Document:

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                                                                    Exhibit 10.2

[Confidential treatment has been requested for portions of this document, and
the confidential material has been filed separately with the SEC].

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                                CARDINAL HEALTH*

                                       AND

                                 CHRONIMED INC.

                             PRIME VENDOR AGREEMENT

================================================================================

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                             PRIME VENDOR AGREEMENT

         THIS PRIME VENDOR AGREEMENT (THE "AGREEMENT") IS MADE __________, 2003,
BETWEEN CHRONIMED INC. ("BUYER") AND CARDINAL HEALTH* ("CARDINAL HEALTH"), WHO
HEREBY AGREE AS FOLLOWS:

1.       DESIGNATION AS PRIMARY WHOLESALER

                  During the term of this Agreement, Buyer will designate
         Cardinal Health as the primary wholesale pharmaceutical supplier to all
         of its retail pharmacies (the "RETAIL PHARMACIES") and mail order
         pharmacies (the "MAIL ORDER PHARMACIES"), in each case whether now or
         hereafter owned, managed or operated by Buyer (the Retail Pharmacies
         and the Mail Order Pharmacies, collectively, the "PHARMACIES" and
         individually, a "PHARMACY"). A current list of the Pharmacies is
         attached hereto as EXHIBIT A. Additional Retail Pharmacies and Mail
         Order Pharmacies may be made parties to this Agreement from time to
         time subject to the prior approval of Buyer and Cardinal Health which
         approval will not unreasonably be withheld.

2.       SALE OF MERCHANDISE

                  Buyer will purchase from Cardinal Health during the term of
         this Agreement its Primary Requirements of pharmaceuticals ("RX
         PRODUCTS") and of other inventory carried by Cardinal Health ("NON-RX
         PRODUCTS" and, together with Rx Products, collectively the
         "MERCHANDISE") for delivery directly to the Pharmacies. The term
         "PRIMARY REQUIREMENTS" means that Buyer will purchase from Cardinal
         Health for each Pharmacy (i) [***] of its requirements of Merchandise
         purchased from pharmaceutical wholesalers and (ii) [***] of its
         requirements of generic Rx Products. Cardinal Health reserves the right
         at all times to determine what Merchandise it will carry based upon
         product quality, manufacturer indemnity, insurance, and other policies,
         and other standards determined by it, and may delete from its available
         inventory items of Merchandise with limited or no movement activity.

3.       PURCHASE PRICE

                  Buyer will pay a purchase price for all Merchandise (except
         for those items that are net-billed as described below) purchased under
         this Agreement in an amount equal to Cardinal Health's Cost plus the
         percentage specified in the pricing matrix attached hereto as EXHIBIT B
         (the "PRICING MATRIX"). For purposes of this Agreement: (a) the term
         "CARDINAL HEALTH'S COST" will mean the [***] for Merchandise at the
         date of Cardinal Health's invoice to the Pharmacy without reduction for
         cash discounts; and (b) the term "QUALIFIED PURCHASES" will mean all
         purchases made and paid for by Buyer and/or the Pharmacies under the
         terms of this Agreement, net of all returns, credits, rebates, late
         charges, or other similar items, on an annual, quarterly, or monthly
         basis, as applicable. Notwithstanding anything herein to the contrary,
         the purchase price for Merchandise which is subject to a Manufacturer
         Contract will be Buyer's contract price for the Pharmacies. Cardinal
         Health reserves the right to adjust the purchase price of any item of
         Merchandise, upon reasonable notice to Buyer, in the event that the
         manufacturer of such item implements a change in policy which
         eliminates or decreases the cash

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         discount terms effective on the Commencement Date with respect to such
         item. Manufacturer off-invoice quantity discounts and promotional
         allowances as evidenced by a manufacturer sell sheet will be made
         available to Buyer.

                  Notwithstanding the foregoing, the purchase price for selected
         Merchandise, including but not limited to generic Rx Products, private
         label products, medical/surgical supplies, home health care/durable
         medical equipment, Merchandise acquired from vendors not offering
         customary cash discount or other terms, and other slow moving,
         specialty, and non-pharmaceutical Merchandise will not be based upon
         the Cardinal Health's Cost-plus pricing described above but will
         instead be net-billed in accordance with the terms and conditions
         established by Cardinal Health (including applicable mark-up) for such
         Merchandise. Merchandise described in this paragraph is sometimes
         referred to as "SPECIALLY PRICED MERCHANDISE." Subject to Buyer's
         obligations under ss.6 with respect to purchases of generic Rx
         Products, Buyer may, but will have no obligation to, purchase any
         specified volume or percentage of its requirements for Specially Priced
         Merchandise.

                  The pricing specified in the Pricing Matrix does not reflect
         administrative fees for membership in any group purchasing organization
         (a "GPO"). If Buyer or any Buyer Pharmacy affiliates with a GPO, the
         appropriate administrative fee will be added to the percentages
         specified in the Pricing Matrix.

                  All orders must be electronically transmitted via cardinal.com
         or other electronic order entry system approved by Cardinal Health to
         qualify for the pricing specified in the Pricing Matrix.
         Non-electronically transmitted orders are subject to Cardinal Health's
         Cost [***] (excluding Schedule II and emergency orders). This Cost
         [***] for non-electronically transmitted orders will not apply to
         orders placed when cardinal.com or other approved electronic order
         entry system is not functioning at the time the order is placed.

