-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C91tINGYLUx4pdxhpSaJ/d09d+1x4i7ippxnOKVe2nSHLeQwG2I+123bKNE6NerV uQ+9jVimnZuobWIlO/YMyA== 0000909518-06-000037.txt : 20060109 0000909518-06-000037.hdr.sgml : 20060109 20060109151314 ACCESSION NUMBER: 0000909518-06-000037 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20060103 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060109 DATE AS OF CHANGE: 20060109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAGELLAN HEALTH SERVICES INC CENTRAL INDEX KEY: 0000019411 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 581076937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06639 FILM NUMBER: 06519065 BUSINESS ADDRESS: STREET 1: 6950 COLUMBIA GATEWAY STREET 2: STE 400 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4109531000 FORMER COMPANY: FORMER CONFORMED NAME: CHARTER MEDICAL CORP DATE OF NAME CHANGE: 19920703 8-K 1 jd1-6_8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 8-K ----------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): January 3, 2006 Magellan Health Services, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 1-6639 58-1076937 (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) 55 Nod Road Avon, Connecticut 06001 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (860) 507-1900 N/A (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 -- ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. On January 3, 2006, the Management Compensation Committee of the Board of Directors of Magellan Health Services, Inc. (the "Company") approved certain amendments of stock options outstanding under the Company's 2003 Management Incentive Plan, including options held by certain executive officers of the Company. The amendments approved, as further described below, are intended primarily to bring the features of the options into compliance with certain requirements established by Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), which was added to the Code by the American Jobs Creation Act of 2004 and governs as a general matter the federal income tax treatment of deferred compensation. The options that have been amended were originally issued in connection with the consummation of the Company's Third Amended Plan of Reorganization, which occurred on January 5, 2004 (the "2004 Options"), and, because the exercise price of such 2004 Options may be considered to have been less than the fair market value of the shares that may be acquired upon exercise of such options as determined by the market trading in such shares following the consummation of the Company's reorganization, such options might be subject to the provisions of Section 409A, including certain penalty tax provisions on the option holders. Except for certain of the 2004 Options held by the Company's three senior executive officers (Chief Executive Officer Stephen J. Shulman, Chief Operating Officer Rene Lerer and Chief Financial Officer Mark S. Demilio), as detailed below, the amendments in each case reduced the period in which the 2004 Options, once vested, could be exercised from the tenth anniversary of the date of grant (or certain earlier times if the optionholder's employment with the Company and its subsidiaries earlier terminated) to the end of the calendar year in which the option vests. The vesting schedule of the options was not changed but the option was made exercisable only in the year in which the option vested; no change was made in the exercise price or other material terms. Thus, those of the 2004 Options that would vest in early 2006, as amended, can only be exercised until the end of 2006; those that would vest in early 2007 can only be exercised until the end of 2007 and those that would vest in 2008 can only be exercised until the end of 2008 (except where the exercise period will end earlier because of an earlier termination of the optionholder's employment with the Company or its subsidiaries). These amendments cover options for 1,002,428 shares of Ordinary Common Stock of the Company held by approximately 75 members of the Company's management, including options held by three executive officers, Jeffrey D. Emerson, Eric Reimer and Anthony M. Kotin covering, respectively, 45,832, 33,332 and 45,832 shares of the Company's Ordinary Common Stock. The form of amendment to the Option Agreement previously entered into by such optionholders that effectuates such amendments is attached hereto as Exhibit 10.1. 