms and conditions set forth in this Agreement and each Notice
of Restricted Stock Unit Award referencing this Agreement, Magellan Health
Services, Inc. (the “Company,” as further defined below) grants to
the Grantee referred to on the signature page hereof the right to receive
on the Settlement Date (as hereinafter defined) the number of shares of
Ordinary Common Stock, $0.01 par value per share, of the Company (“Shares,”
as further defined below) equal to the number of “Stock Units” awarded to the
Grantee as set forth in the Notice of Restricted Stock Unit Award, subject to
adjustment thereto on account of any change that may be made in the Shares as
provided by Section 4 below (the “Unit Shares”).  Each such Notice of Restricted Stock Unit
Award, together with this referenced Agreement, shall be a separate “Restricted
Stock Unit” governed by the terms of this Agreement and any such separate
Restricted Stock Unit may be referred to herein as the “Restricted Stock Unit,”
and, as pertinent, any of multiple Notices of Restricted Stock Unit Award
referencing this Agreement may be referred to herein as the “Restricted Stock
Unit Award Notice.”

 

(b)                                 2008 Management Incentive Plan and Defined Terms.  The Restricted Stock Unit Award is granted
under and subject to the terms of the 2008 Management Incentive Plan, as
amended and supplemented from time to time (the “Plan”), which is
incorporated herein by this reference. 
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings ascribed to them in the Plan.

 

(c)                                  Scope of this Agreement. 
This Agreement shall apply both to the Restricted Stock Unit and to any
Unit Shares acquired upon the settlement of the Restricted Stock Units.

 

SECTION 2.   VESTING AND
SETTLEMENT OF RESTRICTED STOCK UNITS.

 

(a)                                  Vesting.  The
Restricted Stock Unit shall vest in whole or in part on the date or dates
provided by the Notice of Restricted Stock Unit Award, provided that Grantee
remains in the Service of the Company, a Subsidiary or a Parent company at such
date; it being understood that the Notice of Restricted Stock Unit Award may
provide that the Restricted Stock Unit shall vest upon termination of Grantee’s
Service in such circumstances as are provided in the Notice of Restricted Stock
Unit Award.

 

(b)                                 Settlement in Shares. 
Subject to following provisions of this Section 2, the Company
shall settle the Restricted Stock Unit, to the extent it has vested, on the
date on which the 

 

 

Restricted
Stock Unit has vested (or, if such date is not a Business Day, the next
Business Day) by the delivery to Grantee of the number of Unit Shares equal to
the number of Restricted Stock Units so vested. 
The date on which a Restricted Stock Unit is to be settled is herein
referred to as the “Settlement Date.” 
Subject to subsection 2(b) below, in settlement of the Restricted
Stock Unit, the Company shall cause to be issued on the Settlement Date or as
soon as practicable thereafter (but not more than five business days) an
appropriate certificate or certificates for the Unit Shares, registered in the
name of the Grantee (or, at the direction of the Grantee, in the names of such
person and his or her spouse as community property or as joint tenants with
right of survivorship or as tenants in the entirety); provided, however,
that such Unit Shares shall be subject to such restrictions on transfer or
other restrictions as are provided by the Restricted Stock Unit Award Notice
and the certificates so issued may bear a legend reflecting such restrictions
and any restrictions applicable in accordance with subsections 2(g) and 3(c) below.

 

(c)                                  Alternative Settlement in Cash.  In lieu of settlement of the Restricted Stock
Unit in Unit Shares, the Committee may in its sole discretion elect to settle
all or a portion of the Restricted Stock Unit by a cash payment equal to the
Fair Market Value as of the Settlement Date of the Unit Shares that would
otherwise have been issued under this Agreement.  Such payment may be made by good check of the
Company issued in accordance with its normal payroll practices or such other
means as are acceptable to the Company

 

(d)                                 Withholding Requirements. 
The Company may withhold any tax (or other governmental obligation) the
Company is required to withhold as a result of the grant of the Restricted Stock
Unit and/or the issuance of Unit Shares (or cash in lieu of Unit Shares) in
settlement of a Restricted Stock Unit and, as a condition to the grant of the
Restricted Stock Unit or issuance of the Unit Shares in settlement thereof, the
Grantee shall make arrangements satisfactory to the Company to enable it to
satisfy all such withholding requirements.

