8-K

                                  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):

                                February 19, 2008


                         MAGELLAN HEALTH SERVICES, INC.
              (Exact Name of Registrant as Specified in Charter)


    DELAWARE                         1-6639                       58-1076937
(State or Other                 (Commission File                (IRS Employer
  Jurisdiction                       Number)                 Identification No.)
of Incorporation)


       55 NOD ROAD
    AVON, CONNECTICUT                                          06001
  (Address of Principal                                      (Zip Code)
   Executive Offices)


       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 5.02.  DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENT OF CERTAIN OFFICERS.

(b), (c) and (e)

      On February 19, 2008, the Company's Board of Directors named Rene Lerer,
M.D., previously the Company's Chief Operating Officer, as Chief Executive
Officer and the service of Steven J. Shulman as Chief Executive Officer ended.
Mr. Shulman remains non-executive Chairman of the Board of Directors of the
Company. Mr. Lerer retains the title of President of the Company; the Board of
Directors determined not to fill the separate position of chief operating
officer at the present time. In connection with this change in executive roles,
the Company's Bylaws have been amended to reflect that the President of the
Company would be the chief executive officer of the Company (and not chief
operating officer) and the role of the Chairman of the Board would be a
non-executive role, as further discussed below. On February 25, 2008, the
Company issued a press release regarding the change in roles of Messrs. Lerer
and Shulman, as well as certain other executive appointments. A copy of the
Company's press release is attached as Exhibit 99.1 hereto, and is incorporated
by reference into this Item 5.02.

      Rene Lerer, M.D, age 52, has served as President and Chief Operating
Officer of the Company since October 2003 and had been a member of the Board of
Directors since January 2004. He served as Chief Operating Officer of the
company since January 2003. Prior to joining the company, Dr. Lerer co-founded
IHCG, an early stage healthcare technology venture fund, and served as its
President from 1999 to 2002. Prior to IHCG, Dr. Lerer was employed by Prudential
Healthcare, Inc. as its Chief Operating Officer from 1997 to 1999. Dr. Lerer is
a member of the board of directors of IHCG and Digital Insurance, a private
employee benefits service company.

      In connection with Dr. Lerer's election as Chief Executive Officer, the
Company and Dr. Lerer on February 19, 2008 entered into an Employment Agreement,
which replaced the employment agreement previously in effect with respect to Dr.
Lerer's service as Chief Operating Officer. This new employment agreement
provides for him to serve for three years as President and Chief Executive
Officer, and as a director, and is subject to automatic renewal for successive
12-month periods unless notice of non-renewal is given by the Company or Dr.
Lerer at least six months in advance of the renewal date. During his employment
under the agreement Dr. Lerer will be entitled to (i) an annual salary of
$900,000 per year (subject to increase upon annual review in the discretion of
the Board of Directors), (ii) the opportunity to receive an annual performance
bonus (provided he is employed on the last day of the year) based upon the
achievement of performance targets to be set by the Board of Directors in the
first quarter of the year using criteria provided by the Company's Management
Incentive Plan and on terms no less favorable than applicable to other
executives of the Company, in a targeted amount which will be not less than 100%
of his annual salary if the targets are 100% achieved and may in the discretion
of the Board range up to 200%, and any additional bonus payments determined in
the discretion of the Board to be appropriate, (iii) an annual equity grant to
be made in accordance with the Company's established policy for executive equity
grants and otherwise on terms to be determined by the Board based on performance
and compensation trends in the industry, which may include a mix of options,
restricted stock units and/or other equity-linked securities and performance
vesting requirements, but which for 2008 shall be in the amount of $3.7 million
(valued in accordance with Company policies) and (iv) such other employment
benefits as the Company may from time to time provide, on a basis no less
favorable to him than provided to other senior executive but including (A) in
the case of life insurance coverage a death benefit of not less than three times
his annual salary, (B) in the case of long-term disability coverage a benefit of
not less than 60% of his annual salary and (C) the use of a car leased by the
Company at an annual lease cost of no more than $25,000 per year.

      The other terms of the agreement are, in general, substantially the same
as applicable with respect Dr. Lerer's service as Chief Operating Officer
pursuant the employment agreement entered into by him and the Company in 2005.
These terms include provision for certain benefits upon the termination of Dr.
Lerer's employment, including, if his employment is terminated by the Company
without cause or because the Company gives notice that the employment term shall
not automatically renew, a lump-sum severance payment equal to twice his annual
salary and his target bonus amount for the year of termination (three times if
the termination is in connection with a change in control of the Company),
vesting of all unvested equity awards and medical, dental and hospitalization
coverage for Dr. Lerer and his wife until they turn age 65. A copy of Dr.
Lerer's Employment Agreement with the Company is attached as an exhibit and
reference should be made thereto for more detailed information regarding the
provisions described above and the other terms and conditions.




                                       2




      In connection with the change in Mr. Shulman's role with the Company, the
Company and Mr. Shulman entered into a Transition Agreement pursuant to which he
will serve as non-executive Chairman of the Board, providing such services as
are commonly associated with such position and are from time to time requested
by the Board of Directors or the Chief Executive Officer, for up to three years
(assuming he is re-elected to the Board throughout the period), provided that
the Company may elect to terminate Mr. Shulman's services at any time and Mr.
Shulman may elect to terminate his services starting February 19, 2009. At the
end of this three year period, Mr. Shulman would continue as a Board member for
the remainder of his term, or longer if re-nominated and re-elected to the
Board, and may continue as Chairman of the Board in the discretion of the Board.
For his services during the three year period, Mr. Shulman shall be entitled to
an annual fee of $1 million, of which 50% shall be paid in cash in quarterly
installments conforming with the schedule of payments made to other Board
members for directors fees and the other 50% shall be paid in Company securities
(of, if not paid in securities in cash in quarterly installments) in the same
proportion of Common Stock, options and whatever other equity-linked securities
the other Board members receive, valued in the same way the other Board members'
fees paid in equity-linked securities are valued and issued and vesting on the
same schedule as applicable to such equity-linked securities issued to other
Board members; provided that, if the Company terminates Mr. Shulman's services
before February 19, 2009, it shall nevertheless be required to pay him the
remaining fee applicable through such date. In addition, Mr. Shulman will be
entitled to use during the period of his service as Chairman of the Board the
automobile currently provided to him by the Company until the lease thereof by
the Company expires and, unless he otherwise is provided comparable coverage, to
coverage under the Company's medical, dental and hospitalization insurance for
himself and his spouse to the same extent as provided to senior executives of
the Company (or reimbursement of the cost of similar coverage) until Mr. Shulman
and his wife reach age 65. Pursuant to the Transition Agreement, Mr. Shulman
agreed until February 19, 2010 or, if later, one year after he ceases to provide
services under the agreement not to engage or participate directly or indirectly
in any business that competes with the Company in the lines of business in which
the Company currently engages or in which it comes to engage while he provides
services under such agreement.

      As a result of his service as Chief Executive Officer ending, Mr. Shulman
has become entitled to certain payments and other benefits under the Employment
Agreement entered into by the Company and Mr. Shulman in 2004. Pursuant to the
Transition Agreement, Mr. Shulman and the Company agreed that these benefits
include, among other things, a lump-sum payment equal to twice his annual salary
and 2008 target bonus opportunity, plus a pro rata portion of his target bonus
opportunity for 2008 and the vesting of any unvested equity awards. Mr. Shulman
will also be paid the performance bonus earned for 2007 in accordance with the
Employment Agreement and the Company's executive bonus program. The cash
payments currently to be made to Mr. Shulman will total approximately $5.8
million. Further information regarding the terms of Mr. Shulman's Employment
Agreement is contained in the Company's April 12, 2007 Proxy Statement. A copy
of the Transition Agreement is attached as an exhibit and reference should be
made thereto for more detailed information regarding the provisions described
above and the other terms and conditions.


Item 5.03   AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.


      In connection with the changes in executive roles described in Item 5.02
of this report, on February 25, 2008, the Board of Directors of the Company
amended Sections 2 and 3 of Article IV of the Company's Bylaws, effective
immediately, to provide that the President, instead of the Chairman of the
Board, would be Chief Executive Officer of the Company and that the position of
Chairman of the Board will be a non-executive position. As amended, the Bylaws
no longer mandate the appointment of a chief operating officer and the
establishment of such a position is in the discretion of the Board. A copy of
the amendment to the Sections of the Bylaws made as described above is attached
as an exhibit and reference should be made thereto for more detailed
information.


Item 9.01  FINANCIAL STATEMENTS AND EXHIBITS


Exhibit 3.2:      Amendments to Sections 2 and 3 of Article IV of the Company's
                  Bylaws, adopted February 25, 2008.

Exhibit 10.1:     Employment Agreement dated February 19, 2008 between the
                  Company and Rene Lerer, M.D.

Exhibit 10.2:     Transition Agreement dated as of February 19, 2008 between the
                  Company and Steven J. Shulman.

Exhibit 99.1      Press Release, dated February 25, 2008, regarding the change
                  in roles of Messrs. Lerer and Shulman, as well as certain
                  other executive appointments.


                                       3





                                   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
                                            -------------------------------
Date: February 25, 2008                     Name:   Mark S. Demilio
                                            Title:  Executive Vice President and
                                                    Chief Financial Officer

================================================================================


                                  Exhibit Index



Exhibit 3.2:      Amendments to Sections 2 and 3 of Article IV of the Company's
                  Bylaws, adopted February 25, 2008.

Exhibit 10.1:     Employment Agreement dated February 19, 2008 between the
                  Company and Rene Lerer, M.D.

Exhibit 10.2:     Transition Agreement dated as of February 19, 2008 between the
                  Company and Steven J. Shulman.

Exhibit 99.1      Press Release, dated February 25, 2008, regarding the change
                  in roles of Messrs. Lerer and Shulman, as well as certain
                  other executive appointments.

