2 In the case of the 2004 Options issued to the Company's three senior executive officers (Messrs. Shulman, Lerer and Demilio), the amendments also limited the time during which the options could be exercised but also included a deferral of exercisability with respect to certain of the options. The vesting schedule of the options was not changed -- the options will continue to vest in January 2006 and January 2007 -- and no change was made in the exercise price or other material terms except as described below. However, the period in which the option, once vested, could be exercised was reduced from the tenth anniversary of the date of grant (or certain earlier times if the optionholder's employment with the Company and its subsidiaries terminated earlier) to the end of the calendar year in which the option first becomes exercisable. In addition, except for options for 68,834 shares in the case of Mr. Shulman, 41,031 shares in the case of Mr. Lerer and 27,533 shares in the case of Mr. Demilio, as to all of their 2004 Options that vest in January 2006, the time when the options could first be exercised was deferred until January 5, 2007 (except in certain instances where, as already provided by such options, a vested option by its terms would become exercisable earlier following a termination of his employment). This deferral until January 5, 2007 of the time when certain of these options would first become exercisable was agreed upon in connection with the waiver by the Management Compensation Committee of the restriction on sale before January 5, 2007 (the third anniversary of the consummation of the Company's reorganization) of 206,501 shares in the case of Mr. Shulman, 123,901 shares in the case of Mr. Lerer and 82,601 shares in the case of Mr. Demilio, that they had previously acquired upon exercise of a portion of their 2004 Options that vested in January 2005. As a result of these amendments, of the 2004 Options, options for a total of 68,834 shares in the case of Mr. Shulman, 41,031 shares in the case of Mr. Lerer and 27,533 shares in the case of Mr. Demilio will be exercisable in 2006 (and will expire if not exercised before the end of 2006) and options for a total of 894,841 shares in the case of Mr. Shulman, 537,175 shares in the case of Mr. Lerer and 357,936 shares in the case of Mr. Demilio will be exercisable starting on January 5, 2007 (and will expire if not exercised before the end of 2007). In addition, Messrs. Shulman, Lerer and Demilio hold other options, granted in 2005, that have or will become exercisable in 2006 and 2007 for additional shares of the Company's Ordinary Common Stock (49,563 shares, 29,738 shares and 19,825 shares, respectively, in 2006 and 49,562 shares, 29,737 shares and 19,825 shares, respectively, in 2007). These options were not amended. The forms of amendment of the option grant awards for the three senior executive officers that effectuate the amendments referred to above are attached hereto as Exhibits 10.2, 10.3 and 10.4 (each form amending one of the three different 2004 Options granted to all three executive officers). Because the Company's employment agreements with the senior executive officers provide for the 2004 Options as part of their compensation, each senior executive officer and the Company also entered into an amendment of his employment agreement approving the change in option terms for purposes of such employment agreement and confirming that the employment agreements otherwise remain unchanged. These employment agreement amendments are attached hereto as Exhibits 10.5, 10.6 and 10.7. 3 ITEM 9.01 -- FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 10.1 Form of First Amendment to Stock Option Agreement. 10.2 First form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.3 Second form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.4 Third form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.5 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Steven J. Shulman. 10.6 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Rene Lerer. 10.7 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Mark S. Demilio. 4 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MAGELLAN HEALTH SERVICES, INC. By: /s/ Mark S. Demilio ----------------------------------- Name: Mark S. Demilio Title: Executive Vice President and Chief Financial Officer Dated: January 9, 2006 5 Exhibit Index ------------- Exhibit No. Exhibit ----------- ------- 10.1 Form of First Amendment to Stock Option Agreement. 10.2 First form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.3 Second form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.4 Third form of Notice of Amendment of Stock Option Grant, dated as of January 3, 2006, between the Company and Steven J. Shulman, Rene Lerer or Mark S. Demilio. 10.5 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Steven J. Shulman. 10.6 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Rene Lerer. 10.7 Amendment of Employment Agreement, dated as of January 3, 2006, between the Company and Mark S. Demilio. 