Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (“Agreement”) is made and entered
into by and between Karen S. Rohan an individual
(“Employee”), and, Magellan Health Services, Inc.
on behalf of itself and its subsidiaries and affiliates
(collectively referred to herein as “Employer”) on this
28 th day of July, 2009 effective as of
August 1, 2009.
WHEREAS , Employer desires to obtain the services of
Employee and Employee desires to continue to render services to
Employer; and
WHEREAS , Employer and Employee desire to set forth the
terms and conditions of Employee’s employment with Employer
under this Agreement;
NOW, THEREFORE
, in consideration of the foregoing
recitals and of the mutual covenants and agreements contained in
this Agreement and Amendment No. 1 to this Agreement executed
simultaneously herewith (hereinafter “Amendment
No. 1”), the parties agree as follows:
STATEMENT OF
AGREEMENT
1.
Employment
. Employer agrees to employ Employee, and
Employee accepts such employment in accordance with the terms of
this Agreement, for a term of one year commencing on
August 1, 2009 and, unless terminated earlier in accordance
with the terms of this Agreement, ending on July 31, 2010.
Thereafter, this Agreement shall automatically renew for twelve
(12) month periods, unless sooner terminated as provided
herein. If either party desires not to renew the Agreement,
they must provide the other party with written notice of their
intent not to renew the Agreement at least one hundred eighty (180)
days prior to the next renewal date. Non-renewal of the Agreement
by either party will in all cases result in termination of
employment at the non-renewal date. Employer’s notice
of intent not to renew the Agreement shall be deemed to be a
termination without cause and the provisions of
Section 6(c) shall apply.
2.
Position and Duties of
Employee . Employee will serve as President of
Employer. Employee agrees to serve in such position, or in such
other positions as Employer determines, and with agreement from
Employee, from time to time, and to perform the duties that
Employer may assign from time to time to Employee, at the same or
greater base salary level and a similar location, until the
expiration of the term or such time as Employee’s employment
with Employer is terminated pursuant to this Agreement.
3.
Time Devoted
. Employee will devote his or her full business
time and energy to the business affairs and interests of Employer,
and will use his or her best efforts and abilities to promote
Employer’s interests. Employee agrees that he or she
will diligently endeavor to perform services contemplated by this
Agreement in a manner consistent with his or her position and in
accordance with the policies established by the Employer.
Excluding charitable and civic organizations, Employee shall not
serve on any outside boards of directors of any organizations
without the prior approval of the board of directors of
Employer.
4.
Compensation
.
(a)
Base Salary
. Employer will pay Employee
an annual base salary in the amount of $530,000 which amount will
be paid in semi-monthly intervals less appropriate withholdings for
federal and state taxes and other deductions authorized by
Employee. Such salary will be subject to review and
adjustment by Employer not less than annually.
(b)
Annual Bonus
. Employee’s annual
target bonus opportunity will be 75% of Base Salary (“Target
Bonus”) under the Company’s Short-Term Incentive Plan
(or successor annual incentive plan applicable to similarly
situated executive officers). The actual payout to
Employee will be based on Company and individual performance during
the measurement period. Any such bonus payable to Employee
shall be paid to Employee during the period January 1 to
March 15 of each year in respect of service in the preceding
year provided that Employee is still employed by Employer at the
time the bonus is paid. Subject to the conditions for payment of
bonus stated above in this paragraph, for the year 2009
Employee’s Target Bonus shall be 37.5% of Base Salary
(“2009 Target”).
(c)
Sign on Equity Grant.
Employee will receive a grant of
options with a total value of $1,375,000, to purchase that number
of shares equal to $1,375,000 divided by the Black Sholes value of
an option to purchase a share of stock of Employer as determined by
Employer on the first business day of the month following the month
of commencement of her employment under this Agreement (the
“Grant Date”) at an exercise price equal to the closing
price of a share of the Common Stock of Employer on NASDAQ on the
Grant Date. Such options shall be granted on terms provided
to other employees of Employer under the Employer’s 2008
Management Incentive Plan on the Grant Date and shall vest ratably
in annual installments over a period of three years from the Grant
Date.