4.       PAYMENT TERMS

                  (a)      Payment Terms. The payment terms initially applicable
         to Buyer will be [***] as set forth in the following payment terms
         chart. All payments for the Merchandise will be due in accordance with
         [***] terms unless and until otherwise agreed by Buyer and Cardinal
         Health. Buyer may request to adjust its payment terms (with the
         corresponding adjustment to the cost of goods) to one of the two
         payment terms options set forth in the payment terms grid set forth
         below. Changes in payment terms must be requested thirty (30) days in
         advance and will be effective only on August 1 and February 1 of each
         Contract Year. Any such request for adjustment in price is subject to
         Cardinal Health's credit approval, which shall not unreasonably be
         withheld.

<TABLE>
<CAPTION>
                         Terms                                        Cost of Goods Adjustment
-------------------------------------------------------------------------------------------------------
<S>                                                              <C>
[***] Terms - [***], due to Cardinal Health in good              Priced as in Exhibit B pricing matrix
immediately available funds by the [***] ([***] days
sales outstanding)
-------------------------------------------------------------------------------------------------------
[***] Terms - [***] due to Cardinal Health in good               Increase in cost of goods in Exhibit B
immediately available funds on the[***], [***], due with               pricing matrix of [***]
good immediately available funds on the [***] ([***] days
sales outstanding)
------------------------------------------------------------ ------------------------------------------
</TABLE>

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                  (b)      Cost of Goods Adjustments. At the end of each
         calendar quarter, Cardinal Health will evaluate Buyer's payment history
         based on average days of sales outstanding ("DSO") calculated on a
         quarterly basis and average Qualified Monthly Purchases. If such
         payment history shows payment greater than [***] average DSO, as
         calculated above, then an adjustment to the then-applicable Cost of
         Goods may be made by Cardinal Health as appropriate.

                  (c)      Service Charges. All payments for Merchandise
         delivered and services provided by Cardinal Health will be made to the
         applicable servicing division specified in Cardinal Health's invoice
         (or as otherwise specified by Cardinal Health) by electronic funds
         transfer or other method acceptable to Cardinal Health so as to provide
         Cardinal Health with good funds by the due date. Buyer will pay a
         service charge on any amount not paid by Buyer to Cardinal Health when
         due under the terms of this Agreement from the first day of
         delinquency, until such amount is paid in full, along with reasonable
         attorney fees associated with any such delinquency as follows: (a)
         [***] per month (or the maximum allowed by law if such rate is less
         than [***] per month) until Buyer's DSO exceeds [***] and (b) if
         Buyer's DSO exceeds [***] the service fee shall be at [***] per month
         (or the maximum rate allowed by law if such rate is less than [***] per
         month). Within fifteen (15) days after the end of each month, Cardinal
         Health shall notify Buyer if its average DSO exceeded the applicable
         payment terms for each pay period during that month. For example, under
         the [***] terms identified above, if Buyer makes one bank wire transfer
         payment [***] on or before [***] for all purchases made and received by
         Buyer for [***], Buyer will then be in compliance with Cardinal
         Health's definition of [***] DSO. If Buyer's average DSO per pay period
         exceeded the applicable payment terms for four (4) consecutive pay
         periods, or six (6) pay periods in a rolling three (3) month period,
         Cardinal Health will assess any and all service charges as set forth
         above for all late payments for the immediately preceding twelve (12)
         month period. Cardinal Health retains the right, upon notice to Buyer,
         to place Buyer on C.O.D. or prepay status, refuse orders, adjust
         Buyer's Cost of Goods and/or cease its supply relationship with Buyer
         if Cardinal Health has not received payment when due for Merchandise
         delivered or services provided to Buyer.

                  (d)      Submission of Financial Statements. Buyer will
         provide Cardinal Health with quarterly publicly filed financial
         statements and/or filed annual tax returns with all notes and schedules
         and such further information as Cardinal Health may reasonably request
         from time to time.

                  (e)      Guaranty. As an inducement for Cardinal Health to
         supply Merchandise and provide services to the subsidiaries and
         affiliates of Buyer, whether existing now or in the future
         (collectively, "BORROWERS"), Buyer (i) guarantees to Cardinal Health
         the punctual and full payment (and not merely the ultimate
         collectability) of all sums now or hereafter due from Borrowers to
         Cardinal Health; (ii) agrees to indemnify and save harmless Cardinal
         Health against and from any and all losses, damages, liabilities, and
         claims now or at any time hereafter arising directly or indirectly out
         of any failure by Borrowers to promptly and fully perform all of the
         obligations hereunder, and (iii) agrees to pay to Cardinal Health on
         demand the reasonable cost and expense incurred by

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         Cardinal Health in attempting to enforce any indebtedness, liability,
         or obligation under this Agreement, including, without limitation,
         reasonable attorney's fees.

