EXHIBIT 10.

STOCK OPTION AGREEMENT

         STOCK OPTION AGREEMENT made as of October 4, 2004 between NATIONAL
MEDICAL HEALTH CARD SYSTEMS, INC., a Delaware corporation (the "Company"), and
Bill Masters (Optionee").

        WHEREAS, the Optionee is an employee of the Company or a subsidiary
thereof;

        WHEREAS, the Company desires to provide to the Optionee an additional
incentive to promote the success of the Company;

        NOW, THEREFORE, in consideration of the foregoing, the Company hereby
grants to the Optionee (the “Grant”) the right and option to purchase Common
Shares of the Company under and pursuant to the terms and conditions of the 1999
Stock Option Plan (the “Plan”) and upon and subject to the following terms and
conditions:

    1.        GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (the “Option”) to purchase Fifty Thousand Common Shares of the
Company (the “Option Shares”) during the following periods:

    (a)        All or any part of twelve thousand five hundred (12,500) common
Shares may be purchased during the period commencing one year from the date
hereof and exercisable through the close of business on October 3, 2014 (the
“Expiration Date”).

    (b)        All or any part of twelve thousand five hundred (12,500) common
Shares may be purchased during the period commencing two years from the date
hereof and exercisable through the Expiration Date. .

    (c)        All or any part of twelve thousand five hundred (12,500) common
Shares may be purchased during the period commencing three years from the date
hereof and exercisable through the Expiration Date.

    (d)        All or any part of twelve thousand five hundred (12,500) common
Shares may be purchased during the period commencing four years from the date
hereof and exercisable through the Expiration Date.

    2.        NATURE OF OPTION. All Stock Options granted under this Agreement
shall qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), subject to the limitations of
Section 422 of the Code.

    3.        EXERCISE PRICE. The exercise price of each of the Option Shares
shall be Nineteen Dollars and Eighty cents ($19.80) (the “Option Price”).

    4.        EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. As soon as practicable after the receipt of
notice of exercise (in the form annexed hereto as Exhibit A) and payment of the
Option Price as provided for in the Plan, the Company shall tender to the
Optionee certificates issued in the Optionee’s name evidencing the number of
Option Shares covered thereby.

    5.        TRANSFERABILITY. The Option shall not be transferable other than
by will or the laws of descent and distribution and, during the Optionee’s
lifetime, shall not be exercisable by any person other than the Optionee.

    6.        CHANGE OFCONTROL. In the event of a Change in Control (as defined
in the Employment Agreement), any Options granted hereunder which have not
vested as of the date of the Change in Control shall automatically vest on such
date, provided that no acceleration of exercisability shall occur with respect
to an outstanding Option if and to the extent such Option is, in connection with
the Change in Control, to be assumed or otherwise continued in full force or
effect by the successor entity (or parent thereof) pursuant to the terms of the
Change in Control transaction.

    7.        INCORPORATION BY REFERENCE. The terms and conditions of the Plan
are hereby incorporated by reference and made a part hereof.

    8.        NOTICES. Any notice or other communication given hereunder shall
be deemed sufficient if in writing and hand delivered or sent by registered or
certified mail, return receipt requested, addressed to the Company, 26 Harbor
Park Drive, Port Washington, New York 11050, Attention: Jonathan Friedman and to
the Optionee at the address indicated below. Notices shall be deemed to have
been given on the date of hand delivery or mailing, except notices of change of
address, which shall be deemed to have been given when received.

    9.        BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.

    10.        ENTIRE AGREEMENT. This Agreement, together with the Plan,
contains the entire understanding of the parties hereto with respect to the
subject matter hereof and may be modified only by an instrument executed by the
party sought to be charged.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.

                                                     NATIONAL MEDICAL HEALTH
                                                     CARD SYSTEMS, INC.
                                                     By:

                                                     ____________________________________
                                                        James Bigl, Chairman of the Board

                                                     ____________________________________
                                                              Signature of Optionee

                                                     ____________________________________
                                                        Name of Optionee

EXHIBIT A

NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.

a.     OPTION EXERCISE FORM

        The undersigned hereby irrevocably elects to exercise the within Option
dated __________________ to the extent of purchasing___________________ Common
Shares of National Medical Health Card Systems, Inc. The undersigned hereby
makes a payment of $______________ in payment therefor.

                                                                                        ________________________
                                                                                           Name of Optionee

                                                                                        ________________________
                                                                                          Signature of Optionee

                                                                                        ________________________
                                                                                          Address of Holder

                                                                                        ________________________
                                                                                               Date