6 EX-10 2 jd1-6ex10_1.txt 10.1 EXHIBIT 10.1 FIRST AMENDMENT TO STOCK OPTION AGREEMENT THIS FIRST AMENDMENT TO STOCK OPTION AGREEMENT between Magellan Health Services, Inc., a Delaware corporation ("Grantor" or "Company") and ___________("Grantee") is entered into as of the 3rd day of January, 2006. WHEREAS, the Grantee was granted options by the Grantor on January 5, 2004 for so-called "Type A Options" and "Type B Options" as defined in the Stock Option Agreement effective as of January 5, 2004 (the "Agreement"), and WHEREAS, the Jobs Creation Act of 2005 (the "Act") may impose certain additional taxes in connection with the Type A Options and the Type B Options, and WHEREAS, the Act and the regulations issues thereunder permit the amendment of the TypeA and Type B options to reduce such additional tax. NOW THEREFORE, the Grantor and Grantee hereby agree to amend the Agreement as follows: 1. TERM: To delete Section 1. "Term' in its entirety and to insert in place thereof the following; " Term. Subject to the early termination provisions of Section 2 and the exercise requirements of Section 3, this Option shall expire as follows: (i) Options which vest in 2006 shall expire on December 31, 2006, (ii) Options which vest in 2007 shall expire on December 31, 2007, and (iii) Options which vest in 2008 shall expire on December 31, 2008". 2. TIMING OF EXERCISE: To delete Section 3. "Date and Timing of Exercise" in its entirety and to insert in place thereof the following: " Exercise of Options. Options which vest in the calendar year 2006 shall be exercisable only during the calendar year 2006, Options which vest in the calendar year 2007 shall be exercisable only during the calendar year 2007, and Options which vest in the calendar year 2008 shall be exercisable only during the calendar year 2008. If Grantee's employment is terminated for any reason other than death or disability, the vested portion of this Option held by Grantee shall be exercisable for the lesser of six months or the end of the calendar year for which such vested Option is exercisable pursuant to this paragraph. In the event of the death or disability of Grantee, the vested portion of this Option shall be exercisable for the lesser of twelve months or the end of the calendar year for which such Option is exercisable pursuant to this paragraph. IN WITNESS WHEREOF, this First Amendment to Stock Option Agreement has been executed as of the date first above written by the Grantor and Grantee. Magellan Health Services, Inc. By:____________________________ _______________________________ Grantee EX-10 3 jd1-6ex10_2.txt 10.2 EXHIBIT 10.2 MAGELLAN HEALTH SERVICES, INC. ------------------------------ 2003 MANAGEMENT INCENTIVE PLAN NOTICE OF AMENDMENT OF STOCK OPTION GRANT REFERENCE No. 2004-___-1 (___________) As of January 5, 2004, Amended January 3, 2006 THIS NOTICE REFLECTS AMENDMENTS OF THE TERMS OF THE STOCK OPTION GRANT BEARING THE SAME REFERENCE NUMBER DATED AS OF JANUARY 5, 2004, INCLUDING A DEFERRAL OF THE TIME AT WHICH THE OPTION CAN FIRST BE EXERCISED TO JANUARY 5, 2007 AS TO THOSE SHARES SUBJECT TO THE OPTION THAT PREVIOUSLY WERE EARLIER EXERCISABLE AND THE REDUCTION OF THE PERIOD DURING WHICH THE OPTION CAN BE EXERCISED FOR ALL SHARES SUBJECT TO THE OPTION TO END ON DECEMBER 31, 2007 IN ALL CIRCUMSTANCES, AND SUPERCEDES IN ITS ENTIRETY AND REPLACES THE PREVIOUS NOTICE OF THE OPTION GRANT. NAME OF OPTIONEE: SHARES SUBJECT TO OPTION: ________ shares of the Ordinary Common Stock of Magellan Health Services, Inc. ("Shares") as of January 3, 2006. (Original grant was for ________ Shares but the Option has previously been exercised for ________ Shares.) TYPE OF OPTION: ___X___ Nonqualified ________ Incentive EXERCISE PRICE PER SHARE: $ 11.91 DATE OF GRANT; DATE OF AMENDMENT: As of January 5, 2004; amended as of January 3, 2006. EXPIRATION DATE: December 31, 2007. DATE EXERCISABLE: This option shall be exercisable (prior to its expiration) in whole or in part (i) only to the extent it is vested, (ii) only after January 5, 2007 (even if earlier vested) and (iii) only to the extent the Trading Price on the date of exercise (on or after the vesting date) exceeds the Target Price, all as determined as provided below. In addition, after termination of Optionee's Service, this option shall be exercisable (prior to its expiration) during the time period and on the conditions specified below (and only during such time period and on such conditions, notwithstanding the provisions of the Option Agreement otherwise governing the exercise of this option after termination of Optionee's Service). The Target Price shall be the amount equal to the Exercise Price plus a cumulative return thereon of 16% per annum, with daily compounding, from the Date of Grant until the date for determining the Trading Price applicable to the exercise of the option. The Trading Price applicable to the date of exercise of the option shall be determined as of the day on which the Shares traded immediately preceding the exercise date