5.       ORDERING AND DELIVERY

                  Cardinal Health will deliver the Merchandise F.O.B. Pharmacy
         to the Pharmacies and exercise its good faith efforts to provide an
         efficient delivery schedule designed to meet the mutual needs of
         Cardinal Health and the Pharmacies, in accordance with Cardinal
         Health's general delivery schedules established from time to time by
         the applicable Cardinal Health servicing division (exclusive of
         holidays, etc.). All deliveries will be accompanied by an invoice, and
         all delivery costs (not including emergency deliveries) will be
         absorbed by Cardinal Health. Each Pharmacy will be entitled to receive
         [***] delivery per day, [***] days per week, excluding holidays, except
         that (i) the Mail Order Pharmacy in Minneapolis, Minnesota is entitled
         to receive [***] deliveries per day, five days per week, excluding
         holidays, and (ii) Pharmacies located outside of the contiguous United
         States or other Pharmacies will be entitled to deliveries as mutually
         agreed upon by the parties. [***]. Delivery schedules and purchase
         order deadlines may be reviewed and changed from time to time as
         mutually agreed upon by Cardinal Health and Buyer. Cardinal Health will
         make every reasonable effort to accommodate individual order entry and
         delivery requirements. It is possible, depending on the servicing
         Cardinal Health division, that cutoff times may be later than (but not
         before) 7:00 p.m., and that morning deliveries may be earlier than (but
         not later than) noon.

                  Buyer will submit all orders, except for orders for Schedule
         II drugs, for all Merchandise to Cardinal Health via cardinal.com or
         other mutually agreeable electronic means. Cardinal Health will provide
         Buyer with access to cardinal.com and entelligence at no additional
         charge to Buyer; provided, however, Buyer must supply, at its own
         expense, all hardware required for such access, all required Internet
         access and any required interfaces or other network enhancements. Buyer
         agrees not to use cardinal.com, entelligence or any other electronic
         order entry system for any purpose unrelated to this Agreement. Buyer's
         right to use cardinal.com and entelligence will be immediately
         terminated (i) upon expiration or termination of this Agreement for any
         reason or (ii) in the event Cardinal Health reasonably believes
         security of the cardinal.com site or its proprietary rights are
         threatened due to Buyer's access. In the event that electronic order
         entry is temporarily interrupted for reasons beyond the control of
         Buyer or Cardinal Health, Buyer may place orders manually and both
         parties will use reasonable efforts to rectify the problem.

                  DEA Form 222 may be mailed to the applicable Cardinal Health
         distribution center or given to the delivery driver. Schedule II orders
         will be delivered within one (1) day of Cardinal Health's receipt of
         the signed original DEA Form 222. Buyer acknowledges that if Buyer
         gives the DEA Form 222s to the delivery driver, such forms will not be
         received by Cardinal Health until such time that the delivery driver
         physically delivers the DEA Form 222 to the applicable Cardinal Health
         distribution center. Notwithstanding the foregoing, no Schedule II
         orders will be delivered other than in compliance with DEA regulations.

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6.       GENERICS

                  (a)      Participation in CardinalSOURCE. Buyer shall purchase
         [***] of its generic Rx Products needs through Cardinal Health.
         Cardinal Health agrees that during the term of the Agreement, its
         CardinalSOURCE generics program in the aggregate will remain
         competitive with other similar wholesaler generic product programs as
         reasonably determined by Buyer and Cardinal Health based on publicly
         available data. Buyer will utilize the CardinalSOURCE program
         ("CARDINALSOURCE") with autosubstitution with the exception of
         individual products designated by Buyer for its Mail Order Pharmacies,
         for which Buyer shall have the right to override autosubstitution for
         such items upon notice to Cardinal Health.

7.       DISCOUNTS

                  (a)      Upfront Discount. Each year Buyer shall be entitled
         to an annual upfront discount (the "UPFRONT DISCOUNT") in the amount of
         $[***], which shall be provided by Cardinal Health to Buyer upon the
         first day of each Contract Year during the Initial Term of this
         Agreement, in the form of a check. If this Agreement is terminated
         before the end of any Contract Year, Buyer shall repay to Cardinal
         Health the unearned portion of the annual Upfront Discount, which shall
         be repaid prorata based on the number of months remaining until the end
         of such Contract Year. Such repayment amount will be calculated as
         follows:

<TABLE>
-------------------------------------------------------------------------------------------------------
<S>                  <C>                                            <C>                         <C>
Amount to be         (12 minus number of months elapsed since             x                     ($[***])
Repaid =             the Commencement Date /12)                     (multiplied by)
-------------------------------------------------------------------------------------------------------
</TABLE>

                  Payment of the Upfront Discounts will be contingent on Buyer
         meeting its minimum purchase requirement of $[***] in Qualified
         Purchases per Contract Year, and remaining in compliance with all
         payment terms as set forth in this Agreement.

                  (b)      Disclosure. Each of the Upfront Discounts and
         "discount or other reduction in price," as such terms are defined under
         the Medicare/Medicaid Anti-Kickback Statute, on the products and
         services covered by this Agreement, and Buyer may have an obligation to
         accurately report, under any state or federal program which provides
         cost- or charge-based reimbursement for such products or services, or
         as otherwise requested or required by any governmental agency, the net
         cost actually paid by Buyer for such products and services.

