Ex-10.4



 





Exhibit 10.4




AMENDMENT NO. 4 AND WAIVER

TO CREDIT AGREEMENT




     AMENDMENT NO. 4 AND WAIVER, dated as of September 30, 2007 (this “Amendment and Waiver“) to
the Credit Agreement, dated as of January 28, 2005 (as amended, restated, modified or otherwise
supplemented, from time to time, the “Credit Agreement”), by and among NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC. (the “Borrower”), JPMORGAN CHASE BANK, N.A., as Administrative Agent and the LENDERS
from time to time party thereto (each, a “Lender” and, collectively, the “Lenders”).



     WHEREAS, the Borrower has requested, and the Required Lenders have agreed, subject to the
terms and conditions of this Amendment and Waiver, to amend and waive certain provisions of the
Credit Agreement as set forth herein.



     NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:


1. Amendments.




     a. The definition of the term “Applicable Rate” in Section 1.01 of the Credit Agreement is
hereby amended by adding the following sentence at the end thereof:



“Notwithstanding anything to the contrary herein, the Applicable Rate will be
determined based on a ratio of Consolidated Debt to Consolidated EBITDA of greater
than or equal to 2.00:1.00 for all periods from the Effective Date through the
Maturity Date.”



     b. The last sentence of the definition of “Commitments” in Section 1.01 of the Credit
Agreement is hereby amended and restated in its entirety to provide as follows:



“The aggregate amount of the Lenders’ Commitments is $25,000,000.”



     c. The first sentence of the definition of the term “Consolidated Fixed Charge Coverage Ratio”
is hereby amended and restated in its entirety to provide as follows:



“Consolidated Fixed Charge Ratio” means the ratio of (1) Consolidated EBITDA
minus Consolidated Unfunded Capital Expenditures to (2) the sum of (a) the
current portion of Consolidated Debt, including cash “earn-out” payments made by the
Borrower and its Subsidiaries in the twelve (12) months preceding the date of
calculation, plus (b) interest expense plus (c) cash taxes paid by
the Borrower and its Subsidiaries.



     d. The definition of the term “Maturity Date” in Section 1.01 of the Credit Agreement is
hereby amended and restated in its entirety to provide as follows:



“Maturity Date” means March 31, 2008.



     e. The following definitions are hereby added to Section 1.01 of the Credit Agreement in their
appropriate alphabetical order:



 









 





“Borrowing Base” shall mean an amount equal to the sum of (1) seventy five (75%)
percent of all Eligible Receivables, plus (2) the lesser of (a) fifty percent (50%)
of Eligible Inventory or (b) $7,500,000; provided, however, the Required Lenders may
increase or decrease such percentages from time to time in their reasonable
discretion. Any such revision to advance rates or to the inventory limitation would
become effective five (5) days after notice of such change is delivered to the
Borrower, unless a Default or an Event of Default is then existing, in which case
such revision shall be effective immediately upon delivery of such notice.
Notwithstanding anything to the contrary herein, the Required Lenders will not
decrease the advance rate for Eligible Receivable to a rate less than 50% at any
time prior to the occurrence and continuance of an Event of Default.



“Borrowing Base Certificate” shall mean the Borrowing Base Certificate in the form
set forth as Exhibit G attached hereto.



“Customer” shall mean and include the account debtor or obligor with respect to any
Receivable.



“Effective Date” shall mean September 30, 2007.



“Eligible Inventory” shall mean the gross amount of the Borrower’s finished goods
and raw materials inventory located in the United States of America, less the
following items: any packaging materials and supplies; work-in-process; supplies
(other than supplies held for sale), damaged or unsalable goods, damaged or
unsalable goods returned or rejected by Customers; obsolete goods; goods to be
returned to the Borrower’s suppliers; goods in transit to third parties; consigned
inventory; inventory in transit; and inventory located at facilities where the
Administrative Agent has not (a) been granted a first priority perfected security
interest and (b) received landlord or warehousemens’ waiver letters, as appropriate,
if the facility is not owned and occupied by the Borrower, provided “Eligible
Inventory” shall exclude all other inventory which is otherwise regarded by the
Required Lenders in its sole discretion as unsuitable collateral for the Loans. If
any inventory is moved to a location where the Lenders’ security interest therein
becomes unperfected upon such move under applicable law, such inventory shall not be
Eligible Inventory (a) until 91 days after the date on which the Lenders’ security
interest therein has become perfected under applicable law and (b) such inventory
meets all of the other requirements set forth in this definition. The value of all
Eligible Inventory shall be determined at the lower of cost or market value on a
first in first out basis in accordance with Generally Accepted Accounting Principles
applied on a consistent basis.