(d)
Benefits . Employee will be eligible to participate
in Employer’s Benefit Plans commensurate with his or her
position on a basis at least as favorable as other similarly
situated senior level executives of Employer. Employee will
receive separate information detailing the terms of such Benefit
Plans and the terms of those plans will control. Employee
also will be eligible to participate in any annual incentive plan
and stock option plan applicable to Employee by their terms
respectively on terms at least as favorable as other similarly
situated senior level executives of Employer. Annual
incentive payments, if any, will be determined and paid (unless
validly deferred if then permitted by the Company) between
January 1 and March 15 of the year following the
performance year. During the term of this Agreement, Employee
will be entitled to such other benefits of employment with Employer
as are now or may later be in effect for salaried employees of
Employer, and also will be eligible to participate in other
benefits adopted for employees at his or her level.
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5.
Expenses
. During the term of this Agreement,
Employer will reimburse Employee promptly for all reasonable
travel, entertainment, parking, business meetings and similar
expenditures in pursuance and furtherance of Employer’s
business upon receipt of reasonably supporting documentation as
required by Employer’s policies applicable to its employees
generally, subject to Section 10(a) (iii).
6.
Termination
.
(a)
Termination Due to
Resignation.
Employee may resign his or her employment at any time by giving 90
days written notice of resignation to Employer. Except as
otherwise set forth in this Agreement, Employee’s employment,
and Employee’s right to receive compensation and benefits
from Employer, will terminate upon the effective date of
Employee’s termination.
If Employee resigns pursuant to this
Section 6(a), Employer’s only remaining financial
obligation to Employee under this Agreement will be to pay, subject
to Section 10: (i) any earned but unpaid Base Salary and
accrued Paid Time Off through the effective date of
Employee’s termination; (ii) reimbursement of expenses
incurred by Employee through the effective date of termination
which are reimbursable pursuant to this Agreement; and
(iii) the Employee’s vested portion of any Magellan
deferred compensation or other benefit plan.
(b)
Termination with Cause
. Except as otherwise set
forth in this Agreement, Employee’s employment, and
Employee’s right to receive compensation and benefits from
Employer, will be terminated for cause at the discretion of
Employer under the following circumstances:
(i)
Employee’s commission of an
act of fraud or dishonesty involving his or her duties on behalf of
Employer;
(ii)
Employee’s failure or refusal
to faithfully and diligently perform duties assigned to Employee or
other breach of any material term under this Agreement;
(iii)
Employee’s failure or refusal
to abide by Employer’s policies, rules, procedures or
directives; or
(iv)
Employee’s conviction of a
felony or a misdemeanor involving moral turpitude.
If Employee is terminated pursuant
to this Section 6(b), Employer’s only remaining
financial obligation to Employee under this Agreement will be to
pay, subject to Section 10: (i) any earned but unpaid
Base Salary and accrued Paid Time Off through the date of
Employee’s termination; (ii) reimbursement of expenses
incurred by Employee through the date of termination which are
reimbursable pursuant to this Agreement; and (iii) the
Employee’s vested portion of any Magellan deferred
compensation or other benefit plan.
For the events described in Sections
6(b) (ii) and (iii), Employer will give Employee written
notice of such deficiency and a reasonable opportunity to cure such
situation, but in no event more than thirty days.