8.       OTHER SERVICES

                  Cardinal Health will provide comprehensive support services to
         Buyer and the Pharmacies in accordance with Cardinal Health's customary
         terms and practices for retail pharmacies. A list of those programs,
         services, and reports is attached as EXHIBIT C to this Agreement.

9.       EMERGENCY DELIVERIES

                  Cardinal Health will provide a twenty-four (24) hour, seven
         (7) day per week emergency delivery service. The courier charge for
         such orders will be F.O.B. prepaid

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         and added to the invoice. A listing of key management personnel and
         emergency order procedures will be supplied to each Pharmacy.

10.      CONTRACT ADMINISTRATION

                  Cardinal Health will recognize and administer direct purchase
         manufacturer contracts between Buyer and any manufacturer
         (collectively, "MANUFACTURER CONTRACTS") for such manufacturers'
         products purchased by Chronimed through Cardinal Health subject to
         their continued validity in accordance with applicable laws and subject
         to such credit considerations concerning the applicable manufacturers
         as Cardinal Health may consider appropriate; however, if manufacturers'
         chargebacks for contract items submitted by Cardinal Health are
         disallowed, uncollectible, or unreconcilable, then the applicable
         charge will be billed back to Buyer. Cardinal Health reserves the
         right, at any time, to decline to sell or carry any manufacturer's
         merchandise, based upon credit considerations deemed relevant to
         Cardinal Health. Buyer will notify Cardinal Health of all direct
         purchase Manufacturer Contracts. In addition, Buyer or the Pharmacies
         will provide Cardinal Health with a copy of all new Manufacturer
         Contracts entered into after the Commencement Date and manufacturer
         verification of all renewals, replacements or terminations of
         Manufacturer Contracts not less than forty-five (45) days prior to the
         effective date of such new Contract, renewal, replacement or
         termination. Failure to comply with these notice requirements will
         entitle Cardinal Health to discontinue the service level provisions
         herein until forty-five (45) days after delivery of accurate usage data
         for the new items.

                  In order to facilitate Cardinal Health's inventory management
         requirements, Buyer will provide Cardinal Health with respect to each
         Pharmacy accurate six (6) months' usage figures (including NDC numbers)
         on both contract and non-contract items in compatible electronic (disk)
         format thirty (30) days prior to participation under this Agreement by
         that Pharmacy. All purchases under this Agreement by Buyer will be for
         the Pharmacies' "own use" as that term is defined in judicial or
         legislative interpretation, and Buyer will comply with applicable
         manufacturers' pricing criteria and policies.

11.      LICENSURE

                  Buyer represents and warrants to Cardinal Health that Buyer
         and the Pharmacies have complied with, and are currently and will be at
         all times during the term in compliance with, all applicable licensing
         requirements of all applicable federal, state are local governmental
         authorities, including without limitation any licensing requirements to
         purchase, receive, possess, store, use, dispense, and/or distribute or
         otherwise dispose of pharmaceutical products. Prior to purchasing Rx
         Products from Cardinal Health hereunder and at all times during the
         term of this Agreement, Buyer will provide Cardinal Health with copies
         of all such licenses and any renewals, revocations, changes or notices
         related thereto.

12.      SERVICE LEVEL

                  Cardinal Health will provide the following Adjusted Service
         Level (defined in EXHIBIT D-1): (i) for each of the top 15 branded mail
         order Rx Products (the "TOP MAIL ORDER") and the top 15 branded retail
         Rx Products (the "TOP RETAIL"), [***], and (ii) for

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         all other Rx Products, [***], in each case calculated on a Contract
         Quarter in accordance with the standards and procedures specified in
         EXHIBIT D-1. Lists of the Top Mail Order products and the Top Retail
         products as of the Commencement Date are set forth in EXHIBIT D-2. Such
         lists will be revised annually. If Cardinal Health fails to achieve
         either the [***] for the Top Retail and Top Mail Order products
         commitment or the [***] commitment for all other products for any
         Contract Quarter, Buyer shall be entitled to a rebate in an amount
         equal to [***] of the [***] the applicable Adjusted Service Level
         [***]. For example, if [***] of Top Mail Order and Top Retail products
         were $[***] and the Adjusted Service Level was [***] for the Top Retail
         and Top Mail Order Products, then the service credit would be $[***]
         (the "SERVICE LEVEL REBATE"). The Service Level Rebate, if any, is a
         "discount or other reduction in price," as such terms are defined under
         the Medicare/Medicaid Anti-Kickback Statute, on the products and
         services covered by this Agreement, and Buyer may have an obligation to
         accurately report, under any state or federal program which provides
         cost- or charge-based reimbursement for such products or services, or
         as otherwise requested or required by any governmental agency, the net
         cost actually paid by Buyer for such products and services. In addition
         to this service level rebate, Buyer may terminate this Agreement for
         Cardinal Health's failure to meet specified service levels as provided
         for in Section 14, provided that if Buyer terminates this Agreement
         pursuant to Section 14, it shall not be entitled a payment hereunder
         for the last service level default giving rise to termination.

