Document:

Exhibit
10.36

 

INVESTMENT
TECHNOLOGY GROUP, INC.

FORM OF NONQUALIFIED STOCK
OPTION GRANT AGREEMENT

 

THIS
GRANT AGREEMENT, dated as of                  
(the “Date of Grant”), is entered into by and between Investment
Technology Group, Inc. (the “Company”), a Delaware corporation, and
Robert C. Gasser, an employee of the Company (the “Employee”).

 

WHEREAS, the parties entered into an Employment Agreement on                  
(the “Employment Agreement”).

 

WHEREAS, pursuant to Section 4.03(c) of
the Employment Agreement, the Employee is entitled to receive a non-qualified
stock option to purchase shares of the Company’s common stock (the “Common
Stock”).

 

WHEREAS, the Company desires
to grant the Employee this option under the Investment Technology Group, Inc.
2007 Omnibus Equity Compensation Plan (the “Plan”), in order to satisfy its obligation under the
Employment Agreement.  Capitalized
terms used herein and not defined herein shall have the meanings set forth in
the Plan.  In the event of any conflict
between this Grant Agreement and the Plan, the Plan shall control.

 

WHEREAS, the Employee agrees
that this option grant satisfies the Company’s obligation under the Employment
Agreement.

 

NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein, and for
other good and valuable consideration, the parties hereto agree as follows:

 

1.             Grant of the Option.  Subject to the terms and conditions set forth
in this Grant Agreement and the Plan, the Employee is hereby awarded a
nonqualified stock option to purchase                
shares of Company Stock for an Exercise Price of $           
per share (the “Option”).  This
Option is intended to be a nonqualified stock option and shall not be treated
as an incentive stock option under the provisions of the Code.

 

2.             Grant Subject to Plan Provisions.  This Option is awarded pursuant to the Plan,
the terms of which are incorporated herein by reference, and in all respects shall
be interpreted in accordance with the Plan. 
The Plan and the Plan prospectus are available at http://assetlib.itginc.com/stellent/groups/public/documents/itginc/047794.pdf  and http://assetlib.itginc.com/stellent/groups/public/documents/itginc/047867.pdf,
respectively; provided that paper copies of the Plan and the Plan prospectus
are available upon request by contacting the Legal Department of the Company at
ITG_Legal or 212.444.6378.  This Option
is subject to interpretations, regulations and determinations concerning the
Plan established from time to time by the Committee in accordance with the
provisions of the Plan, including, but not limited to, provisions pertaining to
(a) the registration, qualification or listing of the shares issued under
the Plan, (b) changes in capitalization, (c) requirements of applicable
law and (d) all other Plan provisions. 
The Committee has the authority to interpret and construe this Grant
Agreement

 

 

pursuant to the terms of the Plan, and its decisions are conclusive as
to any questions arising hereunder.

 

3.             Vesting of the Option.

 

(a)           Subject to Section 4 below and
the other terms and conditions of this Grant Agreement and the Plan, this
Option shall vest and become exercisable on the following dates, if the
Employee has remained continuously employed by the Employer from the Date of
Grant through the vesting date; provided, however, that the
Option shall vest and become immediately exercisable in full (i) immediately
prior to the effectiveness of a Change in Control if the Employee is employed
by the Employer as of such date or (ii) upon the Employee’s Termination of
Service (as defined below) due to the Employee’s death or Permanent Disability
(as defined in the Employment Agreement):

 

	
  Date

  	
   

  	
  Shares for Which the

  Option is Exercisable

  	
   

  
	
  First
  Anniversary of Date of Grant

  	
   

  	
  33 1/3

  	
  %

  
	
  Second
  Anniversary of Date of Grant

  	
   

  	
  33 1/3

  	
  %

  
	
  Third
  Anniversary of Date of Grant

  	
   

  	
  33 1/3

  	
  %

  

 

The
exercisability of the Option is cumulative, but shall not exceed 100% of the
shares subject to the Option.  If the
foregoing schedule would produce fractional shares, the number of shares for
which the Option becomes exercisable shall be rounded down to the nearest whole
share.

