Exhibit 10.1

 

MAGELLAN HEALTH, INC.

 

2011 MANAGEMENT INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Reference No. 2011- March 3, 2016 [Employee Name]

 

SECTION 1.         GRANT OF OPTION.

 

(a)           OPTION.  On the terms and conditions set forth in this Agreement and each Notice of Stock Option Grant referencing this Agreement, Magellan Health, Inc. (the “COMPANY” as further defined below) grants to the Optionee referred to on the signature page hereof, as of the Date of Grant (as defined below), an option to purchase at the Exercise Price (as defined below) the number of shares of Ordinary Common Stock, $0.01 par value per share, of the Company set forth in such Notice of Stock Option Grant, subject to adjustment thereto on account of any change in respect of the shares of Ordinary Common Stock that may be made as provided by Section 7 below (the “OPTION SHARES”).  Each such Notice of Stock Option Grant, together with this referenced Agreement, shall be a separate option governed by the terms of this Agreement and any such separate option may be referred to herein as “THE OPTION” and, as pertinent, any of multiple Notices of Stock Option Grant referencing this Agreement may be referred to herein as “THE OPTION AWARD NOTICE.”  The option is intended to be an Incentive Stock Option (as defined below) or a Nonqualified Stock Option (as defined below), as provided in the Option Award Notice.

 

(b)           2011 MANAGEMENT INCENTIVE PLAN AND DEFINED TERMS.  The option is granted under and subject to the terms of the Company’s 2011 Management Incentive Plan, as amended and supplemented from time to time (the “Plan”), which is incorporated herein by this reference.  Certain capitalized terms used herein are defined in Section 9 below but terms used herein, if not defined herein, shall have the same meaning for purposes hereof as provided by the Plan.

 

(c)           SCOPE OF THIS AGREEMENT.  This Agreement shall apply both to the option and to the Option Shares acquired upon the exercise of the option.

 

SECTION 2.         RIGHT TO EXERCISE.

 

(a)           EXERCISABILITY.  Subject to the conditions set forth in this Agreement and the Plan, all or part of the option may be exercised to purchase Option Shares prior to expiration of the option at the time or times, and subject to satisfaction of the conditions, set forth in the vesting and exercise provisions of the Option Award Notice.

 

(b)           $100,000 LIMITATION.  If the option is designated as an Incentive Stock Option in the Option Award Notice, then the Optionee’s right to exercise the option shall be deferred to the extent (and only to the extent) that the option would not be treated as an Incentive Stock Option solely by reason of the $100,000 annual limitation under Section 422(d) of the Code, except that the Optionee need not defer his or her right to exercise the option if (i) the Company is subject to an Extraordinary Business Combination Event before the Optionee’s Service terminates, (ii) the Company, or any surviving corporation of any business combination involving the Company or its parent (a “SURVIVING COMPANY”) does not continue the option, and (iii) any Surviving Company does not assume the option or does not substitute an option with substantially the same terms for the option.  The failure to defer exercise of the option in order to comply with this $100,000 limitation as permitted by the foregoing provisions may, however, result in the option no longer being considered an Incentive Stock Option.  Additional limitations with regard to Incentive Stock Options are set forth in the Plan.

 

10.1- 1

 

(c)           INJURIOUS CONDUCT.  Except as otherwise specifically provided by the Option Award Notice or other Award document or by an agreement executed by the Company with the approval of the Committee, in the event the Optionee has engaged in Injurious Conduct as defined in, and as determined to have occurred in accordance with, Section 12 of the Plan during Optionee’s Service or during the year following termination of Optionee’s Service, then (i) no option issued to Optionee under the Plan may be exercised after such determination (even if fully vested) nor shall any other benefit of any Award thereafter accrue to the Optionee under the Agreement or the Plan (including by reason of the lapse of any restriction on transfer or other restriction applicable to Option Shares that have been issued), and the Company shall not complete the settlement of any such option (including completion of the issuance and delivery to the Optionee of Option Shares upon a previous exercise of the option) or the settlement of any other Award (including the removal of any restriction on transfer or other restriction applicable to any Option Shares that have been issued, even upon lapse of or compliance by the Optionee with any other restrictions thereon that are otherwise applicable to Optionee), and (ii) any such unsettled option shall be forfeited and shall terminate and any such Option 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) Stock Units and any related Dividend Equivalent Rights the settlement of which have been deferred at the election of the Optionee, if such Restricted Stock Award or Stock Units were fully vested before the date such Injurious Conduct occurred (as so determined)).  In addition, except as otherwise specifically provided by an Option Award Notice or other Award document or by an agreement executed by the Company with the approval of the Committee, in the event the Optionee has engaged in Injurious Conduct as defined in, and as determined to have occurred in accordance with, Section 12 of the Plan during Optionee’s Service or during the year following termination of Optionee’s Service, any benefits realized by Optionee 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 Optionee and Optionee shall pay over to the Company in cash the amount of any benefits so received by Optionee or deliver to the Company any Shares so received by Optionee and still owned by Optionee ( provided , however , that the foregoing shall not 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 Optionee, 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 Optionee has engaged in Injurious Conduct during Optionee’s Service or during the year following termination of Optionee’s Service, shall not relieve Optionee 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.

 

(d)           TRANSFER RESTRICTIONS ON OPTION SHARES.  Subject to subsection 2(c) above and subsection 3(c) below, unless otherwise provided by the Option Award Notice, upon the acquisition of Option Shares pursuant to the exercise of an option after expiration of the vesting period and satisfaction of any vesting and exercise conditions provided by the Option Award Notice, Optionee shall be free to dispose of Option Shares so acquired in any manner and at any time.

 

SECTION 3.         TRANSFER OF OPTION.

 

(a)           TRANSFERS GENERALLY PROHIBITED.  Except as otherwise provided by the Option Award Notice or otherwise permitted by the Plan or in the case of a transfer permitted by subsection 3(b) below, the option shall be exercisable only during the Optionee’s lifetime and only by the Optionee.  Except as otherwise provided in subsection 3(b) below, the option and the rights and privileges conferred by the option shall not be sold or otherwise Transferred.

 

(b)           CERTAIN TRANSFERS PERMITTED.  Notwithstanding the foregoing provisions of this Section 3, this option may be Transferred (i) in the event of the Optionee’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

 

10.1- 2

 

similar transaction involving the Company and affecting the Shares generally or (iii) with the approval of the Committee, to a member of Optionee’s family, or a trust primarily for the benefit of Optionee and/or one or more members of Optionee’s family, or to a corporation, partnership or other entity primarily for the benefit of Optionee 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 option so Transferred 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.