“Eligible Receivables” shall mean Receivables created by the Borrower in the
ordinary course of business arising out of the sale or lease of goods or rendition
of services by the Borrower, which are and at all times shall continue to be
acceptable to the Required Lenders in all respects. Standards of eligibility may be
fixed and revised from time to time solely by the Required Lenders in the Required
Lenders’ exclusive judgment. In general, without limiting the foregoing, a
Receivable shall in no event be deemed to be an Eligible Receivable unless: (a) all
payments due on the Receivable have been invoiced and the underlying goods shipped
or services performed, as the case may be; (b) no more than ninety (90) days have
elapsed from the invoice date and not more than sixty (60) days have elapsed from
the invoice due date; (c) the payments due on more than 50% of all Receivables from
the same Customer are not more than ninety (90) days past the invoice date or more
than sixty (60) days past due the invoice due date; (d) the



2









 








Receivable arose from a completed and bona fide transaction (and with respect
to a sale of goods, a transaction in which title has passed to the Customer) which
requires no further act under any circumstances on the part of the Borrower in order
to cause such Receivable to be payable in full by the Customer; (e) the Receivable
is in full conformity with the representations and warranties made by the
Administrative Agent and Lenders with respect thereto and is free and clear of all
security interests and Liens of any nature whatsoever other than any security
interest deemed to be held by the Borrower or any security interest created pursuant
to the Security Documents or permitted by Section 7.02 hereof; (f) the Receivable
constitutes an “account” or “chattel paper” within the meaning of the Uniform
Commercial Code of the state in which the Receivable is located; (g) the Customer
has not asserted that the Receivable, and the Borrower is not aware that the
Receivable, arises out of a bill and hold, consignment or progress billing
arrangement or is subject to any setoff, rebate, contrast, net-out contract, offset,
deduction, dispute, credit, counterclaim or other defense arising out of the
transactions represented by the Receivables or independently thereof and the
Customer has finally accepted the goods from the sale out of which the Receivable
arose and has not objected to its liability thereon or returned, rejected or
repossessed any of such goods, except for complaints made or goods returned in the
ordinary course of business for which, in the case of goods returned, goods of equal
or greater value have been shipped in return; (h) the Receivable arose in the
ordinary course of business of the Borrower; (i) the Customer is not (x) the United
States government or the government of any state or political subdivision thereof or
therein, or any agency or department of any thereof or any foreign government unless
there has been compliance to the satisfaction of the Administrative Agent with the
Federal Assignment of Claims Act or similar state or foreign statutes or (y) an
Affiliate of the Borrower or any Guarantor or any Subsidiary of any thereof; (j)
such Receivable is from a Customer which is (i) a United States person, or (ii) an
obligor in the United States; (k) the Receivable complies with all material
requirements of all applicable laws and regulations, whether federal, state or local
(including, without limitation, usury laws and laws, rules and regulations relating
to truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy); (1) the Receivable is in
full force and effect and constitutes a legal, valid and binding obligation of the
Customer enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors’ rights generally and by general equity
principles; (m) the Receivable is denominated in and provides for payment by the
Customer in U.S. dollars; (n) the Receivable has not been and is not required to be
charged off or written off as uncollectible in accordance with Generally Accepted
Accounting Principles or the customary business practices of the Borrower; (o) the
Administrative Agent on behalf of the Lenders possesses a valid, perfected first
priority security interest in such Receivable as security for payment of the
Obligations; (p) the Receivable does not arise with respect to a Customer or a
pharmacy located in the State of Ohio; (q) the Customer has executed the Borrower’s
standard form of Pharmacy Benefit Management Agreement; and (p) the Required Lenders
are satisfied with the credit standing of the Customer in relation to the amount of
credit extended.