 

(b)           In the event of the Employee’s
Termination of Service for Good Reason (as defined in the Employment Agreement)
or not for Cause (as defined in the Employment Agreement) prior to a Change in
Control (as defined in the Employment Agreement) and Employee executes (and
does not revoke) a Release (as defined in the Employment Agreement), (i) the
vested portion of the Option as of the termination date shall remain
exercisable until the earlier of the first anniversary of the termination date
or the expiration of the Option term and (ii) the unvested portion of the
Option as of the termination date shall continue to vest as if Employee had
remained employed by the Employer through the first anniversary of the
termination date and any portion of the Option that vests during the one-year
period following the termination date shall remain exercisable until the
earlier of the one-year period following the applicable vesting date or the
expiration of the Option term.

 

(d)           Unless otherwise provided by the
Committee, all amounts receivable in connection with any adjustments to the Company
Stock under Section 5(d) of the 2007 Plan shall be subject to the vesting
schedule in this Section 3.

 

4.             Termination of Service; Forfeiture of Unvested Option.  In the event of the Employee’s Termination of
Service for any reason other than those outlined in Section 3 above 

 

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prior to the date the Option otherwise becomes vested in accordance
with Section 3 above, the Option shall immediately be forfeited by the
Employee.

 

“Termination of
Service” means the Employee ceases to be employed by the Employer.  If the Employee is employed by a Subsidiary of
the Company, the Employee shall also be deemed to incur a Termination of
Service if such Subsidiary ceases to be a Subsidiary of the Company and the
Employee does not immediately thereafter become employed by the Company or
another Subsidiary of the Company. 
Temporary absences from employment because of illness, vacation or leave
of absence and transfers among Employers shall not be considered a Termination
of Service.

 

5.             Term.  The
Option (to the extent not earlier exercised or forfeited in accordance with Section 4
above) shall expire at 5:00 p.m., Eastern time, on the earliest of (a) the
fifth anniversary of the Date of Grant, (b) the date that is one year
following the date of the Employee’s Termination of Service due to the Employee’s
death or Permanent Disability (as defined in the Employment Agreement), (c) the
dates set forth in Section 3(b) above due to the Employee’s
Termination of Service for Good Reason (as defined in the Employment Agreement)
or not for Cause (as defined in the Employment Agreement) prior to a Change in
Control (as defined in the Employment Agreement) in accordance with Section 3(b) above
or (d) the date that is sixty (60) days after the date of the Employee’s
Termination of Service for any other reason. Notwithstanding any other
provision of this Grant Agreement to the contrary, in the event of a Change in
Control at a time when the Employee is employed by the Employer, the Option shall
be exercisable until 5:00 p.m., Eastern time, on the fifth anniversary of
the Date of Grant, without regard to whether the Employee continues to be employed
by the Employer after the Change in Control.

 

6.             Method of Exercise.  To the extent the Option is exercisable under
the provisions of Sections 3 and 4 hereof, the Employee may exercise the
Option, in whole or in part, at such time as the Option is exercisable and
prior to its expiration by giving written notice of exercise of the Option in
accordance with the Investment Technology Group, Inc. Stock Option Overview
(the “Exercise Overview”).  Such Exercise
Overview is available at http://assetlib.itginc.com/stellent/groups/public/documents/itginc/045582.pdf,
or upon request by contacting the Legal Department of the Company at ITG_Legal
or 212.444.6378.

 

7.             Payment of Exercise Price.  The Exercise Price of the shares of Company
Stock purchased by the Employee upon exercise of the Option (the “Option
Shares”) shall be paid in full to the Company at the time of such exercise in
accordance with the procedures set forth in the Exercise Overview, or by such
other method as the Committee may approve; provided, however, that Company
Stock held for less than six months may be surrendered in payment or partial
payment of the Exercise Price only with the approval of the Committee.

 

8.             Nontransferability.  Neither the Employee nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey the Option, which Option
is, and all rights under this Grant Agreement are, expressly declared to be
unassignable and nontransferable, other than by will or under the 

 

3

 

laws of descent and distribution (or pursuant to a beneficiary designation
authorized by the Committee).

 

9.             No Right to Employer Assets.  Neither the Employee nor any other person
shall acquire by reason of the Option or the Option Shares any right in or
title to any assets, funds or property of the Employer whatsoever including,
without limiting the generality of the foregoing, any specific funds or assets
which the Employer, in its sole discretion, may set aside in anticipation of a
liability.  No trust shall be created in
connection with or by the granting of the Option or the purchase of any Option
Shares, and any benefits which become payable hereunder shall be paid from the
general assets of the Employer.  The Employee
shall have only a contractual right to the amounts, if any, payable pursuant to
this Grant Agreement, unsecured by any asset of the Company or any of its
affiliates.