based on the Fair Market Value of the Shares for each of the 20 consecutive trading days ending on (and including) such trading date. Exercise after termination of Service: -------------------------------------- >> In the event Optionee's Service terminates by reason of his resignation, this option (to the extent then vested and subject to the foregoing condition for exercise regarding the Trading Price of the Shares) shall be exercisable immediately and shall remain exercisable only until the later of (i) 90 days following the date Optionee's Service terminates by reason of such resignation and (ii) the 45th day following the first day on or after the date Optionee's Service so terminates when the Optionee is not subject to a prohibition imposed by the Company on trading securities of the Company and may sell the Shares acquired upon exercise of the Option without violation of Rule 10b-5 under the Securities Exchange Act of 1934 (but not later than the earlier of the end of the calendar year in which this option became exercisable or the expiration of this option on December 31, 2007). >> In the event Optionee's Service terminates by reason of discharge by the Company for cause, this option shall cease to be exercisable (even if vested and notwithstanding the Trading Price at the time) automatically upon the effective date Optionee's Service so terminates. >> In the event Optionee's Service terminates by reason of his death or disability, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable for two years following such termination of Service, subject to the foregoing condition for exercise regarding the Trading Price of the Shares (but not later than the earlier of the end of the calendar year in which this option became exercisable or the expiration of this option on December 31, 2007). >> In the event Optionee's Service terminates by reason of discharge without cause or Optionee terminates his Service for good reason, unless such termination of Service is in connection with a change in control of the Company, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option on December 31, 2007, subject to the foregoing condition for exercise regarding the Trading Price of the Shares. 2 >> In the event Optionee's Service terminates by reason of discharge by the Company without cause or Optionee terminates his Service for good reason in connection with a change in control of the Company, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option on December 31, 2007, subject to the foregoing condition for exercise regarding the Trading Price of the Shares; provided, however, that, upon the occurrence of a change in control of the Company before a termination of Optionee's Service, the foregoing condition for exercise regarding the Trading Price of the Shares shall no longer apply (and shall be deemed satisfied) upon the termination of Optionee's Service. For purposes of determining when the foregoing provisions concerning exercise after termination of Service apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). VESTING: This option shall vest with respect to one-half of the Shares subject hereto (1/3 of the Shares originally subject hereto upon grant on January 5, 2004) on each of the second and third anniversaries of the Date of Grant, provided that Optionee's Service continues until the date of vesting, except that, if Optionee's Service with the Company terminates (i) by reason of his death or disability, (ii) by reason of discharge by the Company without cause (whether or not in connection with a change in control of the Company) or (iii) by the Optionee for good reason (whether or not in connection with a change in control of the Company), this option shall immediately vest in full upon such earlier termination in Service. In addition, in the event of a change in control of the Company, this option shall immediately vest in full. Notwithstanding the vesting of this option as to part of the Shares subject to this option at an earlier time as provided by the immediately preceding sentence, this option shall not be exercisable as to any Shares before to the date provided above. 