EXHIBIT 4.1

                                  FORM OF NOTE



     THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED (THE "ACT"),  OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY
INTEREST  THEREIN  MAY  BE  OFFERED,   SOLD,  PLEDGED,   ASSIGNED  OR  OTHERWISE
TRANSFERRED  UNLESS  (1)  A  REGISTRATION  STATEMENT  WITH  RESPECT  THERETO  IS
EFFECTIVE  UNDER THE ACT AND ANY APPLICABLE  STATE  SECURITIES  LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE, WHICH COUNSEL
AND OPINION ARE REASONABLY  SATISFACTORY  TO THE COMPANY,  THAT THIS NOTE MAY BE
OFFERED,  SOLD,  PLEDGED,  ASSIGNED OR  TRANSFERRED  IN THE MANNER  CONTEMPLATED
WITHOUT AN EFFECTIVE  REGISTRATION  STATEMENT UNDER THE ACT OR APPLICABLE  STATE
SECURITIES LAWS.

                   NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
                              12% Convertible Note

No. ___               January 22, 2002
$_______________          New York, New York
(or such greater
amount as provided
for herein)


     NATIONAL  MEDICAL HEALTH CARD SYSTEMS,  INC., a New York  corporation  (the
"Company"), for value received, hereby promises to pay to _______________,  with
an address  at_____________________,  or registered assigns (the "Holder"),  the
principal  amount  of  _______________  ($ ) on the  Maturity  Date (as  defined
below),  and to pay interest on the unpaid principal  balance hereof at the rate
(calculated  on the basis of a 360-day year  consisting of twelve 30-day months)
of 12% per annum from the date hereof until the Maturity  Date.  Interest on the
unpaid  principal  balance  hereof  shall accrue and be  compounded  and payable
quarterly.  In no event  shall any  interest  to be paid  hereunder  exceed  the
maximum rate permitted by law. In any such event, this Note shall  automatically
be deemed  amended  to permit  interest  charges  at an amount  equal to, but no
greater than, the maximum rate permitted by law.

1.       Offering and Subscription Agreement.
         -----------------------------------

     This Note is one of the notes  issued by the  Company in an  offering  (the
"Offering") of 12% Convertible Notes in the initial  aggregate  principal amount
of  $11,600,000  (collectively,  the "Notes").  The Notes are  convertible  into
shares of common  stock,  par value $.001 per share of the Company  (the "Common
Stock") at a conversion price per share equal to TWELVE DOLLAR ($12.00) (subject
to adjustment upon the occurrence of certain events) (the "Conversion Price," in
accordance  with the terms and conditions set forth herein).  In connection with
the Offering, each purchaser of Notes (collectively, the "Holders") has executed
and delivered a  Subscription  Agreement  (each a  "Subscription  Agreement" and
collectively, the "Subscription Agreements") to the Company.

2.       Payments.
         --------

(a) Principal of, and accrued interest on, this Note shall be due and payable in
full on the Maturity Date. The "Maturity Date" shall be the later of (x) January
22, 2003 (the "Stated Maturity Date") and (y) the Extension Date, as defined in
the immediately following paragraph (but only to the extent the Receivables
Purchase Agreement (as defined below) remains in effect).

     (b) On the Stated  Maturity  Date and on each date upon which the quarterly
interest shall be payable  hereunder (each an "Interest  Date"),  for so long as
the Receivables Purchase Agreement remains in effect, the Company shall not pay,
and the Holder  shall not demand  that the Company  pay,  amounts due under this
Note unless,  on the Business Day immediately  prior to the Stated Maturity Date
or Interest Date, as applicable, the chief financial officer of the Company (the
"CFO") delivers an officer's certificate to the Holder and to Healthcare Finance
Group, Inc. (each an "Officer  Certificate") stating that both immediately prior
to the Stated  Maturity Date or Interest  Date, as applicable,  and  immediately
following the making by the Company of the payment  contemplated under this Note
on the  Stated  Maturity  Date or  Interest  Date,  as  applicable,  no Event of
Termination  (as  defined  in  the  Receivables  Purchase  Agreement)  would  be
continuing under that certain Receivables Purchase and Transfer Agreement, dated
as of January 29, 2002,  among National  Medical Health Card Systems,  Inc., the
other  Providers  named  therein  and  NMHC  Funding,  LLC,  as  Purchaser  (the
"Receivables  Purchase  Agreement")  and no Event of Default  (as defined in the
Loan  Agreement)  would be  continuing  under  that  certain  Loan and  Security
Agreement,  dated as of January  29,  2002  between  NMHC  Funding,  LLC and HFG
Healthco-4 LLC (the "Loan  Agreement") (as either or both such agreements may be
amended,  modified or  supplemented  from time to time).  If with respect to the
payment to the Holder of the principal  amount hereof,  the CFO does not deliver
such Officer  Certificate,  then the Maturity  Date under this Note shall extend
until the first anniversary of the Stated Maturity Date (the "Extension  Date").
If, with respect to an interest  payment due Holder on an Interest Date, the CFO
does not deliver the requisite Officer Certificate,  the amount of such interest
payment due Holder shall be  compounded  and payable on the next  interest  date
upon which the CFO delivers the requisite Officer Certificate. The provisions of
this Section 2(a) shall not limit the rights of the Holder hereunder to exercise
its conversion rights pursuant to Section 9 below and the Holder may convert its
Note in lieu of extending the Stated Maturity Date.

