MAGELLAN HEALTH SERVICES INC
EXHIBIT 10.13
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>a2131133zex-10_13.htm
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
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<P ALIGN="RIGHT"><FONT SIZE=2><B>Exhibit 10.13  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ko1211_employment_agreement"> </A>
<A NAME="toc_ko1211_1"> </A></FONT> <FONT SIZE=2><B>EMPLOYMENT AGREEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>THIS EMPLOYMENT AGREEMENT</B></FONT><FONT SIZE=2> ("Agreement") is made and entered into by and between Megan M. Arthur, an individual
("Employee"), and, Magellan Health Services,&nbsp;Inc. on behalf of itself and its subsidiaries and affiliates (collectively referred to herein as "Employer"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, Employer desires to continue to obtain the services of Employee and Employee desires to continue to render services to Employer;
and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, Employer and Employee desire to set forth the terms and conditions of Employee's employment with Employer under this Agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>NOW, THEREFORE</B></FONT><FONT SIZE=2>, in consideration of the foregoing recitals and of the mutual covenants and agreements contained in this Agreement, the
parties agree as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ko1211_statement_of_agreement"> </A>
<A NAME="toc_ko1211_2"> </A>
<BR></FONT><FONT SIZE=2><B><I>STATEMENT OF AGREEMENT    <BR>    </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Employment</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employer agrees to employ
Employee, and Employee accepts such employment in accordance with the terms of this Agreement, for a term commencing on November&nbsp;1, 2003 and, unless terminated earlier in accordance with the
terms of this Agreement, ending on May&nbsp;22, 2004. Thereafter, this Agreement shall automatically renew for 30-day periods, unless sooner terminated as provided herein. In no event,
however, shall the Agreement continue beyond January&nbsp;31, 2005. If either party desires not to renew the Agreement, they must provide the other party with written notice of their intent not to
renew the Agreement at least fifteen (15)&nbsp;days prior to the next renewal date. Employer or Employee's notice of intent not to renew the Agreement shall be deemed to be a termination without
cause and the provisions of Section&nbsp;6(c) shall apply. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Position and Duties of
Employee</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee will serve as either General Counsel or Deputy General Counsel of Employer. Employee agrees to serve in such position,
or in a comparable position as Employer determines from time to time, and to perform the duties that Employer may assign from time to time to Employee, at the same or greater base salary level and a
similar location, until the expiration of the term or such time as Employee's employment with Employer is terminated pursuant to this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Time Devoted</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Compensation</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Base Salary.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employer will pay Employee a base salary in the amount of Two Hundred Seventy Thousand dollars
($270,000.00), per year, which amount will be paid in semi-monthly intervals less appropriate withholdings for federal and state taxes and other deductions authorized by Employee. Such
salary will be subject to review and adjustment by Employer not less than annually. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Benefits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee will be eligible to participate in Employer's Benefit Plans commensurate with his or her
position. Employee will receive separate information detailing the terms of such Benefit Plans and the terms of those plans will control. Employee also will be eligible to participate in any annual
incentive plan and stock option plan applicable to Employee by their terms respectively. During the term of this Agreement, Employee will be entitled to such other benefits of employment with Employer
[as are now] or may later be in effect for salaried employees of Employer, and also will be eligible to participate in other benefits adopted for employees at his or her level. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Expenses</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Termination</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination Due to Resignation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee may resign his or her employment at any time by giving
30&nbsp;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. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Employee resigns pursuant to this Section&nbsp;6(a), Employer's only remaining financial obligation to Employee under this Agreement will be to pay: (i)&nbsp;any earned but unpaid
Base Salary and accrued Paid Time Off through the effective date of Employee's termination; (ii)&nbsp;reimbursement of expenses incurred by Employee through the effective date of termination which
are reimbursable pursuant to this Agreement; and (iii)&nbsp;the Employee's vested portion of any Magellan deferred compensation or other benefit plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination with Cause.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Employee's
commission of an act of fraud or dishonesty involving his or her duties on behalf of Employer;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Employee's
failure or refusal to faithfully and diligently perform duties assigned to Employee or other breach of any material term under this Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>Employee's