3 For purposes of determining when the foregoing provisions concerning acceleration of vesting apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). OTHER TERMS: The provisions of Section 12 of the Plan and subsection 2(c) of the Stock Option Agreement shall not apply to this option; the provisions of Optionee's Employment Agreement with the Company dated as of January 5, 2004 shall instead apply to any circumstance in which such provisions would otherwise apply. By signing your name below, you accept the amendment, as provided above, of the option award previously granted to you and acknowledge and agree that this award is granted under and governed by the terms and conditions of Magellan Health Services, Inc. 2003 Management Incentive Plan and the related Stock Option Agreement, reference number 2004-001, both of which are hereby made a part of this document. Optionee: ___________________________ Name: MAGELLAN HEALTH SERVICES, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ 4 EX-10 4 jd1-6ex10_3.txt 10.3 EXHIBIT 10.3 MAGELLAN HEALTH SERVICES, INC. ------------------------------ 2003 MANAGEMENT INCENTIVE PLAN NOTICE OF AMENDMENT OF STOCK OPTION GRANT REFERENCE No. 2004-___-2 (___________) As of January 5, 2004, Amended January 3, 2006 THIS NOTICE REFLECTS AMENDMENTS OF THE TERMS OF THE STOCK OPTION GRANT BEARING THE SAME REFERENCE NUMBER DATED AS OF JANUARY 5, 2004, INCLUDING A DEFERRAL OF THE TIME AT WHICH THE OPTION CAN FIRST BE EXERCISED TO JANUARY 5, 2007 AS TO THOSE SHARES SUBJECT TO THE OPTION THAT PREVIOUSLY WERE EARLIER EXERCISABLE AND THE REDUCTION OF THE PERIOD DURING WHICH THE OPTION CAN BE EXERCISED FOR ALL SHARES SUBJECT TO THE OPTION TO END ON DECEMBER 31, 2007 IN ALL CIRCUMSTANCES, AND SUPERCEDES IN ITS ENTIRETY AND REPLACES THE PREVIOUS NOTICE OF STOCK OPTION GRANT. NAME OF OPTIONEE: SHARES SUBJECT TO OPTION: ________ shares of the Ordinary Common Stock of Magellan Health Services, Inc. ("Shares") as of January 3, 2006. (Original grant was for ________ Shares but the Option has previously been exercised for ________ Shares.) TYPE OF OPTION: ___X___ Nonqualified ________ Incentive EXERCISE PRICE PER SHARE: $ 10.43 DATE OF GRANT; DATE OF AMENDMENT: As of January 5, 2004; amended as of January 3, 2006 EXPIRATION DATE: December 31, 2007. DATE EXERCISABLE: This option shall be exercisable (prior to its expiration) in whole or in part (i) only to the extent it is vested, (ii) only after January 5, 2007 and (iii) only to the extent the Trading Price on the date of exercise (on or after the vesting date) exceeds the Target Price, all as determined as provided below. In addition, after termination of Optionee's Service, this option shall be exercisable (prior to its expiration) during the time period and on the conditions specified below (and only during such time period and on such conditions, notwithstanding the provisions of the Option Agreement otherwise governing the exercise of this option after termination of Optionee's Service). The Target Price shall be the amount equal to $11.91 plus a cumulative return thereon of 10% per annum, with daily compounding, from the Date of Grant until the date for determining the Trading Price applicable to the exercise of the option. The Trading Price applicable to the date of exercise of the option shall be determined as of the day on which the Shares traded immediately preceding the exercise date based on the Fair Market Value of the Shares for each of the 20 consecutive trading days ending on (and including) such trading date. Exercise after termination of Service: -------------------------------------- >> In the event Optionee's Service terminates by reason of his resignation, this option (to the extent then vested and subject to the foregoing condition for exercise regarding the Trading Price of the Shares) shall be exercisable immediately, and shall remain exercisable only until the later of (i) 90 days following the date Optionee's Service terminates by reason of such resignation and (ii) the 45th day following the first day on or after the date Optionee's Service so terminates when the Optionee is not subject to a prohibition imposed by the Company on trading securities of the Company and may sell the Shares acquired upon exercise of the Option without violation of Rule 10b-5 under the Securities Exchange Act of 1934 (but not later than the earlier of the end of the calendar year in which this option became exercisable or the expiration of this option on December 31, 2007). >> In the event Optionee's Service terminates by reason of discharge by the Company for cause, this option shall cease to be exercisable (even if vested and notwithstanding the Trading Price at the time) automatically upon the effective date Optionee's Service so terminates. >> In the event Optionee's Service terminates by reason of his death or disability, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable for two years following such termination of Service, subject to the foregoing condition for exercise regarding the Trading Price of the Shares (but not later than the earlier of the end of the calendar year in which this option became exercisable or the expiration of this option on December 31, 2007). >> In the event Optionee's Service terminates by reason of discharge without cause or Optionee terminates his Service for good reason, unless such termination of Service is in connection with a change in control of the Company, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option on December 31, 2007, subject to the foregoing condition for exercise regarding the Trading Price of the Shares. 