“Receivables” shall mean any and all rights of the Borrower to payment for goods
sold or leased or for services rendered, including accounts, contract rights,
general intangibles and any such right evidenced by chattel paper, instruments or
documents.



     f. The first sentence of Section 2.01 of the Credit Agreement is hereby amended and restated
in its entirety to provide as follows:



3









 





“Subject to the terms and conditions set forth herein, each Lender agrees to make
Revolving Loans to the Borrower from time to time during the Availability Period in
an aggregate principal amount that will not result in (a) such Lender’s Revolving
Credit Exposure exceeding such Lender’s Commitment or (b) the sum of the total
Revolving Credit Exposures exceeding the lesser of (x) the total Commitments and (b)
the Borrowing Base.”



     g. The second sentence of Section 2.02(c) of the Credit Agreement is hereby amended and
restated in its entirety to provide as follows:



“At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than
$1,500,000; provided that an ABR Revolving Borrowing may be in an aggregate amount
that is equal to the lesser of (a) the Borrowing Base and (b) the entire unused
balance of the total Commitments or that is required to finance the reimbursement of
an LC Disbursement as contemplated by Section 2.06(e).”



     h. Section 2.04 of the Credit Agreement is hereby amended and restated in its entirety to
provide as follows:



“Intentionally omitted”



     i. The first sentence Section 2.05(a) of the Credit Agreement is hereby amended and restated
in its entirety to provide as follows:



“Subject to the terms and conditions set forth herein, the Swingline Lender agrees
to make Swingline Loans to the Borrower from time to time during the Availability
Period, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans
exceeding $5,000,000 or (ii) the sum of the total Revolving Credit Exposures
exceeding the lesser of (x) the total Commitments and (b) the Borrowing Base;
provided that the Swingline Lender shall not be required to make a Swingline Loan to
refinance an outstanding Swingline Loan.”



     j. The last sentence of Section 2.06(b) of the Credit Agreement is hereby amended and restated
in its entirety to provide as follows:



“A Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed
$5,000,000 and (ii) the sum of the total Revolving Credit Exposures shall not exceed
the lesser of (x) the total Commitments and (y) the Borrowing Base.”



     k. Section 2.09(b) of the Credit Agreement is hereby amended and restated in its entirety to
provide as follows:



“The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and
(ii) the Borrower shall not terminate or reduce the Commitments if, after giving
effect to any



4









 








concurrent prepayment of the Loans in accordance with Section 2.11, the sum of the
Revolving Credit Exposures would exceed the lesser of (x) the total Commitments and
(b) the Borrowing Base.”



     l. Section 2.11(a) of the Credit Agreement is hereby amended to add the following sentence at
the end thereof:



“In addition, to the extent that the Revolving Credit Exposures exceeds the
Borrowing Base as in effect at any time, the Borrower shall immediately prepay the
Loans to the extent necessary to cause compliance with the Borrowing Base.”



     m. Section 4.03 of the Credit Agreement is hereby amended to (a) add the following new
subsection “(c)” immediately following subsection “(b)” therein:



“(c) The Borrower shall have delivered to the Administrative Agent a duly completed
Borrowing Base Certificate, dated such date and signed by a Financial Officer of the
Borrower.


and (b) to delete the reference to “(a) and (b)” in the third line of the unnumbered paragraph at
the end thereof and replace it with “(a), (b) and (c).”




     n. Section 5.01(b) of the Credit Agreement is hereby amended by adding an “(i)” immediately
following “(b)” therein and by adding new clause “(ii)” at the end of such subsection as follows:



"(ii) within 45 days after the end of each of calendar month (other than March,
June, September and December) of each fiscal year of the Borrower, its consolidated
balance sheet and related statements of operations, stockholders’ equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed portion of
the fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of the
end of) the previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;



     o. Section 5.01 of the Credit Agreement is hereby further amended by (a) deleting the “and” at
the end of subsection “(g)” thereof, (b) deleting the period at the end of subjection “(h)” thereof
and replacing it with “; and” and by adding a new subsection “(i)” immediately following subsection
“(h)” as follows:



“(i) (x) simultaneously with the request for a Loan or issuance, amendment, renewal
or extension of a Letter of Credit, a completed Borrowing Base Certificate and (y)
within fifteen (15) days after (A) the end of each fiscal quarter at any time that
the total Revolving Credit Exposures are $0 and (B) the end of each calendar month
at any time that the total Revolving Credit Exposure are greater than $0;”



     p. Section 6.06 of the Credit Agreement is hereby amended and restated in its entirety to
provide as follows:



“The Borrower will not, and will not permit any of its Subsidiaries to, declare or
make, or




5









 








agree to pay or make, directly or indirectly, any Restricted Payment, except (a) the
Borrower may declare and pay dividends with respect to its Equity Interests payable
solely in additional shares of its common stock, (b) Subsidiaries may declare and
pay dividends ratably with respect to their Equity Interests, (c) the Borrower may
make Restricted Payments (other than payments of cash, securities and other
property) pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Borrower and its Subsidiaries, and (d)
scheduled (non-special) dividends with respect to the Series A Preferred in the form
of additional shares of Series A Preferred (it being acknowledged that a dividend or
other Restricted Payment does not occur solely as a result of increases in the
Accrued Value of the Series A Preferred (as such term is defined therein).”



     q. Section 6.13 of the Credit Agreement is hereby deleted in its entirety.



     r. Schedule 2.01 of the Credit Agreement is hereby amended and replaced with Schedule 2.01
attached to this Amendment and Waiver. Exhibit G attached to this amendment and Waiver is hereby
added as Exhibit G to the Credit Agreement.



2. Waiver.




     Compliance with Section 6.12(b) of the Credit Agreement is hereby waived for the fiscal
quarter ended September 30, 2007, provided that the actual Consolidated Fixed Charge Ratio was not
less than 0.26:1.00 at the end of such quarter.



3. Conditions to Effectiveness.




     This Amendment and Waiver shall become effective upon receipt by the Administrative Agent of
(a) this Amendment and Waiver duly executed by each of the parties hereto, (b) a Revolving Credit
Note, in the form of Exhibit 1 attached hereto, duly executed by the Borrower, payable to each
Lender in the applicable Commitment Amount specified on Schedule 2.01 attached hereto, (c) a
Secretary’s Certificate, in form and substance satisfactory to the Administrative Agent, with
copies of Resolutions of the Board of Directors of the Borrower approving the execution and
delivery of this Amendment and Waiver and certifying that there have been no changes to the
Borrower’s Certificate of Incorporation and By-laws since the Closing Date, (d) a Borrowing Base
Certificate as of the date hereof, in form and substance satisfactory to the Administrative Agent,
(e) a Reaffirmation Agreement, substantially in the form of Exhibit 2 attached hereto and (f) an
amendment fee equal to the greater of (i) $25,000 or (ii) one-tenth of one percent (.10%) of the
aggregate Commitments of the Lenders after giving effect to this Amendment and Waiver, for the
pro-rata distribution to the Lenders.



3. Miscellaneous.




     The amendments and waiver herein contained are limited specifically to the matters set forth
above and do not constitute directly or by implication a waiver or amendment of any other provision
of the Credit Agreement or a waiver of any Default or Event of Default which may occur or may have
occurred.



     The Borrower hereby agrees to pay all of the Administrative Agent’s reasonable attorneys’ fees
incurred in connection with the preparation, execution and delivery of this Amendment and Waiver,
including all outstanding amounts, promptly following receipt of a statement describing such fees.



6









 





     Capitalized terms used herein and not otherwise defined herein shall have the same meanings as
defined in the Credit Agreement.



     Except as expressly amended hereby, or as may have been previously amended, the Credit
Agreement shall remain in full force and effect in accordance with the original terms thereof.



     The Borrower hereby represents and warrants that (a) after giving effect to this Amendment and
Waiver, the representations and warranties in the Credit Agreement and the other Loan Documents are
true and correct in all material respects as of the date hereof with the same effect as though such
representations and warranties have been made on and as of such date, unless such representation is
as of a specific date, in which case, as of such date, and (b) after giving effect to this
Amendment and Waiver, no Default or Event of Default has occurred and is continuing.



     This Amendment and Waiver may be executed in one or more counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute but one instrument.



     THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.