 

(e)                                  Injurious Conduct. 
Except as otherwise explicitly provided by the Restricted Stock Unit
Award Notice or other Award document or by an agreement executed by the Company
with the approval of the Committee, in the event the Grantee has engaged in
Injurious Conduct as defined in, and as determined to have occurred in
accordance with, Section 12 of the Plan during Grantee’s Service or during
the year following termination of Grantee’s Service, then (i) no Unit
Shares shall be issued to Grantee in connection with the settlement of a
Restricted Stock Unit Award under the Plan after such determination (even if
such Award is fully vested) nor shall any other benefit of any Award thereafter
accrue to the Grantee under this Agreement or the Plan (including by reason of
the lapse of any restriction on transfer or other restriction then applicable
to Unit Shares that have been issued), and the Company shall not complete the
settlement of any other Award, and (ii) any such unsettled Restricted
Stock Unit Award shall be forfeited and shall terminate and any Unit Shares
subject to any such restrictions shall be forfeited (provided, however,
that the foregoing shall not excuse the Company from settling, completing
delivery of or removing any legend restricting the transfer of (A) any
Restricted Stock Award or (B) Restricted Stock Unit Awards and any related
Dividend Equivalent Rights the settlement of which have been deferred at the
election of the Grantee, if such Restricted Stock Award or Restricted Stock
Unit Awards were fully vested before the date such Injurious Conduct occurred
(as so determined)).  In addition, except
as otherwise specifically provided by a Restricted Stock Unit Award Notice or
other Award document or by an agreement executed by the Company with the
approval of the Committee, in the event the Grantee has engaged in Injurious
Conduct as 

 

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defined in,
and as determined to have occurred in accordance with, Section 12 of the
Plan during Grantee’s Service or during the year following termination of
Grantee’s Service, any benefits realized by Grantee as a result of any Award
under the Plan at any time after such Injurious Conduct occurred (as so
determined), whether upon vesting or exercise of an Option, lapse of
restrictions on Option Shares, vesting of Restricted Stock Awards or Stock
Units or related Dividend Equivalent Rights, or the lapse of any restrictions
on Shares issued as a result thereof, or as a result of any other settlement of
an Award, shall be forfeited by Grantee and Grantee shall pay over to the
Company in cash the amount of any benefits so received by Grantee or deliver to
the Company any Shares so received by Grantee and still owned by Grantee (provided,
however, that the foregoing shall not require the forfeiture of or
excuse the Company from settling, completing delivery of or removing any legend
restricting the transfer of (i) any Restricted Stock Award or (ii) Stock
Units and any related Dividend Equivalent Rights the settlement of which have
been deferred at the election of the Grantee, if such Restricted Stock Award or
Stock Units were fully vested before the date such Injurious Conduct occurred
(as so determined)).  A forfeiture of
benefits as provided hereby upon the Committee determining that Grantee has
engaged in Injurious Conduct during Grantee’s Service or during the year
following termination of Grantee’s Service shall not relieve Grantee of any
other liability he or she may have to the Company, any Subsidiary or any Parent
as a result of engaging in the Injurious Conduct.

 

(f)                                    Transfer Restrictions On Unit Shares.  Subject to subsection 2(d) above and
subsections 2(g) and 3(c) below, unless otherwise provided by the
Restricted Stock Unit Award Notice or another agreement between Grantee and the
Company, upon the acquisition of Unit Shares pursuant to the settlement of a
Restricted Stock Unit Award, Grantee shall be free to dispose of the Unit
Shares so acquired in any manner and at any time.

 

(g)                                 Securities Law Restrictions On Issuance of Unit Shares.  Unless a registration statement under the
Securities Act permitting the sale and delivery of Unit Shares upon settlement
of the Restricted Stock Unit Award is in effect on the Settlement Date, the
Company shall not be required to issue Unit Shares upon such settlement, except
as otherwise provided in this subsection. 
The Company shall use its commercially reasonable efforts to register
under the Securities Act sufficient Unit Shares to permit delivery to Grantee
of all Unit Shares that may be acquired by Grantee upon the settlement of the
Restricted Stock Unit Award; provided, however, that the Company
shall only be so required to register the Unit Shares on Form S-8 under
the Securities Act (or any successor form). 
Notwithstanding the foregoing, the Company shall, if Grantee has given
the Company at least 90 days’ notice requesting the Company to register in
accordance with the foregoing provisions of this subsection the Unit Shares
that may then be acquired by Grantee upon settlement of the Restricted Stock
Unit Award and the Company has failed to do so, issue Unit Shares to Grantee
upon settlement of the Restricted Stock Unit Award without registration thereof
under the Securities Act if (i) Grantee represents, effective on the date
of such issuance, in writing in a form acceptable to the Company (A) that
such Unit Shares are being acquired for investment and not with a present view
to distribution, (B) Grantee understands that the Unit Shares have not
been registered under the Securities Act and cannot be sold or otherwise
Transferred unless a registration statement under the Securities Act is in
effect with respect thereto or the Company has received an opinion of counsel,
satisfactory to it, to the effect that such registration is not required, (C) that
Grantee has, alone or together with any qualified advisor, such knowledge and
experience in financial and business matters as is necessary to evaluate the
risks of an investment in the Unit Shares, is acquiring the Unit Shares 

