EXHIBIT 10.16  

        **STOCKOPTION AGREEMENT** made as of the 4th day of May, 2004 between **NATIONALMEDICAL HEALTH CARD SYSTEMS, INC.**, a New York corporation (the “Company”),and ________________ (the “Optionee”). 

        **WHEREAS,**the Optionee is a non-employee Director of the Company or a subsidiary thereof; 

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

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

    1.                 **GRANT OF OPTION**. The Company hereby grants to the Optionee          the right and option (the “Option”) to purchase up to Fifteen Thousand          (15,000) Common Shares of the Company (the “Option Shares”) during the          following periods: 

    (a)                 All or any part of Five Thousand (5,000) Common          Shares may be purchased during the period commencing one year from the date          hereof and terminating at 5:00 P.M. on May 4, 2011 (the “Expiration          Date”). 

    (b)                 All or any part of an additional Five Thousand (5,000) 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 an additional Five Thousand (5,000)          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. 

    2.                 **NATURE OF OPTION**. Such Options to purchase the Option          Shares are not 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          Shares shall be thirty one dollars ($31.00) (the “Option Price”). The          Company shall pay all original issue or transfer taxes on the exercise of the          Option. 

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

    7.                 **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:          Secretary 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. 

    8.                 **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. 

    9.                 **ACCELERATION.**In the event of any (i) consolidation or merger of          the Company with or into another company where the Company is not the survivor          and the directors of the Company immediately prior to 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 of the Company 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 the successor 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 which a holder of          shares of Common Stock of the Company would have been entitled upon such Change          in Control. 

    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. 

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