     (c)  Interest on this Note shall  accrue from the date of issuance  hereof,
to, but  excluding  the  Maturity  Date,  and shall be  compounded  and  payable
quarterly.

     (d) If the Maturity Date would fall on a day that is not a Business Day (as
defined  below),  the payment due on the Maturity  Date will be made on the next
succeeding  Business  Day with  the  same  force  and  effect  as if made on the
Maturity  Date.  "Business  Day" means any day which is not a Saturday or Sunday
and is not a day on which  banking  institutions  are  generally  authorized  or
obligated to close in the City of New York, New York.

     (e) The Company may, at its  option,subject to 2(b), prepay all or any part
of the principal of this Note,  without  payment of any premium or penalty.  All
payments on this Note shall be applied first to accrued  interest hereon and the
balance to the payment of principal hereof.

     (f) Payments of principal  and interest on this Note shall be made by check
sent to the  Holder's  address set forth  above or to such other  address as the
Holder may designate for such purpose from time to time by written notice to the
Company, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts.

     (g) The  obligations  to make the  payments  provided  for in this Note are
absolute  and   unconditional   and  not  subject  to  any   defense,   set-off,
counterclaim,  rescission,  recoupment  or  adjustment  whatsoever.  The Company
hereby  expressly   waives  demand  and  presentment  for  payment,   notice  of
non-payment,  notice of dishonor,  protest, notice of protest,  bringing of suit
and diligence in taking any action to collect any amount  called for  hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing  hereon,  regardless  of and without any notice,  diligence,  act or
omission with respect to the collection of any amount called for hereunder.

     3.  Ranking of Note.  The payment of the  principal of and interest on this
Note is unsecured in all respects.

4.       Covenants.

     The  Company  covenants  and agrees  with the Holder  that,  so long as any
amount remains unpaid on the Notes,  unless the consent of Holders of a majority
in principal amount of the outstanding  Notes of all of the Holders is obtained,
the Company shall deliver to each Holder:

     (a) as soon as  practicable  after the end of each fiscal year,  and in any
event within 90 days thereafter, audited annual financial statements and as soon
as practicable after the end of the first, second and third quarterly accounting
periods in each fiscal  year of the  Company,  and in any event,  within 45 days
thereafter,  quarterly  unaudited  financial  statements  of the Company and its
subsidiaries and such other  information as is customarily made available to the
Company's shareholders;

     (b)  promptly  after the Company  shall obtain  knowledge of such,  written
notice of all legal or arbitral proceedings, and of all proceedings by or before
any  governmental  or  regulatory   authority  or  agency,   and  each  material
development in respect of such legal or other proceedings, affecting the Company
and its subsidiaries,  except proceedings which, if adversely determined,  would
not have a material adverse effect on the Company and its subsidiaries  taken as
a whole; and

     (c) promptly after the Company shall obtain  knowledge of the occurrence of
any Event of Default (as hereinafter  defined) or any event which with notice or
lapse of time or both would  become an Event of Default  (an Event of Default or
such other event being a "Default"),  a notice  specifying that such notice is a
"Notice of Default" and describing  such Default in reasonable  detail,  and, in
such Notice of Default or as soon  thereafter as  practicable,  a description of
the action the Company has taken or proposes to take with respect thereto.

     5. Events of Default.  The occurrence of any of the following  events shall
constitute an event of default (an "Event of Default"):

     (a) A default in the payment of the principal on any Note,  when and as the
same shall become due and payable.

     (b) A default in the payment of any  interest on any Note,  when and as the
same shall become due and payable, which default shall continue for ten business
days after the date fixed for the making of such interest payment.