2 >> In the event Optionee's Service terminates by reason of discharge by the Company without cause or Optionee terminates his Service for good reason in connection with a change in control of the Company, this option shall vest as provided below and shall be exercisable immediately and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option on December 31, 2007, subject to the foregoing condition for exercise regarding the Trading Price of the Shares; provided, however, that, upon the occurrence of a change in control of the Company before a termination of Optionee's Service, the foregoing condition for exercise regarding the Trading Price of the Shares shall no longer apply (and shall be deemed satisfied) upon the termination of Optionee's Service. For purposes of determining when the foregoing provisions concerning exercise after termination of Service apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). VESTING: One-half (1/2) of the Shares subject to this option (________ and then ________) (being 1/3 of the Shares originally subject hereto upon grant on January 5, 2004) shall vest on each of the second and third anniversaries of the Date of Grant, provided that Optionee's Service continues until the date of vesting, except that, if Optionee's Service with the Company terminates (i) by reason of his death or disability, (ii) by reason of discharge by the Company without cause (whether or not in connection with a change in control of the Company) or (iii) by the Optionee for good reason (whether or not in connection with a change in control of the Company), this option shall immediately vest in full upon such earlier termination in Service. In addition, in the event of a change in control of the Company, this option shall immediately vest in full. Notwithstanding the vesting of this option as to part of the Shares subject to this option at an earlier time as provided by the immediately preceding sentence, this option shall not be exercisable as to any Shares before the date provided above. 3 For purposes of determining when the foregoing provisions concerning acceleration of vesting apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). ADDITIONAL TERMS: Option Shares issues upon exercise of this option may not be sold or otherwise Transferred until the earlier of (i) the third anniversary of the Date of Grant or (ii) termination of Executive's service. For purposes of this provision, the same terms of the Option Agreement as apply in respect of a sale or other Transfer of options (including the definition of "Transfer") shall apply to such Option Shares and for purposes of implementing such restrictions, as a condition of the issuance of such Option Shares, the Company may require the Optionee to enter into an agreement comparable to a Restricted Stock Agreement under the Plan with respect to such Option Shares. OTHER TERMS: The provisions of Section 12 of the Plan and subsection 2(c) of the Stock Option Agreement shall not apply to this option; the provisions of Optionee's Employment Agreement with the Company dated as of January 5, 2004 shall instead apply to any circumstance in which such provisions would otherwise apply. By signing your name below, you accept the amendment, as provided above, of the option previously granted to you and acknowledge and agree that this award is granted under and governed by the terms and conditions of Magellan Health Services, Inc. 2003 Management Incentive Plan and the related Stock Option Agreement, reference number 2004-___, both of which are hereby made a part of this document. Optionee: ______________________________ Name: MAGELLAN HEALTH SERVICES, INC. By:____________________________________ Name: _________________________________ Title:_________________________________ 4 EX-10 5 jd1-6ex10_4.txt 10.4 EXHIBIT 10.4 MAGELLAN HEALTH SERVICES, INC. ------------------------------ 2003 MANAGEMENT INCENTIVE PLAN NOTICE OF AMENDMENT OF STOCK OPTION GRANT REFERENCE No. 2004-___-3 (____________) As of January 5, 2004, Amended January 3, 2006 THIS NOTICE REFLECTS AMENDMENTS OF THE TERMS OF THE STOCK OPTION GRANT BEARING THE SAME REFERENCE NUMBER DATED AS OF JANUARY 5, 2004, INCLUDING A DEFERRAL OF THE TIME AT WHICH THE OPTION CAN FIRST BE EXERCISED TO JANUARY 5, 2007 AS TO PART OF THE SHARES SUBJECT TO THE OPTION THAT PREVIOUSLY WERE EARLIER EXERCISABLE AND THE REDUCTION OF THE PERIOD DURING WHICH THE OPTION CAN BE EXERCISED FOR SOME OF THE SHARES SUBJECT TO THE OPTION TO END ON DECEMBER 31, 2006 AND TO END ON DECEMBER 31, 2007 AS TO ALL OTHER SHARES SUBJECT TO THE OPTION, IN EACH CASE IN ALL CIRCUMSTANCES, AND SUPERCEDES IN ITS ENTIRETY AND REPLACES THE PREVIOUS NOTICE OF THE OPTION GRANT. NAME OF OPTIONEE: SHARES SUBJECT TO OPTION: ________ shares of the Ordinary Common