     This Amendment and Waiver shall constitute a Loan Document.



[the next page is the signature page]




7









 








     IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have caused this
Amendment and Waiver to be duly executed as of the day and year first above written.



	 	 	 	 	 
	 	NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC.

 	 
	 	By:  	/s/ Stuart
Diamond	 
	 	 	Name:  	Stuart Diamond 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., as
Administrative Agent and as a Lender
 	 
	 	By:  	/s/ Stephen
Zajac	 
	 	 	Name:  	Stephen Zajac 	 
	 	 	Title:  	Senior Vice President 	 
	 



	 	 	 	 	 
	 	HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender

 	 
	 	By:  	/s/ John
Garside	 
	 	 	Name:  	John Garside 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	WACHOVIA BANK, N.A., as a Lender

 	 
	 	By:  	/s/ Edward
P. Nallan Jr.	 
	 	 	Name:  	Edward P. Nallan Jr. 	 
	 	 	Title:  	 	 



8









 






	 	 	 	 	 



CONSENT





     Each of the undersigned, not parties to the Credit Agreement but each a Guarantor under a
Corporate Guaranty, hereby consents to and acknowledges the terms of the Amendment to which this
consent is attached and confirms that its Corporate Guaranty is in full force and effect and
reaffirms its continuing liability under its Corporate Guaranty in respect of the Credit Agreement
as amended hereby and all the documents, instruments and agreements executed pursuant thereto or in
connection therewith, without offset, defense or counterclaim (any such offset, defense or
counterclaim as may exist being hereby irrevocably waived by such guarantor).



NMHCRX MAIL ORDER, INC.

INTEGRAIL, INC.

NMHC FUNDING, LLC
NMHCRX, INC.

INTEQ CORP.

INTEQ TX CORP.

INTEQ PBM, L.P.

PORTLAND PROFESSIONAL PHARMACY

PORTLAND PROFESSIONAL PHARMACY ASSOCIATES

SPECIALTY PHARMACY CARE, INC.

CENTRUS CORPORATION

NATIONAL MEDICAL HEALTH CARD IPA, INC.

NMHCRX CONTRACTS, INC.

PHARMACY ASSOCIATES, INC.

INTERCHANGE PMP, INC.

PCN DE CORP.

PHARMACEUTICAL CARE NETWORK

NMHC GROUP SOLUTIONS INSURANCE, INC.




	 	 	 	 	 
	 	 	 
	 	By:  	/s/
 Stuart Diamond	 
	 	 	Stuart Diamond, the Treasurer of each of the 	 
	 	 	foregoing entities 	 



9









 






	 	 	 	 	 



Schedule 2.01




Lender Commitment Amount




	 	 	 	 	 
	Lender	 	Commitment Amount	 
	JPMorgan Chase Bank, N.A.
	 	$	9,615,384.60	 
	HSBC Bank USA
	 	$	7,692,307.70	 
	Wachovia Bank, N.A.
	 	$	7,692,307.70	 






10









 






Exhibit 1




AMENDED AND RESTATED

REVOLVING CREDIT NOTE




	 	 	 
	$____________

	 	Melville, New York
	 

	 	September 30, 2007






     FOR VALUE RECEIVED, NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., a Delaware corporation (the
“Borrower”), promises to pay to the order of
___ (the “Lender”), on or before the
Maturity Date, the principal amount of ___ ($___) DOLLARS, or, if
less, the unpaid principal amount of all Loans made by the Lender to the Borrower under the Credit
Agreement referred to below.



     The Borrower promises to pay interest on the unpaid principal amount hereof from the date
hereof until paid in full at the rates and at the times which shall be determined, and to make
principal repayments on this Note at the times which shall be determined, in accordance with the
provisions of the Credit Agreement referred to below.



     This Note is issued at the request of the Lender pursuant to Section 2.10(c) of the Credit
Agreement, dated as of January 28, 2005 by and among the Borrower, the Lender, JPMorgan Chase Bank,
N.A., as Administrative Agent and the other Lenders party thereto (as the same may be amended,
restated, modified or supplemented from time to time, the “Credit Agreement”) and is entitled to
the benefits of the Credit Agreement to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loans evidenced hereby were made and are to
be repaid. Capitalized terms used herein without definition shall have the meanings set forth in
the Credit Agreement.



