EXHIBIT10.26**DEPARTURE AGREEMENT AND GENERAL RELEASE****(PLEASE READ CAREFULLY. THIS DEPARTURE AGREEMENT AND GENERAL RELEASE HAS IMPORTANT LEGALCONSEQUENCES.)**     This Departure Agreement and General Release (this “***Agreement***”) is between National MedicalHealth Card Systems, Inc. (the “***Company***”) and Tery Baskin (“***Employee***”) and is a complete, final andbinding settlement of all claims and potential claims, if any, with respect to their employmentrelationship. Employee and the Company may sometimes be referred to collectively as the “***Parties***.”          WHEREAS, the Company and Employee are parties to an Employment Agreement dated on or aboutJune 4, 2001 (the “***Employment Agreement***”); and          WHEREAS, the Company and Employee have agreed on certain terms and conditions regarding thetermination of employment under the Employment Agreement;NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, be itagreed as follows:     1. As of May 21, 2007, Employee’s employment relationship with the Company willterminate (the “***Termination Date***”). This Agreement has been presented to Employee on orbefore the Termination Date.     2. In consideration for the covenants and promises set forth herein, following theexecution of the Agreement by Employee ( the “***Execution Date***”):     (a) The Company will pay Employee’s present salary for twelve months (suchperiod to be referred to as the “***Severance Period***”), but only so long as Employeehas not breached and does not breach the provisions of paragraphs 6 through 11 ofthe Employment Agreement, for a total sum not to exceed $230,000, payable intwenty-six bi-weekly installments of $8,846.15 in accordance with the Company’sgeneral payroll practices, less applicable federal, state, and local legallyrequired deductions and less any deductions authorized by Employee to pay hisportion to continue group health coverage.     (b) Employee has received all accrued salary through the Termination Date inaccordance with the Company’s general payroll practices, less applicable federal,state, and local legally required deductions.     (c) Provided that Employee does not violate paragraphs 6 through 11 of theEmployment Agreement and provided that Employee provides any assistance reasonablyrequested by the Company in connection with the renewal of such contracts, theCompany will pay Employee a commission (the “***Commission Payments***”) equal to threecents per net paid claim for the Arkansas
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State Employees account (***“ASE”***) and State of Arkansas Public School account(“***SAPS”***), for each net paid claim submitted during the period commencing on the 2007renewal dates of each such account and ending on the third anniversary of the 2007renewal dates. The Commission Payments shall not exceed a total of $83,333 percalendar year, and the total Commission Payments shall be no greater than $250,000.Each Commission Payment will be made on a quarterly basis and will be paid by thesixtieth day following each calendar quarter, and each Commission Payment shall bepaid only if Employee has continued to provide any assistance reasonably requestedby the Company in connection with such accounts and has otherwise not breached thisAgreement. Such payments will be subject to withholding if and as required by law.Any dispute arising out of or relating to the Commission Payments shall be submittedto binding arbitration by a party’s giving written notice to such effect to theother party and the office of the American Arbitration Association (the ***“AAA”***) inNew York, New York. Arbitration of such controversy, disagreement, or dispute shallbe conducted by a single arbitrator in accordance with the Federal Arbitration Actand the Employment Arbitration Rules of the AAA.     (d) For the period for which Employee is eligible to continue benefits underthe Consolidated Omnibus Budget Reconciliation Act (“***COBRA***”), so long as Employeehas not breached and does not breach the provisions of paragraphs 6 through 11 ofthe Employment Agreement, the Company will pay the Company’s portion of the premiumsas of the date of this Agreement ($7,121 per annum, subject to adjustment at therenewal date in February 2008) for Employee’s medical, dental and prescriptioncoverage from the Termination Date through the end of such period of eligibility butnot to exceed the earlier of the date that (x) Employee is employed by an employeroffering health coverage or (y) the end of the Severance Period. In addition, theCompany will assign its interest in the life insurance policy purchased with respectto Employee within thirty (30) days of the execution of this Agreement and waive anyclaim to reimbursement for premiums paid.     (e) Employee has received all reimbursable expenses pursuant to the Company’sTravel & Entertainment policy incurred through the Termination Date and submittedwithin thirty (30) days after the Termination Date.     (f) Employee has received all accrued vacation pay to which Employee isentitled through and including the Termination Date, which amount is $11,315.34.     (g) The Company will reimburse Employee for attorney’s fees reasonably incurredin the review and execution of this Agreement, not to exceed $5,000. Such requestfor reimbursement must be submitted no later than thirty (30) days after thesignature of Employee and the Company to this Agreement and will be paid withinthirty (30) days after Employee presents a summary invoice for such services.