                                       4

EX-3.(II)

                                                                     EXHIBIT 3.2
                                                                     -----------


                        PROPOSED AMENDMENT TO THE BYLAWS
                                       OF
                         MAGELLAN HEALTH SERVICES, INC.

      RESOLVED, that Article 4 of the bylaws is hereby amended by deleting
Section 2 in its entirety and replacing it with the following:

             "SECTION 2. President. The President shall be the Chief Executive
            Officer of the Corporation and in that capacity shall have general
            management, subject to the control of the Board of Directors, of the
            business of the Corporation, including the appointment of all
            officers and employees of the Corporation for whose election or
            appointment no other provision is made in these By-laws; he shall
            also have the power, at any time, to discharge or remove any officer
            or employee of the Corporation other than those officers and
            employees whose election or appointment is otherwise provided for in
            these By-laws, subject to the action thereon of the Board of
            Directors, and shall perform all other duties appropriate to this
            office. The President shall preside at all meetings of the
            stockholders and, in the absence of a Chairman or Vice Chairman of
            the Board (if any) and Lead Director (if any), at all meetings of
            the Board at which the President is present."

      RESOLVED, that Article 4 of the bylaws is hereby amended by deleting
Section 3 in its entirety and replacing it with the following:

            "SECTION 3. Chief Operating Officer. The Board may designate an
            officer as the chief operating officer of the Corporation, with such
            authority and responsibility as the Board may determine."

EX-10

                                                                    EXHIBIT 10.1
                                                                    ------------



                              EMPLOYMENT AGREEMENT

            THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by
and between Rene Lerer ("Executive") and Magellan Health Services, Inc. on
behalf of itself and its subsidiaries and affiliates (collectively referred to
herein as the "Company" or "Employer").

            WHEREAS, Employer desires to continue to obtain the services of
Executive and Executive desires to continue to render services to Employer; and

            WHEREAS, Employer and Executive desire to set forth the terms and
conditions of Executive'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, the parties
agree as follows:


                             STATEMENT OF AGREEMENT
                             ----------------------


            1.    Employment. Employer agrees to employ Executive, and Executive
accepts such employment in accordance with the terms of this Agreement
(provided, however, that the payments to be made under Section 4(b) and
4(c)(iii) intended to be exempt from Section 162(m) of the Internal Revenue Code
of 1986, as amended, are subject to approval by the Company's shareholders), for
a term of three years from the date of the execution of this Agreement (the
"Operative Date"). 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
six (6) months prior to the next renewal date. Employer's notice of intent not
to renew the Agreement shall be deemed to be a termination without Cause (as
defined below) occurring immediately prior to the expiration of the term of this
Agreement and the provisions of Section 6(d) or 6(e), as applicable, shall
apply.

            2.    Position And Duties Of Executive; Location Of Employment.

            (a)   Executive will serve as President and Chief Executive Officer
and member of the board of directors of the Company (as constituted following
the Operative Date) (the "Board"). Executive shall (i) report, as President and
Chief Executive Officer, directly to the Board and (ii) have such duties and
responsibilities typical of, and consistent with, the position of President and
Chief Executive Officer in a public company the size and nature of the Company.
Executive agrees to serve in such position, until the expiration of the term or
such time as Executive's employment with Employer is terminated pursuant to this
Agreement.

            (b)   Executive shall perform his duties at the Company's principal
executive offices located in Avon, Connecticut (the "Offices").

            3.    Time Devoted. Executive will devote his full business time and
energy to the business affairs and interests of Employer, and will use his best
efforts and abilities to promote Employer's interests. Executive agrees that he
or she will diligently endeavor to perform services contemplated by this






Agreement in a manner consistent with his position and in accordance with the
policies established by the Employer. Notwithstanding the foregoing, Executive
shall be entitled to (i) serve on the boards of directors of companies on which
Executive serves as of the Operative Date, (ii) with the prior approval of the
Board, serve on the boards of directors of a reasonable number of other
companies, (iii) serve on civic or charitable boards and (iv) manage his
personal and family investments, to the extent such activities do not materially
interfere with the performance of his duties for the Company.

            4.    Compensation.

            (a)   Base Salary. Employer will pay Executive a base salary in the
amount of $900,000 per year ("Base Salary"), with annual review for increase by
the Board or a duly authorized committee thereof, it being understood that any
such increase shall be at the discretion of the Board or a duly authorized
committee thereof, which amount will be paid in semi-monthly intervals, less
appropriate withholdings for federal and state taxes and other deductions
authorized by Executive.

            (b)   Bonus. Executive shall be entitled to an annual target bonus
opportunity of 100% of Base Salary ("Target Bonus") with the ability to earn up
to 200% of Base Salary at the sole discretion of the Board or a duly authorized
committee thereof. The applicable performance targets for each year shall be
fixed by the Board or a duly authorized committee thereof during the first
quarter of the year after consultation with Executive (the "Performance
Targets"); provided that the Performance Targets established with respect to the
Target Bonus shall not be less favorable than the corporate performance targets
applicable to other bonus eligible executives of the Company. The performance
criteria upon which such Performance Targets are based shall be one or more of
the performance criteria set forth in the Company's Management Incentive Plan.
Executive shall earn the applicable portion of the Target Bonus based on the
achievement of the Performance Targets, as follows:

  % Achievement of Performance Targets          % of Target Bonus Earned
  ------------------------------------          ------------------------
                  100%                                    100%

The Board or a duly authorized committee thereof may, in its sole discretion,
authorize the Company to pay Executive additional bonus amounts. Payments of any
annual bonus shall be made no later than the March 31 of the year following the
year in which such bonus is earned (e.g., by March 31, 2009 for the bonus earned
for 2008). The Target Bonus or applicable percentage thereof, if any, for a
given year shall be earned on December 31 of such year and, except as
specifically set forth in Sections 6(c)(ii) and (iii), 6(d)(ii) and (iii) and
6(e)(ii) and (iii), Executive shall not be entitled to any payment of Target
Bonus, or a percentage thereof, for a given year if he is not employed on
December 31 of such year.

            (c)   Equity Award. The Company shall make an annual equity grant to
Executive ("Long Term Compensation"). The amount of Long Term Compensation will
be determined annually by the Board or a duly authorized committee thereof based
on performance and compensation trends in the industry. The initial Long Term
Compensation to be issued in the first quarter of 2008 in accordance with the



                                       2





Company's Policy Regarding Awards of Equity-Based Incentive Arrangements to
Executive Officers and Other Employees, which deals with the terms, timing and
pricing of equity awards will be in the amount of $3.7 million. The mix of stock
options, restricted stock units ("RSUs"), and other equity-linked securities,
which in 2008 will aggregate to $3.7 million, and the performance based vesting
schedule will be determined by the Board or a duly authorized committee thereof.

            (d)   Benefits. Executive shall be entitled to participate in the
employee welfare benefit programs of the Company on a basis at least as
favorable as other similarly-situated, senior-level executives of the Company;
provided that (i) subject to the obligations set forth in clause (ii) below, the
Board may modify or terminate any employee welfare benefit program established
by the Company; provided that no such amendment or termination may adversely
affect any benefits accrued by Executive prior to the date of such amendment or
termination and (iii) in any event, the Company shall provide at its cost life
insurance benefits to Executive of no less than three times Executive's Base
Salary, Executive shall be permitted to purchase at his own expense additional
life insurance coverage in an amount no less than three times his Base Salary,
and the Company shall provide long-term disability coverage equal to no less
than 60% of Executive's Base Salary; provided, in all cases Executive is
insurable by an insurance company with respect to such coverage.

            (e)   Other Long Term Incentives. Executive shall be entitled to
participate in the long-term incentive programs of the Company including those
contained in the Management Incentive Plan, on a basis that are at least as
favorable as awards to other similarly-situated, senior-level executives of the
Company, it being understood that the Board may modify or terminate any
long-term incentive plan established by the Company; provided that no such
amendment or termination may adversely affect any outstanding long-term
incentive awards of Executive.

            (f)   Deferred Compensation Plan. For so long as the Company
sponsors a deferred compensation plan approved by the Board on or after the
Operative Date, Executive shall be entitled to participate in any such qualified
or non-qualified deferred compensation plan with the Company contributing an
amount equal to 11% of Executive's Base Salary or, if greater, such amount as is
provided to other senior executives, on terms no less favorable a basis than is
made available to other senior executives of the Company, it being understood
that the Board may modify or terminate any deferred compensation plan
established by the Company; provided that no such amendment or termination may
adversely affect any benefits accrued by Executive prior to the date of such
amendment or termination.

            (g)   Perquisite. Executive shall be entitled to use of a car of his
choosing leased by the Company at an expense to the Company of no more than
$25,000 per annum.

            5.    Expenses. During the term of this Agreement, Employer will
reimburse Executive promptly for all reasonable and appropriate travel,
entertainment, parking, business meetings and similar expenditures in pursuance
and furtherance of Employer's business and all licensing and professional
organization dues and fees and all other expenses reimbursable to employees
generally pursuant to the Company's policies upon receipt of reasonably
supporting documentation as required by Employer's policies applicable to its
employees generally.





                                       3




            6.    Termination.

            (a)   Termination Due to Resignation. Executive may resign his
employment at any time by giving 90 days written notice of resignation to
Employer. Except as otherwise set forth in this Agreement, Executive's
employment, and Executive's right to receive compensation and benefits from
Employer, will terminate upon the effective date of Executive's termination. If
Executive resigns pursuant to this Section 6(a), Employer's only remaining
financial obligation to Executive under this Agreement will be to pay: (i) any
earned but unpaid Base Salary through the date of termination, (ii) all vested
stock options shall remain exercisable until the later of (A) 90 days following
the date of termination or (B) the 45th day following the first day on or after
the date of termination on which Executive is not subject to a trading
"blackout" imposed by the Company and may sell the shares acquired upon option
exercise without violation of Rule 10b-5 under the Securities Exchange Act of
1934, (iii) any other amounts earned, accrued or owing to Executive but not yet
paid, and (iv) other payments, entitlements or benefits, if any, that are
payable in accordance with applicable plans, programs, arrangements or other
agreements of the Company or any affiliate.