     (c) A default in the  performance,  or a breach,  of any other  covenant or
agreement of the Company in this Note and  continuance of such default or breach
for a period  of 15 days  after  receipt  of notice  from the  Holder as to such
breach or after the Company had or should have had knowledge of such breach.

     (d) Any  representation,  warranty  or  certification  made by the  Company
pursuant to this Note or the  Subscription  Agreements  shall prove to have been
false or misleading as of the date made in any material respect.

     (e) A default by the Company shall be declared under any indebtedness which
gives the holder thereof the right to declare such indebtedness due prior to its
stated  maturity  and such  indebtedness  is in fact  declared  due prior to its
stated maturity.

     (f) A final  judgment  or  judgments  for the payment of money in excess of
$2,000,000  in  the  aggregate   shall  be  rendered  by  one  or  more  courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such  discharge),  or a stay of  execution  thereof  shall not be  procured,
within 60 days from the date of entry thereof and the Company shall not,  within
such 60-day  period,  or such longer period  during which  execution of the same
shall have been stayed,  appeal therefrom and cause the execution  thereof to be
stayed during such appeal.

     (g) The entry of a decree or order by a court having jurisdiction adjudging
the  Company   bankrupt  or   insolvent,   or   approving  a  petition   seeking
reorganization,  arrangement,  adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter  constituted,  or any
other applicable  federal or state bankruptcy,  insolvency or other similar law,
and the  continuance  of any such decree or order  unstayed  and in effect for a
period of 60 days; or the  commencement by the Company of a voluntary case under
federal bankruptcy law, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency, or other similar law, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under federal  bankruptcy law or any other  applicable  federal or state law, or
the  consent by it to the filing of such  petition  or to the  appointment  of a
receiver,  liquidator,  assignee, trustee,  sequestrator or similar official for
the Company or for any substantial part of its property,  or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its  inability  to pay its debts  generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.

6.       Remedies Upon Default.

     Upon the occurrence of an Event of Default  referred to in Section 5 (other
than an Event of Default  pursuant to Section  5(g),  upon which the Notes shall
immediately  become due and payable  together  with  interest  accrued  thereon,
without action of the part of the Holder),  the Holder of this Note may, at his,
her or its option, by notice in writing to the Company,  declare such Note to be
due and payable  together with interest accrued  thereon,  without  presentment,
demand,  protest or notice of any kind,  all of which are  hereby  waived by the
Company.  The Holder may institute  such actions or proceedings in law or equity
as it  shall  deem  expedient  for  the  protection  of  its  rights  hereunder.
Notwithstanding  the  foregoing,  an Event of  Default  may be  waived  with the
consent of Holders of a majority in principal amount of outstanding Notes, which
waiver shall be effective against all the Holders of Notes.

7.       Transfer.

     (a) Any Notes  issued upon the  transfer of this Note shall be numbered and
shall be registered in a Note Register as they are issued.  The Company shall be
entitled to treat the registered  holder of any Note on the Note Register as the
owner in fact thereof for all  purposes and shall not be bound to recognize  any
equitable  or other  claim to or  interest in such Note on the part of any other
person,  and shall not be liable for any registration or transfer of Notes which
are  registered or to be registered in the name of a fiduciary or the nominee of
a fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting  such  registration  or transfer,  or
with the knowledge of such facts that its  participation  therein amounts to bad
faith.  This Note shall be  transferable  only on the books of the Company  upon
delivery thereof duly endorsed by the Holder or by his duly authorized  attorney
or representative, or accompanied by proper evidence of succession,  assignment,
or  authority to  transfer.  In all cases of transfer by an attorney,  executor,
administrator,  guardian,  or other  legal  representative,  duly  authenticated
evidence of his or its authority  shall be produced.  Upon any  registration  of
transfer,  the Company shall deliver a new Note or Notes to the person  entitled
thereto.  This Note may be exchanged,  at the option of the Holder thereof,  for
another  Note,  or other  Notes of  different  denominations,  of like tenor and
representing  in the aggregate a like  principal  amount,  upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the Company
shall have no  obligation to cause Notes to be  transferred  on its books to any
person if, in the  opinion of counsel to the  Company,  such  transfer  does not
comply with the provisions of the Act and the rules and regulations thereunder.