     Each of the Lender and any subsequent holder of this Note agrees, by its acceptance hereof,
that before transferring this Note it shall record the date, Type and amount of each Loan and the
date and amount of each payment or prepayment of principal of each Loan previously made hereunder
on the grid schedule annexed to this Note; provided, however, that the failure of
the Lender or holder to set forth such Loans, payments and other information on the attached grid
schedule shall not in any manner affect the obligation of the Borrower to repay the Loans made by
the Lender in accordance with the terms of this Note.



     This Note is subject to prepayment pursuant to Section 2.11 of the Credit Agreement.



     Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this
Note together with all accrued but unpaid interest thereon, may become, or may be declared to be,
due and payable in the manner, upon the conditions and with the effect provided in the Credit
Agreement.



     All payments of principal and interest in respect of this Note shall be made in lawful money
of the United States of America in immediately available funds at the office of the Administrative
Agent at its offices located at 131 South Dearborn Avenue, 5th Floor, Chicago, Illinois
60603, or at such other place as shall be designated in writing for such purpose in accordance with
the terms of the Credit Agreement.



     No reference herein to the Credit Agreement and no provision of this Note or the Credit
Agreement shall alter or impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of and interest on this Note at the place, at the respective
times, and in the currency



11









 




herein prescribed.




     The Borrower and endorsers of this Note waive presentment, diligence, demand, protest, and
notice of any kind in connection with this Note.



     [This Note amends and restates in its entirety the Revolving Credit Note in the principal
amount of $20,000,000 from the Borrower in favor of the Lender dated January 25, 2005 (the
“Original Note”). The execution and delivery of this Note shall not be construed to have
constituted a repayment of any principal of, or interest on, the Original Note.] [Wachovia only]



     THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.



     IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and delivered by its duly
authorized officer, as of the day and year and at the place first above written.



	 	 	 	 	 
	 	NATIONAL MEDICAL HEALTH CARD

SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



12









 






	 	 	 	 	 



SCHEDULE




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date	 	Principal	 	Type	 	 	 	 	 	Applicable	 	Amount of	 	Notation
	of	 	Amount of	 	of	 	Interest	 	Interest	 	Principal	 	Made
	Loan	 	Loan	 	Loan	 	Rate	 	Period	 	Paid	 	By





13









 






Exhibit 2




Form of

Reaffirmation Agreement




September 30, 2007




JPMorgan Chase Bank, N.A., as Administrative Agent

395 North Service Road

Melville, New York 11747



Gentlemen:




     Reference is hereby made to that certain Amendment No. 4 and Waiver to Credit Agreement dated
the date hereof (the “Amendment and Waiver”) with respect to the Credit Agreement, dated as of
January 28, 2005 by and among NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. (the “Borrower”), JPMORGAN
CHASE BANK, N.A., as Administrative Agent and the LENDERS from time to time party thereto (as
amended, the “Credit Agreement”). Capitalized terms not otherwise defined herein shall have the
meanings given to them in the Credit Agreement.



     As a condition precedent to the effectiveness of the Amendment and Waiver, the Borrower and
each Guarantor hereby:



          (a) acknowledges and confirms that, (i) all terms and provisions contained in the Loan
Documents to which they are a party are, and shall remain, in full force and effect in accordance
with their respective terms, (ii) the liens heretofore granted, pledged and/or assigned to the
Administrative Agent for the benefit of the Lenders as security for any of the undersigned’s
obligations shall not be impaired, limited or affected in any manner whatsoever by reason of the
Amendment and Waiver or this Reaffirmation, and (iii) all such liens and security interests shall
be deemed granted, pledged and/or assigned to the Bank as security for all of the undersigned’s
obligations and liabilities to the Bank, whether now existing or hereafter arising;



          (b) reaffirms and ratifies all the representations and covenants contained in their respective
Loan Documents; and



          (c) represents, warrants and confirms the non-existence of any offsets, defenses, or
counterclaims to their respective obligations under the Loan Documents to which they are a party,
including, with respect to the Borrower, the Credit Agreement.



