Exhibit 10.2


MAGELLAN HEALTH SERVICES,
INC.


2006
MANAGEMENT INCENTIVE PLAN


NOTICE OF
STOCK OPTION GRANT


(REFERENCE
NO. 20   -  -   )


	
  Name of
  Optionee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Shares Subject to Option:

  	
   

  	
          shares
  of Ordinary Common Stock of Magellan Health Services, Inc. (the
  “Shares”)

  
	
   

  	
   

  	
   

  
	
  Type of Option:

  	
   

  	
       Nonqualified                                   Incentive

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share:

  	
   

  	
  $         

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
                ,
  20  

  
	
   

  	
   

  	
   

  
	
  Date Exercisable and Other Conditions of
  Exercise:

  	
   

  	
  This option shall be exercisable, in whole or in
  part, until its Expiration Date only to the extent it is vested and while the
  Optionee’s Service with the Company, a Subsidiary or a Parent company
  continues. In addition, this option, to the extent vested on the date of
  termination of the Optionee’s Service, shall be exercisable for the period
  after the termination of the Optionee’s Service provided by Optionee’s Option
  Agreement, unless a different period is specified in Optionee’s employment
  agreement with the Company, a Subsidiary or a parent company, in which case
  this option shall be exercisable for such different period after termination
  of Optionee’s Service (but in no event on or after the Expiration Date). 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [In addition, with respect to          
  of the Shares subject to this option (a ratable potion of which shall vest on
  each of the vesting dates of this option), the following provisions shall
  apply to the exercise of this option: Prior to the fifth anniversary of the
  Date of Grant, this option shall be exercisable, for all or part of such
  Shares as to which this option has vested, only if on or after the date on
  which such Shares have vested the Trading Price (as defined below) exceeds
  the Target Price (as defined below) applicable on any date. After the fifth
  anniversary of the Date of Grant, this option shall be exercisable without
  regard to the Trading Price as of the last date of vesting.] 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In addition, this option may be exercised, to the
  extent vested, only when exercise is otherwise permitted in accordance with
  the terms of the 2006 Management Incentive Plan and the Option Agreement to
  which this notice of grant relates (including the provisions thereof
  applicable in the event of Injurious Conduct). 

  
	
   

  	
   

  	
   

  




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  [The “Trading Price” as of any date shall be the
  average of the Fair Market Value of a share of Ordinary Common Stock of the
  Company (or any successor security) over the 20 consecutive trading days
  ending on the trading day immediately preceding such date. The “Target Price”
  as of the vesting dates of this option shall be as provided on Attachment A
  hereto.]

  
	
   

  	
   

  	
   

  
	
  Vesting:

  	
   

  	
  This option shall vest with respect to the Shares
  subject hereto as to one-third of such Shares on each of the first, second
  and third anniversaries of the Date of Grant, provided that in each case the
  Optionee’s Service has not terminated prior to such date. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding the preceding paragraph, this Option
  shall earlier vest immediately with respect to 100% of the Shares subject
  hereto in the event, after the date hereof, a Change in Control of the
  Company (as defined below) shall have occurred and within the period of
  eighteen months (or such other period as is provided by Optionee’s employment
  agreement, if any, in effect at the time of the Change of Control) following
  occurrence of the Change in Control, Optionee’s Service with the Company
  shall be terminated by the Company without Cause (as defined below) or by the
  Optionee with Good Reason (as defined below), provided that the Optionee’s
  Service with the Company has not previously terminated after the date hereof
  for any other reason, and upon such accelerated vesting this Option shall
  continue to be exercisable for the same period after such termination of
  Optionee’s Service as provided above. For purposes of this Option, the terms
  “Change in Control,” “Cause” and “Good Reason” shall have the same meanings
  as provided in any employment agreement between the Company and Optionee in
  effect at the time of the Change in Control (including any terms of
  substantially comparable significance in any such employment agreement even
  if not of identical wording) or, if no such employment agreement is in effect
  at such time or no such meanings are provided in such employment agreement,
  shall have the meanings ascribed thereto below:

  



 


	
  

  	
  (1)