     (b) The Holder  acknowledges  that he has been  advised by the Company that
this Note and any shares of Common Stock  issuable upon  conversion  hereof have
not been  registered  under the Act, that this Note is being issued on the basis
of the statutory  exemption  provided by Section 4(2) of the Act or Regulation D
promulgated  thereunder,  or both,  relating  to  transactions  by an issuer not
involving any public offering,  and that the Company's reliance thereon is based
in part upon the  representations  made by the  original  Holder in the original
Holder's  Subscription  Agreement  executed and delivered in accordance with the
terms of the Offering.  The Holder acknowledges that he has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the  Act  and  the  rules  and  regulations  thereunder  on the  transfer  of
securities.  In  particular,  the  Holder  agrees  that no sale,  assignment  or
transfer of this Note shall be valid or effective,  and the Company shall not be
required to give any effect to any such sale, assignment or transfer, unless (i)
the sale,  assignment or transfer of this Note is  registered  under the Act, it
being  understood  that this Note is not currently  registered for sale and that
the Company has no  obligation  or intention  to so register the Notes,  or (ii)
this  Note  is  sold,  assigned  or  transferred  in  accordance  with  all  the
requirements and limitations of Rule 144 under the Act, it being understood that
Rule 144 is not available at the time of the original  issuance of this Note for
the sale of this  Note and that  there can be no  assurance  that Rule 144 sales
will be available at any  subsequent  time, or (iii) such sale,  assignment,  or
transfer is otherwise exempt from registration under the Act.

8.   Additional Representations and Covenants

     The Company hereby represents and warrants as follows:

     (a) The  execution,  delivery and  performance  by the Company of this Note
will not (A)  conflict  with or result in a breach  or  violation  of any of the
terms or provisions of,  constitute a default or result in the  acceleration  of
any obligation  under,  result in the  acceleration of any obligation  under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or its subsidiaries  pursuant to, the terms of
any indenture,  mortgage, loan agreement, note or other evidence of indebtedness
or any other  contract,  agreement  or  instrument  to which the  Company or its
subsidiaries  (if  any)  is a  party  or by  which  the  Company  or  any of its
properties  or assets  are bound or  affected,  or (B)  violate  any  applicable
statute, law, rule, code, administrative regulation,  ordinance, judgment, order
or decree of any government,  governmental  instrumentality,  court, arbitration
panel or other body having jurisdiction over the Company or its subsidiaries (if
any) or any of their  respective  properties or obligations  which,  in any such
case,  would  have a material  adverse  effect on the  Company or its  financial
condition.

     (b) No consent,  approval,  authorization,  license or order of or from, or
registration,  qualification,  declaration or filing with,  any federal,  state,
local, foreign or other governmental  authority,  court  administrative  agency,
tribunal  or other body is required  for the  consummation  of the  transactions
contemplated  by this Note  except as may have been made or  obtained  under any
federal or state securities laws.

     (c) the Company has outstanding (A) 7,183,996  shares of Common Stock,  (B)
warrants,  rights or options  to  subscribe  for or  purchase  from the  Company
1,195,232  shares of  Common  Stock  and (C) no other  obligations  to issue any
shares of Common Stock or securities  convertible or exchangeable into shares of
Common Stock.

     (d) There is no action,  suit or  proceeding  pending or, to the  Company's
knowledge,  threatened  before or by any  federal  or state  court,  commission,
regulatory body,  administrative  agency or other governmental body, domestic or
foreign,  to which the Company is or may become a party or of which any property
of the Company is subject or affected that, if adversely  determined against the
Company,  might  individually or in the aggregate  result in a material  adverse
effect to the Company or its financial condition.

     (e) The Company is not (A) in violation  of its Charter or By-laws,  (B) in
violation of any statute, law, rule, code, administrative regulation, ordinance,
judgment,  order or  decree  of any  government,  governmental  instrumentality,
court,  domestic or foreign, or arbitration panel or other body applicable to it
where such violation would have a material  adverse effect on the Company or its
financial  condition or (C) in default in the  performance  or observance of any
contract where such defaults, singly or in the aggregate,  would have a material
adverse effect on the Company or its financial condition.

     (f) The Company is duly qualified to do business in all jurisdictions where
required for the conduct of its business  except where the failure to so qualify
would not have a material  adverse  affect on the  Company or its  ability to so
conduct such business.

     (g) As of the date hereof and since January 1, 2000,  the Company has filed
with the Securities and Exchange  Commission all periodic reports required under
the Securities Exchange Act of 1934, as amended.