     Except as expressly provided herein, the execution, delivery and effectiveness of this
Reaffirmation shall not operate as a waiver of any right, power or remedy of the Bank, nor
constitute a waiver of any provision of the Credit Agreement, any other Loan Document, or any other
document or agreement executed in connection therewith.



14









 





     IN WITNESS WHEREOF, the parties hereto have caused this Reaffirmation to be executed and
delivered as of the date first above written.



	 	 	 	 	 
	 	NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.

 	 
	 	By:  	/s/ Stuart
Diamond	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



NMHCRX MAIL ORDER, INC.

INTEGRAIL, INC.

NMHC FUNDING, LLC

NMHCRX, INC.

INTEQ CORP.

INTEQ TX CORP.

INTEQ PBM, L.P.

PORTLAND PROFESSIONAL PHARMACY

PORTLAND PROFESSIONAL PHARMACY ASSOCIATES

SPECIALTY PHARMACY CARE, INC.

CENTRUS CORPORATION

NATIONAL MEDICAL HEALTH CARD IPA, INC.

NMHCRX CONTRACTS, INC.

PHARMACY ASSOCIATES, INC.

INTERCHANGE PMP, INC.

PCN DE CORP.

PHARMACEUTICAL CARE NETWORK

NMHC GROUP SOLUTIONS INSURANCE, INC.




	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Acknowledged and Agreed:




JPMORGAN CHASE BANK, N.A., as

Administrative Agent




	 	 	 	 	 
	 	 	 
	By:  	/s/ Stephen
Zajac	 	 
	 	Title: Senior Vice President 	 	 
	 	 	 	 



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Exhibit B




Form of Borrowing Base Certificate




NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. (“NMHC”)




As of ____/____/____




	 	 	 	 	 
	Accounts Receivable Balance Per Aged Subsidiary Ledger
	 	$	 	 
	 
	 	 	 
	Less:     Ineligible Accounts Receivable Balances
	 	 	 	 
	Balances Aged > 90+ DPI (over 90 days from invoice date)
	 	$	 	 
	 
	 	 	 
	Credits in past due (over 90 days from transaction date)
	 	$	 	 
	 
	 	 	 
	Cross Aged Balances (greater than 50% of customer balance 90+ DPI)
	 	$	 	 
	 
	 	 	 
	Sponsors using Ohio Pharmacies (net of P/D)
	 	$	 	 
	 
	 	 	 
	Contra Accounts Receivable Balances (PBM Customers Rebates Payable)
	 	$	 	 
	 
	 	 	 
	Intercompany Accounts Receivable Balances
	 	$	 	 
	 
	 	 	 
	Other Rebates
	 	$	 	 
	 
	 	 	 
	Billed but not Shipped
	 	$	 	 
	 
	 	 	 
	General Ledger Reserve for Uncollectible A/R (Ascend Division)
	 	$	 	 
	 
	 	 	 
	Other
	 	$	 	 
	 
	 	 	 
	Total Ineligible Accounts Receivable Collateral
	 	$	 	 
	 
	 	 	 
	Net Eligible Accounts Receivable Collateral
	 	$	 	 
	 
	 	 	 
	Advance Rate against Eligible Accounts
	 	 	75%	
	Available Accounts Receivable @ 75%
	 	$	 	 
	 
	 	 	 
	Gross Inventory per Perpetual Reports (Mail Order/Ascend)
	 	$	 	 
	 
	 	 	 
	Net Eligible Inventory Collateral
	 	$	 	 
	 
	 	 	 
	Advance Rate against Eligible Inventory
	 	 	50%	
	Available Inventory @ 50%
	 	$	 	 
	 
	 	 	 
	Combined Available Collateral Balance
	 	$	 	 
	 
	 	 	 





16









 





The undersigned hereby represents and warrants that all information set forth herein, including
with respect to the status of NMHC’s accounts receivable and inventory, is true, complete and
correct. The undersigned further understands and acknowledges that the Lenders will rely upon the
information set forth herein in making loans to the undersigned. The undersigned further
represents and warrants that NMHC is in compliance with all of the terms and conditions contained
in the agreements between NMHC, the Lenders and JPMorgan Chase Bank, N.A.




	 	 	 	 	 
	 	National Medical Health Card Systems, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




17