 

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based on an
independent evaluation of the long-term prospects of an investment in the Unit
Shares and has been furnished with such financial and other information
regarding the Company as the Grantee has requested for purposes of making such
evaluation, and (D) Grantee is able to bear the economic risk of an
investment in the Unit Shares subject to such restrictions on Transfer and (ii) if
the Company determines that under the circumstances issuing the Unit Shares
pursuant to such settlement of the Restricted Stock Unit Award is lawful; provided,
however, that the Company may require, as a condition of such issuance
of Unit Shares, that Grantee execute and deliver to it such other certificates,
agreements and other instruments as in the judgment of the Company, upon advice
of counsel, are necessary or appropriate to assure that the Unit Shares are
issued to Grantee in accordance with the Securities Act and any other
applicable securities law and may require that any certificates representing
Unit Shares so issued bear any restrictive legend appropriate for such
purpose.  In addition, even if a
registration statement under the Securities Act permitting the delivery of Unit
Shares upon settlement of the Restricted Stock Unit Award is in effect at the
Settlement Date, the Company may suspend the issuance of Unit Shares pursuant
to the settlement of all Restricted Stock Unit Awards issued under the Plan for
such period of time as in the judgment of the Company, upon advice of counsel,
is necessary in order for the Company to come into compliance with all the
reporting requirements applicable to the Company pursuant to Section 13(a) of
the Exchange Act or to otherwise avoid in connection with the issuance of the
Unit Shares under such registration statement a violation of Sections 10, 11 or
12 of the Securities Act.  If the Company
suspends the issuance of Unit Shares pursuant to the settlement of Restricted
Stock Unit Awards issued under the Plan, the Company shall give prompt written
notice thereof to the Grantee (but the failure of the Company to give such
notice shall not prevent the Company from suspending the issuance of Unit
Shares as permitted hereby) and, at such time as such period of suspension
ends, shall give prompt written notice thereof to Grantee.  Notwithstanding that the Company in
accordance with this subsection may not be able to issue Unit Shares in
settlement of a Restricted Stock Unit, the Company shall not be required to
settle a Restricted Stock Unit in cash, but may do so if it elects in its
discretion to do so, as provided by subsection 2(c) above.

 

(h)                                 Special Distribution Rules to
Comply with Code Section 409A.  In the event that any
Restricted Stock Units constitute a “deferral of compensation” under Section 409A
of the Internal Revenue Code (the “Code”),(1) the timing of settlement of such
Restricted Stock Units (hereinafter defined as “409A RSUs”) will be subject to
applicable limitations under Code Section 409A and Section 19(a) of
the Plan, including the following restrictions on settlement:

 

(i)                                     The
“six-month delay rule”

 

·                  The six-month delay rule will
apply to 409A RSUs if these four conditions are met:

·                  The grantee has a separation from
service (within the meaning of Treasury Regulation § 1.409A-1(h))

·                  A distribution of shares is triggered
by the separation from service (but not due to death)

·                  The Grantee is a “key employee” (as
defined in Code Section 416(i) without regard to paragraph (5) thereof).  The Company will determine 

 

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status of “key
employees” annually, under administrative procedures applicable to all 409A
plans and arrangements

·                  The Company’s stock is publicly
traded on an established securities market or otherwise.