13.      RETURNED GOODS POLICY

                  Cardinal Health will accept Merchandise for return from
         Pharmacies in accordance with the Standard Cardinal Health Returned
         Goods Policy (the "CARDINAL HEALTH RETURNS POLICY"). Cardinal Health
         will not accept for return any Merchandise from Buyer prior to
         execution of an Ongoing Assurances Form in the identical form as
         attached as an exhibit hereto. Cardinal Health will work with a third
         party returned goods processor in accordance with the Standard Third
         Party Returned Goods Policy (the "THIRD PARTY RETURNS POLICY"). Current
         copies of both the Cardinal Health Returns Policy and the Third Party
         Returns Policy are attached as EXHIBITS E-1 and E-2.

14.      TERM

                  (a)      The term of this agreement will be for three (3)
         years, beginning on August 1, 2003 (the "COMMENCEMENT DATE") and ending
         on July 31, 2006.

                  (b)      Either party may effect an early termination of this
         Agreement upon the occurrence of a material breach by the other party.
         The non-breaching party must give written notice to the breaching party
         of the occurrence of such breach. The notice must describe in detail
         the nature of the breach. The breaching party will have the opportunity
         to cure its breach to the reasonable satisfaction of the non-breaching
         party during a sixty (60) day period beginning on the date the
         breaching party receives the written notice (the "CURE PERIOD"). In the
         alternative, if such breach is of a nature that it cannot be cured in
         sixty (60) days, the breaching party must commence and diligently
         prosecute in good faith the cure of such breach within the Cure Period
         and cure such breach within one hundred twenty (120) days. If the
         breach is not cured by the expiration of the Cure Period, or the
         breaching party has not begun the cure process if it cannot be cured in
         sixty (60) days and does not cure the breach within one hundred twenty
         (120) days, then the

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         non-breaching party may provide written notice to the breaching party
         that this Agreement will be terminated in thirty (30) days following
         the expiration of the Cure Period. Notwithstanding the foregoing, with
         respect to payment defaults by Buyer, Cardinal Health may terminate
         this Agreement immediately. In addition, Cardinal Health may terminate
         this Agreement immediately upon notice to Buyer in the event of the
         following: (i) Buyer files for or is otherwise subject to bankruptcy
         proceedings or is or becomes insolvent, (ii) Buyer defaults on the
         terms of any bank agreement or other loan or (iii) Buyer is delisted
         from NASDAQ or any other national securities exchange. Buyer may
         terminate this Agreement immediately upon notice to Cardinal Health if
         Cardinal Health has committed a Service Level Default in each of [***]
         consecutive quarters within a rolling twelve (12) month period, or a
         total of four quarters over the three year term of the Agreement. If
         Cardinal Health commits a Service Level Default in each of [***]
         consecutive quarters within a rolling twelve (12) month period, Buyer
         must notify Cardinal Health in writing of their intent to end the
         Agreement within a thirty day period from the end of the second
         consecutive quarter that the Service Level Default has occurred. If
         notification is not given, Buyer forfeits the right to exercise this
         specific Service Level Default. As used herein, a "SERVICE LEVEL
         DEFAULT" shall mean a breach of either the (i) Top Mail Order and Top
         Retail Adjusted Service Level or (ii) the Adjusted Service Level for
         all other products, as specified in Section 12. No termination notice
         from Buyer to Cardinal Health will be effective until such time as
         Cardinal Health has received payment for all amounts due from Buyer.

15.      NOTICES

                  Any notice or other communication required or desired to be
         given to either party under this Agreement shall be in writing and
         shall be deemed given when: (a) received by the recipient, after being
         sent via certified mail, return receipt requested, and addressed to
         that party at the address for such party set forth at the end of this
         Agreement; (b) received by the recipient after being sent via Federal
         Express, Airborne, or any other similar overnight delivery service for
         delivery to that party at that address; or (c) received by facsimile
         transmission, as evidenced by electronic confirmation, to that party at
         its facsimile number set forth at the end of this Agreement. Either
         party may change its address or facsimile number for notices under this
         Agreement by giving the other party notice of such change.

16.      TAXES/COMPLIANCE WITH LAWS

                  Buyer will pay when due any sales, use, excise, gross
         receipts, or other federal, state, or local taxes or other assessments
         (other than any tax based solely on the net income of Cardinal Health)
         and related interest and penalties in connection with or arising out of
         the transactions contemplated by this Agreement. If Cardinal Health
         pays any such amounts which Buyer is obligated to pay under this
         section, then Buyer will promptly reimburse Cardinal Health in an
         amount equal to the amount so paid by Cardinal Health.

                  Buyer and Cardinal Health shall comply with all federal and
         state laws, rules and regulations applicable to the storage,
         distribution, purchase, sale and use of pharmaceutical products.

<PAGE>

                  If and to the extent any discount, credit, rebate or other
         purchase incentive is paid or applied by Cardinal Health with respect
         to the Merchandise purchased under this Agreement, such discount,
         credit, rebate or other purchase incentive shall constitute a "discount
         or other reduction in price," as such terms are defined under the
         Medicare/Medicaid Anti-Kickback Statute, on the Merchandise purchased
         by Buyer under the terms of this Agreement. Cardinal Health and Buyer
         agree to use their best efforts to comply with any and all requirements
         imposed on sellers and buyers, respectively, under 42 U.S.C. Section
         1320a-7b(b)(3)(A) and the "safe harbor" regulations regarding discounts
         or other reductions in price set forth in 42 C.F.R. Section
         1001.952(h). In this regard, Buyer may have an obligation to accurately
         report, under any state or federal program which provides cost or
         charge based reimbursement for the products or services covered by this
         Agreement, or as otherwise requested or required by any governmental
         agency, the net cost actually paid by Buyer.

