**EXHIBIT 10.7**

 

**FORM OF STOCK OPTION AGREEMENT FOR SENIOR EXECUTIVE OFFICERS**

 

**STOCK OPTION AGREEMENT** made as of the                     between **NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC**., a Delaware corporation (the “Company”), and(“Optionee”). 

 

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

 

**WHEREAS**, the Company desires toprovide 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 the1999 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 up to             (    ) Common Shares of the Company (the “Option Shares”) pursuant to Plan. The Option shall vest and become exercisable in accordance withthe provisions of section 4 below. The Options granted pursuant to this agreement shall remain exercisable through the close of business on             ,20    . 

 

2. **NATURE OF OPTION**.Such Options to purchase the Option Shares are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, relating to “incentive stock options”. 

 

3. **EXERCISE PRICE**. The exercise price of each of the Option Sharesshall be             . The Company shall pay all original issue or transfer taxes on the exercise of the Option. 

 

4. **VESTING.**Except as specifically provided otherwise herein or in the Plan, and subject to the Optionee remaining inthe continuous employment with the Company or its subsidiaries through the applicable vesting dates provided below, the Option shall be come vested and exercisable as follows: 

 

(a) All or any part of **            ** Common Sharesmay be purchased during the period commencing one year from the date hereof and terminating at 5:00 P.M. on              20     (the “ExpirationDate”). 

 

(b) All or any part of**            ** Common Shares may be purchased during the period commencing two years from the date hereof and terminating at 5:00 P.M. on the Expiration Date. 

 

(c) All or any part of**            ** Common Shares may be purchased during the period commencing three years from the date hereof and terminating at 5:00 P.M. on the Expiration Date. 

 

(d) All or any part of****             Common Shares may be purchased during the period commencing four years from the date hereof and terminating at 5:00 P.M. on the Expiration Date. 

5. **EXERCISE OF OPTIONS**. The Option shall be exercised in accordance with the provisions of thePlan. 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 theOptionee’s name evidencing the number of Option Shares covered thereby. 

 

6. **ACCELERATED VESTING UPON CHANGE OF CONTROL.**In the event of any (i) consolidation or merger of the Company with or into another company where the Company is not the survivor or the directors of the Company immediately priorto the consolidation or merger do not constitute a majority of the board of directors subsequent to the consolidation or merger, or (ii) conveyance of all or substantially all of the assets or 50% or more of the common or preferred stock of theCompany to another company, (such consolidation, merger or conveyance of assets a “Change in Control”) each then outstanding Option (x) shall, immediately prior to the effective date of the Change in Control, become fully exercisable,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 thesuccessor entity (or parent thereof) pursuant to the terms of the Change in Control transaction, and (y) shall upon exercise thereafter entitle the holder thereof to such number of shares of Common Stock or other securities or property to whicha holder of shares of Common Stock of the Company would have been entitled upon such Change in Control. 

 

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

 

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

 

9. **NOTICES**. Any notice or other communication given hereunder shall be deemed sufficient if in writing and handdelivered or sent by registered or certified mail, return receipt requested, addressed to the Company, 26 Harbor Park Drive, Port Washington, New York 11050, Attention: Secretary and to the Optionee at the address indicated below. Notices shall bedeemed 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. 

 

10. **BINDING EFFECT**. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legalrepresentatives, successors and assigns. 

 

11. **ENTIREAGREEMENT**. This Agreement, and 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 Smith, Chief Executive Officer

 

 

Signature of Optionee

 

 

Name of Optionee

 

 

Address of Optionee

**EXHIBIT A**

 

**NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.**

 

**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