            (b)   Termination with Cause. Except as otherwise set forth in this
Section 6(b), Executive's employment, and Executive's right to receive
compensation and benefits from Employer, may be terminated for Cause at the
discretion of Employer under the following circumstances:

                  (i)   Executive is convicted of (or pleads guilty or nolo
                        contendere to) a felony;

                  (ii)  intentional fraud by Executive in the performance of his
                        duties for the Company or intentional misappropriation
                        of Company funds by Executive;

                  (iii) (A) material breach of Section 8(b), (c) or (d) of this
                        Agreement or (B) a willful and material breach of
                        Section 8(a) of this Agreement;

                  (iv)  a willful and material violation by Executive of the
                        Company's written policies and procedures that are legal
                        and ethical and have been made available to Executive
                        and relate to the performance of his duties for the
                        Company (provided that the Company has not failed to
                        terminate other employees for comparable violations) or
                        willful gross misconduct by Executive relating to the
                        performance of his duties for the Company; or

                  (v)   willful failure to comply with direction of the Board or
                        any duly authorized committee thereof (including any
                        written policies or procedures promulgated by those
                        bodies), provided that (A) such directions (or policies
                        or procedures) are action of the Board or a duly
                        authorized committee thereof within the meaning of
                        Section 141 of the General Corporation Law of the State



                                       4




                        of Delaware (or any comparable provision of applicable
                        law), (B) the existence of such directions (or policies
                        or procedures) is known by Executive or such directions
                        (or policies or procedures) have been communicated to
                        Executive, (C) such directions (or policies or
                        procedures) are consistent with the duties and role of a
                        Chief Executive Officer or a director of a company the
                        nature and size of the Company and (D) such directions
                        (or policies or procedures) do not require actions that
                        are illegal or unethical.

Each of clauses (i) through (v) are independent of others and the fact that
Executive may not be terminated for Cause under any one of such clauses shall
have no bearing on whether he may be terminated for Cause under any other such
clauses. For purposes of clauses (iii) and (iv)(but not clause (v)), no act or
failure to act shall be deemed to be "willful" if Executive reasonably believed
in good faith that such act or failure to act was in, or not opposed to, the
best interests of the Company. Anything to the contrary notwithstanding,
Executive's employment shall not be terminated for "Cause," within the meaning
of clauses (ii) through (v) above, unless Executive has been given written
notice by the Board stating the basis for such termination and, in the case of
clauses (iii) through (v) above, he is also given fifteen (15) days to cure the
neglect or conduct that is the basis of any such claim and, if he fails to cure
such conduct, or such conduct cannot be cured (and also for any purported
termination for Cause under clause (ii) above), Executive has an opportunity to
be heard before the Board and after such hearing, the Board gives Executive
written notice confirming that in the judgment of a majority of the members of
the Board that, for so long as the Company has or is required by law to have two
such directors, includes at least two directors who are independent for purposes
of the listing requirements of the principal securities exchange (including, for
this purpose, the Nasdaq Stock Market) on which the Company's securities are
listed (or, in the event the Company's securities are no longer listed on any
such securities exchange, the listing requirements of the last such exchange on
which the Company's securities were listed) "Cause" for terminating Executive's
employment on the basis set forth in the original notice exists. Executive's
communication to the Board of his disagreement with decisions made by the Board
and the reasons for that disagreement shall not constitute "Cause" provided that
he does not engage in conduct constituting Cause as set forth in clause (v)
above. Any termination for Cause shall be subject to de novo review in
accordance with the arbitration provisions of this Agreement. If an arbitrator
or arbitrators determine that the basis of Cause did not exist, then Executive's
termination of employment shall be treated as a termination without Cause.

If Executive's employment is terminated pursuant to this Section 6(b), (A)
Employer's only remaining financial obligation to Executive under this Agreement
will be to pay: (i) any earned but unpaid Base Salary through the date of
termination, (ii) any other amounts earned, accrued or owing to Executive but
not yet paid, and (iii) other payments, entitlements or benefits, if any, that
are payable in accordance with applicable plans, programs, arrangements or other
agreements of the Company or any affiliate and (B) all stock options shall
terminate immediately upon the date of termination.

            (c)   Automatic Termination. This Agreement will terminate
automatically upon the death or Disability of Executive. "Disability" shall mean
Executive's inability, due to physical or mental incapacity, to substantially
perform his duties and responsibilities for a period of 180 consecutive days as


                                       5




determined by a medical doctor selected by the Company and Executive. If the
parties cannot agree on a medical doctor, each party shall select a medical
doctor and the two doctors shall select a third doctor who shall be the approved
medical doctor for this purpose. If Executive's employment is terminated
pursuant to this Section 6(c), Executive (or in the event of his death, his
estate or other legal representative) will receive:

                  (i)   Base Salary through the end of the month in which
termination occurs;

                  (ii)  An amount equal to the product of the Target Bonus for
the year in which termination occurs and a fraction, the numerator of which is
the number of elapsed days in such year of termination up to and including the
date of termination and the denominator of which is 365 (366 in the case of a
leap year)("pro rata Target Bonus"), payable in a single installment immediately
after termination;

                  (iii) in the case of a termination due to Executive's
Disability, a lump-sum cash payment equal to two times the sum of (a) Base
Salary plus (b) Target Bonus; provided that this payment shall not be made if
Executive is eligible at the time of the termination of his employment for
long-term disability benefits under the Company's long-term disability program;

                  (iv)  accelerated vesting of all outstanding equity awards not
yet vested, with all vested options remaining exercisable for two years
following termination (but not beyond the original term of such options);
options that are not exercisable as of the date of termination because the
applicable performance hurdle has not been satisfied as of such date shall not
become exercisable until and unless the applicable conditions for exercisability
are satisfied during this two-year post-termination exercise period;

                  (v)   any other amounts earned, accrued or owing to Executive
but not yet paid; and

                  (vi)  other payments, entitlements or benefits, if any, that
are payable in accordance with applicable plans, programs, arrangements or other
agreements of the Company or any affiliate.

            (d)   Termination Without Cause By The Company or With Good Reason
By Executive. Employer may terminate this Agreement and Executive's employment
without Cause at any time. If Employer terminates this Agreement without Cause
or if Executive terminates this Agreement and Executive's employment with Good
Reason, Executive shall (unless Section 6(e) is applicable) receive:

                  (i)   Base Salary through the date of termination;

                  (ii)  pro-rata Target Bonus for the year in which termination
occurs, payable in a single installment immediately after termination;

                  (iii) 2 times the sum of (a) Base Salary plus (b) Target
Bonus, payable in a single cash installment immediately after termination;





                                       6




                  (iv)  accelerated vesting of all outstanding equity awards not
yet vested, with all vested options remaining exercisable for two years after
termination (but not beyond the original term of such options); options that are
not exercisable as of the date of termination because the applicable performance
hurdle has not been satisfied as of such date shall not become exercisable until
and unless the applicable conditions for exercisability are satisfied during
this two-year post-termination exercise period;

                  (v)   continued participation at the Company's expense in all
medical, dental and hospitalization coverages for Executive until the Executive
attains age sixty-five (65) and for Executive's wife until the Executive's wife
attains age sixty-five (65);

                  (vi)  at his election, continuation of his life insurance
and/or long-term disability coverage by the Company for up to two years
following termination (provided Executive reimburses the Company for such
premiums);

                  (vii) any other amounts earned, accrued or owing to Executive
but not yet paid;

                 (viii) other payments, entitlements or benefits, if any, that
are payable in accordance with applicable plans, programs, arrangements or other
agreements of the Company or any affiliate.

For purposes of this Agreement "Good Reason" shall mean termination by Executive
of his employment after written notice to the Company following the occurrence
of any of the following events without his consent:

                  (i)   a reduction in Executive's then current Base Salary, the
                        then Target Bonus opportunity (i.e., 100% of Base
                        Salary) or, to the extent as would constitute a breach
                        of this Agreement, any other compensation to which
                        Executive is entitled under this Agreement, other than a
                        reduction in the right to participate in a deferred
                        compensation plan if such reduction is applicable to all
                        senior executives;

                  (ii)  a material diminution in Executive's positions, duties
                        or authorities (including any removal of Executive from
                        any position set forth in Section 2 above, or any
                        failure to elect or re-elect the Executive as a member
                        of the Board) or interference with Executive's carrying
                        out his duties or exercising his authority so that he is
                        unable to carry out his duties or exercise his authority
                        as Chief Executive Officer or director (including any
                        action by the Board or one or more members thereof to
                        give direction to other employees of the Company with
                        the intent of undermining, or in a manner that, by
                        itself or in combination with other actions described in
                        this parenthetical in clause (ii), could reasonably be
                        expected to materially undermine Executive's authority,
                        provided that no action taken by (A) the Board or one or
                        more members thereof in accordance with any requirement



                                       7





                        of law or regulation or the listing standards of NASDAQ
                        or other securities exchange on which the Company's
                        securities are listed or (B) the Board as a whole or a
                        duly authorized committee of the Board as a whole, in
                        accordance with generally accepted principles of sound
                        corporate governance for public companies of the size
                        and nature of the Company, shall constitute "Good
                        Reason");

                  (iii) the assignment to Executive of duties which are
                        materially inconsistent with his duties or which
                        materially impair Executive's ability to function as
                        President and Chief Executive Officer of the Company or
                        as director;

                  (iv)  a change in the reporting structure so that Executive
                        reports to someone other than the Board;

                  (v)   requiring Executive to relocate, or the relocation of
                        the Offices, to a location that is more than 30 miles
                        from Avon, Connecticut;

                  (vi)  a breach by the Company of any material provision of
                        this Agreement;

                  (vii) the failure of the Company to obtain the assumption in
                        writing of its obligation to perform this Agreement by
                        any successor to all or substantially all of the assets
                        of the Company within 15 days after a merger,
                        consolidation, sale or similar transaction; or

                 (viii) for any reason by Executive during the 30-day period
                        immediately following the six-month anniversary of a
                        Change in Control (whether or not Executive consented to
                        such Change in Control);

provided that in the case of clauses (i) through (vii) (but not clause (viii))
such event continues uncured for fifteen (15) days after Executive gives the
Company notice thereof.