failure or refusal to abide by Employer's policies, rules, procedures or directives; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>Employee's
conviction of a felony or a misdemeanor involving moral turpitude. </FONT></DD></DL>
</UL>
</UL>
<UL>
<UL>

<P><FONT SIZE=2>If
Employee is terminated pursuant to this Section&nbsp;6(b), Employer's only remaining financial obligation to Employee under this Agreement will be to pay: (i)&nbsp;any earned but unpaid Base
Salary and accrued Paid Time Off through the date of Employee's termination; (ii)&nbsp;reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant
to this Agreement; and (iii)&nbsp;the Employee's vested portion of any Magellan deferred compensation or other benefit plan. </FONT></P>


<P><FONT SIZE=2>For
the events described in Sections 6(b)(ii)&nbsp;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. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination Without Cause.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee may terminate this Agreement without cause by providing Employer with
written notice of her intent not to renew the Agreement. Such notice shall be provided at least fifteen (15)&nbsp;days prior to the expiration of the then current term. Employer may terminate this
Agreement without cause at any time. "Without cause" termination by Employer shall include, but not be limited to: (i)&nbsp;Employer's notice to Employee of its intent not to renew this Agreement in
accordance with the provisions of Section&nbsp;1 hereof; (ii)&nbsp;Employer's notice to Employee that his or her position will be relocated to an office which is greater than 35 miles from
Employee's prior office location; and (iii)&nbsp;Employer's reduction of Employee's base salary to less than the base salary identified in Section&nbsp;4(a) of this Agreement. If this Agreement is
terminated without cause, Employer shall continue to pay Employee the compensation provided for in Section&nbsp;4(a) of this Agreement for a period of time equal to twelve months. Such pay </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>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)&nbsp;any earned but unpaid Base Salary and accrued Paid Time Off through the date of Employee's termination; (ii)&nbsp;reimbursement of expenses incurred by Employee through the date of
termination which are reimbursable pursuant to this Agreement; and (iii)&nbsp;the Employee's vested portion of any Magellan Health Services retirement, deferred compensation or other benefit plan,
including but not limited to, any stock option or restricted stock grant plans, in accordance with the terms of those plans. If Employee participates in any bonus plan(s), including but not limited
to, any long term bonus plan(s), Employer may pay Employee, on a pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full
calendar year. The pro-ration will be determined by the fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by
12&nbsp;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)&nbsp;the Employee's target
bonus (percentage of base salary), (ii)&nbsp;the Company's financial performance and (iii)&nbsp;the Employee's achievement of his or her specific performance objectives. At the time of
termination, Employer shall determine the Employee's bonus amount, if any. Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial
targets established by the Company's Board of Directors. Payment of any bonus shall be made at the time of the annual bonus payout for all employees. COBRA coverage may be elected to continue health,
dental, and vision insurance during the Severance Period and beyond. If COBRA coverage is elected, Employee will pay only the employee contribution rate for the health insurance portion of the COBRA
coverage during the Severance Period. Dental and vision coverage under COBRA will be billed at the full COBRA rate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Automatic Termination.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement will terminate automatically upon the death or permanent disability of
Employee. Employee will be deemed to be "Disabled" or to suffer from a "Disability" within the meaning of this Agreement if, because of a physical or mental impairment, Employee has been unable to
perform the essential functions of his or her position, with or without reasonable accommodation, for a period of 180 consecutive days, or if Employee can reasonably be expected to be unable to
perform the essential functions of his or her position for such period. If Employee is terminated pursuant to this Section&nbsp;6(d), Employee will receive (i)&nbsp;any earned but unpaid Base
Salary and accrued Paid Time Off through the date of Employee's termination; (ii)&nbsp;reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant
to this Agreement; and (iii)&nbsp;the Employee's vested portion of any Magellan Health Services retirement, deferred compensation or other benefit plan, including but not limited to, any stock
option or restricted stock grant plans, in accordance with the terms of those plans. If Employee participates in any bonus plan(s), including but not limited to, any long term bonus plan(s), Employer
may pay Employee, on a pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full calendar year. The pro-ration will be
determined by the fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by 12&nbsp;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)&nbsp;the Employee's target bonus (percentage of base salary);
(ii)&nbsp;the Company's financial performance; and (iii)&nbsp;the Employee's achievement of his or her specific performance objectives. At the time of termination, Employer shall determine the
Employee's bonus amount, if any. Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial targets established by the Company's Board
of Directors. Payment of any bonus shall be made at the time of the annual bonus payout for all employees. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effect of Termination.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise provided for in this Section&nbsp;6, upon termination of this