17.      FORCE MAJEURE

                  Cardinal Health's obligations under this Agreement will be
         excused if and to the extent that any delay or failure to perform such
         obligations is due to fire or other casualty, product or material
         shortages, strikes or labor disputes, transportation delays, change in
         business conditions (other than insignificant changes), manufacturer
         out-of-stock or delivery disruptions, acts of God, seasonal supply
         disruptions, or other causes beyond the reasonable control of Cardinal
         Health. During the period of any such delay or failure, Buyer may
         purchase the Primary Requirements for the affected Pharmacies from
         others, but will recommence purchasing from Cardinal Health upon
         cessation of such delay or failure.

18.      RECORDS AND AUDIT

                  Cardinal Health will maintain records pertaining to the
         pharmaceutical products purchased by Buyer under this Agreement as
         required by applicable state and federal laws and regulations. Not more
         than once in any twelve (12) month period, and following sixty (60)
         days advance written notice to Cardinal Health, Buyer or its agent will
         have the right to review those relevant records applicable to its
         pharmaceutical purchases for the sole purpose of verifying compliance
         with pricing the terms of this Agreement. Any such review will be
         limited to the most current full twelve (12) months of historical
         information as of the date such advance written notice is provided to
         Cardinal Health pertaining to transactions performed under this
         Agreement and will be subject to an executed mutually agreed upon
         confidentiality agreement. With respect to contracts between Cardinal
         Health and certain manufacturers or other contracts which must remain
         confidential as determined by Cardinal Health, Buyer may only review
         records relating to such contracts through an employee of a national
         accounting firm mutually agreed to by both parties (i.e., not a Buyer
         employee) only to verify compliance with this Agreement. Such
         accounting firm may confirm to Buyer that Cardinal Health has (or has
         not) complied with the pricing of this Agreement, but may not (and will
         not) disclose to Buyer any confidential information. All information
         reviewed by such accounting firm employee will be done only pursuant to
         a confidentiality agreement mutually agreed to by both parties and
         signed by Buyer and the accounting firm who will have access to such
         information, prior to beginning any such review. Any such audit will be
         at Buyer's sole cost and expense. Buyer shall provide Cardinal Health a
         Summary of

<PAGE>

         Findings at the completion of any audit. Buyer will allow Cardinal
         Health thirty (30) days to review the Summary of Findings and in good
         faith discuss all disagreements in such findings with Buyer. Any
         findings that provide mutual benefits or off setting errors to both
         parties will be addressed in good faith and the cost of the audit will
         be shared equally. In the event that the parties agree that Buyer was
         overcharged, Cardinal Health shall pay Buyer the amount of such
         overcharges within forty-five (45) days of submission of the Summary of
         Findings.

19.      ENTIRE AGREEMENT; SUCCESSORS

                  This Agreement and its exhibits constitutes the entire
         agreement and understanding of the parties with respect to the subject
         matter hereof, and supersedes all prior and contemporaneous agreements,
         proposals, bids/bid responses, and understandings between the parties
         relative to the subject matter of this Agreement. This Agreement will
         be governed by Ohio law. Neither Cardinal Health nor Buyer may assign
         its rights under this Agreement without the written consent of the
         other; provided, however, that Cardinal Health may delegate its rights
         and obligations to any entity that is controlled by or under common
         control with Cardinal Health, Inc. This Agreement will be binding on,
         inure to the benefit of, and be enforceable by and against the
         respective successors and assigns of each party to this Agreement.

20.      AMENDMENTS

                  No changes to this Agreement will be made or be binding on any
         party unless made in writing and signed by each party to this
         Agreement.

21.      WAIVER

                  The failure of either party to enforce any provision of this
         Agreement will not be considered a waiver of any future right to
         enforce such provision.

22.      ANNOUNCEMENTS

                  Neither party will issue any press release or other public
         announcement, verbally or in writing, referring to the other party or
         any entity which is controlled by or under common control with the
         other party, without the other party's prior written consent and advice
         of counsel. Each party will provide to the other a written copy of any
         such press release or other public announcement no less than
         seventy-two (72) hours prior to the party's intent to issue such
         release or announcement. Any such press release or other public
         announcement proposed by either party will be subject to the other
         party's revision and final approval. Nothing contained herein will
         limit the right of either party to issue a press release if, in the
         opinion of that party's counsel, such press release is required
         pursuant to state or federal securities laws, rules or regulations, in
         which case the party required to make the press release or public
         announcement shall use commercially reasonable efforts to obtain the
         approval of the other party as to the form, nature and content of the
         press release or other announcement prior to issuing the press release
         or making the public announcement. In the case of notices to Cardinal
         Health under this Section 22 the contact person shall be EVP of Sales,
         with a copy to the SVP, Corporate Communications at the address set
         forth at the end of this Agreement. For Chronimed

<PAGE>

         such notices shall be sent to the EVP Operations at the address set
         forth at the end of this Agreement.