 

10.           Limitations.  Nothing herein shall limit the Company’s
right to issue Company Stock, or stock options or other rights to purchase Company
Stock subject to vesting, expiration and other terms and conditions deemed
appropriate by the Company and its affiliates. 
Nothing expressed or implied herein is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto, any right,
remedy or claim under or by reason of this Grant Agreement or of any term,
covenant or condition hereof.

 

11.           Withholding.  The Employee shall pay to the Employer or
make arrangements satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law to be withheld at any
time with respect to the issuance of Option Shares or the payment of money
pursuant to the exercise of the Option, and the Employer shall, to the extent
permitted or required by law, have the right to deduct from any payment of any
kind otherwise due to the Employee, federal, state and local taxes of any kind
required by law to be withheld.  To the
extent permitted by the Committee, the Employee may elect to have the Employer
withhold Company Stock to pay any applicable withholding taxes resulting from
the exercise of the Option and the issuance of Option Shares, in accordance
with any rules or regulations of the Committee then in effect.

 

12.           Expenses of Issuance of Option
Shares.  The issuance of stock certificates
hereunder shall be without charge to the Employee.  The Company shall pay, and indemnify the
Employee from and against any issuance, stamp or documentary taxes (other than
transfer taxes) or charges imposed by any governmental body, agency or official
(other than income taxes) by reason of the issuance of the Option Shares.

 

13.           Terms are Binding.  The terms of this Grant Agreement shall be
binding upon the executors, administrators, heirs, successors, transferees and
assignees of the Employee and the Company.

 

14.           Compliance with Law.  The exercise of the Option and the
obligations of the Company to issue or transfer Option Shares hereunder shall
be subject to the terms, conditions and restrictions as set forth in the
governing instruments of the Company, Company policies, applicable federal and
state securities laws or any other applicable laws or regulations, and 

 

4

 

approvals by any governmental or regulatory agency as may be
required.  In no event shall Employee be
permitted to exercise the Option if the issuance of Option Shares at that time
would violate any law or regulation.  By
signing this Grant Agreement, the Employee agrees not to sell any Option Shares
at a time when applicable laws or the Company policies prohibit a sale.

 

15.           References.  References herein to rights and obligations
of the Employee shall apply, where appropriate, to the Employee’s legal
representative or estate without regard to whether specific reference to such
legal representative or estate is contained in a particular provision of this Grant
Agreement.

 

16.           Notices.  Any notice required or permitted to be given
under this Grant Agreement shall be in writing and shall be deemed to have been
given when delivered personally or by courier, or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned at the address indicated below or to such changed address
as such party may subsequently, by similar process, give notice of:

 

If to the Company:

 

Investment Technology
Group, Inc.

380 Madison Avenue

New York, NY 10017

Attention: General
Counsel

 

If to the Employee:

 

At the Employee’s most
recent address shown on the Employer’s corporate records, or at any other
address at which the Employee may specify in a notice delivered to the Company
in the manner set forth herein.

 

17.           No Right to Continued Employment.  This Option shall not confer upon the
Employee any right to continue in the employ of the Employer nor shall this Option
interfere with the right of the Employer to terminate the Employee’s employment
at any time.

 

18.           Costs.  In any action at law or in equity to enforce
any of the provisions or rights under this Grant Agreement, including any
arbitration proceedings to enforce such provisions or rights, the unsuccessful
party to such litigation or arbitration, as determined by the court in a final
judgment or decree, or by the panel of arbitrators in its award, shall pay the
successful party or parties all costs, expenses and reasonable attorneys’ fees
incurred by the successful party or parties (including without limitation
costs, expenses and fees on any appeals), and if the successful party recovers
judgment in any such action or proceeding such costs, expenses and attorneys’
fees shall be included as part of the judgment.

 

19.           Further Assurances.  The Employee agrees to perform all acts and
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this 

 

5

 

Grant Agreement, including but not limited to all acts and documents
related to compliance with federal and/or state securities laws.

 

20.           Counterparts.  For convenience, this Grant Agreement may be
executed in any number of identical counterparts, each of which shall be deemed
a complete original in itself and may be introduced in evidence or used for any
other purposes without the production of any other counterparts.

 

21.           Governing Law.  This Grant Agreement shall be construed and
enforced in accordance with Section 19(h) of the Plan.

 

22.           Entire Agreement.  This Grant Agreement, together with the Plan,
sets forth the entire agreement between the parties with reference to the
subject matter hereof, and there are no agreements, understandings, warranties,
or representations, written, express, or implied, between them with respect to
the Option other than as set forth herein or therein, all prior agreements,
promises, representations and understandings relative thereto being herein
merged.