Agreement, all rights and obligations under this Agreement will cease except for the rights and obligations under Sections 4 and 5 to the extent Employee has not been compensated or reimbursed for
services performed prior to termination (the amount of compensation to be prorated for the portion of the pay period prior to termination); the rights and obligations under Sections 7, 8 and 9; and
all procedural and remedial provisions of this Agreement. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>7.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Protection of Confidential
Information/Non-Competition/Non-Solicitation</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee
covenants and agrees as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)(i)&nbsp;&nbsp;&nbsp;&nbsp;Confidential
Information: During Employer's employment of Employee and for a period of one year following the termination of Employee's employment for any reason,
Employee will not use or disclose, directly or indirectly, for any reason whatsoever or in any way, other than at the direction of Employer during the course of Employee's employment or after receipt
of the prior written consent of
Employer, any confidential information of Employer or its controlled subsidiaries or affiliates, that comes into his or her knowledge during his or her employment by Employer (the "Confidential
Information" as hereinafter defined). The obligation not to use or disclose any Confidential Information will not apply to any Confidential Information that is or becomes public knowledge through no
fault of Employee, and that may be utilized by the public without any direct or indirect obligation to Employer, but the termination of the obligation for non-use or nondisclosure by
reason of such information becoming public will extend only from the date such information becomes public knowledge. The above will be without prejudice to any additional rights or remedies of
Employer under any state or federal law protecting trade secrets or other information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)(ii)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Trade Secrets.</I></FONT><FONT SIZE=2> Employee shall hold in confidence all Trade Secrets of Employer, its direct and indirect subsidiaries,
and/or its customers that came into his or her knowledge during his or her employment by Employer and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets,
other than at the direction of Employer, for as long as the information remains a Trade Secret. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)(iii)&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this Agreement, the following definitions apply: </FONT></P>

</UL>

<P><FONT SIZE=2>"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: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>is
or subsequently becomes publicly available without the breach of any obligation owed to the Employer;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>is
disclosed with the prior written approval of the Employer; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>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; </FONT><FONT SIZE=2><B>provided, however,</B></FONT><FONT SIZE=2> 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). </FONT></DD></DL>
</UL>
</UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"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 </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>information
similar to any of the foregoing, which (i)&nbsp;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)&nbsp;is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)(iv)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Interpretation.</I></FONT><FONT SIZE=2> The restrictions stated in paragraphs 7(a)(i)&nbsp;and 7(a)(ii)&nbsp;are in addition to and not
in lieu of protections afforded to trade secrets and confidential information under applicable state law. Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise
limiting Employer's right under applicable state law to protect its trade secrets and confidential information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Non-Competition</I></FONT><FONT SIZE=2>. </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Employee
covenants and agrees that during the term of his or her employment with Employer and for a period of one year immediately following the termination of said
employment for any reason, he or she will not, on his or her own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, engage
or attempt to engage in the business of providing or selling services in the United States that are services offered by Employer at the time of the termination of this Agreement, unless waived in
writing by Employer in its sole discretion. Employee recognizes that the above restriction is reasonable and necessary to protect the interest of the Employer and its controlled subsidiaries and
affiliates.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>During
the one year period immediately following Employee's termination from his or her employment with Employer, Employee may submit a written request to Employer
outlining a proposed employment or other employment opportunity that Employee is considering. Employer will review such request, and make a determination within ten (10)&nbsp;business days following
receipt of such request, in its sole discretion, as to whether the opportunity would constitute a breach of the non-competition covenant. </FONT></DD></DL>
</UL>
</UL>
</UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Non-Solicitation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To protect the goodwill of Employer and its controlled subsidiaries and
affiliates, or the customers of Employer and its controlled subsidiaries and affiliates, Employee agrees that, for a period of one year immediately following the termination of his or her employment