23.      [***]

                  Cardinal Health will [***] Buyer, as possible, [***], and as
         [***], in [***].

24.      INDEPENDENT CONTRACTORS

                  This relationship is that of independent contractors. This
         Agreement does not create any employment, agency, franchise, joint
         venture, partnership or other similar legal relationship between Buyer
         and Cardinal Health. No party has the authority to bind or act on
         behalf of the other party except as otherwise specifically stated in
         this Agreement.

25.      OTHER DEFINITIONS

                  For purposes of this Agreement, "CONTRACT YEAR" shall mean
         each successive twelve (12) month period with the first Contract Year
         commencing as of the Commencement Date. "CONTRACT QUARTER" or "QUARTER"
         means each successive three (3) month period that this Agreement is in
         effect with the first such quarter commencing on the Commencement Date.

26.      CARDINAL HEALTH REPRESENTATIONS

                  Cardinal Health represents that it will comply with all
         applicable federal and state laws and regulations regarding the
         handling, storage and distribution of Merchandise, including the
         Prescription Drug Marketing Act of 1987.

CHRONIMED INC.                                      CARDINAL HEALTH*
___________________________________________         7000 CARDINAL PLACE
___________________________________________         DUBLIN, OHIO 43017
FACSIMILE:_________________________________         FACSIMILE: (614) 757-6000

BY_________________________________________         BY__________________________

TITLE______________________________________         TITLE_______________________

DATE_______________________________________         DATE________________________

*The term "CARDINAL HEALTH" means the following pharmaceutical distribution
companies: Cardinal Health 106, Inc. (formerly known as James W. Daly, Inc.), a
Massachusetts corporation (Peabody, Massachusetts); Cardinal Health 103, Inc.
(formerly known as Cardinal Southeast, Inc.), a Mississippi corporation
(Madison, Mississippi); Cardinal Health 110, Inc. (formerly known as Whitmire
Distribution Corporation), a Delaware corporation (Folsom, California) and any
other subsidiary of Cardinal Health, Inc., an Ohio corporation ("CHI"), as may
be designated by CHI.

<PAGE>

                                                                       EXHIBIT A

PHARMACIES

                         Chronimed/Statscript Pharmacies
                                   March 2003

Mail Order ("Mail Order Pharmacy Group")

Minnetonka
San Francisco
Miami Beach - satellite mail order facility
Memphis - satellite mail order facility
Houston - satellite mail order facility

Retail (the "Retail Pharmacy Group")

Kansas City
Chicago
Dallas
Houston
Fort Lauderdale
St. Louis
West Palm Beach
Tampa
Miami Beach
Montrose
Philadelphia
Washington D.C.
Atlanta
Indianapolis
San Francisco
West Hollywood
Seattle
San Diego
Las Vegas
Boston
St. Petersburg
Orlando
New York
Milwaukee
Oaks
Memphis
Minneapolis

<PAGE>

                                                                       EXHIBIT B

PRICING MATRIX

         This Pricing Matrix has been established based upon Buyer's
representations that, in each Contract Year:

         (a)      Buyer will purchase each Pharmacy's Primary Requirements from
                  Cardinal Health;

         (b)      Minimum total aggregate Annual Qualified Purchases from
                  Cardinal Health will be $[***] per Contract Year in order for
                  Upfront Discounts to remain in effect.

         The foregoing (a) through (c) are collectively referred to herein as
the "MINIMUM REQUIREMENTS"). If, for any reason, some or all of the Minimum
Requirements are not met by Buyer, then Cardinal Health may reasonably modify
this Pricing Matrix.

         Subject to the Minimum Requirements and Section 4 of this Agreement
regarding timely payment, Buyer will be entitled to purchase from Cardinal
Health branded Rx Products, Schedule II Rx Products (that are not Specially
Priced Merchandise or subject to a Manufacturer Contract) and over-the-counter
Merchandise at an amount as set forth in the table below:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
AGGREGATE ANNUAL QUALIFIED PURCHASES OF ALL           CARDINAL HEALTH'S [***]
                PHARMACIES                           THE FOLLOWING PERCENTAGE:
----------------------------------------------------------------------------------
<S>                                              <C>
               BELOW $[***]                      AS MUTUALLY AGREED BY THE PARTIES
----------------------------------------------------------------------------------
              $[***] - $[***]                                  [***]
----------------------------------------------------------------------------------
              $[***] - $[***]                                  [***]
----------------------------------------------------------------------------------
              $[***] - $[***]                                  [***]
----------------------------------------------------------------------------------
              $[***] - $[***]                                  [***]
----------------------------------------------------------------------------------
              $[***] AND ABOVE                   AS MUTUALLY AGREED BY THE PARTIES
----------------------------------------------------------------------------------
</TABLE>

         *Pricing in the above table is based on [***] DSO

         Buyer will initially be invoiced at Cardinal Health's [***]. Each
Contract Quarter, Cardinal Health will evaluate the total, aggregate Qualified
Monthly Purchases of all Pharmacies during the immediately preceding Contract
Quarter. If the total, aggregate annualized Qualified Monthly Purchases of all
Pharmacies during such quarter entitle Buyer to purchase Merchandise at a lower
(or higher) cost of goods according to the foregoing table than Buyer was
invoiced during the applicable quarter, prospective adjustments to the cost of
goods will be made as further described below.