 

23.           Amendment; Waiver.  This Grant Agreement may be amended,
modified, superseded, canceled, renewed or extended and the terms or covenants
hereof may be waived only by a written instrument executed by the parties
hereto or, in the case of a waiver, by the party waiving compliance.  Any such written instrument must be approved
by the Committee to be effective as against the Company.  The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect the
right at a later time to enforce the same. 
No waiver by any party of the breach of any term or provision contained
in this Grant Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Grant Agreement.

 

24.           Severability.  Any provision of this Grant Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.

 

[SIGNATURE PAGE FOLLOWS]

 

6

 

IN WITNESS WHEREOF, the
undersigned have executed this Grant Agreement as of the date first above
written.

 

 

	
   

  	
   

  	
  INVESTMENT
  TECHNOLOGY GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Maureen
  O’Hara

  
	
   

  	
   

  	
  Title:

  	
   Chairman
  of the Board of Directors

  
					

 

 

I hereby accept
the Option described in this Grant Agreement, and I agree to be bound by the
terms of the Plan and this Grant Agreement. 
I hereby further agree that all the decisions and determinations of the
Committee shall be final and binding.

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Robert C.
  Gasser

  

 

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Exhibit 10.39    
    

 
 

EMPLOYMENT AGREEMENT    
    

        THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and between R. Caskie Lewis-Clapper, an
individual ("Employee"), and, Magellan Health Services, Inc. on behalf of itself and its subsidiaries and affiliates (collectively referred to herein as "Employer"). 

        WHEREAS, Employer desires to continue to obtain the services of Employee and Employee desires to continue to render services to Employer;
and 

        WHEREAS, Employer and Employee desire to set forth the terms and conditions of Employee's employment with Employer under this Agreement; 

        NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual covenants and agreements contained in this Agreement, the
parties agree as follows: 

 
 

STATEMENT OF AGREEMENT

        1.    Employment.    Employer agrees to employ Employee, and Employee accepts such employment
in accordance with the terms of this Agreement, for a term of one year commencing on August 2, 2004 and, unless terminated earlier in accordance with the terms of this Agreement, ending on
August 1, 2005. Thereafter, this Agreement shall automatically renew for twelve (12) month periods, unless sooner terminated as provided herein. If either party desires not to renew the
Agreement, they must provide
the other party with written notice of their intent not to renew the Agreement at least fifteen (15) days prior to the next renewal date. Employer's notice of intent not to renew the Agreement
shall be deemed to be a termination without cause and the provisions of Section 6(c) shall apply. 

        2.    Position and Duties of Employee.    Employee will serve as Chief Human Resources Officer
of Employer. Employee agrees to serve in such position, or in such other positions as Employer determines from time to time, and to perform the duties that Employer may assign from time to time to
Employee, at the same or greater base salary level and a similar location, until the expiration of the term or such time as Employee's employment with Employer is terminated pursuant to this
Agreement. 

        3.    Time Devoted.    Employee will devote his or her full business time and energy to the
business affairs and interests of Employer, and will use his or her best efforts and abilities to promote Employer's interests. Employee agrees that he or she will diligently endeavor to perform
services contemplated by this Agreement in a manner consistent with his or her position and in accordance with the policies established by the Employer. 

        4.    Compensation.    

        (a)    Base Salary.    Employer will pay Employee a base salary in the amount of Two Hundred and Fifty Thousand
dollars per year, which amount will be paid in semi-monthly intervals less appropriate withholdings for federal and state taxes and other deductions authorized by 

 

Employee.
Such salary will be subject to review and adjustment by Employer not less than annually. 

        (b)    Benefits.    Employee will be eligible to participate in Employer's Benefit Plans commensurate with his or her
position. Employee will receive separate information detailing the terms of such Benefit Plans and the terms of those plans will control. Employee also will be eligible to participate in any annual
incentive plan and stock option plan applicable to Employee by their terms respectively. During the term of this Agreement, Employee will be entitled to such other benefits of employment with Employer
as are now or may later be in effect for salaried employees of Employer, and also will be eligible to participate in other benefits adopted for employees at his or her level. 

        5.    Expenses.    During the term of this Agreement, Employer will reimburse Employee
promptly for all reasonable travel, entertainment, parking, business meetings and similar expenditures in pursuance and furtherance of Employer's business upon receipt of reasonably supporting
documentation as required by Employer's policies applicable to its employees generally. 