 

(c)           FIDUCIARY, SECURITIES LAW AND OFFICER RESTRICTIONS.  As an employee, officer and/or director of the Company, Optionee may be subject to restrictions on his or her ability to sell or otherwise Transfer Option 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 Optionee in connection therewith.  Nothing contained herein shall relieve Optionee of any restriction on sale or other Transfer of Option Shares provided thereby and any other restrictions of sale or other Transfer of Option Shares provided herein (including in an Option Award Agreement or in the Plan) shall be in addition to and not in lieu of any other restrictions provided thereby. Pursuant to the Company’s Equity Ownership Policy currently in effect and as may be amended from time to time (the “Equity Ownership Policy”) certain officers of the Company are currently, or may in the future be, subject to restrictions on sales or transfers of Option Shares and other equity rights issued by the Company.  If Grantee is at any time subject to such Equity Ownership Policy, sale or transfer of Grantees’ Option Shares shall be restricted as provided in such Equity Ownership Policy.

 

SECTION 4.                             EXERCISE PROCEDURES.

 

(a)           NOTICE OF EXERCISE.  The Optionee (or the Optionee’s personal representative or permitted Transferee) may exercise the option by giving written notice to the Company specifying the election to exercise the option, the number of Option Shares for which it is being exercised and the form of payment.  Exhibit A is an example of a “Notice of Exercise.”  The Notice of Exercise shall be signed by the person exercising the option.  In the event that the option is being exercised by the Optionee’s personal representative or permitted Transferee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise the option.  The Optionee or the Optionee’s representative or permitted Transferee shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5 below for the full amount of the Purchase Price.

 

(b)           ISSUANCE OF COMMON STOCK.  Subject to subsection 2(c) above and subsection 4(d) below, after receiving a proper notice of exercise and payment for the Option Shares for which the option was exercised, the Company shall cause to be issued a certificate or certificates for the Option Shares as to which this option has been exercised, registered in the name of the person exercising the option (or, at the direction of the Optionee, 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).

 

(c)           WITHHOLDING REQUIREMENTS.  The Company may withhold any tax (or other governmental obligation) as a result of the exercise of the option, as a condition to the exercise of the option, and the Optionee shall make arrangements satisfactory to the Company to enable it to satisfy all such withholding requirements.  The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the vesting or disposition of Option Shares purchased by exercising of the option.

 

(d)           SECURITIES LAW RESTRICTIONS ON EXERCISE.  Unless a registration statement under the Securities Act permitting the sale and delivery of Option Shares upon exercise of the option is in effect at the date of exercise, the Company shall not be required to issue Option Shares upon such exercise, except as otherwise provided in this subsection.  The Company shall use its commercially reasonable efforts to register under the Securities Act sufficient Option Shares to permit the sale and delivery to Optionee of all Option Shares that may

 

10.1- 3

 

be acquired by Optionee upon the exercise of the option; provided , however , that the Company shall only be so required to register the Option Shares on Form S-8 under the Securities Act (or any successor form).  Notwithstanding the foregoing, the Company shall, if Optionee has given the Company at least 90 days’ notice requesting the Company to register the Option Shares that may then be acquired by Optionee upon exercise of the option in accordance with the foregoing provisions of this subsection and the Company has failed to do so, issue Option Shares to Optionee upon exercise of the option without registration thereof under the Securities Act if (i) Optionee represents, effective on the date of such issuance, in writing in a form acceptable to the Company (A) that such Option Shares are being acquired for investment and not with a present view to distribution, (B) Optionee understands that the Option Shares have not been registered under the Securities Act and cannot be sold or otherwise Transferred unless a registration statement under the Securities Act is in effect with respect thereto or the Company has received an opinion of counsel, satisfactory to it, to the effect that such registration is not required, (C) that Optionee 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 Option Shares, is purchasing the Option Shares based on an independent evaluation of the long-term prospects of an investment in the Option Shares and has been furnished with such financial and other information regarding the Company as the Optionee has requested for purposes of making such evaluation , and (D) Optionee is able to bear the economic risk of an investment in the Option Shares subject to such restrictions on Transfer and (ii) if the Company determines that under the circumstances issuing the Option Shares pursuant to such exercise of the option is lawful; provided , however , that the Company may require, as a condition of such issuance of Option Shares, that Optionee 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 Option Shares are issued to Optionee in accordance with the Securities Act and any other applicable securities law and may require that any certificates representing Option Shares so issued bear any restrictive legend appropriate for such purpose.  In addition, even if a registration statement under the Securities Act permitting the sale and delivery of Option Shares upon exercise of the option is in effect at the date of exercise, the Company may suspend the issuance of Option Shares pursuant to the exercise of all options 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 Option Shares under such registration statement a violation of Sections 10, 11 or 12 of the Securities Act.  If the Company suspends the issuance of Option Shares pursuant to the exercise of options issued under the Plan, the Company shall give prompt written notice thereof to the Optionee (but the failure of the Company to give such notice shall not prevent the Company from suspending the issuance of Option Shares as permitted hereby) and, at such time as such period of suspension ends, shall give prompt written notice thereof to Optionee.

 

SECTION 5.         PAYMENT FOR OPTION SHARES.

 

(a)           CASH OR CHECK.  All or part of the Purchase Price may be paid in cash or by good check.

 

(b)           ALTERNATIVE METHODS OF PAYMENT.  Subject to any provision pertaining thereto in the Option Award Agreement, at the sole discretion of the Committee, all or any part of the Purchase Price and any applicable withholding requirements may be paid by one or more of the following alternative methods:

 

(i)            Surrender of Stock.  Payment may be made by surrendering ownership of Shares that are already owned by the Optionee free and clear of any restriction or limitation, unless the Company specifically agrees to accept such Shares subject to a restriction or limitation.  In such cases, such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date of exercise of the option.  Without the specific approval of the Committee, the Optionee shall not be permitted to surrender ownership of Shares in payment of the Purchase Price (or withholding) if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the option for financial reporting purposes that otherwise would not have occurred.

 

10.1- 4

 

(ii)           Net Exercise.  Payment may be made in the case of Nonqualified Stock Options by reducing the number of Option Shares otherwise deliverable upon the exercise of the option by the number of Shares having a Fair Market Value equal to the amount of the Purchase Price and the withholding required to be made by the Company in connection with such exercise of the option.

 

(iii)          Exercise/Sale.  Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction (A) to a securities broker approved by the Company to sell Option Shares (or other Shares owned by Optionee) and to deliver all or part of the sales proceeds to the Company or (B) to pledge Option Shares (and/or other Shares owned by Optionee) to a securities broker or lender approved by the Company as security for a loan, and to deliver all or part of the loan proceeds to the Company.

 

Should the Committee exercise its discretion to permit the Optionee to exercise the option in whole or in part in accordance with subsection 5(b) above, it shall have no obligation to permit such alternative exercise with respect to the remainder of the option or with respect to any other option to purchase Shares held by the Optionee.

 

SECTION 6.         TERM AND EXPIRATION.

