CORPORATE INCENTIVE PLAN
FY96
I. PURPOSE
The purpose of this plan is to provide an incentive to certain
executives and key employees of the Company who contribute to the
success of the enterprise by offering an opportunity to such persons to
earn compensation in addition to their salaries, based on the pre-tax
net income of Magellan Health Services, Inc. (the "Company").
II. ELIGIBLE PARTICIPANTS
Eligibility for participation in the Incentive Plan shall be determined
by management from among those key employees who are in a position to
materially contribute to the success of the Company. Additionally,
requirements for participation are outlined in Section III, Conditions
for Receiving Payment.
If a person otherwise eligible for participation in the Incentive Plan
becomes an employee of the Company during the fiscal year, such
employee shall be eligible to receive a prorated portion of the annual
bonus (number of semi-monthly pay periods of employment divided by
twenty-four), subject to the approval of such employee's vice
president.
III. CONDITIONS FOR RECEIVING PAYMENT
Incentive compensation under the Incentive Plan is not an integral part
of an employee's compensation package. An employee's base salary
compensates the employee for the expected results of any given job.
Payment of incentive compensation is at the discretion of the
Companies' Board of Directors.
NO INCENTIVE COMPENSATION WILL BE PAID TO ANY EMPLOYEE IF EMPLOYMENT IS
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TERMINATED, WHETHER VOLUNTARY OR INVOLUNTARY, PRIOR TO THE ACTUAL
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PAYMENT DATE.
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However, the Companies' Board of Directors retains authority to make
exceptions to the foregoing policy in unusual or meritorious cases
including, but not limited to, the death of an employee during the
fiscal year or termination of employment due to total or partial
disability or retirement with the consent of the Company.
IV. METHOD OF CALCULATION
Each participant must meet the goals established by management. In
order to receive a bonus, each participant must be recommended for all,
part or none of the bonus by his superior, with the approval of the
Chairman. Each participant's assigned bonus percentage of base pay
corresponds to established targets set by management. The percentages
are on a variable scale and calculated on performance to target. The
various percentages of achievement are:
TARGET BONUS PERCENTAGE
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100% 110% 120%
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Chairman 50.0% 67.5% 85%
Senior Officer (SVP & above) 40.0% 65.0% 85% BASE
Officer (AVP & VP) 32.5% 60.0% 80% SALARY
Sr. Exec., Exec. & Sr. Dir. 25.0% 40.0% 50%
Director 15.0% 25.0% 35%
Other Corporate 5.0% 10.0% 15%
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V. DISTRIBUTION
The distribution of bonuses shall be made promptly after completion of
unaudited financial statements for the 1996 fiscal year or as may be
otherwise approved by the Board of Directors. Specific provisions
regarding distribution are outlined in Section III, Conditions for
Receiving Payment.
VI. ADMINISTRATION
The plan will be administered by a Committee of Company officers.
VII. INTERPRETATION AND DURATION
Any areas of question, interpretation, dispute, etc., concerning any
area of this plan shall be governed by the Committee of Company
officers. The Committee is defined as the Chairman, the Executive Vice
President/ Chief Financial Officer, the Executive Vice President of
Administration, and the Sr. Vice President of Human Resources. This
plan shall be effective for the fiscal year beginning October 1, 1995.
The Committee and the Board of Directors each retain the authority to
modify, repeal or discontinue the plan on a prospective or
retrospective basis, for any reason.
VIII. DEFINITION OF TERMS
A. Pre-tax Net Income of the Company is income before provision
for state and federal income taxes and subject to adjustment
for the following:
1. Change in Operations
A significant, unexpected change in the operation of
the company as a result of condemnation, major
physical damage from a fire or other catastrophe,
strike, governmental seizure or disruption due to
construction will result in an adjustment to income.
This will avoid any penalty or windfall as a result
of changes in capacity to contribute to overall
parent company earnings which are not the result of
the participant's ability to manage the operation.
This does not include changes in Blue Cross or
governmental reimbursement policies, loss of a prime
admitter, expansion by another hospital, etc., which
are regarded as normal business risks.
2. Change in Accounting Policy or Practice
A material change (from the prior year) in accounting
policy or practice which has an effect on the
company's Pre-tax Net Income will be considered as an
adjustment to Pre-tax Net Income. Year end
adjustments to correct prior errors or to adjust
previous estimates and accruals will not be regarded
as changes in policy or practice.
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