        6.    Termination.    

        (a)    Termination Due to Resignation.    Employee may resign his or her employment at any time by giving
30 days written notice of resignation to Employer. Except as otherwise set forth in this Agreement, Employee's employment, and Employee's right to receive compensation and benefits from
Employer, will terminate upon the effective date of Employee's termination. 

        If
Employee resigns pursuant to this Section 6(a), Employer's only remaining financial obligation to Employee under this Agreement will be to pay: (i) any earned but unpaid
Base Salary and accrued Paid Time Off through the effective date of Employee's termination; (ii) reimbursement of expenses incurred by Employee through the effective date of termination which
are reimbursable pursuant to this Agreement; and (iii) the Employee's vested portion of any Magellan deferred compensation or other benefit plan. 

        (b)    Termination with Cause.    Except as otherwise set forth in this Agreement, Employee's employment, and
Employee's right to receive compensation and benefits from Employer, will be terminated for cause at the discretion of Employer under the following circumstances: 

	(i)
	Employee's
commission of an act of fraud or dishonesty involving his or her duties on behalf of Employer;

	(ii)
	Employee's
failure or refusal to faithfully and diligently perform duties assigned to Employee or other breach of any material term under this Agreement;

	(iii)
	Employee's
failure or refusal to abide by Employer's policies, rules, procedures or directives; or

	(iv)
	Employee's
conviction of a felony or a misdemeanor involving moral turpitude. 

2

 

        If
Employee is terminated pursuant to this Section 6(b), Employer's only remaining financial obligation to Employee under this Agreement will be to pay: (i) any earned but
unpaid Base Salary and accrued Paid Time Off through the date of Employee's termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are
reimbursable pursuant to this Agreement; and (iii) the Employee's vested portion of any Magellan deferred compensation or other benefit plan. 

        For
the events described in Sections 6(b)(ii) and (iii), Employer will give Employee written notice of such deficiency and a reasonable opportunity to cure such situation, but in
no event more than thirty days. 

        (c)    Termination Without Cause.    Employer may terminate this Agreement without cause at any time. "Without cause"
termination shall include, but not be limited to: (i) Employer's notice to Employee of its intent not to renew this Agreement in accordance with the provisions of Section 1 hereof;
(ii) Employer's notice to Employee that his or her position will be relocated to an office which is greater than 35 miles from Employee's prior office location; and (iii) Employer's
reduction of Employee's base salary to less than the base salary identified in Section 4(a) of this Agreement. If Employer terminates this Agreement without cause, Employer shall continue to
pay Employee the compensation provided for in Section 4(a) of this Agreement for a period of time equal to twelve months. Such pay continuation is contingent upon Employee executing Employer's
standard severance agreement, which incorporates a general release, at the time of termination. In addition, Employee will receive (i) any earned but unpaid Base Salary and accrued Paid Time
Off through the date of Employee's termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant to this Agreement; and
(iii) the Employee's vested portion of any Magellan Health Services retirement, deferred compensation or other benefit plan, including but not limited to, any stock option or restricted stock
grant plans, in accordance with the terms of those plans. If Employee participates in any bonus plan(s), including but not limited to, any long term bonus plan(s), Employer may pay Employee, on a
pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full calendar year. The pro-ration will be determined by the
fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by 12 months. In determining whether a pro-rata bonus
shall be paid to Employee, the Employer may consider factors that include but are not limited to (i) the Employee's target bonus (percentage of base salary), (ii) the Company's financial
performance and (iii) the Employee's achievement of his or her specific performance objectives. At the time of termination, Employer shall determine the Employee's bonus amount, if any.
Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial targets established by the Company's Board of Directors. Payment of any
bonus shall be made at the time of the annual bonus payout for all
employees. COBRA coverage may be elected to continue health, dental, and vision insurance during the Severance Period and beyond. If COBRA coverage is elected, Employee will pay only the employee
contribution rate for the health insurance portion of the COBRA coverage during the Severance Period. Dental and vision coverage under COBRA will be billed at the full COBRA rate. 