            (e)   Termination Without Cause By the Company or With Good Reason
By Executive In Connection With, Or Within Three Years After, A Change in
Control. If Employer terminates this Agreement and Executive's employment
without Cause, or if Executive terminates this Agreement and his employment with
Good Reason, in connection with a Change in Control (as defined below)(whether
before or at the time of such Change in Control) or within three years after a
Change in Control, Executive shall receive, in lieu of the amounts and benefits
described in Section 6(d):

                  (i)   Base Salary through the date of termination;

                  (ii)  pro-rata Target Bonus for the year in which termination
occurs, payable in a single installment immediately after termination;




                                       8




                  (iii) 3 times the sum of (a) Base Salary plus (b) Target
Bonus, payable in a single cash installment immediately after termination;

                  (iv)  accelerated vesting of all outstanding equity awards not
yet vested, with all vested options remaining exercisable for two years after
termination (but not beyond the original term of such options); options that are
not exercisable as of the date of termination because the applicable performance
hurdle has not been satisfied as of such date shall not become exercisable until
and unless the applicable conditions for exercisability are satisfied during
this two-year post-termination exercise period; provided that this clause (iv)
shall apply to stock options that vested upon the Change in Control as provided
in Section 7 below only if such options will receive more favorable treatment
under this clause;

                  (v)   continued participation at the Company's expense in all
medical, dental and hospitalization coverages for Executive until the Executive
attains age sixty-five (65) and for Executive's wife until the Executive's wife
attains age sixty-five (65);

                  (vi)  at his election, continuation of his life insurance
and/or long-term disability coverage by the Company for up to three years
following termination (provided Executive reimburses the Company for such
premiums);

                  (vii) any other amounts earned, accrued or owing to Executive
but not yet paid;

                 (viii) other payments, entitlements or benefits, if any, that
are payable in accordance with applicable plans, programs, arrangements or other
agreements of the Company or any affiliate.

For purposes of this Agreement "Change in Control" shall mean the occurrence of
any one of the following events:

                  (i)   any "person," as such term is used in Sections 3(a)(9)
                        and 13(d) of the Securities Exchange Act of 1934,
                        becomes after the Operative Date a "beneficial owner,"
                        as such term is used in Rule 13d-3 promulgated under
                        that act, of 30% or more of the Voting Stock of the
                        Company;

                  (ii)  the majority of the Board consists of individuals other
                        than Incumbent Directors, which term means the members
                        of the Board on the Operative Date; provided that any
                        person becoming a director subsequent to the Operative
                        Date whose election or nomination for election was
                        supported by two-thirds of the directors who then
                        comprised the Incumbent Directors, shall be considered
                        to be an Incumbent Director;

                  (iii) the Company adopts any plan of liquidation providing for
                        the distribution of all or substantially all of the
                        Company's assets;





                                       9




                  (iv)  all or substantially all of the assets of the Company
                        are disposed of pursuant to a merger, consolidation,
                        share exchange, reorganization or other transaction
                        unless the shareholders of the Company immediately prior
                        to such merger, consolidation, share exchange,
                        reorganization or other transaction beneficially own,
                        directly or indirectly, in substantially the same
                        proportion as they owned the Voting Stock or other
                        ownership interests of the Company, a majority of the
                        Voting Stock or other ownership interests of the entity
                        or entities, if any, that succeed to the business of the
                        Company; or

                  (v)   the Company combines with another company and is the
                        surviving corporation but, immediately after the
                        combination, the shareholders of the Company immediately
                        prior to the combination hold, directly or indirectly,
                        50% or less of the Voting Stock of the combined company
                        (there being excluded from the number of shares held by
                        such shareholders, but not from the Voting Stock of the
                        combined company, any shares received by Affiliates of
                        such other company who were not Affiliates of the
                        Company prior to the relevant transaction in exchange
                        for stock of such other company).

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

            (f)   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 the rights and obligations under the
last sentence of Section 1, this Section 6 and Sections 7, 8, 9 and 10; and all
procedural and remedial provisions of this Agreement.

            (g)   No Mitigation; No Offset. In the event of termination of
employment, Executive shall be under no obligation to seek other employment, and
there shall be no offset against any amounts due him under the Agreement on
account of any remuneration attributable to any subsequent employer or claims
asserted by the Company or any affiliate.

            7.    Change In Control Protection.

            (a)   Treatment of Equity. There shall be full vesting immediately
prior to a Change in Control that occurs prior to the termination of Executive's
employment for any reason of all outstanding equity awards (including, but not
limited to, stock options), with all vested stock options to remain exercisable
for the remainder of their terms; provided that options held by Executive shall


                                       10




be cashed out in connection with a Change in Control if (i) required by the
terms of the Management Incentive Plan and (ii) all other options issued by the
Company are cashed out in connection with such Change in Control. Options that
are not exercisable because the applicable performance hurdle has not been
satisfied shall become exercisable immediately prior to a Change in Control that
occurs prior to the termination of Executive's employment for any reason.

            (b)   Tax Gross-Up. The following provisions shall apply with
respect to any excise tax imposed under Section 4999 of the Internal Revenue
Code as amended (the "Code"), (the "Excise Tax"):

                  (i)   If any of the payments or benefits received or to be
received by Executive in connection with a Change in Control or Executive's
termination of employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control of the Company or any person affiliated
with the Company or such person (the "Total Payments")) will be subject to the
Excise Tax, the Company shall pay to Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive after payment
of (a) the Excise Tax, if any, on the Total Payments and (b) any Excise Tax and
income tax due in respect of the Gross-Up Payment, shall equal the Total
Payments. Such payment shall be made in a single lump sum within 10 days
following the date a determination that only such payment is required.

                  (ii)  For purposes of determining whether any of the Total
Payments will be subject to Excise Tax and the amount of such Excise Tax, (i)
any Total Payments shall be treated as "parachute payments" (within the meaning
of Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel
selected by the Company and reasonably acceptable to Executive, such payments or
benefits (in whole or in part) should not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, and all "excess
parachute payments" (within the meaning of Section 280G(b)(1) of the Code) shall
be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the Code), or are otherwise not subject to the Excise
Tax, and (ii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of Section 280G(d)(3) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income and employment taxes at the highest marginal rate of federal
income and employment taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income and employment taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the date of termination of employment (or such other time as
hereinafter described), net of the maximum reduction in federal income or
employment taxes which could be obtained from deduction of such state and local
taxes.

            In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
Executive's employment (or such other time as is hereinafter described),
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the applicable federal rate, as defined in Section 1274(b)(2)(B) of



                                       11




the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination of Executive's
employment (or such other time as is hereinafter described) (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest at the applicable federal rate,
penalties or additions payable by Executive with respect to such excess) at the
time that the amount of such excess is finally determined. Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

            8.    Protection Of Confidential
Information/Non-Competition/Non-Solicitation.

            Executive covenants and agrees as follows:

            (a)   (i)   Confidential Information: During Employer's employment
of Executive and following the termination of Executive's employment for any
reason, Executive 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 Executive's employment or after receipt of the prior written
consent of Employer, any Confidential Information (as hereinafter defined) of
Employer or its controlled subsidiaries or affiliates, that comes into his
knowledge during his employment by Employer (the "Confidential Information").
The obligation not to use or disclose any Confidential Information will not
apply to any Confidential Information that (i) is or becomes public knowledge
through no fault of Executive, 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
or (ii) 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, Executive shall promptly
notify the Employer and shall provide the Employer with an opportunity (if then
available) to contest and cooperate with the Employer to contest, in each case,
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). 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.

                  (ii)  Trade Secrets. Executive shall hold in confidence all
Trade Secrets of Employer, its direct and indirect subsidiaries, and/or its
customers that came into his knowledge during his 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.

                  (iii) For purposes of this Agreement, the following
definitions apply:



                                       12




            "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.

            "Trade Secret" means information including, but not limited to, any
technical or non-technical data, know-how, software, formula, pattern,
compilation, program, device, method, technique, plan, blueprint, 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.

                  (iv)  Interpretation. The restrictions stated in paragraphs
8(a)(i) and 8(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
trade secrets and confidential information.

            (b)   Non-Competition.

                  (i)   Executive covenants and agrees that for any period
                        during which Base Salary is continued (or in respect of
                        which it is paid in a lump sum), or for one year after
                        Executive's voluntary termination of employment without
                        Good Reason or his termination of employment for Cause
                        ("Non-Compete Period"), he will not directly or
                        indirectly engage in or invest in, own, manage, operate,
                        finance, control or participate in the ownership,
                        management, operation, financing or control of, be
                        employed by, associated with or in any manner connected
                        with, lend Executive's name or any similar name to, lend
                        Executive's credit to, or render services or advice to
                        any business similar to or competitive with any business
                        engaged in, or which provides goods or services similar
                        to or competitive with any goods and services provided
                        by Employer or its subsidiaries or affiliates at the
                        time of termination, in the United States or any other
                        geographic location in which Employer or a controlled
                        subsidiary or affiliate of Employer operates, other than
                        Internet Healthcare Group, Digital Insurance, and
                        Navimedix, unless waived in writing by Employer in its
                        sole discretion. Executive recognizes that the above
                        restriction is reasonable and necessary to protect the
                        interest of the Employer and its controlled subsidiaries
                        and affiliates.