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     (h) Employee acknowledges and agrees that he is not entitled to any additionalwages, bonus payments, benefits or other compensation from the Company except as setforth herein.     3. For purposes of the National Medical Health Card Systems, Inc. 1999 Stock OptionPlan, as amended (the ***“Stock Option Plan”***), and the National Medical Health Card Systems,Inc. Amended and Restated 2000 Restricted Stock Grant Plan (the ***“Restricted Stock Plan”***),the termination of Employee’s employment will be considered as an involuntary terminationwithout cause. Accordingly, under the terms of the Stock Option Plan, Employee will have 90days following the Termination Date to exercise any of his *vested*options. The Partiesacknowledge that, on the Termination Date, Employee will forfeit and have no further right,title or interest in or with respect to, any and all *non-vested*options, shares ofrestricted stock and restricted stock unit awards held by Employee under the Stock OptionPlan and/or the Company’s Restricted Stock Plan. Employee affirms the provision of anyRestricted Stock Agreement that the Company shall have the right to instruct the Company’stransfer agent to transfer any unvested restricted stock to the Company.     4. Release Provisions.     (a) As a material inducement to Employee to enter this Agreement, and inconsideration for the Company’s payments to Employee as set forth in this Agreement,and for other good and valuable consideration, as and for Employee’s completerelease of all statutory, contract, tort and all other claims against the Companyand each of its current and former owners (including, without limitation, NewMountain Capital, L.L.C., New Mountain Partners, L.P., New Mountain AffiliatedInvestors, L.P., and their respective affiliates), predecessors, assigns, employees,representatives, attorneys, benefit plans, insurers, parent companies, divisions,subsidiaries, affiliates, directors, managers, partners, members, and officers,including any and all persons acting by, through, or under or in concert with any ofthem (collectively “***Releasees***”), Employee hereby releases and forever discharges theReleasees from any all actions, causes of action, suits, dues, sums of money,reckonings, covenants, contracts, bonuses, controversies, agreements, claims,promises, charges, obligations, complaints and demands whatsoever in law or equity,which Employee (and Employee’s heirs, executors, administrators, successors and/orassigns) may now have or hereafter can, shall, may, or may have had for, upon, or byreason of any matter, cause or actual or alleged act, omission, transaction,practice, conduct, occurrence, or other matter up to and including the execution ofthis Agreement by Employee, including without limitation, any claim arising out ofor relating to Employee’s employment by the Company and each of its subsidiaries andaffiliated entities, and any and all obligations and liabilities of the Companyunder the Employment Agreement, the letter agreement dated November 28, 2005 betweenthe Company and Employee (to the extent such letter agreement exists and iseffective), or any other agreement between Employee and any of the Releasees,including, without limitation, any claim for car allowances, club dues, unusedvacation time, or other benefits incident to Employee’s employment, and theownership, acquisition,
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offer or sale of, or rights to any equity interest, or any option to purchaseor acquire any equity interest in the Company, excepting only the rights andobligations (i) created by this Agreement; (ii) that may exist under anyindemnification agreement or the Company’s Certificate of Incorporation and Bylaws,as amended, to indemnify Employee; (iii) Employee’s rights under state worker’scompensation laws (for occupational illness or injury only) (iv) Employee’s vestedrights under the Company’s health, dental, pharmacy and 401(k) benefit plans, (v)any rights, whenever arising, Employee may have in his capacity as a shareholder ofthe Company and not arising from his capacity as officer, employee or agent of theCompany; provided, however, that Employee shall neither (A) initiateany claim based in whole or in part upon Employee’s status as a shareholder of theCompany nor (B) directly or indirectly counsel or encourage another person or entityto initiate, or voluntarily provide assistance in respect of, any claims based inwhole or in part upon any person’s or entity’s status as a shareholder of theCompany; provided, further, that nothing herein is intended to norshall it preclude Employee from providing truthful testimony if under legalcompulsion as a witness regarding any such claim and (vi) any cause of action thatarises in whatever capacity after the date of this Agreement.     (b) Without limiting the generality of the foregoing, this Agreement isintended to and shall release Releasees from any and all claims, whether known orunknown, which Employee ever had, has, or may have against any Releasee with respectto Employee’s employment, the terms, benefits, and conditions of that employment,and/or the termination thereof, including without limitation those arising under theCivil Rights Act of 1866, 42 U.S.C.A. Section 1981, the Civil Rights Act of 1964, asamended, 42 U.S.C.A. Section 2000e, et seq., the Age Discrimination in EmploymentAct of 1967, as amended, 29 U.S.C.A. Section 621 et seq., the National LaborRelations Act, 29 U.S.C.A. Section 151 et seq., the Fair Labor Standards Act, 29U.S.C.A. Section 201 et seq., the Labor Management Reporting and Disclosure Act of1959, as amended, 29 U.S.C.A. Section 401 et seq., the Americans with DisabilitiesAct, 42 U.S.C.A. Section 12101, et. Seq., the Constitution and the laws of theUnited States and the State of New York, including specifically, New York’s HumanRights Law, Executive Law Section 290 et seq., or any other federal, state, or localhuman rights, civil rights, wage-hour, pension, or labor laws, rules and/orregulation, public policy, contract or tort law; and any and all claims arising outof the acquisition, offer or sale of, or rights to any equity interest, or relatingto any option to purchase or acquire any equity interest in the Company, thatEmployee has held at any time in the Company or any of its predecessors oraffiliates, including any claims, arising under the Securities Act of 1933, asamended, the Securities Exchange Act of 1934, as amended, any federal, state orlocal securities law, the rules or regulations promulgated under any of them, or anydoctrine of common law or equity applicable to the ownership, acquisition or sale ofsecurities or the solicitation of proxies with respect thereto; and any and allclaims for attorneys’ fees, costs, disbursements, or any action similar thereto.
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EMPLOYEE SPECIFICALLY ACKNOWLEDGES AND AGREES THAT BY EXECUTING THIS AGREEMENT, HEIS WAIVING ALL RIGHTS OR CLAIMS, IF ANY, THAT HE HAS OR MAY HAVE UNDER THE AGEDISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED. EMPLOYEE FURTHER ACKNOWLEDGES ANDAGREES THAT HIS WAIVER OF SUCH RIGHTS OR CLAIMS IS KNOWING AND VOLUNTARY.     (c) Employee promises never to initiate, be represented or participate in,submit or file, or permit to be submitted or filed on or in his behalf, any lawsuit,charge, claim, complaint or other proceeding against any Releasee with anyadministrative agency, court, arbitrator or other forum, based upon claims that werereleased pursuant to this Agreement. This covenant not to sue (and the remediesprovided in this Agreement, including those in paragraph 4(d)) does not affectEmployee’s right to test the knowing and voluntary nature of his waiver of rights.Nothing in this Agreement shall be construed to affect the rights andresponsibilities of the Equal Employment Opportunity Commission, or any other stateor local agency with similar responsibilities (the “***Commission***”), to enforce anylaws pertaining to employment discrimination or retaliation. Likewise, this waiverwill not be used to justify interfering with the protected right of any employee tofile a charge or participate in an investigation or proceeding conducted by theCommission; however, Employee waives the right to any benefits or recovery arisingout of any such proceeding.     (d) Subject to paragraph 4(c), if Employee materially breaches any of hispromises contained in this paragraph 4 by filing a lawsuit or administrative chargebased on claims that he has released, Employee will indemnify the Company and/or anyReleasee for any costs, including reasonable attorneys’ fees, that the Companyand/or any Releasee may incur as the result of Employee’s breach. In addition,without limiting any other legal or equitable remedy available to the Company underthis Agreement or otherwise, if Employee materially breaches the promises made inany provision of this Agreement (other than the promises made in paragraph 7 of thisAgreement), (i) the Company shall cease making further payments, if any, pursuant toparagraph 2 above and (ii) Employee shall forfeit and immediately repay to theCompany the amount of all payments, if any, received pursuant to paragraph 2(a) andthe first sentence of paragraph 2(d) above to the extent such payments receivedexceed $115,000.     (e) The Company represents to Employee that, to the actual knowledge of thecurrent executive officers of the Company as of the Execution Date, there is nobasis for any lawsuit, charge, claim, complaint or other proceeding by the Companyagainst Employee.     5. The Company will honor its obligation to indemnify Employee pursuant to theCompany’s Certificate of Incorporation and Bylaws, as amended (the “***Charter Documents***”) andthe Company acknowledges that Employee was an officer of the Company for such purposes. Inthe event that the provisions of any of the Charter Documents relating to indemnification,exculpation or advancement of expenses are
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amended after the Execution Date in a manner adverse to Employee, then subject toapplicable law, the Company will indemnify Employee in accordance with the terms of theCharter Documents as they exist as provided to Employee on July 10, 2007. Nothing containedin this paragraph will limit or preclude the exercise or be deemed exclusive of any rightunder the law, by contract or otherwise, relating to indemnification of or advancement ofexpenses to Employee as an employee or officer of the Company or was serving, at theCompany’s request, as a general partner, manager, officer, director, member, limitedpartner, trustee, employee or agent of another partnership, association, limitedpartnership, limited liability company, corporation, joint venture, trust, employee benefitplan or other enterprise. Nothing contained in this paragraph will limit the ability of theCompany to otherwise indemnify or advance expenses to Employee.     6. Employee acknowledges and agrees that, for the time periods set forth in theEmployment Agreement, he shall comply with paragraphs 6 through 11 of the EmploymentAgreement and that such provisions shall survive the termination of the EmploymentAgreement. Employee acknowledges and agrees that the provisions of paragraphs 6 through 11of the Employment Agreement are fully enforceable and reasonable to protect the legitimatebusiness interests of the Company. Furthermore, Employee represents and warrants that hehas returned to the Company any and all identification cards, files, books, records,materials, equipment or documents in his possession or under his control that were providedto or obtained by him in connection his employment. The Company acknowledges that forpurposes of the Employment Agreement, ideas, as opposed to expressions of ideas, are notInventions (within the meaning of such term as used in the Employment Agreement) andspecifically agrees that the Employee’s ideas of integration of TPA, case management, PBMand data analysis is not an Invention for the purposes of the Employment Agreement.     7. Employee further agrees, at all times prior to October 1, 2010, to refrain frommaking any statements or comments, whether oral or written to any person or entity thatwould tend to disparage or harm the Company; provided, however, that this sentence shall notbe construed to constrain Employee from providing truthful testimony when required by law inthe course of a legal or administrative proceeding. Without limiting any other legal orequitable remedy available to it under this Agreement or otherwise, the Company shall beentitled to offset against amounts otherwise payable to Employee pursuant to paragraphs 2(a)or 2(d) above an amount equal to the amount of any damages the Company suffers resultingfrom any such disparaging or harmful remark. Employee understands and agrees that violationof this paragraph shall be treated as a material breach of this Agreement. Any disputearising out of or relating to the Company’s exercise of the offset right provided aboveshall be submitted to binding arbitration by a party’s giving written notice to such effectto the other party and the office of the AAA in New York, New York. Arbitration of suchcontroversy, disagreement, or dispute shall be conducted by a single arbitrator inaccordance with the Federal Arbitration Act and the Employment Arbitration Rules of the AAA.     8. The Company expressly agrees that upon its material breach of this Agreement inaddition to the remedy of the benefits provided to Employee under this Agreement, suchbreach shall release Employee from any and all restrictions and