Stock of Magellan Health Services, Inc. ("Shares") as of January 3, 2006. (Original grant was for ________ Shares but the Option has previously been exercised for ________ Shares.) TYPE OF OPTION: ___X___ Nonqualified ________ Incentive EXERCISE PRICE PER SHARE: $ 11.91 DATE OF GRANT; DATE OF AMENDMENT: As of January 5, 2004; amended as of January 3, 2006. EXPIRATION DATE: December 31, 2007, except that, in respect of the ________ Shares for which this option is exercisable on January 5, 2006, this option shall expire on December 31, 2006. DATE EXERCISABLE: This option shall be exercisable (prior to its expiration) in whole or in part (i) only to the extent it is vested and (ii) as follows: ________ Shares after January 5, 2006 and until December 31, 2006 and ________ Shares after January 5, 2007 and until December 31, 2007. In addition, after termination of Optionee's Service, this option shall be exercisable (prior to its expiration) during the time period and on the conditions specified below (and only during such time period and on such conditions, notwithstanding the provisions of the Option Agreement otherwise governing the exercise of this option after termination of Optionee's Service). Exercise after termination of Service: -------------------------------------- >> In the event Optionee's Service terminates by reason of his resignation, this option (to the extent then vested) shall be exercisable immediately (regardless of the restrictions on exercisability set forth above) but only until the later of (i) 90 days following the date Optionee's Service terminates by reason of such resignation and (ii) the 45th day following the first day on or after the date Optionee's Service so terminates when the Optionee is not subject to a prohibition imposed by the Company on trading securities of the Company and may sell the Shares acquired upon exercise of the Option without violation of Rule 10b-5 under the Securities Exchange Act of 1934 (but not later than the earlier of the end of the calendar year in which such termination occurs or the expiration of the option (on December 31, 2006 or 2007, as the case may be). >> In the event Optionee's Service terminates by reason of discharge by the Company for cause, this option shall cease to be exercisable (even if vested) automatically upon the effective date Optionee's Service so terminates. >> In the event Optionee's Service terminates by reason of his death or disability, this option shall vest as provided below and shall be exercisable immediately (regardless of the restrictions on exercisability set forth above) and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option (on December 31, 2006 or 2007, as the case may be). >> In the event Optionee's Service terminates by reason of discharge by the Company without cause or Optionee terminates his Service for good reason (whether or not in connection with a change in control of the Company), this option shall vest as provided below and shall be exercisable immediately (regardless of the restrictions on exercisability set forth above) and shall remain exercisable until the earlier of the end of the calendar year in which such termination occurs or the expiration of the option (on December 31, 2006 or 2007, as the case may be). For purposes of determining when the foregoing provisions concerning exercise after termination of Service apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). VESTING: This option shall vest with respect one-half of the Shares subject hereto (1/3 of the Shares originally subject hereto upon grant on January 5, 2004), i.e., ________ Shares, on each of the second and third anniversaries of the Date of Grant, provided that Optionee's Service continues until the date of vesting, except that, if Optionee's Service with the Company terminates (i) by reason of his death or disability, (ii) by reason of discharge by the Company without cause (whether or not in connection with a change in control of the Company) or (iii) by the Optionee for good reason (whether or not in connection with a change in control of the Company), this option shall immediately vest in full upon such earlier termination in Service. In addition, in the event of a change in control of the Company, this option shall immediately vest in full. Notwithstanding the vesting of this option as to part of the Shares subject to this option at an earlier time as provided by the immediately preceding sentence, this option shall not be exercisable as to any Shares before the date provided above. For purposes of determining when the foregoing provisions concerning acceleration of vesting apply (including what events constitute a change in control of the Company and when a termination of Service is in connection with a change in control of the Company), the provisions of Optionee's Employment Agreement