                        The foregoing shall not be deemed to prohibit
                        Executive's association with a company if an immaterial
                        portion of such company's revenues is attributable to
                        operations directly competitive with the Company
                        (provided Executive is not employed within those



                                       13




                        directly competitive operations). Further, nothing
                        contained in this Section 8(b)(i) shall restrict
                        Executive from making any investments in any corporation
                        or other business enterprise whose outstanding capital
                        stock or other equity interests are listed or admitted
                        to unlisted trading privileges on a national securities
                        exchange or included for quotation through an
                        inter-dealer quotation system of a registered national
                        securities association, provided that such investment
                        (i) represents less than five percent (5%) of the
                        aggregate outstanding capital stock or other equity
                        interests of such corporation, partnership or business
                        enterprise and (ii) does not otherwise provide Executive
                        or any affiliate of Executive with the right or power
                        (whether or not exercised) to influence, direct or cause
                        the direction of the management, policies and/or affairs
                        of any business or enterprise which is or might directly
                        or indirectly compete with any business operations or
                        activities of Company or any of its subsidiaries.

                  (ii)  During the period following Executive's termination from
                        his employment with Employer for which Executive is
                        subject to the restrictions set forth in Section
                        8(b)(i), Executive may submit a written request to
                        Employer outlining a proposed employment or other
                        employment opportunity that Executive is considering.
                        Employer will review such request and make a
                        determination, in its sole discretion, as to whether the
                        opportunity would constitute a breach of the
                        non-competition covenant.

            (c)   Non-Solicitation. To protect the goodwill of Employer and its
controlled subsidiaries and affiliates, or the customers of Employer and its
controlled subsidiaries and affiliates, Executive agrees that, during his
employment and for any period during which Base Salary is continued (or in
respect of which it is paid in a lump sum), or for one year after Executive's
voluntary termination of employment without Good Reason or his termination of
employment for Cause, he or she will not, without the prior written permission
of Employer, directly or indirectly, for himself 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 or a controlled subsidiary or affiliate of Employer. For
purposes of this Section 8(c), "Customer" means any individual or entity to whom
Employer or its controlled subsidiaries or affiliates has provided, or
contracted to provide, services during the twelve months prior to the
termination of his employment.

            (d)   Solicitation of Employees. During Employer's employment of
Executive and for any period during which Base Salary is continued (or in
respect of which it is paid in a lump sum), or for one year after Executive's
voluntary termination of employment without Good Reason or his termination of
employment for Cause, Executive will not, and will not assist any other person
or entity to, directly or indirectly, solicit for employment or consultation any
employee of Employer or any 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 Executive's termination, or in any manner


                                       14




knowingly induce or attempt to induce any such employee to terminate his or her
employment with Employer.

            9.    Work Made For Hire. Executive agrees that any written program
materials, protocols, research papers, other writings (including those in
electronic format), as well as improvements, inventions, new techniques,
programs or products (the "Work") made or developed by Executive 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 Executive
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, Executive agrees
to assign, convey, and transfer to the Employer all right, title and interest
Executive 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, without payment of
any consideration by Employer, except as set forth in this Agreement.
Additionally, Executive agrees to execute any documents necessary for Employer
to record and/or perfect its ownership of the Work and the applicable copyright.

            10.   Property Of Employer. Executive agrees that, upon the
termination of Executive's employment with Employer, Executive 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 Executive.

            11.   Governing Law. This Agreement and all issues relating to the
validity, interpretation, and performance will be governed by, interpreted, and
enforced under the laws of the State of Connecticut.

            12.   Remedies. An actual or threatened violation by Executive of
the covenants and obligations set forth in Sections 8, 9 and 10 will cause
irreparable harm to Employer or its controlled subsidiaries or affiliates and
the remedy at law for any such violation will be inadequate. Executive 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.

            13.   Arbitration. Except for an action for injunctive relief as
described in Section 12, any disputes or controversies arising under this
Agreement will be settled by arbitration in Hartford, Connecticut, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
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.

____________________
Executive's Initials



                                       15





            14.   Notices. 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:

            To Executive:     Rene Lerer
                              29 Saint Andrews Drive
                              Avon, CT 06001
                              Tel:  (860) 673-8702

            To Employer:      Magellan Health Services, Inc.
                              55 Nod Road
                              Avon, CT 06001
                              Attention:   General Counsel

            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.

            15.   Headings. 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.

            16.   Severability. 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.

            17.   Binding Effect. 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 Executive 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.

            18.   Employer Policies, Regulations, And Guidelines For Employees.
Employer may issue policies, rules, regulations, guidelines, procedures or other
material, whether in the form of handbooks, memoranda, or otherwise, relating to
its Executives. These materials are general guidelines for Executive's



                                       16





information and will not be construed to alter, modify, or amend this Agreement
for any purpose whatsoever.

            19.   Indemnification. The Company shall indemnify Executive to the
fullest extent permitted by the laws of State of Delaware and the Company shall
obtain and maintain directors and officers liability insurance in an amount not
less than $50 million.

            20.   Entire Agreement. 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 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 Executive or Employer
to enter into this Agreement, which are not expressly set forth within this
Agreement. Executive and Employer acknowledge and agree that Employer's
controlled subsidiaries and affiliates are express third party beneficiaries of
this Agreement.



                               [signatures follow]




















                                       17




            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the ____ day of February, 2008.

                                         MAGELLAN HEALTH SERVICES, INC.
"Executive"                              "Employer"

  /s/  Rene Lerer                        By:
- ----------------------------                 ----------------------------
Rene Lerer                               Name:
                                         Title:





































                                       18

EX-10

                                                                    EXHIBIT 10.2
                                                                    ------------


                              TRANSITION AGREEMENT


      This agreement is made and entered into as of February 19, 2008 between
Magellan Health Services, Inc., a Delaware corporation on behalf of itself and
its subsidiaries and affiliates (collectively referred to as the "Company") and
Steven J. Shulman (the "Executive").

      The Company and the Executive are party to an employment agreement dated
January 5, 2004 (as amended, the "Employment Agreement"), pursuant to which the
Executive serves as the executive Chairman and Chief Executive Officer and
member of the Board of Directors of the Company. The Company and the Executive
wish to provide for the termination of the Executive's employment by the Company
pursuant to the Employment Agreement, the termination of the Executive as the
executive Chairman and Chief Executive Officer of the Company and its
subsidiaries, and for the Executive's service as non-executive Chairman of the
Board of the Company.

      FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:

      1.    Termination of Employment. The Executive and the Company agree that
the Executive's employment with the Company and his service as the executive
Chairman and Chief Executive Officer of the Company and its subsidiaries
pursuant to the Employment Agreement is hereby terminated, effective today, with
the effect provided in the Employment Agreement for a termination without Cause
by the Company or a termination with Good Reason by the Executive (as provided
in Section 3).

      2.    Retention as Non-Executive Chairman. Subject to termination as
provided below, the Executive shall serve as the non-executive Chairman of the
Board of the Company during the three-year period (the "Extended Term")
commencing today. In that capacity, the Executive shall perform such services
consistent with that status and title as the Board of Directors of the Company
(the "Board") or the Chief Executive Officer of the Company (the "Chief
Executive Officer") may from time to time request, including (i) chairing
meetings of the Board, except for meetings of the Independent directors, (ii) as
requested by the Chief Executive Officer, providing advice and guidance to the
Chief Executive Officer, (iii) as requested by Chief Executive Officer,
representing the Company in interacting with employees, agents, governmental and
regulatory agencies, political figures, and industry and trade organizations.
During the Extended Term, the Company shall, subject to the fiduciary duties of
the Board, recommend to the stockholders of the Company the re-election of the
Executive as a member of the Board, and the Executive shall serve as a member of
the Board if so re-elected. Nothing herein shall prevent the Executive from
engaging in personal, charitable, business, professional and investment
activities to the extent that such activities do not result in a violation of
Sections 5 or 11 hereof. The Company may terminate the Extended Term by written
notice to the Executive at any time and the Executive may terminate the Extended
Term by written notice to the Company at any time after February 19, 2009; the
Extended Term shall terminate automatically if the stockholders of the Company







fail to elect the Executive to the Board or if the Executive is removed from the
Board. In the event that the Company terminates the Extended Term at any time,
the Company shall pay to the Executive the pro rata portion of the Compensation
(as defined in Section 4 below) for the period of time elapsed through the
termination date, at the times otherwise provided in Section 4, provided that in
the event the Company terminates the Extended Term prior to February 19, 2009,
the Company shall continue to pay to the Executive the Compensation that would
otherwise be payable through February 19, 2009, at the times otherwise provided
in Section 4. The Company shall continue to employ Gina Scaglione for a number
of weeks after the date hereof equal to 52 minus the number of weeks severance
pay to which she will be entitled upon termination of her employment, and during
such period shall make Ms. Scaglione available to the Executive to provide him
with administrative support in the same manner and to the same extent as
currently provided to the Executive. The Executive shall resign from the Board
upon the termination of the Extended Term.