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obligations under paragraphs 6 through 11 of the Employment Agreement as well as anyrestrictions and obligations under the terms of this Agreement as of the date of suchbreach. For purposes of this paragraph, unless Employee shall have failed to comply withparagraphs 6 through 11 of the Employment Agreement, failure by the Company to strictlycomply with any payment obligation set forth in paragraphs 2(a) and 2(d) above within ten(10) days after receipt by the Company (at the physical mailing address or facsimile numberset forth in paragraph 12 below, to the attention of the Company’s President) of writtennotice from Employee specifying such noncompliance in reasonable detail shall be a materialbreach of this Agreement.     9. Employee expressly agrees that this Agreement is not and shall not in any way bedeemed to constitute an admission or evidence of any breach of contract, wrongdoing orliability on the part of the Company, nor of any violation of any federal, state ormunicipal statute, regulation or principle of common law or equity.     10. Employee agrees to make himself reasonably available in connection with anyinformation the Company requires relating to the services Employee had provided to theCompany, including any litigation the Company is or may become involved in to which Employeehas knowledge. The Company agrees to provide Employee with reasonable notice in connectionwith any depositions or court appearances where his presence is necessary or reasonablydesirable. The Company shall pay Employee’s travel expenses in this regard. Employee andthe Company shall agree on a reasonable per diem fee for any time Employee is required tomake himself available in person pursuant to this paragraph.     11. Employee and the Company acknowledge and agree:     (a) that each of them has read and understands the contents of this Agreement;     (b) that this Agreement does not waive rights or claims that may arise afterthe date that this Agreement is executed;     (c) that Employee waives rights or claims only in exchange for considerationthat Employee would not be entitled to but for executing this Agreement;     (d) that the Company has informed Employee that Employee should consult with anattorney in connection with this Agreement; and     (e) that Employee’s decision to consult with an attorney or not to consult withany attorney was made without influence by the Company.     12. Both Parties understand that Employee shall have 45 days to consider this Agreementbefore signing. Both Parties understand that Employee shall have seven (7) days in which torevoke this Agreement after signing, and that this Agreement shall not become effective orenforceable until the expiration of seven (7) days after signing (the date of suchexpiration, “***Effective Date***”), and the severance compensation payable
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hereunder (beyond the $115,000 payable under the Employment Agreement) shall not be dueand owing until after the Effective Date set forth herein. To accept the Agreement,Employee must send a signed copy to Neil Carfagna, National Medical Health Card Systems,Inc., 26 Harbor Park Drive, Port Washington, New York 11050, (516) 605 6802, (516) 626 4632(facsimile), NCarfagna@nmhc.com. Any notice of revocation must also be sent such that it isreceived prior to the end of the seven day revocation period by Neil Carfagna, NationalMedical Health Card Systems, Inc., 26 Harbor Park Drive, Port Washington, New York 11050,(516) 605 6802, (516) 626 4632 (facsimile), NCarfagna@nmhc.com. Employee also acknowledgesreceipt of the following information:     (a) The group of individuals covered: All employees who hold positions whoseemployment is being terminated on or about May 21, 2007.     (b) Eligibility factors: A severance proposal is being offered to allemployees whose employment is being terminated on or about May 21, 2007.     (c) Time limits: Each employee who is offered a severance proposal has 45 daysto consider the Agreement and seven (7) days to revoke acceptance after signing.     (d) Employee acknowledges that Employee has received and reviewed theinformation contained in Exhibit “A” to this Agreement. The information in Exhibit“A” includes the job titles and ages of all individuals from the group of employeesconsidered for termination on or about May 21, 2007, and whether or not thoseemployees were selected for termination of employment or otherwise offered aseverance proposal.     13. This Agreement is made in the State of New York. This Agreement is to beinterpreted under the laws of the State of New York without regard to conflict of lawsprinciples. The Parties agree that the federal and state courts sitting in Nassau County,New York, shall be the exclusive venue for the resolution of any dispute arising out of orrelating to this Agreement.     14. Except as provided in this Agreement, this is the entire agreement between Employeeand the Company and supersedes any and all prior agreements or understandings between theParties, whether written or oral, pertaining to Employee’s employment with the Company.This Agreement may only be amended or modified by a written document signed by both Parties.The Company has made no promises to Employee other than those in this Agreement.Notwithstanding anything to the contrary in this paragraph 14, except as explicitly providedotherwise in this Agreement, (i) paragraphs 6 through 11 of the Employment Agreement, and(ii) any obligation of the Company under any indemnification agreement or the Company’sCertificate of Incorporation and Bylaws, as amended and in existence on July 10, 2007, toindemnify Employee shall survive the execution of this Agreement in accordance with theirrespective terms and conditions.
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     15. Should any provision of this Agreement be declared or determined by any court to beillegal, invalid or unenforceable, the validity of the remaining parts, terms and provisionsshall not be effected thereby and any said illegal, invalid or unenforceable part, terms orprovisions shall be deemed stricken and severed from this Agreement.     16. The obligations of the Company as set forth in paragraph 2 above shall survive thedeath or disability of Employee and upon the death of Employee, payments shall be made tothe estate of Employee or as Employee may otherwise designate in writing to the Company orin any will or trust executed after the date hereof.     17. This Agreement may be executed in one or more counterparts, and each effectivecounterpart shall be effective as a signed original.     18. The Company makes no representations to Employee concerning the tax consequencesarising out of any payments under this Agreement, including, without limitation, whether anyof the payments hereunder are subject to 26 U.S.C. § 409A. The Company urges Employee toobtain his own tax counsel with regard to any tax consequences arising out of or relating tothis Agreement.     19. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS CAREFULLY READ THIS AGREEMENT; THATEMPLOYEE HAS HAD AT LEAST 45 DAYS IN WHICH TO CONSIDER AND RETURN THIS AGREEMENT; THATEMPLOYEE HAS HAD AN OPPORTUNITY TO CONSULT WITH ANY ATTORNEY OF EMPLOYEE’S CHOICE INCONNECTION WITH THIS AGREEMENT; THAT EMPLOYEE FULLY UNDERSTANDS THE TERMS, CONDITIONS, ANDSIGNIFICANCE AND CONSEQUENCES OF THIS AGREEMENT; AND THAT EMPLOYEE HAS EXECUTED THISAGREEMENT KNOWINGLY AND VOLUNTARILY, AND OF EMPLOYEE’S OWN FREE WILL.
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     **IN WITNESS WHEREOF**, the Parties hereto have executed this Agreement as of the date below.**NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.**     By: /s/ Thomas W. Erickson                                 , its authorized representative       Date: August 1, 2007    /s/ Tery Baskin     Tery Baskin  Date:August 1, 2007
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**Exhibit “A”**             **OFFERED SEVERANCE PROPOSAL**                            **JOB TITLE** **AGE** **OR NOT (Y/N)**Chief Human Resource Officer   51 NChief Clinical Officer   46 NChief Specialty Officer   44 NChief Services Officer   48 YChief Financial Officer   46 NSenior Vice President, Sales   47 NPresident and Chief Executive Officer   58 YChief Marketing Officer   53 YChief Information Officer   56 YChief Legal Officer   37 YVice President Marketing   44 YController   48 Y
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