dated as of January 5, 2004 shall apply (even in the event such agreement has previously expired in accordance with its terms). OTHER TERMS: The provisions of Section 12 of the Plan and subsection 2(c) of the Stock Option Agreement shall not apply to this option; the provisions of Optionee's Employment Agreement with the Company dated as of January 5, 2004 shall instead apply to any circumstance in which such provisions would otherwise apply. By signing your name below, you accept the amendment, as provided above, of the option award previously granted to you and acknowledge and agree that this award is granted under and governed by the terms and conditions of Magellan Health Services, Inc. 2003 Management Incentive Plan and the related Stock Option Agreement, reference number 2004-001, both of which are hereby made a part of this document. Optionee: ___________________________ Name: MAGELLAN HEALTH SERVICES, INC. By:____________________________________ Name:__________________________________ Title:_________________________________ 3 EX-10 6 jd1-6ex10_5.txt 10.5 EXHIBIT 10.5 [Magellan Health Services logo] 55 Nod Road Avon, CT 06001 (860) 507-1900 tel (860) 507-1900 fax January 3, 2006 Dear Mr. Shulman: This letter confirms that your Employment Agreement, dated as of January 5, 2004, with Magellan Health Services, Inc. has been amended in regard to the provisions concerning the terms of the options issued to you pursuant to the agreement in accordance with the three Notices of Stock Option Grant dated as of January 5, 2004, including the effect on such options of a termination of your employment, all as reflected in the three Notices of Amendment of Stock Option Grant, dated as of January 3, 2006, copies of which are attached hereto. Upon your execution of this letter, you acknowledge and agree that the terms and conditions of such options shall be as provided in such Notices of Amendment of Stock Options, notwithstanding any contrary provision in your Employment Agreement, which shall in all other respects remain in full force and effect. MAGELLAN HEALTH SERVICES, INC. By: /s/ Daniel N. Gregoire -------------------------------- Name: Daniel N. Gregoire Title: General Counsel Acknowledged and agreed: By: /s/ Steven J. Shulman -------------------------------- Steven J. Shulman EX-10 7 jd1-6ex10_6.txt 10.6 EXHIBIT 10.6 [Magellan Health Services logo] 55 Nod Road Avon, CT 06001 (860) 507-1900 tel (860) 507-1900 fax January 3, 2006 Dear Mr. Lerer: This letter confirms that your Employment Agreement, dated as of January 5, 2004, with Magellan Health Services, Inc. has been amended in regard to the provisions concerning the terms of the options issued to you pursuant to the agreement in accordance with the three Notices of Stock Option Grant dated as of January 5, 2004, including the effect on such options of a termination of your employment, all as reflected in the three Notices of Amendment of Stock Option Grant, dated as of January 3, 2006, copies of which are attached hereto. Upon your execution of this letter, you acknowledge and agree that the terms and conditions of such options shall be as provided in such Notices of Amendment of Stock Options, notwithstanding any contrary provision in your Employment Agreement, which shall in all other respects remain in full force and effect. MAGELLAN HEALTH SERVICES, INC. By: /s/ Daniel N. Gregoire -------------------------------- Name: Daniel N. Gregoire Title: General Counsel Acknowledged and agreed: By: /s/ Rene Lerer -------------------------------- Rene Lerer EX-10 8 jd1-6ex10_7.txt 10.7 EXHIBIT 10.7 [Magellan Health Services logo] 55 Nod Road Avon, CT 06001 (860) 507-1900 tel (860) 507-1900 fax January 3, 2006 Dear Mr. Demilio: This letter confirms that your Employment Agreement, dated as of January 5, 2004, with Magellan Health Services, Inc. has been amended in regard to the provisions concerning the terms of the options issued to you pursuant to the agreement in accordance with the three Notices of Stock Option Grant dated as of January 5, 2004, including the effect on such options of a termination of your employment, all as reflected in the three Notices of Amendment of Stock Option Grant, dated as of January 3, 2006, copies of which are attached hereto. Upon your execution of this letter, you acknowledge and agree that the terms and conditions of such options shall be as provided in such Notices of Amendment of Stock Options, notwithstanding any contrary provision in your Employment Agreement, which shall in all other respects remain in full force and effect. MAGELLAN HEALTH SERVICES, INC. By: /s/ Daniel N. Gregoire -------------------------------- Name: Daniel N. Gregoire Title: General Counsel Acknowledged and agreed: By: /s/ Mark S. Demilio -------------------------------- Mark S. Demilio -----END PRIVACY-ENHANCED MESSAGE-----