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(c)
Termination Without
Cause . Employer
may terminate this Agreement for any reason without cause at any
time. “Without cause” termination shall also
include, but not be limited to (i) Employer’s notice to
Employee of its intent not to renew this Agreement in accordance
with the provisions of Section 1 hereof;
(ii) Employer’s notice to Employee that his or her
position will be relocated to an office which is greater than 50
miles from Employee’s prior office location; or
(iii) Employer’s material reduction of Employee’s
base salary to an amount less than the base salary identified in
Section 4(a) of this Agreement (a reduction with an
annualized value of 1.5% of Employee’s base pay or more,
taking into account any related effect of the reduction on annual
incentive, shall be deemed material); provided, however, that in
the case of the reasons stated in (i), (ii) and
(iii) above, Employee must have given notice to Employer that
an event under clause (i), (ii) or (iii) has occurred,
that the Employee objects to such action by the Employer and the
circumstance must remain uncorrected by Employer after the
expiration of 30 days after receipt of such notice. If
Employer terminates this Agreement without cause, Employer shall
continue to pay, subject to Section 10, Employee the
compensation provided for in Section 4(a) of this
Agreement for a period of time equal to one year. Such pay
continuation is contingent upon Employee executing Employer’s
standard severance agreement, which incorporates a general release,
at the time of termination. In addition, Employee will
receive (i) any earned but unpaid Base Salary and accrued Paid
Time Off through the date of Employee’s termination;
(ii) reimbursement of expenses incurred by Employee through
the date of termination which are reimbursable pursuant to this
Agreement; and (iii) the Employee’s vested portion of
any Magellan Health Services, Inc. deferred compensation or
other benefit plan, including but not limited to, any stock option
or restricted stock grant plans, in accordance with the terms of
those plans. If Employee participates in any bonus plan(s),
including but not limited to, any long term bonus plan(s), Employer
may in its sole discretion pay Employee, on a pro-rata basis, the
amount of such plan(s) as Employee would have earned if
Employee had been employed for the full calendar year. The
pro-ration will be determined by the fraction of the number of
months in the calendar year in which the Employee worked (rounded
to the nearest whole month) divided by 12 months. In determining
whether a pro-rata bonus shall be paid to Employee, the Employer
may consider factors that include but are not limited to
(i) the Employee’s target bonus (percentage of base
salary), (ii) the Company’s financial performance and
(iii) the Employee’s achievement of his or her specific
performance objectives. At the time of termination, Employer shall
determine the Employee’s bonus amount, if any.
Notwithstanding the foregoing, any payout of such bonus amount
shall be at the Employer’s sole discretion and shall be
contingent upon the Company satisfying the financial targets
established by the Company’s Board of Directors. Payment of
bonus, if any, shall be made at the time of the annual bonus payout
for all employees, subject to Section 4(b). Also,
notwithstanding the foregoing, Employer shall have sole discretion
to make any additional payments to Employee. COBRA coverage
may be elected to continue health, dental, and vision insurance
during the Severance Period and beyond. If COBRA coverage is
elected, Employee will pay only the employee contribution rate for
the health insurance portion of the COBRA coverage during the
Severance Period. Dental and vision coverage under COBRA will
be billed at the full COBRA rate.
(d)
Automatic Termination
. This Agreement will
terminate automatically upon the death or permanent disability of
Employee. Employee will be deemed to be
“Disabled” or to suffer from a “Disability”
within the meaning of this Agreement if, because of a physical or
mental
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impairment, Employee has been unable to perform
the essential functions of his or her position, with or without
reasonable accommodation, for a period of 180 consecutive days, or
if Employee can reasonably be expected to be unable to perform the
essential functions of his or her position for such period.
If Employee is terminated pursuant to this Section 6(d),
Employee or her estate will receive, subject to Section 10,
(i) any earned but unpaid Base Salary and accrued Paid Time
Off through the date of Employee’s termination;
(ii) reimbursement of expenses incurred by Employee through
the date of termination which are reimbursable pursuant to this
Agreement; and (iii) the Employee’s vested portion of
any Magellan Health Services retirement, deferred compensation or
other benefit plan, including but not limited to, any stock option
or restricted stock grant plans, in accordance with the terms of
those plans. If Employee participates in any bonus plan(s),
including but not limited to, any long term bonus plan(s), Employer
may at its sole discretion pay Employee or her estate, on a
pro-rata basis, the amount of such plan(s) as Employee would
have earned if Employee had been employed for the full calendar
year. The pro-ration will be determined by the fraction of the
number of months in the calendar year in which the Employee worked
(rounded to the nearest whole month) divided by 12 months. In
determining whether a pro-rata bonus shall be paid to Employee or
her estate, the Employer may consider factors that include but are
not limited to (i) the Employee’s target bonus
(percentage of base salary); (ii) the Company’s
financial performance; and (iii) the Employee’s
achievement of her specific performance objectives. At the time of
termination, Employer shall determine the Employee’s bonus
amount, if any. Notwithstanding the foregoing, any payout of such
bonus amount shall be at Employer’s sole discretion and shall
be contingent upon the Company satisfying the financial targets
established by the Company’s Board of Directors. Payment of
bonus, if any, shall be made at the time of the annual bonus payout
for all employees, subject to Section 4(b).