 

(a)           BASIC TERM.  Subject to earlier termination in accordance with subsection 6(b) below, the exercise period of this option shall expire ten (10) years after the date it is granted.

 

(b)           TERMINATION OF SERVICE.  If the Optionee’s Service terminates, then the exercise period for this option shall expire (except as otherwise set forth in the Option Award Notice) on the earliest of the following occasions (or such later date as the Committee in a specific instance may determine), but in no event after the expiration of the ten year period referred to in subsection 6(a) above:

 

(i)            the date six (6) months after the termination of the Optionee’s Service for any reason other than death, normal retirement or Disability;

 

(ii)           the date thirty-six (36) months after the termination of the Optionee’s Service by reason of retirement at or after the normal date for retirement as determined pursuant to the current formal retirement policy of the Company; or

 

(iii)          the date twelve (12) months after the Optionee’s death or Disability.

 

The Optionee (or in the case of the Optionee’s death or disability, the Optionee’s personal representative) may exercise all or part of the option at any time before its expiration under the preceding provisions of this Section 6, but only to the extent that the option had become exercisable for Option Shares on or before the date the Optionee’s Service terminates.  When the Optionee’s Service terminates, this option shall expire immediately with respect to the number of Option Shares for which this option has not yet become exercisable, except by reason of retirement as determined pursuant to the formal retirement policy of the Company.

 

(c)           NOTICE CONCERNING INCENTIVE STOCK OPTION TREATMENT.  If this option is designated as an Incentive Stock Option in the Option Award Notice, it ceases to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (i) more than three (3) months after the date the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code), (ii) more than twelve (12) months after the date the Optionee ceases to be an Employee by reason of such permanent and total disability or (iii) after the Optionee has been on a leave of absence for more than ninety (90) days, unless the Optionee’s reemployment rights are guaranteed by statute or by contract.

 

10.1- 5

 

SECTION 7.         ADJUSTMENT OF SHARES.

 

(a)           ADJUSTMENT GENERALLY.  If while the option remains in effect there shall be any change in the outstanding Shares of the class which may be purchased upon exercise of the option, 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 option so that the option shall thereafter be exercisable, otherwise on the same terms and conditions as provided by the Option Award Notice, this Agreement and the Plan, for such securities, cash and/or other property as would have been received in respect of the Shares that would have been issued upon exercise of the option had the option been exercised in full immediately prior to such change or distribution (whether or not the option was then exercisable in full) or, if and to the extent the Committee determines that so adjusting the consideration to be received upon exercise of the option, in whole or in part, is not practicable, the Committee shall equitably modify the consideration to be received in respect of the exercise of the option or the Exercise Price or other pertinent terms and conditions of the option as provided by subsection 7(b) below.  Such an adjustment shall be made successively each time any such change in the outstanding Shares of the class which may be purchased upon exercise of the option or extraordinary distribution in respect of such outstanding Shares or extraordinary change in the capital structure of the Company shall occur.

 

(b)           MODIFICATION OF OPTION.  In the event any change in the outstanding Shares of the class which may be purchased upon exercise of the option or extraordinary distribution in respect of such outstanding Shares or extraordinary change in the capital structure of the Company described in subsection 7(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, Optionee as a participant in the Plan or which otherwise warrants equitable adjustment to the terms and conditions of the option 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 Shares and/or other securities and/or cash or other property that may be issued or delivered upon the exercise of the option and/or adjust the Exercise Price and/or other terms and conditions of the option as the Committee in its discretion determines to be equitable in order to prevent dilution or enlargement of the Optionee’s rights in respect of the option as such existed before such event.  Appropriate adjustments may likewise be made by the Committee in other terms and conditions of the option 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 option or any restrictions on Option Shares.  Notwithstanding the foregoing, (i) each such adjustment with respect to an Incentive Stock Option shall comply with the rules of Section 424(a) of the Code, (ii) in no event shall any adjustment be made which would render any Incentive Stock Option granted hereunder other than an “incentive stock option” for purposes of Section 422 of the Code without the consent of the Optionee and (iii) 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 shall be interpreted in accordance with Section 409A of Code and Department of Treasury regulations and other interpretive guidance issued there under, including without limitation any such regulations or guidance that may be issued after the Date of Grant.  Without limiting the authority of the Committee under subsection 7(b) above to make modifications to the option 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, Optionee as a participant in the Plan or which otherwise warrants equitable adjustment to the terms and conditions of the option because such event interferes with the operation of the Plan, and notwithstanding any provision of the 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 Optionee to a penalty tax) in connection with the grant or vesting of the option or any other provision of the Option Award Notice or this Agreement or the Plan, the Company may (a) adopt such amendments to the option, 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 option

 

10.1- 6

 

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 of Grant, to the extent permitted under Section 409A and regulations and guidance thereunder. Adjustments to the Option under this Section 7 shall be authorized and made only to the extent such adjustment does not cause the Option to fail to qualify for the exemption under Treasury Regulation § 1.409A-1(b)(5) for stock rights not providing for the deferral of compensation.

 

SECTION 8.         MISCELLANEOUS PROVISIONS.

 

(a)           RIGHTS AS A SHAREHOLDER.  Neither the Optionee nor the Optionee’s personal representative or permitted Transferee shall have any rights as a shareholder with respect to any Option Shares until the Optionee or his or her personal representative or permitted Transferee becomes entitled to receive such Option Shares by (i) filing a notice of exercise and (ii) paying the Purchase Price as provided by this Agreement, and any such right shall also be subject to subsections 2(c) and 4(d) above.

 

(b)           TENURE.  Nothing in the Option Award Notice, this Agreement or the Plan shall confer upon the Optionee 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 Optionee) or of the Optionee, 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 Optionee at the address that he or she most recently provided to the Company.

 

(d)           ENTIRE AGREEMENT.  This Agreement, any related Option 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; it being understood, however, that, if this Agreement is being entered into by the Company in the performance of obligations under an employment agreement between the Company and Optionee, the Company and Optionee shall also have those separate obligations, if any, relating to the granting of options provided thereby.

 

(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 Optionee, the Optionee’s personal representatives, heirs, legatees and other permitted Transferees, 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 9.         DEFINITIONS.

 

(a)           “AGREEMENT” shall mean this Stock Option Agreement.

 

10.1- 7

 

(b)           “BOARD OF DIRECTORS” shall mean the Board of Directors of the Company, as constituted from time to time.

 

(c)           “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 there under.

 

(d)           “COMMITTEE” shall mean the committee of the Board of Directors described in Section 2 of the Plan and (without limitation of the Committee’s authority to otherwise delegate any of its powers or responsibilities as permitted by law) shall include any officer of the Company to whom such committee has specifically delegated by resolution adopted by the Committee authority to approve payment for Option Shares by an alternative method of payment referred to in subsection 5(b) above.