with Employer, he or she will not, without the prior written permission of Employer, directly or
indirectly, for himself or herself or on behalf of any other person or entity, solicit, divert away, take away or attempt to solicit or take away any Customer of Employer for purposes of providing or
selling services that are offered by Employer, if Employer, or the particular controlled subsidiary or affiliate of Employer, is then still engaged in the sale or provision of such services at the
time of the solicitation. For purposes of this Section&nbsp;7(c), "Customer" means any individual or entity to whom Employer or its controlled subsidiaries or affiliates has provided, or contracted
to provide, services and with whom Employee had, alone or in conjunction with others, contact with or knowledge of, during the twelve months prior to the termination of his or her employment. For
purposes of this Section&nbsp;7(c), Employee had contact with or knowledge of a customer if (i)&nbsp;Employee had business dealings with the customer on behalf of Employer or its controlled
subsidiaries or affiliates; (ii)&nbsp;Employee was responsible for supervising or coordinating the dealings between the customer and Employer or its controlled subsidiaries or affiliates; or
(iii)&nbsp;Employee obtained or had access to trade secrets or confidential information about the customer as a result of Employee's association with Employer or its controlled subsidiaries or
affiliates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Solicitation of Employees.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During Employer's employment of Employee and for a period of one year following
the termination of Employee's employment with Employer for any reason, Employee will not solicit for employment, directly or indirectly, any employee of Employer or any </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2>of
its controlled subsidiaries or affiliates who was employed with Employer or its controlled subsidiaries or affiliates within the one year period immediately prior to Employee's termination. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Work Made for Hire.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee agrees that any written program
materials, protocols, research papers, other writings, as well as improvements, inventions, new techniques, programs or products (the "Work") made or developed by Employee within or after normal
working hours relating to the business or activities of Employer or any of its subsidiaries, shall be deemed to have been made or developed by Employee solely for the benefit of Employer and will be
considered "work made for hire" within the meaning of the United States Copyright Act, Title 17, United States Code, which vests all copyright interest in and to the Work in the Employer. In the
event, however, that any court of competent jurisdiction finally declares that the Work is not or was not a work made for hire as agreed, Employee agrees to assign, convey, and transfer to the
Employer all right, title and interest Employee may presently have or may have or be deemed to have in and to any such Work and in the copyright of such work, including but not limited to, all rights
of reproduction, distribution, publication, public performance, public display and preparation of derivative works, and all rights of ownership and possession of the original fixation of the Work and
any and all copies. Additionally, Employee agrees to execute any documents necessary for Employer to record and/or perfect its ownership of the Work and the applicable copyright. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Property of Employer.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee agrees that, upon the
termination of Employee's employment with Employer, Employee will immediately surrender to Employer all property, equipment, funds, lists, books, records and other materials of Employer or its
controlled subsidiaries or affiliates in the possession of or provided to Employee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Governing Law.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement and all issues relating to the
validity, interpretation, and performance will be governed by</FONT><FONT SIZE=2><B>,</B></FONT><FONT SIZE=2> interpreted, and enforced under the laws of the State of Maryland. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Remedies.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An actual or threatened violation by Employee of
the covenants and obligations set forth in Sections 7, 8 and 9 will cause irreparable harm to Employer or its controlled subsidiaries or affiliates and that the remedy at law for any such violation
will be inadequate. Employee agrees, therefore, that Employer or its controlled subsidiaries or affiliates will be entitled to appropriate equitable relief, including, but not limited to, a temporary
restraining order and a preliminary injunction, without the necessity of posting a bond. Employee will also be entitled to seek equitable relief against Employer in connection with enforcement of the
covenants and obligations set forth in Sections 7, 8 and 9. The provisions of Sections 4, 5, 6, 7, 8 and 9 will survive the termination of this Agreement in accordance with the terms set forth in each
Section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Arbitration.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for an action for injunctive relief as
described in Section&nbsp;11, any disputes or controversies arising under this Agreement will be settled by arbitration in Columbia, Maryland in accordance with the rules of the American Arbitration
Association relating to the arbitration of employment disputes. The determination and findings of such arbitrators will be final and binding on all parties and may be enforced, if necessary, in any
court of competent jurisdiction. The costs and expenses of the arbitration shall be paid for by Employer, but each party shall pay its own attorney's fees and other litigation costs. </FONT></P>