3

 

        (d)    Automatic Termination.    This Agreement will terminate automatically upon the death or permanent disability of
Employee. Employee will be deemed to be "Disabled" or to suffer from a "Disability" within the meaning of this Agreement if, because of a physical or mental impairment, Employee has been unable to
perform the essential functions of his or her position, with or without reasonable accommodation, for a period of 180 consecutive days, or if Employee can reasonably be expected to be unable to
perform the essential functions of his or her position for such period. If Employee is terminated pursuant to this Section 6(d), Employee will receive (i) any earned but unpaid Base
Salary and accrued Paid Time Off through the date of Employee's termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant
to this Agreement; and (iii) the Employee's vested portion of any Magellan Health Services retirement, deferred compensation or other benefit plan, including but not limited to, any stock
option or restricted stock grant plans, in accordance with the terms of those plans. If Employee participates in any bonus plan(s), including but not limited to, any long term bonus plan(s), Employer
may pay Employee, on a pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full calendar year. The pro-ration will be
determined by the fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by 12 months. In determining whether a
pro-rata bonus shall be paid to Employee, the Employer may consider factors that include but are not limited to (i) the Employee's target bonus (percentage of base salary);
(ii) the Company's financial performance; and (iii) the Employee's achievement of his or her specific performance objectives. At the time of termination, Employer shall determine the
Employee's bonus amount, if any. Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial targets established by the Company's Board
of Directors. Payment of any bonus shall be made at the time of the annual bonus payout for all employees. 

        (e)    Effect of Termination.    Except as otherwise provided for in this Section 6, upon termination of this
Agreement, all rights and obligations under this Agreement will cease except for the rights and obligations under Sections 4 and 5 to the extent Employee has not been compensated or reimbursed
for services performed prior to termination (the amount of compensation to be prorated for the portion of the pay period prior to termination); the rights and obligations under Sections 7, 8
and 9; and all procedural and remedial provisions of this Agreement. 

        7.    Protection of Confidential
Information/Non-Competition/Non-Solicitation.    

        Employee
covenants and agrees as follows: 

        (a)(i)
Confidential Information: During Employer's employment of Employee and for a period of one year following the termination of Employee's employment for any reason, Employee will
not use or disclose, directly or indirectly, for any reason whatsoever or in any way, other than at the direction of Employer during the course of Employee's employment or after receipt of the prior
written consent of Employer, any confidential information of Employer or its controlled subsidiaries or affiliates, that comes into his or her knowledge during his or her employment by Employer (the
"Confidential Information" as hereinafter defined). The obligation not to use or disclose any Confidential Information will not apply to any Confidential Information that is or becomes public
knowledge through no fault of Employee, and that may be utilized by the public 

4

 

without
any direct or indirect obligation to Employer, but the termination of the obligation for non-use or nondisclosure by reason of such information becoming public will extend only
from the date such information becomes public knowledge. The above will be without prejudice to any additional rights or remedies of Employer under any state or federal law protecting trade secrets or
other information. 

        (a)(ii)    Trade Secrets.    Employee shall hold in confidence all Trade Secrets of Employer, its direct and indirect
subsidiaries, and/or its customers that came into his or her knowledge during his or her employment by Employer and shall not disclose, publish or make use of at any time after the date hereof such
Trade Secrets, other than at the direction of Employer, for as long as the information remains a Trade Secret. 

        (a)(iii)    For purposes of this Agreement, the following definitions apply:    

"Confidential
Information" means any data or information, other than Trade Secrets, that is valuable to Employer and not generally known to the public or to competitors of Employer. It is understood
that the term "Confidential Information" does not mean and shall not include information which: 

	(a)
	is
or subsequently becomes publicly available without the breach of any obligation owed to the Employer;

	(b)
	is
disclosed with the prior written approval of the Employer; or

	(c)
	is
obligated to be produced under order of a court of competent jurisdiction or a valid administrative, congressional, or other subpoena, civil investigative demand or similar
process; provided, however, that upon issuance of any such order, subpoena, demand or other process, the Employee shall promptly notify the Employer and
shall provide the Employer with an opportunity (if then available) to contest, at the Employer's expense, the propriety of such order or subpoena (or to arrange for appropriate safeguards against any
further disclosure by the court or administrative or congressional body seeking to compel disclosure of such Confidential Information). 

        "Trade
Secret" means information including, but not limited to, any technical or non-technical data, formula, pattern, compilation, program, device, method, technique,
drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives
economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use;
and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 

        (a)(iv)  Interpretation. The restrictions stated in paragraphs 7(a)(i) and 7(a)(ii) are in addition to and not in lieu of
protections afforded to trade secrets and confidential information under applicable state law. Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise limiting
Employer's right under applicable state law to protect its trade secrets and confidential information. 