 

·                  If it applies, the six-month delay rule will
delay a distribution in settlement of 409A RSUs triggered by separation from
service where the distribution otherwise would be within six months after the
separation

·                  Any delayed payment shall be made on
the date six months after separation from service

·                  During the six-month delay period,
accelerated distribution will be permitted in the event of the grantee’s death
and for no other reason (including no acceleration upon a Change in Control),
except for the limited exceptions permitted under the 409A regulations

·                  Any payment that is not triggered by
a separation from service, or triggered by a separation from service but which
would be made more than six months after separation (without applying this
six-month delay rule), shall be unaffected by the six-month delay rule.  Each payment in a series of installments
would be treated as a separate payment for this purpose.

 

·                  If the terms of a 409A RSUs agreement
impose this six-month delay rule in circumstances in which it is not
required for compliance with 409A, those terms shall not be given effect.

 

(ii)                                Change
in Control Rule:

 

·                  If any distribution of 409A RSUs
would be triggered by a Change in Control, such distribution will be made only
if, in connection with the Change in Control, there occurs a change in the
ownership of the Company, a change in effective control of the Company, or a
change in the ownership of a substantial portion of the assets of the Company
as defined in Treasury Regulation § 1.409A-3(i)(5) (a “409A Change in
Control”).

 

·                  In this case, distribution of the
409A RSUs shall occur not later than five business days after (i) the
occurrence of a 409A Change in Control occurring at the time of or following
the Change in Control or (ii) upon occurrence of the Change in Control occurring
within 90 days after the 409A Change in Control, but only if the occurrence of
the Change in Control is non-discretionary and objectively determinable at the
time of the 409A Change in Control (in this case, the Grantee shall have no
influence on when during such 90-day period the settlement shall occur).

 

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·                  Upon a Change in Control during the
six-month delay period, no accelerated distribution applies (even if the events
involve a 409A Change in Control) to a distribution delayed by application of
the six-month delay rule.

 

(iii)                            Separation
from Service

 

·                  Any distribution in settlement of
409A RSUs that is triggered by a termination of employment will occur only at
such time as the participant has had a “separation from service” within the
meaning of Treasury Regulation § 1.409A-1(h), regardless of whether any
other event might be viewed as a termination of employment by the Company for
any other purpose.

 

·                  In particular, if a grantee switches
to part-time employment or becomes a consultant in connection with a
termination of employment, whether the event will be deemed a termination of
employment for purposes of 409A RSUs will be determined in accordance with
Treasury Regulation § 1.409A-1(h).

 

(iv)                               Other
Restrictions.

 

·                  The settlement of 409A RSUs may not
be accelerated by the Company except to the extent permitted under 409A.

 

·                  Any restriction imposed on RSUs under
these 409A Compliance Rules or imposed on RSUs under the terms of other
documents solely to ensure compliance with 409A shall not be applied to RSUs
that are not 409A RSUs except to the extent necessary to preserve the status of
such RSUs as not 409A RSUs.  If any
mandatory term required for 409A RSUs or non-409A RSUs to avoid tax penalties
under Section 409A is not otherwise explicitly provided under this
document or other applicable documents, such term is hereby incorporated by
reference and fully applicable as though set forth at length herein, and

 

(v)                                 Any
other applicable provisions of Plan Section 19(a) will apply to such
Restricted Stock Units.

 

SECTION 3.   TRANSFER OF
RESTRICTED STOCK UNIT AWARD OR UNIT SHARES

 

(a)                                  Transfers Generally Prohibited.  Except as otherwise provided by the Restricted
Stock Unit Award Notice or otherwise permitted by the Plan or in the case of a
transfer permitted by subsection 3(b) below, the Restricted Stock Unit
Award may be settled only during the Grantee’s lifetime and only by the
issuance of Unit Shares (or a cash payment in lieu thereof where permitted by
the Restricted Stock Unit Award Notice) to Grantee.  Except as otherwise provided in subsection 3(b) below,
the Restricted Stock Unit Award and the rights and privileges conferred by the
Restricted Stock Unit Award shall not be sold or otherwise Transferred.