      3.    Termination Payments and Benefits. As a result of the termination of
his employment by the Company, the Executive shall be entitled to receive the
payments and benefits provided by Section 6(d) of the Employment Agreement (but
in the case of continuing health care coverage provided for under Section
6(d)(v) of the Employment Agreement, as modified by clause (vi) below), which
the Executive and the Company agree are as follows:

      (i)   Base Salary through the date of termination of employment;

      (ii)  $1,828,000, representing bonus for 2007, payable in a single cash
installment immediately after termination of employment;

      (iii) $155,148, representing pro-rata Target Bonus for the current year,
payable in a single cash installment immediately after termination of
employment;

      (iv)  $4,542,720, representing two times the sum of (a) Base Salary
($1,135,680) plus (b) Target Bonus, payable in a single cash installment
immediately after termination of employment;

      (v)   accelerated vesting of all outstanding equity awards not yet vested,
with all vested options remaining exercisable for three years after termination
(but not beyond the original term of such options); options that are not
exercisable as of the date of termination because the applicable performance
hurdle has not been satisfied as of such date shall not become exercisable until
and unless the applicable conditions for exercisability are satisfied during
this three-year post-termination exercise period, with such exercisability to be
determined on such basis whether or not the Executive remains as non-executive
Chairman during such three-year period (Exhibit A hereto sets forth a summary of
all outstanding equity awards held by the Executive);

      (vi)  if the Executive and his spouse do not otherwise have health,
medical, dental and hospitalization coverage at any time prior to the Terminal
Date (as defined below), participation for Executive and his spouse at the
Company's sole expense in the Company's health, medical, dental and
hospitalization coverages (to the same extent as other senior executives of the
Company) or, if such participation is not permitted by applicable law or the


                                       2




terms of the applicable plan, prompt reimbursement on a monthly basis to the
Executive for the reasonable cost of comparable coverages, in either case, until
the earlier of (a) the death of the Executive and his spouse and (b) the date on
which the Executive and his spouse have reached age 65 (the date on which the
events in either clause (a) or (b) occur, the "Terminal Date") (it being the
intention of the parties to cooperate in good faith to structure the foregoing
on a tax efficient basis);

      (vii) at Executive's election, continuation of his life insurance and/or
long-term disability coverage by the Company for up to two years following
termination of employment (the Executive shall reimburse the Company for the
premiums for such coverage as incurred);

      (viii) reimbursement of expenses incurred by the Executive prior to the
date hereof in accordance with Sections 4(g) and 5 of the Employment Agreement,
and reimbursement for the reasonable legal fees and expenses incurred by him for
the negotiation of this agreement promptly following submission of appropriate
documentation evidencing such fees and expenses; and

      (ix) other payments, entitlements or benefits, if any, that have been
earned, are accrued or are payable or to be provided by reason of his employment
by the Company through the date hereof in accordance with applicable plans,
programs, arrangements or other agreements of the Company or any affiliate,
including, without limitation, the Company's long-term incentive programs and
the deferred compensation plan (the SAP) referred to in Sections 4(f) and (e) of
the Employment Agreement, payable in accordance with the terms thereof.

The Executive confirms and agrees that, except as expressly provided for herein,
including Section 12(d), no other amounts are payable to him by reason of his
employment by the Company or the termination thereof.

      4.    Compensation and Benefits During the Extended Term. During the
Extended Term the Company shall pay to the Executive compensation at the rate of
$1,000,000 per year (the "Compensation"), of which 50% shall be paid in cash in
quarterly installments conforming with the payment schedule for other Board
members and the other 50% shall be paid in Company securities (a) in the same
proportion of Common Stock, options and whatever other equity-linked securities
the other Board members receive, (b) valued the same way the other Board members
equity distribution is valued, (c) with the same vesting schedule as the other
Board members, and (d) issued on the same date as the other Board members
receive their annual equity award, provided that (i) in the event the Board
members are not paid cash, the cash installments shall be paid no less
frequently than every 3 months and (ii) in the event the Board members are not
issued equity, the other 50% shall be paid by the Company in cash on a quarterly
basis as aforesaid. The Compensation shall be in lieu of, and not in addition
to, fees and equity awards to which the Executive would otherwise be entitled by
reason of his service as a member of the Board or any committee thereof.
Executive will be entitled to prompt reimbursement of expenses associated with
carrying out his responsibilities as Non-Executive Chairman in accordance with
the Company's policies for expense reimbursement of Board members' expenses.
During the Extended Term, the Executive may continue to use the Company
automobile currently provided to him until the current lease period expires and,


                                       3




with the approval of the Board, may use Company aircraft for purposes of the
Company's business, including attendance at a Board meeting.

      5.    Non-Competition; Non-Solicitation. (a) Executive covenants and
agrees that during the period from the date of this agreement through the later
of February 19, 2010 or one year after the end of the Extended Term (the
"Restricted Period") he will not directly or indirectly engage in or invest in,
own, manage, operate, finance, control or participate in the ownership,
management, operation, financing or control of, be employed by, associated with
or in any manner connected with, lend Executive's name or any similar name to,
lend Executive's credit to, or render services or advice to, any business which
provides or sells managed behavioral care services, managed radiology services
or managed specialty pharmaceutical services (in each case, of the type provided
or sold by the Company and its controlled subsidiaries or affiliates) or any
other products or services which are provided or sold by the Company or its
controlled subsidiaries or affiliates during the Extended Term, in the United
States or any other geographic location in which the Company or a controlled
subsidiary or affiliate of the Company operates, other than Internet Healthcare
Group, Digital Insurance, and Health Markets, unless waived in writing by the
Board in its sole discretion. Executive recognizes that the above restriction is
reasonable and necessary to protect the interest of the Company and its
controlled subsidiaries and affiliates.

The foregoing shall not be deemed to prohibit Executive's association with a
company if an immaterial portion of such company's revenues is attributable to
operations directly competitive with the Company (provided Executive is not
employed within or associated with those directly competitive operations).
Further, nothing contained in this Section 5 shall restrict Executive from
making any investments in any corporation or other business enterprise whose
outstanding capital stock or other equity interests are listed or admitted to
unlisted trading privileges on a national securities exchange or included for
quotation through an inter-dealer quotation system of a registered national
securities association, provided that such investment (i) represents less than
five percent (5%) of the aggregate outstanding capital stock or other equity
interests of such corporation, partnership or business enterprise and (ii) does
not otherwise provide Executive or any affiliate of Executive with the right or
power (whether or not exercised) to influence, direct or cause the direction of
the management, policies and/or affairs of any business or enterprise which is
directly or indirectly competing with any business operations or activities of
Company or any of its subsidiaries.

      (b)   Executive covenants and agrees that during the Restricted Period he
will not, and will not assist any other person or entity to, directly or
indirectly, solicit for employment or consultation any employee of the Company
or any of its controlled subsidiaries or affiliates who was employed with the
Company or its controlled subsidiaries or affiliates at any time from February
19, 2007 through the date hereof, or in any manner knowingly induce or attempt
to induce any such employee to terminate his or her employment with the Company
or its controlled subsidiaries or affiliates, provided that this Section 5(b)
shall not prohibit soliciting employees through general advertising not directed
to employees of the Company or its controlled subsidiaries or affiliates. The
Company agrees that the following shall not be deemed a violation of this
subsection 5(b): (i) the Executive's responding to an unsolicited request for an


                                       4




employment reference regarding any former employee of the Company from such
former employee, or from a third party, by providing a reference setting forth
his personal views about such former employee, or (ii) if an entity with which
the Executive is associated solicits any employee of the Company or any of its
subsidiaries, if the Executive was not, directly or indirectly, involved in
identifying such person as a potential recruit or assisting in the recruitment
of such employee. For purposes hereof, the Executive shall only be deemed to
have been involved "indirectly" in soliciting or identifying an employee if the
Executive (x) directs, encourages or authorizes another person to solicit the
employee, (y) identifies an employee to another person as a potential recruit or
(z) aids, assists or participates with another person in soliciting an employee.

      6.    Withholding. The Company shall be entitled to withhold from amounts
payable to the Executive hereunder taxes that it is required to withhold by law.

      7.    Executive's Release. As a material inducement to the Company to
enter into this agreement, the Executive, on behalf of himself, his
representatives, agents, estate, heirs, successors and assigns, and with full
understanding of the contents and legal effect of this agreement and having the
right and opportunity to consult with his counsel, releases and discharges the
Company, its shareholders, officers, directors, supervisors, members, managers,
employees, agents, representatives, attorneys, insurers, parent companies,
divisions, subsidiaries, affiliates, and all employee benefit plans sponsored by
or contributed to by the Company, and all related entities of any kind or
nature, and its and their predecessors, successors, heirs, executors,
administrators, and assigns (collectively, the "Company Released Parties") from
any and all claims, actions, causes of action, grievances, suits, charges, or
complaints of any kind or nature whatsoever, that he ever had or now has through
the date hereof, whether fixed or contingent, liquidated or unliquidated, known
or unknown, suspected or unsuspected, and whether arising in tort, contract,
statute, or equity, before any federal, state, local, or private court, agency,
arbitrator, mediator, or other entity, regardless of the relief or remedy.
Without limiting the generality of the foregoing, it being the intention of the
parties to make this release as broad and as general as the law permits, this
release specifically includes, but is not limited to, any and all subject matter
and claims arising from any alleged violation by the Company Released Parties
under the Age Discrimination in Employment Act of 1967, as amended; the Fair
Labor Standards Act; Title VII of the Civil Rights Act of 1964, as amended; the
Civil Rights Act of 1866, as amended by the Civil Rights Act of 1991 (42 U.S.C.
ss. 1981); the Rehabilitation Act of 1973, as amended; the Employee Retirement
Income Security Act of 1974, as amended; the Americans with Disabilities Act;
the Family and Medical Leave Act; the Worker Adjustment and Retraining
Notification Act; the Equal Pay Act; Executive Order 11246; Executive Order
11141; and any other federal, state or local constitutional or statutory claim,
tort claim, employment or other contract or implied contract claim, or common
law claim for wrongful discharge, breach of an implied covenant of good faith
and fair dealing, defamation, invasion of privacy, or any other claim, arising
out of or involving his employment with the Company, the termination of his
employment with the Company, or involving any other matter, including but not
limited to his employment with the Company or termination of employment with the
Company. The Executive further acknowledges that he is aware that statutes exist
that render null and void releases and discharges of any claims, rights,
demands, liabilities, action and causes of action which are unknown to the



                                       5





releasing or discharging party at the time of execution of the release and
discharge. The Executive hereby expressly waives, surrenders and agrees to
forego any protection to which he would otherwise be entitled by virtue of the
existence of any such statute in any jurisdiction. The release provided by this
Section 7 shall not limit or release (i) the Executive's right to enforce this
agreement (including those sections of the Employment Agreement incorporated by
reference in this agreement), (ii) any rights of the Executive to receive
benefits under the plans, programs, policies and other arrangements of the
Company in which he participated at the time of his termination of employment,
subject to such rights being superseded or modified by a specific provision of
this agreement, (iii) the Executive's rights to indemnification and advancement
of expenses from the Company pursuant hereto and pursuant to Section 145 of the
Delaware General Corporation Law, and the Certificate of Incorporation and
By-laws of the Company, or pursuant to any applicable insurance policy, and (iv)
any right the Executive may have to obtain contribution as permitted by law in
the event of the entry of a judgment against the Executive as a result of any
act or failure to act for which the Executive, on the one hand, and any Company
Released Party, on the other hand, are jointly liable.