5

 

        (b)    Non-Competition.    

	(i)
	Employee
covenants and agrees that during the term of his or her employment with Employer and for a period of one year immediately following the termination of said
employment for any reason, he or she will not, on his or her own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, engage
or attempt to engage in the business of providing or selling services in the United States that are services offered by Employer at the time of the termination of this Agreement, unless waived in
writing by Employer in its sole discretion. Employee recognizes that the above restriction is reasonable and necessary to protect the interest of the Employer and its controlled subsidiaries and
affiliates.

	(ii)
	During
the one year period immediately following Employee's termination from his or her employment with Employer, Employee may submit a written request to Employer
outlining a proposed employment or other employment opportunity that Employee is considering. Employer will review such request, and make a determination within ten (10) business days following
receipt of such request, in its sole discretion, as to whether the opportunity would constitute a breach of the non-competition covenant. 

        (c)    Non-Solicitation.    To protect the goodwill of Employer and its controlled subsidiaries and
affiliates, or the customers of Employer and its controlled subsidiaries and affiliates, Employee agrees that, for a period of one year immediately following the termination of his or her employment
with Employer, he or she will not, without the prior written permission of Employer, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, divert away,
take away or attempt to solicit or take away any Customer of Employer for purposes of providing or selling services that are offered by Employer, if Employer, or the particular controlled subsidiary
or affiliate of Employer, is then still engaged in the sale or provision of such services at the time of the solicitation. For purposes of this Section 7(c), "Customer" means any individual or
entity to whom Employer or its controlled subsidiaries or affiliates has provided, or contracted to provide, services and with whom Employee had, alone or in conjunction with others, contact with or
knowledge of, during the twelve months prior to the termination of his or her employment. For purposes of this Section 7(c), Employee had contact with or knowledge of a customer if
(i) Employee had business dealings with the customer on behalf of Employer or its controlled subsidiaries or affiliates; (ii) Employee was responsible for supervising or coordinating the
dealings between the customer and Employer or its controlled subsidiaries or affiliates; or (iii) Employee obtained or had access to trade secrets or confidential information about the customer
as a result of Employee's association with Employer or its controlled subsidiaries or affiliates. 

6

 

        (d)    Solicitation of Employees.    During Employer's employment of Employee and for a period of one year following
the termination of Employee's employment with Employer for any reason, Employee will not solicit for employment, directly or indirectly, any employee of Employer or any of its controlled subsidiaries
or affiliates who was employed with Employer or its controlled subsidiaries or affiliates within the one year period immediately prior to Employee's termination. 

        8.    Work Made for Hire.    Employee agrees that any written program materials, protocols,
research papers, other writings, as well as improvements, inventions, new techniques, programs or products (the "Work") made or developed by Employee within or after normal working hours relating to
the business or activities of Employer or any of its subsidiaries, shall be deemed to have been made or developed by Employee solely for the benefit of Employer and will be considered "work made for
hire" within the
meaning of the United States Copyright Act, Title 17, United States Code, which vests all copyright interest in and to the Work in the Employer. In the event, however, that any court of competent
jurisdiction finally declares that the Work is not or was not a work made for hire as agreed, Employee agrees to assign, convey, and transfer to the Employer all right, title and interest Employee may
presently have or may have or be deemed to have in and to any such Work and in the copyright of such work, including but not limited to, all rights of reproduction, distribution, publication, public
performance, public display and preparation of derivative works, and all rights of ownership and possession of the original fixation of the Work and any and all copies. Additionally, Employee agrees
to execute any documents necessary for Employer to record and/or perfect its ownership of the Work and the applicable copyright. 

        9.    Property of Employer.    Employee agrees that, upon the termination of Employee's
employment with Employer, Employee will immediately surrender to Employer all property, equipment, funds, lists, books, records and other materials of Employer or its controlled subsidiaries or
affiliates in the possession of or provided to Employee. 

        10.    Governing Law.    This Agreement and all issues relating to the validity,
interpretation, and performance will be governed by, interpreted, and enforced under the laws of the State of Maryland. 