 

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(b)                                 Certain Transfers Permitted. 
Notwithstanding the foregoing provisions of this Section 3, the
Restricted Stock Unit Award may be Transferred (i) in the event of the
Grantee’s death, by will or the laws of descent and distribution or by a
written beneficiary designation accepted by the Company, (ii) by operation
of law in connection with a merger, consolidation, recapitalization,
reclassification or exchange of Shares, reorganization or similar transaction
involving the Company and affecting the Shares generally or (iii) with the
approval of the Committee, to a member of Grantee’s family, or a trust
primarily for the benefit of Grantee and/or one or more members of Grantee’s
family, or to a corporation, partnership or other entity primarily for the
benefit of Grantee and/or one or more such family members and/or trusts or (iv) with
the approval of the Committee, in another estate or personal financial planning
transaction; provided, however, that in any such case the
Restricted Stock Unit Award so Transferred and, upon issuance of Unit Shares in
settlement thereof, the Unit Shares issued to the Transferee shall remain
subject in the hands of the Transferee to the restrictions on Transfer provided
hereby and all other terms hereof, including the terms of subsection 2(c) above.  The foregoing notwithstanding, if RSUs
constitute deferrals of compensation for purposes of Code Section 409A,
RSUs and any related right of Grantee shall not be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Grantee or his or her beneficiary, except as
permitted under Code Section 409A and regulations and guidance thereunder.

 

(c)                                  Fiduciary And Securities Law Restrictions.  As a employee, officer and/or director of the
Company, Grantee may be subject to restrictions on his or her ability to sell
or otherwise Transfer Unit Shares by reason of being a fiduciary for the
Company or by reason of federal or state securities laws and/or the policies
regarding transactions in securities of the Company from time to time adopted
by the Company and applicable to Grantee in connection therewith.  Nothing contained herein shall relieve
Grantee of any restriction on sale or other Transfer of Unit Shares provided
thereby and any other restrictions of sale or other Transfer of Unit Shares
provided herein (including in a Restricted Stock Unit Award Notice or in the
Plan) shall be in addition to and not in lieu of any other restrictions
provided thereby.

 

SECTION 4.   ADJUSTMENT
OF SHARES.

 

(a)                                  Adjustment Generally. 
If while the Restricted Stock Unit remains in effect there shall be any
change in the outstanding Shares of the class which are to be issued upon
settlement of the Restricted Stock Unit, through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, combination of shares, exchange of shares for other securities or other
like change in the outstanding Shares, or any spin-off, split-off, dividend in
kind or other extraordinary dividend or other distribution in respect of such
outstanding Shares or other extraordinary change in the capital structure of
the Company, an adjustment shall be made to the terms of the Restricted Stock
Unit so that the Restricted Stock Unit shall thereafter be ultimately settled,
otherwise on the same terms and conditions as provided by the Restricted Stock
Unit Award Notice, this Agreement and the Plan, for such securities, cash
and/or other property as would have been received in respect of the Shares that
would have been issued upon settlement of the Restricted Stock Unit had the
Restricted Stock Unit been settled in full immediately prior to such change or
distribution (whether or not the Restricted Stock Unit was then fully vested)
or, if and to the extent the Committee determines that so adjusting the
consideration to be received upon settlement of the Restricted Stock Unit, in whole
or in part, is 

 

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not
practicable, the Committee shall equitably modify the consideration to be
received in respect of the settlement of the Restricted Stock Unit or other
pertinent terms and conditions of the Restricted Stock Unit as provided by
subsection 4(b) below.  Such an
adjustment shall be made successively each time any such change in the
outstanding Shares of the class which may be received upon settlement of the
Restricted Stock Unit or extraordinary distribution in respect of such
outstanding Shares or extraordinary change in the capital structure of the
Company shall occur.

 

(b)                                 Modification Of Restricted Stock Unit.  In the event any change in the outstanding
Shares of the class which may be received upon settlement of the Restricted
Stock Unit or extraordinary distribution in respect of such outstanding Shares
or extraordinary change in the capital structure of the Company described in
subsection 4(a) above occurs, or in the event of any change in applicable
laws or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Grantee in respect of a Restricted Stock Unit or otherwise as a participant in
the Plan or which otherwise warrants equitable adjustment to the terms and
conditions of the Restricted Stock Unit because such event or circumstances
interferes with the intended operation of the Plan (including the intended tax
consequences of Awards) occurs, then the Committee may, and shall where
required by subsection 7(a) above, adjust the number and kind of Unit
Shares and/or other securities and/or cash or other property that may be issued
or delivered upon the settlement of the Restricted Stock Unit and/or adjust the
other terms and conditions of the Restricted Stock Unit as the Committee in its
discretion determines to be equitable in order to prevent dilution or
enlargement of the Grantee’s rights in respect of the Restricted Stock Unit as
such existed before such event. 
Appropriate adjustments may likewise be made by the Committee in other
terms and conditions of the Restricted Stock Unit to reflect equitably such
changes in circumstances, including modifications of performance targets and
changes in the length of performance periods relating to the vesting of the
Restricted Stock Unit or any restrictions on Unit Shares.  Notwithstanding the foregoing, no adjustment
shall be made which is prohibited by Section 13 of the Plan.