<P><FONT SIZE=2>_______________________<BR>
Employee's Initials </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Notices.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any notice or request required or permitted to be
given to any party will be given in writing and, excepting personal delivery, will be given at the address set forth below or at such other address as such party may designate by written notice to the
other party to this Agreement: </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>To Employee:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Megan M. Arthur<BR>
7706 Graystone Court<BR>
Ellicott City, Maryland 21043<BR>
(410)&nbsp;379-9378</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><BR>
To Employer:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Magellan Health Services,&nbsp;Inc.<BR>
6950 Columbia Gateway Drive<BR>
Columbia, Maryland 21046<BR>
Attention: General Counsel</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
notice given in accordance with this Section will be deemed to have been given, if personally delivered, on the date personally delivered; if delivered by facsimile transmission,
when sent and confirmation of receipt is received; or, if mailed, on the third day following the day on which it is deposited in the United States mail, certified or registered mail, return receipt
requested, with postage prepaid, to the address last given in accordance with this Section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>14.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Headings.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The headings of the sections of this Agreement
have been inserted for convenience of reference only and should not be construed or interpreted to restrict or modify any of the terms or provisions of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>15.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Severability.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision will be fully severable and this Agreement and each separate provision
will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. In addition, in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid
and enforceable, to the extent such reformation is allowable under applicable law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>16.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Binding Effect.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement will be binding upon and
shall inure to the benefit of each party and each party's respective successors, heirs and legal representatives. This Agreement may not be assigned by Employee to any other person or entity but may
be assigned by Employer to any subsidiary or affiliate of Employer or to any successor to or transferee of all, or any part, of the stock or assets of Employer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>17.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Employer Policies, Regulations, and Guidelines for
Employees.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employer may issue policies, rules, regulations, guidelines, procedures or other material, whether in the form of handbooks, memoranda, or otherwise,
relating to its Employees. These materials are general guidelines for Employee's information and will not be construed to alter, modify, or amend this Agreement for any purpose whatsoever. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>18.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Waiver of Claim Against Employer Pursuant to the Chapter 11
Filing.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Employee agrees to waive any claim he/she may have relating to Employer's rejection of Employee's executory contract in the course of its Chapter 11
filing. To the extent Employee has filed a proof of claim with the bankruptcy court, Employee agrees to take affirmative steps to withdraw such claim. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>19.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Entire Agreement.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement embodies the entire
agreement and understanding between the parties with respect to its subject matter and supersedes all prior agreements and understandings, whether written or oral, relating to its subject matter,
unless expressly provided </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>otherwise
within this Agreement. No amendment or modification of this Agreement, will be valid unless made in writing and signed by each of the parties. No representations, inducements, or agreements
have been made to induce either Employee or Employer to enter into this Agreement, which are not expressly set forth within this Agreement.&nbsp;&nbsp;&nbsp;&nbsp;Employee and Employer acknowledge and agree
that Employer's controlled subsidiaries and affiliates are express third party beneficiaries of this Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[signatures
follow] </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>IN WITNESS WHEREOF</B></FONT><FONT SIZE=2>, the parties hereto have executed this Agreement on the 24th day of March, 2004. </FONT></P>

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&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B>MAGELLAN HEALTH SERVICES,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Megan M. Arthur</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>"Employer"</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MEGAN M. ARTHUR</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>STEVEN J. SHULMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Steven J. Shulman</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2>Chairman and Chief Executive Officer</FONT></TD>
</TR>
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<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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