 

(e)           “COMPANY” shall mean Magellan Health, Inc, a Delaware corporation and any successor thereto.

 

(f)            “DATE OF GRANT” in respect of an option shall mean, unless otherwise approved by the Board of Directors or the Committee, (i) the date on which the Board of Directors or the Committee resolved to grant the option to Optionee or (ii) either (A) the date on which the Board of Directors or the Committee resolved to authorize the grant of the option to Optionee, as part of grants of options to be made to Employees to be selected by an authorized officer of the Company pursuant to authority delegated by the Board or Committee, if such date was set as the date of grant by the Board of Directors or Committee in providing such authorization or (B) the date on which an authorized officer of the Company determined, as evidenced by a writing, to grant the option to Optionee pursuant to authority delegated to such officer as permitted by applicable law by a resolution adopted by the Board of Directors or the Committee, where such authorizing resolution did not itself provide that the date of authorization should be the date of grant (which date determined by such officer shall in no event be earlier than the date of such authorizing resolution of the Board of Directors or the Committee) and (iii) such later date, after the resolution of the Board of Directors or Committee referred to in clauses (i) or (ii)(A) of this sentence or the determination of the officer referred to in clause (ii)(B) of this sentence), on which Optionee’s Service commenced.

 

(g)           “DISABILITY” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment as determined by the Committee in its sole discretion.

 

(h)           “EMPLOYEE” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(i)            “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 there under.

 

(j)            “EXERCISE PRICE” shall mean the amount for which one Option Share may be purchased upon exercise of the option, as specified in the Option Award Notice.

 

(k)           “EXTRAORDINARY BUSINESS COMBINATION EVENT” shall be deemed to have occurred upon any of the following events:

 

(i)            any person (as such term is used in Section 13(d) of the Exchange Act) becomes the “beneficial owner” (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power in the election of directors of the Company’s then outstanding securities, except that, in the case of a person who beneficially owned 50% of such combined voting power on the date of the Option Award Notice, such person become the beneficial owner (as so defined) of securities of the Company representing sixty percent (60%) of more of such combined voting power; or

 

10.1- 8

 

(ii)           during any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the members of the Board of Directors and any new director, whose election to the Board of Directors or nomination for election to the Board of Directors by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors; or

 

(iii)          the Company shall merge with or consolidate into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding immediately thereafter securities representing more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

 

(iv)          the stockholders of the Company approve and effect a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

 

(l)            “FAIR MARKET VALUE” of a Share as of any day shall mean the closing price of the Shares on such day (or on the last preceding trading date if the Shares were not traded on such day) if the Shares are readily tradable on a national securities exchange or the NASDAQ Stock Market (or other established market system involving current interdealer quotations), and, if the Shares are not readily tradable, “Fair Market Value” shall mean the amount determined in good faith by the Committee (or in accordance with procedures approved by the Committee) as the fair market value of the Shares, which determination shall be final and binding on all persons.

 

(m)          “INCENTIVE STOCK OPTION” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(n)           “NONQUALIFIED STOCK OPTION” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

 

(o)           “OPTION AWARD NOTICE” shall have the meaning provided by Section 1 of this Agreement.

 

(p)           “OPTIONEE” shall mean the person signing this Agreement as such.

 

(q)           “PARENT” shall mean a “parent corporation” as defined in Section 424(e) of the Code.

 

(r)            “PLAN” shall mean the Magellan Health, Inc. 2011 Management Incentive Plan.

 

(s)            “PURCHASE PRICE” shall mean the Exercise Price multiplied by the number of Option Shares with respect to which this option is being exercised.

 

(t)            “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 there under.

 

(u)           “SERVICE” shall mean service as an Employee.  For any purpose under this Agreement, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing or if continued crediting of Service for such purpose is expressly permitted by the terms of such leave or required by applicable law (as determined by the Company).

 

10.1- 9

 

(v)           “SHARE” shall mean a share of Ordinary Common Stock 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 subsection 7(a) above (and in the event of any such exchange or change, any security resulting from any such successive exchange or change).

 

(w)          “TRANSFER” shall mean, with respect to the option or Option 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 Share, or of any beneficial interest therein, now or hereafter owned by the Optionee, including by execution, attachment, levy or similar process.

 

(x)           “SUBSIDIARY” shall mean a “subsidiary corporation” as defined in Section 424(f) of the Code.

 

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

 

		MAGELLAN HEALTH, INC.
		Name:
		Title:
OPTIONEE:
Name:
Date:
Address for Notice:

 

10.1- 10

 

EXHIBIT A

 

SAMPLE NOTICE OF EXERCISE

 

Magellan Health, Inc.
[ADDRESS]
Attn:  Corporate Secretary

 

Re: Exercise of Option, Option Award Notice Reference No.     .

 

I hereby exercise my stock option identified above granted under the Magellan Health, Inc. 2011 Management Incentive Plan (the “Plan”) and notify you of my desire to purchase the Option Shares of that have been offered pursuant to the Plan and related Option Agreement as described below.

 

Except as otherwise agreed with the Company as provided by the Option Agreement, I shall pay for the Option Shares by delivery of a check payable to Magellan Health, Inc. (the “Company”) in the amount described below in full payment for such Option Shares plus all amounts required to be withheld by the Company under state, federal or local law as a result of such exercise or shall provide such documentation as is satisfactory to the Company demonstrating that I am exempt from any withholding requirement.

 

This notice of exercise is delivered this     day of               , 20  .

 

No. of Option Shares to be Acquired		Type of Option		Exercise Price		Total
		Nonqualified Stock Option
		Incentive Stock Option
Estimated Withholding		Nonqualified only
				Amount Paid

 

	Very truly yours,
	Signature of Optionee
	Optionee’s Name and Mailing Address:
	Optionee’s Social Security Number:

 

10.1- 11

Exhibit 10.2

 

MAGELLAN HEALTH, INC.