 

(c)                                  Modifications To Comply With Section 409A.  To the extent applicable, this Agreement
(including any related Notice of Restricted Stock Award) shall be interpreted
in accordance with Code Section 409A and Department of Treasury
regulations and other interpretive guidance issued thereunder, including
without limitation any such regulations or guidance that may be issued after
the date on which a Restricted Stock Unit was awarded.  Without limiting the authority of the
Committee under subsection 4(b) above to make modifications to the
Restricted Stock Unit by reason of changes in law or circumstances that would
result in any substantial dilution or enlargement of the rights granted to, or
available for, Grantee in respect of a Restricted Stock Unit or otherwise as a
participant in the Plan or which otherwise warrants equitable adjustment to the
terms and conditions of the Restricted Stock Unit because such event interferes
with the operation of the Plan, and notwithstanding any provision of this
Agreement to the contrary, in the event that the Committee or an authorized
officer of the Company determines that any amounts will be immediately taxable
to the Participant under Section 409A of the Code and related Department
of Treasury guidance (or subject the Grantee to a penalty tax) in connection
with the grant or vesting of the Restricted Stock Unit or any other provision
of the Restricted Stock Unit Award Notice or this Agreement or the Plan, the
Company may (a) adopt such amendments to the Restricted Stock Unit,
including amendments to this 

 

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Agreement
(having prospective or retroactive effect), that the Committee or authorized
officer determines to be necessary or appropriate to preserve the intended tax
treatment of the Restricted Stock Unit and/or (b) take such other actions
as the Committee or authorized officer determines to be necessary or
appropriate to comply with the requirements of Section 409A of the Code
and related Department of Treasury guidance, including such Department of
Treasury guidance and other interpretive materials as may be issued after the
date on which such Restricted Stock Unit was awarded, but only to the extent
permitted under Code Section 409A and regulations and guidance thereunder.

 

SECTION 5.   MISCELLANEOUS
PROVISIONS.

 

(a)                                  Rights as a Shareholder. 
Neither the Grantee nor the Grantee’s personal representative or
permitted Transferee shall have any rights as a shareholder with respect to any
Unit Shares until the Grantee or his or her personal representative or
permitted Transferee becomes entitled to receive such Unit Shares pursuant to
this Agreement, the Plan and the applicable Restricted Stock Unit Award Notice,
and any such right shall also be subject to subsections 2(g) and 3(c) above.

 

(b)                                 Tenure.  Nothing in
the Restricted Stock Unit Award Notice, this Agreement or in the Plan shall
confer upon the Grantee any right to continue in the Company’s Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
the Grantee) or of the Grantee, which rights are hereby expressly reserved by
each, to terminate his or her Service at any time and for any reason, with or
without cause.

 

(c)                                  Notification.  Any
notification required by the terms of this Agreement shall be given in writing
and shall be deemed effective upon personal delivery to the President,
Treasurer, General Counsel, Secretary or any Assistant Secretary of the Company
or five Business Days upon deposit with the United States Postal Service, by
registered or certified mail, with postage and fees prepaid addressed to the
Company.  A notice shall be addressed to
the Company at its principal executive office, marked to the attention of the
Corporate Secretary, and to the Grantee at the address that he or she most
recently provided to the Company.

 

(d)                                 Entire Agreement. 
This Agreement, any related Restricted Stock Unit Award Notice and the
Plan constitute the entire contract between the parties hereto with regard to
the subject matter hereof and supersede any other agreements, representations
or understandings (whether oral or written and whether express or implied)
which relate to the subject matter hereof.

 

(e)                                  Waiver.  No waiver of
any breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition whether of like or different nature.

 

(f)                                    Successors and Assigns. 
The provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Company and its successors and assigns and upon the Grantee,
the Grantee’s personal representatives, heirs, legatees and other permitted
Transferees, assigns and the legal representatives, heirs and legatees of the
Grantee’s estate, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to be joined herein and be bound by
the terms hereof.

 

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(g)                                 Choice of Law.  This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware, as such laws are applied to contracts entered into and
performed in such State.