  	
   A “Change in
  Control” of the Company shall mean the first to occur after the date hereof
  of any of the following events:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
  any “person,” as such term is used in Sections
  3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as
  amended (the “Exchange Act”), becomes a “beneficial owner,” as such term is
  used in Rule 13d-3 promulgated under the Exchange Act, of 30% or
  more of the Voting Stock (as defined below) of the Company;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
  the majority of the Board of Directors of the
  Company consists of individuals other than “Continuing Directors,” which
  shall mean the members of the Board on the date hereof;

  




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  c.

  	
  the Board of Directors of the Company adopts and, if
  required by law or the certificate of incorporation of the Corporation, the
  shareholders approve the dissolution of the Company or a plan of liquidation
  or comparable plan providing for the disposition of all or substantially all
  of the Company’s assets;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d.

  	
  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 previously 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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e.

  	
  the Company merges or combines with another company
  and, immediately after the merger or combination, the shareholders of the
  Company immediately prior to the merger or combination own, directly or
  indirectly, 50% or less of the Voting Stock of the successor company,
  provided that in making such determination there shall being excluded from
  the number of shares of Voting Stock held by such shareholders, but not from
  the Voting Stock of the successor company, any shares owned by Affiliates of
  such other company who were not also Affiliates of the Company prior to such
  merger or combination.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  “Cause” shall mean:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
  Optionee is convicted of (or pleads guilty or nolo
  contendere to) a felony or a crime involving moral turpitude;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
  Optionee’s commission of an act of fraud or
  dishonesty involving his or her duties on behalf of the Company;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.

  	
  Optionee’s willful failure or refusal to faithfully
  and diligently perform duties lawfully assigned to Optionee as an officer or
  employee of the Company or other willful breach of any material term of any
  employment agreement at the time in effect between the Company and Optionee;
  or

  




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  d.

  	
  Optionee’s willful failure or refusal to abide by
  the Company’s policies, rules, procedures or directives, including any
  material violation of the Company’s Code of Ethics.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (3)

  	
  “Good Reason” shall mean:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
  a reduction in Optionee’s salary in effect at the
  time of a Change in Control, unless such reduction is comparable in degree to
  the reduction that takes place for all other employees of the Company of
  comparable rank (for which purpose any person who is an executive officer of
  the Company (as determined for purposes of the Exchange Act shall be
  considered of comparable rank) or a reduction in Optionee’s bonus for the
  year in which or any year after the year in which the Change of Control occurs
  from Optionee’s maximum bonus opportunity for the year in which the Change in
  Control occurs (if any) as established under any employment agreement
  Optionee has with the Company or any bonus plan of the Company applicable to
  Optionee (or, if no such maximum bonus opportunity has yet been established
  for Optionee under a bonus plan applicable to Optionee for the year in which
  the Change of Control has occurred, the maximum bonus opportunity so
  established for Optionee for the immediately preceding year (if any));

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
  a material diminution in Optionee’s position, duties
  or responsibilities as in effect at the time of a Change in Control or the
  assignment to Optionee of duties which are materially inconsistent with such
  position, duties and authority, unless in either case such change is made
  with the consent of the Optionee; or

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.

  	
  the relocation by more than 50 miles of the offices
  of the Company which constitute at the time of the Change in Control
  Optionee’s principal location for the performance of his or her services to
  the Company;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  provided that, in each such case, such event or
  condition continues uncured for a period of more than 15 days after Optionee
  gives notice thereof to the Company.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  For purposes of the foregoing definitions,
  (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 that all such Voting Stock is
  entitled to cast.

  
	
   

  	
   

  	
   

  	
   

  
	
  Other Terms (if any):

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
               ,
  20   

  
	
   

  	
   

  	
   

  	
   

  



 



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By signing your name
below, you accept this award and acknowledge and agree that this award is
granted under and governed by the terms and conditions of Magellan Health
Services, Inc. 2006 Management Incentive Plan and the related Stock Option
Agreement, reference number 2006-  , both of which are hereby
made a part of this document.


	
  Optionee:

  	
   

  	
  MAGELLAN HEALTH SERVICES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 


 



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