 

2011 MANAGEMENT INCENTIVE PLAN

 

NOTICE OF STOCK OPTION GRANT

 

(REFERENCE NO. 2011-MARCH 3, 2016)

 

Name of Optionee:		[Employee Name]
Shares Subject to Option:		shares of Ordinary Common Stock of Magellan Health, Inc. (the “Shares”)
Type of Option:		x   Nonqualified                                             o Incentive
Exercise Price per Share:		$
Date of Grant:		March 3, 2016
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 2011 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, if the Optionee’s Service is terminated for Retirement as defined under the Company’s Retirement Policy Applicable to Employee Stock Options, this Option shall earlier vest immediately with respect to 100% of the Shares subject hereto. Notwithstanding the first paragraph of this section entitled “Vesting”, 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

 

10.2- 1

 

		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:
		SECTION 10.                      A “Change in Control” of the Company shall mean the first to occur after the date hereof of any of the following events:
		(a)                                  any “person,” as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes a “beneficial owner,” as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 50% or more of the Voting Stock (as defined below) of the Company;
		(b)                                  the majority of the Board of Directors of the Company consists of individuals other than “Continuing Directors,” which shall mean the members of the Board on the date hereof;
		(c)                                   the Board of Directors of the Company adopts and, if required by law or the certificate of incorporation of the Corporation, the shareholders approve the dissolution of the Company or a plan of liquidation or comparable plan providing for the disposition of all or substantially all of the Company’s assets;
		(d)                                  all or substantially all of the assets of the Company are disposed of pursuant to a merger, consolidation, share exchange, reorganization or other transaction unless the shareholders of the Company immediately prior to such merger, consolidation, share exchange, reorganization or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they previously owned the Voting Stock or other ownership interests of the Company, a majority of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company; or
		(e)                                   the Company merges or combines with another company and, immediately after the merger or combination, the shareholders of the Company immediately prior to the merger or combination own, directly or indirectly, 50% or less of the Voting Stock of the successor company, provided that in making such determination there shall being excluded from the number of shares of Voting Stock held by such shareholders, but not from the Voting 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.
		SECTION 11.                                         “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;

 

10.2- 2

 

		(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.
		SECTION 12.                                         “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 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.

 

10.2- 3

 

		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, 2026

 

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, Inc. 2011 Management Incentive Plan and the related Stock Option Agreement, reference number 2011-March 3, 2016, both of which are hereby made a part of this document.

 

 

		MAGELLAN HEALTH, INC.
		Name: Barry M. Smith
		Title: Chief Executive Officer
OPTIONEE:
Name:
Date:

 

10.2- 4

Exhibit 10.3

 

MAGELLAN HEALTH, INC.

 

2011 MANAGEMENT INCENTIVE PLAN

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT

 

REFERENCE NUMBER:  2011- MARCH 3, 2016 — [Employee Name]

 

As of March 3, 2016

 

SECTION 1.                             GRANT OF PERFORMANCE-BASED RESTRICTED STOCK UNITS.

 

(a)                                  Performance-Based Restricted Stock Units.  On the terms and conditions set forth in this Agreement and each Notice of Performance-Based Restricted Stock Unit Award referencing this Agreement, Magellan Health, 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 “Performance Stock Units” awarded to the Grantee as set forth in the Notice of Performance-Based 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 “Performance Unit Shares”).  Each such Notice of Performance-Based Restricted Stock Unit Award, together with this referenced Agreement, shall be a separate “Performance-Based Restricted Stock Unit” governed by the terms of this Agreement and any such separate Performance-Based Restricted Stock Unit may be referred to herein as the “Performance-Based Restricted Stock Unit,” and, as pertinent, any of multiple Notices of Performance-Based Restricted Stock Unit Award referencing this Agreement may be referred to herein as the “Performance-Based Restricted Stock Unit Award Notice.”

 

(b)                                  2011 Management Incentive Plan and Defined Terms.  The Performance-Based Restricted Stock Unit Award is granted under and subject to the terms of the 2011 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 Performance-Based Restricted Stock Unit and to any Performance Unit Shares acquired upon the settlement of the Performance-Based Restricted Stock Units.

 

SECTION 2.                             VESTING AND SETTLEMENT OF PERFORMANCE-BASED RESTRICTED STOCK UNITS.

 

(a)                                  Vesting.  The Performance-Based Restricted Stock Unit shall vest in whole or in part on the date or dates provided by the Notice of Performance-BasedRestricted 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 Performance-Based Restricted Stock Unit Award may provide that the Performance-Based Restricted Stock Unit shall vest upon termination of Grantee’s Service in such circumstances as are provided in the Notice of Performance-Based Restricted Stock Unit Award.

 

(b)                                  Settlement in Shares.  Subject to the following provisions of this Section 2, the Company shall settle the Performance-Based Restricted Stock Unit, to the extent it has vested, on the date on which the Performance-Based 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 Performance Unit Shares equal to the number of Performance-Based Restricted Stock Units so vested.  The date on which a Performance-Based 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 Performance-Based Restricted Stock Unit, the Company shall cause to be issued on the Settlement Date or as soon as practicable

 

10.3- 1

 

thereafter (but not more than five business days) an appropriate certificate or certificates for the Performance 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 Performance Unit Shares shall be subject to such restrictions on transfer or other restrictions as are provided by the Performance-Based 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 Performance-Based Restricted Stock Unit in Performance Unit Shares, the Committee may in its sole discretion elect to settle all or a portion of the Performance-Based Restricted Stock Unit by a cash payment equal to the Fair Market Value as of the Settlement Date of the Performance 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 Performance-Based Restricted Stock Unit and/or the issuance of Performance Unit Shares (or cash in lieu of Performance Unit Shares) in settlement of a Performance-Based Restricted Stock Unit and, as a condition to the grant of the Performance-Based Restricted Stock Unit or issuance of the Performance 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 Performance-Based 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 Performance Unit Shares shall be issued to Grantee in connection with the settlement of a Performance-Based 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 Performance Unit Shares that have been issued), and the Company shall not complete the settlement of any other Award, and (ii) any such unsettled Performance-Based Restricted Stock Unit Award shall be forfeited and shall terminate and any Performance 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) Performance-Based 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 Performance-Based Restricted Stock Unit Awards were fully vested before the date such Injurious Conduct occurred (as so determined)).  In addition, except as otherwise specifically provided by a Performance-Based 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

 

10.3- 2

 

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

 

(g)                                   Securities Law Restrictions On Issuance of Performance Unit Shares.  Unless a registration statement under the Securities Act permitting the sale and delivery of Performance Unit Shares upon settlement of the Performance-Based Restricted Stock Unit Award is in effect on the Settlement Date, the Company shall not be required to issue Performance 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 Performance Unit Shares to permit delivery to Grantee of all Performance Unit Shares that may be acquired by Grantee upon the settlement of the Performance-Based Restricted Stock Unit Award; provided, however, that the Company shall only be so required to register the Performance 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 Performance Unit Shares that may then be acquired by Grantee upon settlement of the Performance-Based Restricted Stock Unit Award and the Company has failed to do so, issue Performance Unit Shares to Grantee upon settlement of the Performance-Based 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 Performance Unit Shares are being acquired for investment and not with a present view to distribution, (B) Grantee understands that the Performance Unit Shares have not been registered under the Securities Act and cannot be sold or otherwise Transferred unless a registration statement under the Securities Act is in effect with respect thereto or the Company has received an opinion of counsel, satisfactory to it, to the effect that such registration is not required, (C) that Grantee has, alone or together with any qualified advisor, such knowledge and experience in financial and business matters as is necessary to evaluate the risks of an investment in the Performance Unit Shares, is acquiring the Performance Unit Shares based on an independent evaluation of the long-term prospects of an investment in the Performance 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 Performance Unit Shares subject to such restrictions on Transfer and (ii) if the Company determines that under the circumstances issuing the Performance Unit Shares pursuant to such settlement of the Performance-Based Restricted Stock Unit Award is lawful; provided, however, that the Company may require, as a condition of such issuance of Performance 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 Performance 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 Performance 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 Performance Unit Shares upon settlement of the Performance-Based Restricted Stock Unit Award is in effect at the Settlement Date, the Company may suspend the issuance of Performance Unit Shares pursuant to the settlement of all Performance-Based 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 Performance 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 Performance Unit Shares pursuant to the settlement of Performance-Based 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 Performance 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 Performance Unit Shares in settlement of a Performance-Based Restricted Stock Unit, the Company shall not be required to settle a