      8.    Executive's Covenant Not to Sue. The Executive, for himself, his
heirs, executors, administrators, successors and assigns agrees not to bring,
file, claim, sue or cause, assist, or permit to be brought, filed, or claimed
any action or cause of action regarding or in any way related to any of the
claims released in Section 7, and further agrees that this agreement is, will
constitute and may be pleaded as, a bar to any such claim, action or cause of
action. Nothing in this agreement shall prohibit or restrict Executive from: (i)
making any disclosure of information required by law or legal process or (ii)
filing a charge with Equal Employment Opportunity Commission or state fair
employment practices agency. However, Executive will not seek or accept personal
equitable or monetary relief in any such civil action, suit or legal proceeding
that involves any matter occurring at any time prior to the execution date of
this agreement by Executive.

      9.    Company's Release. As a material inducement to the Executive to
enter into this agreement, the Company, on behalf of itself, its controlled
subsidiaries and affiliates, and their respective directors, officers,
representatives, agents, successors and assigns, and with full understanding of
the contents and legal effect of this agreement and having the right and
opportunity to consult with its counsel, releases and discharges the Executive,
his agents and representatives, his and their successors, heirs, executors,
administrators, and assigns (collectively, the "Executive Released Parties")
from any and all claims, actions, causes of action, grievances, suits, charges,
or complaints of any kind or nature whatsoever, that it ever had or now has
through the date hereof, whether fixed or contingent, liquidated or
unliquidated, known or unknown, suspected or unsuspected, and whether arising in
tort, contract, statute, or equity, before any federal, state, local, or private
court, agency, arbitrator, mediator, or other entity, regardless of the relief
or remedy. Without limiting the generality of the foregoing, it being the
intention of the parties to make this release as broad and as general as the law
permits, this release specifically includes, but is not limited to, any and all
subject matter and claims arising out of or involving the Executive's employment
with the Company or the termination of his employment with the Company, or
involving any other matter, including but not limited to his employment with the
Company or the termination of his employment with the Company. The Company



                                       6





further acknowledges that it is aware that statutes exist that render null and
void releases and discharges of any claims, rights, demands, liabilities, action
and causes of action which are unknown to the releasing or discharging party at
the time of execution of the release and discharge. The Company hereby expressly
waives, surrenders and agrees to forego any protection to which it would
otherwise be entitled by virtue of the existence of any such statute in any
jurisdiction. The release provided by this Section 9 shall not limit or release
(i) the Company's right to enforce this agreement (including those sections of
the Employment Agreement incorporated herein), (ii) any rights of the Company
under the plans, programs, policies and other arrangements of the Company in
which the Executive participated at the time of his termination of employment,
subject to such rights being superseded or modified by a specific provision of
this agreement, (iii) any rights the Company may have by reason of fraud or
intentional misconduct by the Executive and (iv) any right the Company may have
to obtain contribution as permitted by law in the event of the entry of a
judgment against the Company as a result of any act or failure to act for which
the Company, on the one hand, and any Executive Released Party, on the other
hand, are jointly liable.

      10.   Company's Covenant Not to Sue. The Company, for itself, its
controlled subsidiaries and affiliates, and their respective directors,
officers, representatives, agents, successors and assigns agrees not to bring,
file, claim, sue or cause, assist, or permit to be brought, filed, or claimed
any action or cause of action regarding or in any way related to any of the
claims released in Section 9, and further agrees that this agreement is, will
constitute and may be pleaded as, a bar to any such claim, action or cause of
action. Nothing in this agreement shall prohibit or restrict the Company from
making any disclosure of information required by law or legal process.

      11.   Covenants. The restrictive covenants contained in Section 8 of the
Employment Agreement are incorporated by reference as if fully set forth herein;
Sections 8(b)(i) and 8(d) of the Employment Agreement are amended to conform
with Section 5 of this agreement.. Executive hereby reaffirms and agrees to
perform such obligations and acknowledges his agreement to be so bound forever
in the case of Section 8(a) and for the Restricted Period in the case of
Sections 8(b), 8(c) and 8(d). The Executive hereby reaffirms and agrees to
perform his obligations under Sections 9 and 10 (provided that the Executive and
the Company agree that the obligations set forth in such Section 10 shall be
applicable upon the expiration or termination of the Extended Term, except to
the extent that the Board requests earlier performance) of the Employment
Agreement (which sections are incorporated by reference as if fully set forth
herein). The Company and the Executive hereby reaffirm, and the Company and the
Executive agree to perform their respective obligations under, the last two
sentences of Sections 4(c)(i) and 4(c)(ii) of the Employment Agreement and
Section 7(b) of the Employment Agreement (which sections are incorporated by
reference as if fully set forth herein).

      12.   Miscellaneous Provisions.

            (a)   Governing Law; Construction. This agreement and all issues
relating to the validity, interpretation, and performance will be governed by,
interpreted, and enforced under the laws of the State of Connecticut. The
parties hereto participated jointly in the negotiation and preparation of this
agreement, and each party has had the opportunity to obtain the advice of legal



                                       7





counsel and to review and comment upon the agreement. Accordingly, it is agreed
that no rule of construction shall apply against any party or in favor of any
party. This agreement shall be construed as if the parties jointly prepared this
agreement, and any uncertainty or ambiguity shall not be interpreted against one
party and in favor of the other.

            (b)   Remedies. An actual or threatened violation by the Executive
of the covenants and obligations set forth or referred to in Sections 5 or 11
will cause irreparable harm to the Company or its subsidiaries or affiliates and
the remedy at law for any such violation will be inadequate. The Executive
agrees, therefore, that the Company or its subsidiaries or affiliates will be
entitled to seek appropriate equitable relief, including, but not limited to, a
temporary restraining order and a preliminary injunction, without the necessity
of posting a bond.

            (c)   Arbitration. Except for an action for equitable relief as
described in Section 12(b), any disputes or controversies arising under this
agreement will be settled by arbitration in Hartford, Connecticut, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
and before three arbitrators selected in accordance with such Rules. 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. Each party shall pay its own attorney's fees and other arbitration
and enforcement costs.

            (d)   Indemnification. The Company shall indemnify Executive to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware and shall provide the Executive with directors' and officers'
liability insurance coverage to the same extent as provided to other officers
and directors of the Company.

            (e)   Reimbursement. With respect to the reimbursement of costs and
expenses to which the Executive is entitled in accordance with this agreement,
(x) such reimbursement shall be paid to the Executive no later than December 31
of the calendar year following the calendar year in which such costs or expenses
were incurred, (y) to the extent not inconsistent with the terms of health,
medical, dental and hospitalization coverages provided to the Executive, the
costs and expenses incurred by the Executive in any calendar year that are
eligible for reimbursement shall not affect the costs and expenses incurred by
the Executive in any other calendar year that are eligible for reimbursement,
and (z) the Executive's right to reimbursement shall not be subject to
liquidation or exchange for any other benefit.

            (f)   Level of Services. The Executive shall not be required to
perform services for the Company hereunder during the Extended Term at a level
greater than 20% of the average level of services performed by him for the
Company over the immediately preceding 36 month period, unless the Company
reasonably determines that as a result of a change in its business circumstances
from those prevailing on February 19, 2008 it needs the Executive to perform
services at a level greater than 20% of such average level during any period
within the Extended Term, and the Executive agrees to perform such greater level
of services during such period.

            (g)   Notices. Any notice or request required or permitted to be
given to any party will be given in writing and, excepting personal delivery,


                                       8




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:

            To Executive:     At the address set forth in the  Company's
            records.

            To the Company:   Magellan Health Services, Inc.
                              55 Nod Road
                              Avon, Connecticut 06001
                              Attention:  Chief Executive  Officer and General
                                          Counsel

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;
or, if set by recognized overnight courier, on the second business day following
the business day on which it is provided to such courier.

            (h)   Headings. 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.

            (i)   Severability. 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.

            (j)   Binding Effect. 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 Executive or
the Company to any other person or entity but may be assigned by the Company to
any subsidiary or affiliate of the Company or to any successor to or transferee
of all, or any part, of the stock or assets of the Company.

            (k)   Entire Agreement. 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 otherwise within this
agreement. The Employment Agreement is terminated without any further liability
of any party, except to the extent incorporated by reference in this agreement.
In the event of any direct conflict between the express terms of this agreement


                                       9




and of any plan referred to herein the terms of this agreement will prevail. No
amendment or modification of this agreement will be valid unless made in writing
and signed by each of the parties. No waiver of any provision of this agreement
will be valid unless in writing and signed by the party to be charged. No
representations, inducements, or agreements have been made to induce either
Executive or the Company to enter into this agreement, which are not expressly
set forth within this agreement. Executive and the Company acknowledge and agree
that the Company's subsidiaries and affiliates are express third party
beneficiaries of this agreement.

            (l)   Representations. The Company represents that the execution and
delivery of this agreement by the Company have been duly authorized by all
requisite corporate action. The Executive represents and certifies that he has
carefully read and fully understands all of the provisions and effects of this
agreement, has knowingly and voluntarily entered into this agreement freely and
without coercion, and acknowledges that the Company advised him to consult with
an attorney prior to executing this agreement and further advised him that he
had twenty-one (21) days within which to review and consider this agreement and
that, if he signs this agreement in less time, he has done so voluntarily in
order to obtain sooner the benefits under this agreement. The Executive is
voluntarily entering into this agreement and neither the Company nor its
employees, officers, directors, representatives, attorneys or other agents made
any representations concerning the terms or effects of this agreement other than
those contained in this agreement itself.

