Document:

Exhibit 10.2

 

MAGELLAN HEALTH SERVICES,
INC.

 

2008 MANAGEMENT INCENTIVE PLAN

 

NOTICE OF STOCK OPTION GRANT

 

(REFERENCE NO. 2008-MARCH 3, 2010)

 

	
  Name
  of Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Shares
  Subject to Option:

  	
   

  	
          
  shares of Ordinary Common Stock of Magellan Health Services, Inc. (the
  “Shares”)

  
	
   

  	
   

  	
   

  
	
  Type
  of Option:

  	
   

  	
  x  Nonqualified

  	
  o Incentive

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date
  of Grant:

  	
   

  	
  March 3, 2010

  
	
   

  	
   

  	
   

  
	
  Date
  Exercisable and Other Conditions of Exercise:

  	
   

  	
  This option shall be
  exercisable, in whole or in part, until its Expiration Date, only to the
  extent it is vested and while the Optionee’s Service with the Company, a
  Subsidiary or a Parent company continues. 
  In addition, this option, to the extent vested on the date of
  termination of the Optionee’s Service, shall be exercisable for the period
  after the termination of the Optionee’s Service provided by Optionee’s Option
  Agreement, unless a different period is specified in Optionee’s employment
  agreement with the Company, a Subsidiary or a parent company, in which case
  this option shall be exercisable for such different period after termination
  of Optionee’s Service (but in no event on or after the Expiration Date).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In addition, this
  option may be exercised, to the extent vested, only when exercise is
  otherwise permitted in accordance with the terms of the 2008 Management
  Incentive Plan and the Option Agreement to which this notice of grant relates
  (including the provisions thereof applicable in the event of Injurious
  Conduct).

  
	
   

  	
   

  	
   

  
	
  Vesting:

  	
   

  	
  This option shall vest
  with respect to the Shares subject hereto as to one-third of such Shares on
  each of the first, second and third anniversaries of the Date of Grant,
  provided that in each case the Optionee’s Service has not terminated prior to
  such date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding the
  preceding paragraph, this Option shall earlier vest immediately with respect
  to 100% of the 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 Optionee’s employment agreement, if any, in effect at the time of the
  Change of Control) following occurrence of the Change in Control, Optionee’s
  Service with the Company shall be terminated by the Company without Cause (as
  defined below) or by the Optionee with Good Reason (as defined below),
  provided that the Optionee’s Service with the Company has not previously
  terminated after the date hereof for any other reason, and upon such
  accelerated vesting this Option shall continue to be exercisable for the same
  period after such termination of Optionee’s Service as provided above. For
  purposes of this Option, the terms “Change in Control,” “Cause” and “Good
  Reason” shall have the same meanings as provided in any employment agreement
  between the Company and Optionee 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 

  

 

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  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.

  	
  Optionee is convicted
  of (or pleads guilty or nolo contendere to) a felony or a crime involving
  moral turpitude;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  b.

  	
  Optionee’s commission
  of an act of fraud or dishonesty involving his or her duties on behalf of the
  Company;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  c.

  	
  Optionee’s willful
  failure or refusal to faithfully and diligently perform duties lawfully
  assigned to Optionee 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 Optionee; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  d.

  	
  Optionee’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 reduction in
  Optionee’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 

  

 

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  shall be considered of
  comparable rank) or a reduction in Optionee’s target bonus opportunity for
  the year in which or any year after the year in which the Change of Control
  occurs from Optionee’s target bonus opportunity for the year in which the
  Change in Control occurs (if any) as established under any employment
  agreement Optionee has with the Company or any bonus plan of the Company
  applicable to Optionee (or, if no such target bonus opportunity has yet been
  established for Optionee under a bonus plan applicable to Optionee for the
  year in which the Change of Control has occurred, the target bonus
  opportunity so established for Optionee 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 Optionee of at least one and one half percent (1.5%) of
  Optionee’s then current base salary, provided that Optionee 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 Optionee’s position, duties or responsibilities as in
  effect at the time of a Change in Control or the assignment to Optionee 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
  Optionee; 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 Optionee’s principal location
  for the performance of his or her services to the Company;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  provided
  that, in each such case, Optionee 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 Optionee gives notice thereof to the Company, and Optionee terminates
  Service within 18 months after such event or condition has arisen.

  
							

 

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  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.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other
  Terms (if any):

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
  March 3, 2020

  

 

5

 

By signing your name below, you accept this award and acknowledge and
agree that this award is granted under and governed by the terms and conditions
of the Magellan Health Services, Inc. 2008 Management Incentive Plan and
the related Stock Option Agreement, reference number 2008-March3, 2010, both of
which are hereby made a part of this document.

 

	
   

  	
   

  	
  MAGELLAN
  HEALTH SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:
  René Lerer

  
	
   

  	
   

  	
  Title:
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  OPTIONEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  

 

6Exhibit
10.3

 

MAGELLAN HEALTH SERVICES, INC.

 

2008 MANAGEMENT INCENTIVE PLAN

 

RESTRICTED STOCK UNIT AGREEMENT

 

REFERENCE NUMBER:  2008- MARCH 3,
2010 (Name)

As of  MARCH 3, 2010

 

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 

 

2

 

(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 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 

 

3

 

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 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”), 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)

 

4

 

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

 

5

 

·                  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 

 

6

 

Award and the rights and privileges conferred by the Restricted Stock
Unit Award shall not be sold or otherwise Transferred.

 

(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 

 

7

 

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 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 

 

8

 

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
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.

 

9

 

(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.

 

(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

 

10

 

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:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

11

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