 

10.3- 3

 

Performance-Based 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 Performance-Based Restricted Stock Units constitute a “deferral of compensation” under Section 409A of the Internal Revenue Code (the “Code”), the timing of settlement of such Performance-Based 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:

 

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

 

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

 

c.                                        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; and

 

d.                                       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 RSU 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.

 

a.                                       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”).

 

b.                                       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

 

10.3- 4

 

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).

 

c.                                        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.

 

a.                                       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.

 

b.                                       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.

 

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

 

b.                                       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 Performance-Based Restricted Stock Units.

 

SECTION 3.                             TRANSFER OF PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD OR PERFORMANCE UNIT SHARES

 

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

 

(b)                                  Certain Transfers Permitted.  Notwithstanding the foregoing provisions of this Section 3, the Performance-Based 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

 

10.3- 5

 

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 Performance-Based Restricted Stock Unit Award so Transferred and, upon issuance of Performance Unit Shares in settlement thereof, the Performance 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, Securities Law and Officer Restrictions.  As an employee, officer and/or director of the Company, Grantee may be subject to restrictions on his or her ability to sell or otherwise Transfer Performance 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 Performance Unit Shares provided thereby and any other restrictions of sale or other Transfer of Performance Unit Shares provided herein (including in a Performance-Based Restricted Stock Unit Award Notice or in the Plan) shall be in addition to and not in lieu of any other restrictions provided thereby.  Pursuant to the Company’s Equity Ownership Policy currently in effect and as may be amended from time to time, certain officers of the Company are currently, or may in the future be, subject to restrictions on sales or transfers of Performance Unit Shares and other equity rights issued by the Company.  If Grantee is at any time subject to such Equity Ownership Policy, sale or transfer of Grantees’ Performance Unit Shares shall be restricted as provided in such Equity Ownership Policy.

 

SECTION 4.                             ADJUSTMENT OF SHARES.

 

(a)                                  Adjustment Generally.  If while the Performance-Based 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 Performance-Based 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 Performance-Based Restricted Stock Unit so that the Performance-Based Restricted Stock Unit shall thereafter be ultimately settled, otherwise on the same terms and conditions as provided by the Performance-Based Restricted Stock Unit Award Notice, this Agreement and the Plan, for such securities, cash and/or other property as would have been received in respect of the Shares that would have been issued upon settlement of the Performance-Based Restricted Stock Unit had the Performance-Based Restricted Stock Unit been settled in full immediately prior to such change or distribution (whether or not the Performance-Based Restricted Stock Unit was

 

10.3- 6

 

then fully vested) or, if and to the extent the Committee determines that so adjusting the consideration to be received upon settlement of the Performance-Based 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 Performance-Based Restricted Stock Unit or other pertinent terms and conditions of the Performance-Based 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 Performance-Based 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 Performance-Based Restricted Stock Unit.  In the event any change in the outstanding Shares of the class which may be received upon settlement of the Performance-Based 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 Performance-Based Restricted Stock Unit or otherwise as a participant in the Plan or which otherwise warrants equitable adjustment to the terms and conditions of the Performance-Based 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 Performance Unit Shares and/or other securities and/or cash or other property that may be issued or delivered upon the settlement of the Performance-Based Restricted Stock Unit and/or adjust the other terms and conditions of the Performance-Based 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 Performance-Based 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 Performance-Based 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 Performance-Based Restricted Stock Unit or any restrictions on Performance 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 Performance-Based Restricted Stock Unit was awarded.  Without limiting the authority of the Committee under subsection 4(b) above to make modifications to the Performance-Based 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 Performance-Based Restricted Stock Unit or otherwise as a participant in the Plan or which otherwise warrants equitable adjustment to the terms and conditions of the Performance-Based 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 Performance-Based

 

10.3- 7

 

Restricted Stock Unit or any other provision of the Performance-Based Restricted Stock Unit Award Notice or this Agreement or the Plan, the Company may (a) adopt such amendments to the Performance-Based 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 Performance-Based 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 Performance-Based 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 Performance Unit Shares until the Grantee or his or her personal representative or permitted Transferee becomes entitled to receive such Performance Unit Shares pursuant to this Agreement, the Plan and the applicable Performance-Based 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 Performance-Based 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 Performance-Based Restricted Stock Unit Award Notice and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof and supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.

 

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

 

(f)                                                                                    Successors and Assigns.  The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Grantee, the Grantee’s personal representatives, heirs, legatees and other permitted Transferees, assigns and the legal representatives, heirs and legatees of the Grantee’s

 

10.3- 8

 

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, 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 Performance-Based 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 Performance-Based 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.

 

10.3- 9

 

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, INC.
		By:
		Name:
		Title:
GRANTEE:
Name:
Date:
Address for Notice:

 

10.3- 10

Exhibit 10.4

 

Magellan Health, Inc.

2011 Management Incentive Plan

Notice of Terms of Performance-Based Restricted Stock Units

 

(Reference No. 2011-March 2016)

 

Name of Grantee :		«Name»
Date of Grant :		March 3, 2016
Type of Award:		Performance-Based Restricted Stock Units (“PSU”), each PSU representing the right to receive on the terms and conditions of the Performance-Based Restricted Stock Unit Agreement between you (as Grantee) and the Company referenced below and the terms and conditions of this Notice, a share of Ordinary Common Stock, par value $0.01 per share (“Share”), of Magellan Health, Inc. (the “Company”), subject to adjustment thereto as provided in this Notice.
Number of Performance-Based Restricted Stock Units Awarded (“Target PSUs”):
Dividend Equivalent Rights:		None.