 

SECTION 6.   DEFINITIONS.

 

(a)                                  “Code” shall mean the Internal Revenue Code of
1986, as amended and as the same may be amended from time to time, and the regulations promulgated thereunder.

 

(b)                                 “Company” shall mean Magellan Health Services, Inc., a
Delaware corporation, and any successor thereto.

 

(c)                                  “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended and as the same may be amended from time to time, and any
successor statute, and the rules and regulations promulgated thereunder.

 

(d)                                 “Securities Act” shall mean the Securities Act of 1933, as
amended and as the same may be amended from time to time, and any successor
statute, and the rules and regulations promulgated thereunder.

 

(e)                                  “Share” shall mean a
share of Ordinary Common Stock, $0.01 par value per share, of the Company, as
the same may generally be exchanged for or changed into any other share of
capital stock or other security of the Company or any other company in
connection with a transaction referred to in Section 4 above (and in the
event of any such successive exchange or change, any security resulting from
any such successive exchange or change).

 

(f)                                    “Transfer” shall mean, with respect to any Restricted Stock
Unit or any Unit Share, any sale, assignment, transfer, alienation, conveyance,
gift, bequest by will or under intestacy laws, pledge, lien encumbrance or
other disposition, with or without consideration, of all or part of such
Restricted Stock Unit or any Unit Share, or of any beneficial interest therein,
now or hereafter owned by the Grantee, including by execution, attachments,
levy or similar process

 

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In consideration of the
foregoing and intending to be legally bound hereby, the Company and the Grantee
named below have executed this Agreement as of the date first above written.

 

	
   

  	
   

  	
  MAGELLAN HEALTH SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: René Lerer

  
	
   

  	
   

  	
  Title: President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  GRANTEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security Number:

  	
   

  	
   

  	
   

  
				

 

11Exhibit 10.4

 

MAGELLAN HEALTH SERVICES, INC.

 

2008 MANAGEMENT INCENTIVE PLAN

 

NOTICE OF RESTRICTED STOCK UNIT AWARD

 

(REFERENCE NO. 2008-MARCH 4, 2009)

 

	
  Name of Grantee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  March 4, 2009

  
	
   

  	
   

  	
   

  
	
  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 (i) the portion of this Award which vests on
  the 1st anniversary of the Date of Grant shall not
  vest unless the Company has earnings per share (“EPS”) for the year ended
  December 31, 2009 of at least $1.90 (“2009 EPS Target”); if the Company
  does not achieve the 2009 EPS Target in 2009, this tranche will vest if the
  Company achieves $1.90 of EPS in any subsequent calendar year up to and
  including calendar year 2018, (ii) the portion of this Award which vests
  on the 2nd anniversary of the Date of Grant shall not
  vest unless the Company has earnings per share for the year ended
  December 31, 2010 of at least $2.00 per share (the “2010 EPS Target”);
  if the Company does not achieve the 2010 EPS Target in 2010, this tranche
  will vest if the Company achieves $2.00 of EPS in any subsequent calendar
  year up to and including calendar year 2018 and (iii) the portion of
  this Award which vests on the 3rd anniversary of the
  Date of Grant shall not vest unless the Company has earnings per share for
  the year ended December 31, 2011 of at least $2.10 per share (the 2011
  “EPS Target”); if the Company does not achieve the 2011 EPS Target in 2011,
  this tranche will vest if the Company achieves $2.10 of EPS in any subsequent
  calendar year up to and including calendar year 2018.

  

 

	
  Vesting Date

  	
   

  	
  Vesting Percentage

  
	
   

  	
   

  	
   

  
	
  1st
  anniversary of the Date of Grant

  	
   

  	
  33.4%

  
	
   

  	
   

  	
   

  
	
  2nd
  anniversary of the Date of Grant

  	
   

  	
  66.7%

  (i.e., an additional 33.3%)

  
	
   

  	
   

  	
   

  
	
  3rd
  anniversary of the Date of Grant

  	
   

  	
  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, 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

  

 

2

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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 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

  

 

3

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  
	
  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.
2008 Management Incentive Plan (“Plan”) and the Restricted Stock Unit Agreement,
reference number 2008-March 4, 2009 (“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.

 

4

 

	
   

  	
  MAGELLAN HEALTH
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: René Lerer

  
	
   

  	
  Title: President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  GRANTEE:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
			

 

5

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