            (m)   Revocation. The Executive acknowledges that he has seven (7)
days from the date this agreement is executed in which to revoke this agreement.
To be effective, any such revocation must be in writing and delivered to the
Company's principal place of business on or before the seventh day after signing
and must expressly state the Executive's intention to revoke this agreement.

            (n)   Counterparts. This agreement may be executed in counterparts,
including by fax or Adobe Acrobat, each of which, when taken together shall
constitute one and the same agreement.










                                       10





      PLEASE READ THIS AGREEMENT AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS
BEFORE SIGNING IT. THIS AGREEMENT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS, INCLUDING THOSE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT,
AND OTHER FEDERAL, STATE AND LOCAL LAWS PROHIBITING DISCRIMINATION IN
EMPLOYMENT.

      IN WITNESS WHEREOF, the Executive and the Company have voluntarily signed
this agreement effective as of the first date set forth above.

MAGELLAN HEALTH SERVICES, INC.



By:                                          /s/  Steven J. Shulman
   -----------------------------          -----------------------------
                                          Steven J. Shulman

Its:
    ----------------------------
























                                       11





                                                                       Exhibit A

                            MAGELLAN HEALTH SERVICES
                                PERSONNEL SUMMARY
                                 AS OF 2/19/2008
                               SHULMAN, STEVEN J.



                                                Granted                                   Outstanding
Grant                                  --------------------------     Exercised     --------------------------
Date          Plan/Type     Price       Total   Vested  Unvested        Sold         Total   Vested  Unvested
                                                                              
3/10/2005     TypB/NQ       $34.57    198,250   99,126   99,124          --        198,250   99,126   99,124
3/10/2005     TypB/RSA      $ 0.00     24,451   12,226   12,225       12,226        12,225      --    12,225
3/14/2005     TypA/RSA      $ 0.00     14,507   14,507      --        14,507           --       --       --
5/16/2006     TypD/NQ       $38.52    165,664   55,222  110,442          --        165,664   55,222  110,442
5/16/2006     TypE/NQ       $38.52    110,442   36,814   73,628          --        110,442   36,814   73,628
5/16/2006     TypE/RSU      $ 0.00     35,144   11,715   23,429       11,715        23,429      --    23,429
 3/2/2007     TypD/NQ       $40.63    266,181      --   266,181          --        266,181      --   266,181
 3/2/2007     TypD/RSU      $ 0.00     32,167      --    32,167          --         32,167      --    32,167
























                                       12

EX-99

                                                                    EXHIBIT 99.1
                                                                    ------------

                                                          NEWS RELEASE

MAGELLAN                                                  55 Nod Road
HEALTH SERVICES                                           Avon, CT 06001
Getting Better All the Time                               www.MagellanHealth.com


For Immediate Release
- ---------------------                           Media Contact:      Erin Somers
                                                                    410-953-2405

                                                Investor Contact:   Melissa Rose
                                                                    877-645-6464

                   MAGELLAN HEALTH SERVICES BOARD OF DIRECTORS
                 NAMES RENE LERER, M.D., CHIEF EXECUTIVE OFFICER
                 Company Announces Other Executive Appointments
- --------------------------------------------------------------------------------

AVON, Conn. - February 25, 2008 - The Board of Directors of Magellan Health
Services (Nasdaq:MGLN), a leading diversified specialty health care management
organization, has named Rene Lerer, M.D., president and chief executive officer,
effective immediately. Lerer, 52 years old, most recently served as president
and chief operating officer (COO) of the Company. He succeeds Steven J. Shulman,
who will continue to serve as non-executive chairman of the board.

Lerer joined Magellan in 2002. As president and COO, he was responsible for the
Company's three lines of business - behavioral health, diagnostic imaging and
specialty pharmaceuticals - as well as its customer service, care management and
claims operations, and a number of corporate functions. Earlier in his career he
was a co-founder and president of Internet HealthCare Group, a health care
technology venture fund, and served as COO for Prudential Health Care
nationally. He received his undergraduate degree from Oberlin College and his
doctor of medicine degree from the State University of New York at Buffalo.

"I believe Rene Lerer is one of the strongest executives in the managed care
field today and his leadership has been critical to the Company's success over
the last five years," Shulman said. "He was integral to the operational
turn-around effort that Magellan undertook in 2003 and 2004 and, since that
time, has successfully led the Company's operational expansion beyond its
behavioral business into other areas of health care. As I relinquish the CEO
role and transition to my retirement, it is my privilege to be continuing my
association with a great organization and a remarkable leader."

On behalf of Magellan's board, Lead Director Robert M. Le Blanc said, "The
Company's directors and Steve have always considered Rene to be Steve's natural
successor and felt it was important to recognize his talents and strengths by
promoting him to the CEO role at this time. Over the last several years, Steve's
vision has helped guide the Company and he has played a pivotal role in
shepherding Magellan through its turnaround and the design and development of
its strategic growth initiatives and business diversification. We deeply
appreciate his contributions and look forward to continuing to draw on his
expertise in his role with the board."

Commenting on his appointment, Lerer said, "I am honored to have the opportunity
to lead Magellan as its president and chief executive officer and gratified by
the confidence that Steve and the board have shown in me. Steve's mentorship
over the course of our working relationship has been invaluable to me personally
and professionally. As I take the reins as CEO, I thank both Steve and the board
and look forward to their continued support."

                                     -more-





MAGELLAN HEALTH SERVICES BOARD OF DIRECTORS NAMES RENE LERER, M.D., CHIEF
EXECUTIVE OFFICER
- - Page 2 -


"Magellan has a great future ahead of it and I am fortunate to be taking on my
new role backed by a team of particularly strong leaders who have created a
robust foundation for the Company's growth. Key among them is Mark Demilio, our
chief financial officer, whom I will ask to take on a greater leadership role as
the Company enters a new era. His strategic insights, financial acumen and
thoughtful counsel have played a crucial part in our ability to achieve our
objectives and I look forward to partnering with him as we chart the Company's
course for the future."

While the Company will incur a charge in the first quarter associated with
Shulman's transition agreement, it does not anticipate revising its 2008
earnings guidance. The Company also confirmed its previously announced 2007
earnings guidance.

Additional Executive Appointments

The Company also announced that Eric S. Reimer, 38, now will lead the Company's
strategic development and mergers and acquisitions effort, and that Tina M.
Blasi, 50, has joined the Company as CEO of National Imaging Associates (NIA),
succeeding Reimer.

Reimer led the acquisitions of both NIA and the Company's specialty
pharmaceutical business, ICORE Healthcare. He was named CEO of NIA in 2006 and
led the transformation of the organization into a full-service radiology
benefits management firm, with provider network and claims payment capabilities
and the ability to manage services on a risk basis. Blasi co-founded and served
as chief operating officer of Lumenos, a leading consumer-directed health plan
located in Alexandria, Va. While with Lumenos, prior to and after its
acquisition by WellPoint in 2005, she was responsible for all financial,
technological, operational, and client-centered aspects of the company,
including new product development, account management and management of network
and partner relationships.

"Eric played a critical role in diversifying the company beyond our behavioral
health footprint," Lerer said. "With Eric having jump-started NIA's growth
efforts, and with another seasoned health care executive available to succeed
him and ensure a seamless transition, now is a natural time for him once again
to lead our M&A activity. We are delighted to welcome Tina to Magellan's
executive management team and look forward to drawing on her entrepreneurial
background and expertise in growing world-class emerging-industry businesses.
She is a strong leader who will build on NIA's foundation for growth and track
record of success while ensuring a seamless transition for those served by NIA."

Conference Call to Address Investor and Media Inquiries

Because the Company has entered its customary quiet period in advance of its
fourth quarter and fiscal year 2007 earnings announcement to be held Friday,
February 29th, it will not be addressing investor or media inquiries on an
individual basis. Rather, management will hold a conference call tomorrow,
Tuesday, February 26th, at 8:30 a.m. Eastern, at which time it will respond to
such inquiries.

To participate in the conference call, interested parties should call
1-888-282-3966 and reference the passcode Magellan approximately 15 minutes
before the start of the call. The conference call also will be available via a
live Webcast at Magellan's investor relations page at www.MagellanHealth.com.

A taped replay of the conference call will be available for one week following
the call. The call-in numbers for the replay are 800-964-3773 and 402-998-0868
(from outside the U.S.).






MAGELLAN HEALTH SERVICES BOARD OF DIRECTORS NAMES RENE LERER, M.D., CHIEF
EXECUTIVE OFFICER
- - Page 3 -



About Magellan: Headquartered in Avon, Conn., Magellan Health Services, Inc.
(Nasdaq:MGLN) is a leading diversified specialty managed health care
organization. Its customers include health plans, corporations and government
agencies.

Cautionary Statement: This release contains forward-looking statements within
the meaning of the Securities Exchange Act of 1934 and the Securities Act of
1933, as amended, that involve a number of risks and uncertainties. All
statements, other than statements of historical information provided herein, may
be deemed to be forward-looking statements including, without limitation,
statements regarding the future success of the Company. These statements are
based on management's analysis, judgment, belief and expectation only as of the
date hereof, and are subject to uncertainty and changes in circumstances.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," "may," "should," "could," "estimate," "intend" and other similar
expressions are intended to identify forward-looking statements. Actual results
could differ materially due to, among other things, the possible election of
certain of the Company's customers to manage the healthcare services of their
members directly; changes in rates paid to and/or by the Company by customers
and/or providers; higher utilization of health care services by the Company's
risk members; delays, higher costs or inability to implement new business or
other Company initiatives; the impact of changes in the contracting model for
Medicaid contracts; termination or non-renewal of customer contracts; the impact
of new or amended laws or regulations; governmental inquiries; litigation;
competition; operational issues; health care reform; and general business
conditions. Additional factors that could cause actual results to differ
materially from those reflected in the forward-looking statements include, but
are not limited to, the risks discussed in the "Risk Factors" section included
within the Company's most recent Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q filed with the SEC. Readers are cautioned not to
place undue reliance on these forward-looking statements. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date of this release.


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