 

The terms and conditions of the award are as follows:

 

1.                                       Vesting Provisions

 

(a)                                  General .  Subject to your continued employment or other service with the Company or its subsidiaries through March 3, 2019 (the “Vesting Date”) (except as otherwise provided herein), the Award shall become vested based upon the Company’s “Relative Total Shareholder Return” in terms of percentile ranking as compared to the Peer Group (as defined in Exhibit A) over the period beginning January 1, 2016 and ending December 31, 2018 (the “ Measurement Period ”) in accordance with the schedule below:

 

Relative Total Shareholder Return Ranking over Measurement Period (“TSR Percentile”)		Payout % Level
75th Percentile or Higher		200	%
50 th  Percentile		100	%
25 th  Percentile		50	%
<25 th  Percentile		0	%

 

In the event of a payout percentage level above 100%, you will be awarded additional PSUs so that the total number of PSUs that vest as of the Vesting Date (excluding dividend equivalent PSUs if applicable) equals your Target PSUs multiplied by the payout percentage level. For each percent above the 50 th  TSR Percentile, the payout percentage will be increased four percent, up to

 

10.4- 1

 

but not exceeding the maximum payout percent level. In the event of a payout percentage level below 100%, your Target PSUs will be forfeited to the extent necessary to provide that the total number of PSUs that vest as of the Vesting Date (excluding dividend equivalent PSUs if applicable) equals your Target PSUs multiplied by the payout percentage level. For each percent below the 50 th  TSR Percentile down to the 25 th  percentile, the payout percentage will be decreased two percent.

 

(b)                                  Payout Limits .  In no event shall the number of PSUs vested as of the Vesting Date exceed 200% of the Target PSUs, and if the TSR Percentile achieved is less than the 25 th  percentile, all of your PSUs will be forfeited.

 

2.                                       Termination of Employment.   In the event your employment is terminated prior to vesting of the PSUs for any reason other than as provided in paragraph 3 with regard to certain terminations following a Change in Control of the Company, all PSUs granted hereunder shall immediately be forfeited by you and canceled, except as otherwise provided in the Company’s “Retirement Policy Applicable to Employee Equity Awards” or otherwise provided in any employment agreement between you and the Company in effect at the date of your termination.

 

3.                                       Change in Control. This Award shall earlier vest immediately with respect to 100% of the Target PSUs in the even that, after the date hereof, a Change in Control of the Company shall have occurred and at the time of the change in Control or within the period of 18 months (or such other period as provided by your employment agreement, if any, in effect at the time of the Change in Control) following occurrence of the Change in Control, your service with the Company shall be terminated by the Company without Cause (as defined below) or by you with Good Reason (as defined below), provided that your service with the Company has not previously terminated after the date hereof for any other reason. For purposes of this Award, the terms “Change in Control,” “Cause” and “Good Reason” shall have the same meanings as provided in any employment agreement between the Company and you in effect at the time of the Change in Control (including any terms of substantially comparable significance in any such employment agreement even if not of identical wording) or, if no such employment agreement is in effect at such time or no such meanings are provided in such employment agreement, shall have the meanings ascribed thereto below:

 

(1)                                  A “Change in Control” of the Company shall mean the first to occur after the date hereof of any of the following events:

 

a.               any “person,” as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes a “beneficial owner,” as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 50% or more of the Voting Stock (as defined below) of the Company;

 

b.               the majority of the Board of Directors of the Company consists of individuals other than “Continuing Directors,” which shall mean the members of the Board on the date hereof;

 

c.                the Board of Directors of the Company adopts and, if required by law or the certificate of incorporation of the Corporation, the shareholders approve the dissolution of the Company or a plan of liquidation or comparable plan providing for the disposition of all or substantially all of the Company’s assets;

 

d.               all or substantially all of the assets of the Company are disposed of pursuant to a merger, consolidation, share exchange, reorganization or other transaction unless the shareholders of the Company immediately prior to such merger, consolidation, share exchange, reorganization or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they previously owned the Voting Stock or other ownership interests of the Company, a majority of the Voting Stock or other

 

10.4- 2

 

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

 

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

 

c.                Grantee’s willful failure or refusal to faithfully and diligently perform duties lawfully assigned to Grantee as an officer or employee of the Company or other willful breach of any material term of any employment agreement at the time in effect between the Company and Grantee; or

 

d.               Grantee’s willful failure or refusal to abide by the Company’s policies, rules, procedures or directives, including any material violation of the Company’s Code of Ethics.

 

(3)                                  “Good Reason” shall mean:

 

a.               a material reduction in Grantee’s salary in effect at the time of a Change in Control, unless such reduction is comparable in degree to the reduction that takes place for all other employees of the Company of comparable rank (for which purpose any person who is an executive officer of the Company (as determined for purposes of the Exchange Act shall be considered of comparable rank) or a material reduction in Grantee’s target bonus opportunity for the year in which or any year after the year in which the Change of Control occurs from Grantee’s target bonus opportunity for the year in which the Change in Control occurs (if any) as established under any employment agreement Grantee has with the Company or any bonus plan of the Company applicable to Grantee (or, if no such target bonus opportunity has yet been established for Grantee under a bonus plan applicable to Grantee for the year in which the Change of Control has occurred, the target bonus opportunity so established for Grantee for the immediately preceding year (if any)). For purposes of this provision, an action or actions of the Company will be deemed “material” if, individually or in the aggregate, the action or actions result(s) or potentially result(s) in a reduction in compensation in the current year or a future year having a present value to Grantee of at least one and one half percent (1.5%) of Grantee’s then current base salary, provided that Grantee will have a legal right to claim damages for a breach of contract for any action by the Company or event having an effect described under those paragraphs that does not meet this objective materiality test, and actions may be material in a given case at levels less than the specified level.

 

b.               a material diminution in Grantee’s position, duties or responsibilities as in effect at the time of a Change in Control or the assignment to Grantee of duties which are materially inconsistent with such position, duties and authority, unless in either case such change is made with the consent of the Grantee; or

 

10.4- 3

 

c.                the relocation by more than 50 miles of the offices of the Company which constitute at the time of the Change in Control Grantee’s principal location for the performance of his or her services to the Company;

 

provided that, in each such case, Grantee provides notice to the Company within 90 days that such event or condition constituting Good Reason has arisen, and such event or condition continues uncured for a period of more than 30 days after Grantee gives notice thereof to the Company, and Grantee terminates Service within eighteen months after such event or condition has arisen.

 

For purposes of the foregoing definitions, (A) “the Company” shall include any entity that succeeds to all or substantially all of the business of the Company, (B) “Affiliate” of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified, and (C) “Voting Stock” shall mean any capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors of a corporation and reference to a percentage of Voting Stock shall refer to such percentage of the votes that all such Voting Stock is entitled to cast.

 

4.                                       Leave of Absence.   Unless otherwise required by law, in the event you have an authorized leave of absence at any time during the Measurement Period which absence extends beyond three full calendar months (including any absence that began before the Grant Date), your PSU payout will be prorated based on the number of full and partial months spent on the active payroll (beginning with the first full calendar month after the Grant Date). Payout for the award will be made at the same time as payment would have been made without regard to any leave of absence, and will in all respects be subject to the Company’s actual Relative Total Shareholder Return achievement for the full Measurement Period.