9.       Conversion.

     (a) A Holder of a Note may convert the  principal  amount of such Note into
shares of Common  Stock at any time after the date of  original  issuance of the
Note to the close of business on the Business Day prior to the Maturity Date, or
any extension thereof. The Conversion Price is TWELVE DOLLARS ($12.00) per share
of Common Stock (subject to adjustment in certain  circumstances).  To determine
the number of shares  issuable  upon  conversion  of a Note  (collectively,  the
"Conversion  Shares"),  divide  the  principal  amount  to be  converted  by the
Conversion  Price and round the result to the nearest 1/100th share. The Company
is not required to issue fractional  shares of Common Stock upon conversion and,
instead, will pay a cash amount representing the difference to the Holder.

     (b) To convert a Note a Holder must (1)  complete  and sign the  Conversion
Notice attached hereto, with appropriate signature guarantee, on the back of the
Note,  (2)  surrender  the  Note  to  the  Company,   (3)  furnish   appropriate
endorsements  and transfer  documents if required by the Company or its transfer
agent,  (4) pay the  amount  of  interest,  if any,  the  Holder  may be paid as
provided in the last sentence of the above paragraph and (5) pay any transfer or
similar tax if required. A Holder may convert a portion of a Note if the portion
is $1,000 principal amount or a whole multiple of $1,000 principal amount.

     (c) Any Conversion  Shares shall bear a legend  restricting  transfer until
after the second  anniversary  of the later of the issue date for the Conversion
Shares and the last date on which the  Company or any  Affiliate  of the Company
was the owner of such  shares or Note (or any  predecessor  Note) from which the
shares were  converted  (or such  shorter  period of time as  permitted  by Rule
144(k) under the Securities Act or any successor provision  thereunder) (or such
longer  period of time as may be required by the  Securities  Act or  applicable
state  securities  laws,  unless  otherwise agreed by the Company and the Holder
thereof.

     (d) If the Company at any time while this Note  remains  outstanding  shall
split,  subdivide,  combine its Common Stock or other capital stock or declare a
dividend, the Conversion Price then in effect shall be proportionately decreased
in the case of a split, subdivision or dividend, or proportionately increased in
the case of a combination.  Any adjustment  under this Section 9(d) shall become
effective when the split, subdivision or combination becomes effective.

     (e) The Company will not by its Certificate of  Incorporation  or Bylaws or
through  any  reorganization,  transfer  of  assets,  consolidation  or  merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the  observance or  performance of any of the terms to be observed
or  performed  hereunder  by the  Company,  but will at all times in good  faith
assist in carrying out of all  provisions of this Section 9(e) and in the taking
of all such action as may be  necessary or  appropriate  in order to protect the
exercise and conversion rights of the Holder against impairment.

     (f) Upon the occurrence of any event  adjusting the Conversion  Price,  the
Company at its expense shall promptly  furnish the Holder written notice setting
forth such established or adjusted Conversion Price.

     (g) If any capital  reorganization or reclassification of the capital stock
of the  Company,  or any  consolidation  or merger of the Company  with  another
entity,  or the sale of all or substantially all of the assets of the Company to
another entity,  or any exchange of capital stock of the Company for cash or any
other securities or assets,  shall be effected in such a way that the holders of
the Company's capital stock shall be entitled to receive stock, securities, cash
or assets with respect to the exchange for capital stock, then as a condition of
such reorganization, reclassification,  consolidation, merger, sale or exchange,
lawful and adequate  provisions  shall be made  whereby the Holder  hereof shall
thereafter  have the right to purchase and receive,  upon the basis and upon the
terms  and  conditions  specified  in this  Note  and in lieu of  capital  stock
originally   purchasable   and  receivable  upon  the  exercise  of  the  rights
represented hereby, such shares of stock,  securities,  cash or assets as may be
issued or  payable in  connection  with such  reorganization,  reclassification,
consolidation,  merger,  sale or exchange with respect to or in exchange for the
number of shares of capital stock originally purchasable and receivable upon the
exercise of the rights represented  hereby, had the Holder exercised such rights
immediately prior to the consummation of such reorganization,  reclassification,
consolidation, merger, sale or exchange. In any such case, appropriate provision
shall be made with  respect to the rights  and  interests  of the Holder of this
Note to the end that  the  provisions  hereof  (including,  without  limitation,
provisions for adjustments of the applicable  conversion price) shall thereafter
be  applicable,  as nearly as may be  practicable,  in relation to any shares of
stock,  securities,  cash or assets  thereafter  deliverable  upon the  exercise
hereof.