(e)
Effect of Termination
. Except as otherwise provided
for in this Section 6, upon termination of this Agreement, all
rights and obligations under this Agreement will cease except for
(i) the rights and obligations under Sections 4 and 5 to the
extent Employee has not been compensated or reimbursed for services
performed prior to termination (the amount of compensation to be
prorated for the portion of the pay period prior to termination);
(ii) the rights and obligations under Sections 7, 8 and 9; and
(iii) all procedural and remedial provisions of this
Agreement.
7.
Protection of Confidential
Information/Non-Competition/Non-Solicitation
.
Employee covenants and agrees as
follows:
(a)(i)
Confidential Information:
During Employer’s employment of Employee and for a period of
one year following the termination of Employee’s employment
for any reason, Employee will not use or disclose, directly or
indirectly, for any reason whatsoever or in any way, other than at
the direction of Employer during the course of Employee’s
employment or after receipt of the prior written consent of
Employer, any confidential information of Employer or its
controlled subsidiaries or affiliates, that comes into her
knowledge during her employment by Employer (the
“Confidential Information” as hereinafter
defined). The obligation not to use or disclose any
Confidential Information will not apply to any Confidential
Information that is or becomes public knowledge through no fault of
Employee, and that may be utilized by the public without any direct
or indirect obligation to Employer, but the termination of the
obligation for non-use or nondisclosure by
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reason of such information becoming public will
extend only from the date such information becomes public
knowledge. The above will be without prejudice to any
additional rights or remedies of Employer under any state or
federal law protecting trade secrets or other
information.
(a)(ii)
Trade Secrets.
Employee shall hold in
confidence all Trade Secrets of Employer, its direct and indirect
subsidiaries or affiliates, and/or its customers that came into her
knowledge during her employment by Employer and shall not disclose,
publish or make use of at any time after the date hereof such Trade
Secrets, other than at the direction of Employer, for as long as
the information remains a Trade Secret.
(a)(iii)
For purposes of this Agreement, the
following definitions apply:
“Confidential Information” means any
data or information, other than Trade Secrets, that is valuable to
Employer and not generally known to the public or to competitors of
Employer. It is understood that the term “Confidential
Information” does not mean and shall not include information
which:
(a)
is or subsequently becomes publicly
available without the breach of any obligation owed to the
Employer;
(b)
is disclosed with the prior written
approval of the Employer; or
(c)
is obligated to be produced under
order of a court of competent jurisdiction or a valid
administrative, congressional, or other subpoena, civil
investigative demand or similar process; provided, however,
that upon issuance of any such order, subpoena, demand or other
process, the Employee shall promptly notify the Employer and shall
provide the Employer with an opportunity (if then available) to
contest, at the Employer’s expense, the propriety of such
order or subpoena (or to arrange for appropriate safeguards against
any further disclosure by the court or administrative or
congressional body seeking to compel disclosure of such
Confidential Information).
“Trade Secret” means
information including, but not limited to, any technical or
non-technical data, formula, pattern, compilation, program, device,
method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or
suppliers or other information similar to any of the foregoing,
which (i) derives economic value, actual or potential, from
not being generally known to, and not being readily ascertainable
by proper means by, other persons who can derive economic value
from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy.
(a)(iv) Interpretation. The restrictions stated in paragraphs
7(a)(i) and 7(a)(ii) are in addition to and not in lieu
of protections afforded to trade secrets and confidential
information under applicable state law. Nothing in this
Agreement is intended to or shall be interpreted as diminishing or
otherwise limiting Employer’s right under applicable state
law to protect its tr