 

5.                                       Settlement of Award.   Shares in settlement of vested PSUs under this Award (or, at the Company’s election, cash in lieu thereof) shall be delivered to you on the Vesting Date (the “Settlement Date”) as further provided in your Performance Based Restricted Stock Unit Agreement with the Company. Settlement and your retention of cash or Shares issued in settlement or the proceeds of a sale of Shares or other benefits resulting form this Award, are subject to the terms of the provisions of the Performance Based Restricted Stock Unit Agreement (without regard to any previous vesting of this Award).

 

6.                                       Transfer Restrictions.  Shares issued in settlement of this Award shall not be subject to any additional transfer restrictions, other than those provided by your Performance Based Restricted Stock Unit Agreement.

 

By signing your name below, you acknowledge and agree that this Award is governed by the terms and conditions of the Magellan Health, Inc. 2011 Management Incentive Plan (the “Plan”) and the Performance Based Restricted Stock Unit Agreement, reference number 2011-March 3, 2016 (the “Agreement”), both of which are hereby made a part of this document. Capitalized terms used but not defined in this Notice of Performance Based Restricted Stock Units shall have the meaning assigned to them in the Plan and Agreement.

 

10.4- 4

 

		MAGELLAN HEALTH, INC.
		Name:	Barry M. Smith
		Title:	Chairman and Chief Executive Officer
GRANTEE:
Name:
Date:

 

10.4- 5

 

Magellan Health, Inc.

 

Performance Based Restricted Stock Unit

Exhibit A — Calculation of Relative Total Shareholder Return

 

·                   “ Relative Total Shareholder Return ” means the Company’s Total Shareholder Return (“TSR”) relative to the TSR of the Peer Companies. Relative TSR will be determined by ranking the Company and the Peer Companies from highest to lowest according to their respective TSRs. After this ranking, the percentile performance of the Company relative to the Peer Companies will be determined as follows:

 

 

where:  “P” represents the percentile performance which will be rounded, if necessary, to the nearest whole percentile by application of regular rounding.

 

“N” represents the remaining number of Peer Companies, plus the Company.

 

“R” represents the Company’s ranking among the Peer Companies.

 

Example: If there are 24 Peer Companies, and the Company ranked 7 th , the performance would be at the 75 th  percentile: 1 – ((7-1)/(25-1)).

 

Relative TSR shall be determined by the Compensation Committee of the Board of Directors of the Company based on the terms set forth in this Exhibit A and in the Compensation Committee’s sole and absolute discretion, provided that in no event shall the Compensation Committee take any action that would constitute “positive discretion” with respect to awards intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code.

 

·                   “ TSR ” means, for each of the Company and the Peer Companies, the company’s total shareholder return, expressed as a percentage, which will be calculated by dividing (i) the Closing Average Share Value by (ii) the Opening Average Share Value and subtracting one from the quotient.

 

·                   “ Opening Average Share Value ” means the average, over the trading days in the Opening Average Period, of the closing price of a company’s stock multiplied by the Accumulated Shares for each trading day during the Opening Average Period.

 

·                   “ Opening Average Period ” means the 30 trading days beginning as of January 1, 2016.

 

·                   “ Accumulated Shares ” means, for a given trading day, the sum of (i) one (1) share and (ii) a cumulative number of shares of the company’s common stock purchased with dividends declared on a company’s common stock, assuming same day reinvestment of the dividends in the common stock of a company at the closing price on the ex-dividend date, for ex-dividend dates during the Opening Average Period or between the Grant Date and the Vesting Date, as applicable.

 

·                   “ Closing Average Share Value ” means the average, over the trading days in the Closing Average Period, of the closing price of the company’s stock multiplied by the Accumulated Shares for each trading day during the Closing Average Period.

 

·                   “ Closing Average Period ” means the 30 trading days immediately preceding January 1, 2019.

 

10.4- 6

 

·                   “ Peer Companies ” means the S&P Health Care Services Industry Index as of February 29, 2016 which includes the following companies:

 

Acadia Healthcare Co Inc		Ensign Group Inc		McKesson Corp
Aceto Corp		Envision Healthcare		MEDNAX Inc
Aetna Inc		ExamWorks Group Inc		Molina Healthcare Inc
Air Methods Corp		Express Scripts Holding Co		Owens & Minor Inc
Amedisys Inc		Hanger Inc		Patterson Cos Inc
AmerisourceBergen Corp		HCA Holdings Inc		PharMerica Corp
AMN Healthcare Services Inc		Health Equity Inc		Premier Inc
Amsurg Corp		Health Net Inc/CA		Providence Service Corp
Anthem Inc		HealthSouth Corp		Quest Diagnostics Inc
Brookdale Senior Living Inc		Healthways Inc		Select Medical Holdings Inc
Capital Senior Living Corp		Henry Schein Inc		Surgical Care Affilliates Inc
Cardinal Health Inc		Humana Inc		Team Health Holdings Inc
Centene Corp		Kindred Healthcare Inc		Tenet Healthcare Corp
Chemed Corp		Laboratory Corp of America		Triple-S Management Corp
CIGNA Corp		Landauer Inc		UnitedHealth Group Inc
Community Health Systems Inc		LHC Group Inc		Universal Health Services Inc
Cross Country Healthcare Inc		LifePoint Hospitals Inc		US Physical Therapy I
DaVita Healthcare Partners		Magellan Health, Inc		VCA Inc
Diplomat Pharmacy				WellCare Health Plans Inc

 

The Peer Companies may be changed as follows:

 

(i)                          In the event of a merger, acquisition or business combination transaction of a Peer Company with or by another Peer Company, the surviving entity shall remain a Peer Company.

 

(ii)                       In the event of a merger of a Peer Company with an entity that is not a Peer Company, or the acquisition or business combination transaction by or with a Peer Company, or with an entity that is not a Peer Company, in each case where the Peer Company is the surviving entity and remains publicly traded, the surviving entity shall remain a Peer Company.

 

(iii)                    In the event of a merger or acquisition or business combination transaction of a Peer Company by or with an entity that is not a Peer Company, a “going private” transaction involving a Peer Company or the liquidation of a Peer Company, where the Peer Company is not the surviving entity or is otherwise no longer publicly traded, the company shall no longer be a Peer Company.

 

(iv)                   In the event of a bankruptcy of a Peer Company, such company shall remain a Peer Company.

 

(v)                      In the event of a stock distribution from a Peer Company consisting of the shares of a new publicly-traded company (a “spin-off”), the Peer Company shall remain a Peer Company and the stock distribution shall be treated as a dividend from the Peer Company based on the closing price of the shares of the spun-off company on its first day of trading.  The performance of the shares of the spun-off company shall not thereafter be tracked for purposes of calculating TSR.

 

·                   For purposes of calculating TSR, the value of any Peer Company shares traded on a foreign exchange will be converted to U.S. dollars.

 

10.4- 7