     (h) The Company  shall at all times  reserve and keep  available out of the
aggregate of its authorized but unissued  Common Stock or other capital stock or
its issued Common Stock or other capital stock held in its treasury or both, for
the purpose of effecting the  conversion of this Note,  such number of shares of
Common  Stock,  capital  stock,  or capital stock  equivalents  as shall then be
issuable upon the conversion of this Note. The Company covenants that all shares
of Common Stock or capital stock issued on conversion of this Note shall be duly
and  validly  issued and fully paid and  nonassessable  and free from all taxes,
liens, and charges with respect to the issue thereof.

     10. Registration  Rights. The Holder hereof shall have certain registration
rights  with  respect  to the  Conversion  Shares as set  forth in that  certain
Registration  Rights  Agreement,  dated as of January 22, 2002, by and among the
Company and the investors participating in the Offering.

         11.      Miscellaneous.

     (a) Any notice or other  communication  required or  permitted  to be given
hereunder  shall be in writing  and shall be mailed by  certified  mail,  return
receipt  requested,  or by Federal  Express,  Express Mail or similar  overnight
delivery or courier  service or delivered  (in person or by  telecopy,  telex or
similar telecommunications equipment) against receipt to the party to whom it is
to be given, (i) if to the Company, at its address at 26 Harbor Park Drive, Port
Washington,  New York 11050,  Attention:  Chief Financial Officer (ii) if to the
Holder,  at its address set forth on the first page  hereof,  or (iii) in either
case,  to such other  address as the party  shall have  furnished  in writing in
accordance  with the provisions of this Section  11(a).  Notice to the estate of
any party  shall be  sufficient  if  addressed  to the party as provided in this
Section 11(a). Any notice or other  communication  given by certified mail shall
be  deemed  given  at the time of  certification  thereof,  except  for a notice
changing a party's  address  which shall be deemed  given at the time of receipt
thereof.  Any notice given by other means  permitted by this Section 11(a) shall
be deemed given at the time of receipt thereof.

     (b) Upon  receipt  of  evidence  satisfactory  to the  Company of the loss,
theft,  destruction  or mutilation of this Note (and upon surrender of this Note
if mutilated), the Company shall execute and deliver to the Holder a new Note of
like date, tenor and denomination.

     (c) No course of dealing and no delay or omission on the part of the Holder
in exercising any right or remedy shall operate as a waiver thereof or otherwise
prejudice the Holder's  rights,  powers or remedies.  No right,  power or remedy
conferred  by this Note upon the Holder  shall be  exclusive of any other right,
power or remedy  referred  to herein or now or  hereafter  available  at law, in
equity,  by statute or otherwise,  and all such remedies may be exercised singly
or concurrently.

     (d) This Note may be amended only by a written  instrument  executed by the
Company and the Holder hereof.  Any amendment  shall be endorsed upon this Note,
and all future Holders shall be bound thereby.

     (e) This Note has been  negotiated and consummated in the State of New York
and shall be governed by and construed in accordance  with the laws of the State
of New York, without giving effect to principles governing conflicts of law.

     IN WITNESS  WHEREOF,  the Company  has caused this Note to be executed  and
dated the day and year first above written.

                                 NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.



                                  By:_________________________________
                                  Name:



                                CONVERSION NOTICE

     To convert this Note into Common  Stock of the Company,  check the box: |_|
To convert only part of this Note,  state the  principal  amount to be converted
(must be in multiples of $1,000):

$

If you want the stock certificate made out in another person's name, fill in the
form below:



(Insert other person's soc. sec. Or tax I.D. no.)








(Print or type other person's name, address and zip code)
---------------------------------------------------------------

Date:______________    Signature(s):
                                    --------------------------

                                        (Signatures must be guaranteed by an
                                          "eligible guarantor institution"
                                          meeting the requirements of the
                                          Company and its transfer agent, which
                                          requirements include membership or
                                          participation in the Security Transfer
                                          Agent Medallion Program ("STAMP") or
                                          such other "signature guarantee
                                          program" as may be determined by the
                                          Registrar in addition to, or in
                                          substitution for, STAMP, all in
                                          accordance with the Securities
                                          Exchange Act of 1934, as amended.)




<PAGE>


     Signature(s)  guaranteed by: (Signatures must be guaranteed by an "eligible
guarantor  institution" meeting the requirements of the Company and its transfer
agent,  which  requirements  include membership or participation in the Security
Transfer Agent Medallion  Program  ("STAMP") or such other "signature  guarantee
program"  as  may  be  determined  by  the  Registrar  in  addition  to,  or  in
substitution  for, STAMP, all in accordance with the Securities  Exchange Act of
1934, as amended.)