        11.    Remedies.    An actual or threatened violation by Employee of the covenants and
obligations set forth in Sections 7, 8 and 9 will cause irreparable harm to Employer or its controlled subsidiaries or affiliates and that the remedy at law for any such violation will be
inadequate. Employee agrees, therefore, that Employer or its controlled subsidiaries or affiliates will be entitled to appropriate equitable relief, including, but not limited to, a temporary
restraining order and a preliminary injunction, without the necessity of posting a bond. Employee will also be entitled to seek equitable relief against Employer in connection with enforcement of the
covenants and obligations set forth in Sections 7, 8 and 9. The provisions of Sections 4, 5, 6, 7, 8 and 9 will survive the termination of this Agreement in accordance with the terms set
forth in each Section. 

        12.    Arbitration.    Except for an action for injunctive relief as described in
Section 11, any disputes or controversies arising under this Agreement will be settled by arbitration in Columbia, Maryland in accordance with the rules of the American Arbitration Association
relating to the arbitration of employment disputes. The determination and findings of such arbitrators will be final 

7

 

and
binding on all parties and may be enforced, if necessary, in any court of competent jurisdiction. The costs and expenses of the arbitration shall be paid for by Employer, but each party shall pay
its own attorney's fees and other litigation costs. 

Employee's

Initials 

        13.    Notices.    Any notice or request required or permitted to be given to any party will
be given in writing and, excepting personal delivery, will be given at the address set forth below or at such other address as such party may designate by written notice to the other party to this
Agreement: 

	 	 	 	 	 
	 	 	To Employee:	 	R. Caskie Lewis-Clapper

P.O. Box 1027

Avon, Connecticut 06001
	

 	
 	

To Employer:	
 	

Magellan Health Services, Inc.

16 Munson Road

Farmington, Connecticut 06032

Attention: General Counsel

        Each
notice given in accordance with this Section will be deemed to have been given, if personally delivered, on the date personally delivered; if delivered by facsimile transmission,
when sent and confirmation of receipt is received; or, if mailed, on the third day following the day on which it is
deposited in the United States mail, certified or registered mail, return receipt requested, with postage prepaid, to the address last given in accordance with this Section. 

        14.    Headings.    The headings of the sections of this Agreement have been inserted for
convenience of reference only and should not be construed or interpreted to restrict or modify any of the terms or provisions of this Agreement. 

        15.    Severability.    If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the term of this Agreement, such provision will be fully severable and this Agreement and each separate provision will be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. In addition, in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable, to the
extent such reformation is allowable under applicable law. 

        16.    Binding Effect.    This Agreement will be binding upon and shall inure to the benefit
of each party and each party's respective successors, heirs and legal representatives. This Agreement 

8

 

may
not be assigned by Employee to any other person or entity but may be assigned by Employer to any subsidiary or affiliate of Employer or to any successor to or transferee of all, or any part, of
the stock or assets of Employer. 

        17.    Employer Policies, Regulations, and Guidelines for Employees.    Employer may issue
policies, rules, regulations, guidelines, procedures or other material, whether in the form of handbooks, memoranda, or otherwise, relating to its Employees. These materials are general guidelines for
Employee's information and will not be construed to alter, modify, or amend this Agreement for any purpose whatsoever. 

        18.    Waiver of Claim Against Employer Pursuant to the Chapter 11 Filing.    Employee
agrees to waive any claim he/she may have relating to Employer's rejection of Employee's executory contract in the course of its Chapter 11 filing. To the extent Employee has filed a proof of
claim with the bankruptcy court, Employee agrees to take affirmative steps to withdraw such claim. 

        19.    Entire Agreement.    This Agreement embodies the entire agreement and understanding
between the parties with respect to its subject matter and supersedes all prior agreements and understandings, whether written or oral, relating to its subject matter, unless expressly provided
otherwise within this Agreement. No amendment or modification of this Agreement, will be valid unless made in writing and signed by each of the parties. No representations, inducements, or agreements
have been made to induce either Employee or Employer to enter into this Agreement, which are not expressly set forth within this Agreement. Employee and Employer acknowledge and agree that Employer's
controlled subsidiaries and affiliates are express third party beneficiaries of this Agreement. 

[signatures
follow] 

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the 2nd day of August, 2004. 

	 	 	MAGELLAN HEALTH SERVICES, INC.
	"Employee"	 	"Employer"
	

 	
 	

 	

 
	/s/ R. Caskie Lewis-Clapper
 R. Caskie Lewis-Clapper	 	By:	/s/ Steve Shulman

	 	 	 	 
	 	 	Name:	Steve Shulman

	 	 	 	 
	 	 	Title:	Chairman and CEO

9

QuickLinks

Exhibit 10.39

EMPLOYMENT AGREEMENT

STATEMENT OF AGREEMENT

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