         For example, if the cost of goods is equal to Cardinal Health's [***],
and if, during a Contract Quarter, the average, annualized aggregate Qualified
Monthly Purchases of all Pharmacies were $[***] (and Buyer's payment terms
remained [***]), then Buyers' cost of

<PAGE>

goods for the following Contract Quarter will be decreased to Cardinal Health's
[***]. Conversely, if the average, annualized aggregate Qualified Monthly
Purchases of all of the Pharmacies was $[***] (and Buyer's payment terms
remained [***]), then Buyer's cost of goods for the following Contract Quarter
will be increased to Cardinal Health's [***].

         The parties acknowledge that Cardinal Health may need to retroactively
calculate Buyer's Cost of Goods for the period beginning on the first day of a
Contract Year and continuing until the first date on which an adjustment is
reflected on Buyer's invoice. If Buyer overpaid Cardinal Health for its
purchases during such period, then Cardinal Health will refund to Buyer the
overpayment in the form of a check or a credit memo to be used toward future
purchases of Merchandise from Cardinal Health. If Buyer underpaid Cardinal
Health, then Buyer will pay to Cardinal Health any additional amount owed. Any
refunds due to Buyer from Cardinal Health, or any payments due to Cardinal
Health from Buyer, will be calculated and paid within [***] following the end of
each Contract Year.

         Notwithstanding the foregoing, the following Merchandise will not be
available for purchase in accordance with the cost of goods set forth above, but
instead will be [***]:

[***]
[***] equipment
Certain [***] Merchandise
Merchandise subject to a Manufacturer Contract

<PAGE>

                                                                       EXHIBIT C

OTHER SERVICES

         BASE SERVICE PACKAGE

<TABLE>
<CAPTION>
---------------------------------------------------
PROGRAMS AND SERVICES               FREQUENCY
---------------------------------------------------
<S>                                 <C>
EOE Machines                        One per store
---------------------------------------------------
Shelf Labels                        With each order
---------------------------------------------------
Price Stickers                      With each order
---------------------------------------------------
Auto Generic Substitution           Ongoing
Program
---------------------------------------------------
Auto Repack Substitution            Ongoing
Program
---------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------
PROGRAMS AND SERVICES               FREQUENCY
-----------------------------------------------------------
<S>                                 <C>
Category Purchase                   Monthly, upon request
Summary
-----------------------------------------------------------
Item Purchases Report               Monthly, upon request
-----------------------------------------------------------
Rx Velocity Report -                Quarterly, upon request
Top 200 Items
-----------------------------------------------------------
Generic Purchase Report             Quarterly, upon request
-----------------------------------------------------------
Price Change Notification           Weekly, upon request
-----------------------------------------------------------
Controlled Substance                Monthly, upon request
Variance Report
-----------------------------------------------------------
DEA Report                          Monthly, upon request
-----------------------------------------------------------
</TABLE>

<PAGE>

                                                                     EXHIBIT D-1

                            SERVICE LEVEL DEFINITION

         For purposes of this Agreement, the service level percentage will be
calculated by [***] of [***] by the [***] of [***]. The following items will be
excluded from the service level calculation:

         1.       [***];

         2.       [***] and/or [***];

         3.       Items where a Pharmacy has failed to provide [***]; and

         4.       Items where a Pharmacy's historical demand is [***].

         The foregoing calculation is the "ADJUSTED SERVICE LEVEL."

         The service level guaranty in this Agreement for Buyer will commence
[***] following the later of the Commencement Date or Cardinal Health's receipt
of accurate usage data. The service level guaranty for Pharmacies added to this
Agreement after the Commencement Date will commence [***] following receipt by
Cardinal Health of accurate usage data. This will allow Cardinal Health to gain
usage information and adjust inventory levels appropriately.

         Upon Buyer's request, if Cardinal Health does not meet its service
level for any quarter, Cardinal Health and Buyer will jointly develop a service
level action plan for the following quarter. During the implementation of the
service level action plan, Buyer may not terminate this Agreement for cause.

         Buyer will notify Cardinal Health at least [***] days prior to the
expiration of any manufacturer's contract which is being replaced with a
different contract, and will cooperate with and assist Cardinal Health in
disposing of any excess inventory of Merchandise previously stocked at Buyer's
or a Pharmacy's request. Failure to comply with these notice requirements will
entitle Cardinal Health to discontinue the service level guaranty to the
Pharmacies until [***] after delivery of accurate usage data for the new items.

<PAGE>

                                                                     EXHIBIT D-2

                      TOP 15 BRANDED MAIL ORDER RX PRODUCTS
                                       AND
                        TOP 15 BRANDED RETAIL RX PRODUCTS

Mail order:

[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]

Retail:

[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]

<PAGE>

EXHIBIT E-1

                 CARDINAL HEALTH RETURNED GOODS POLICY - RETAIL

GENERAL POLICY

Product in "merchantable condition" (as defined below) may generally be returned
to the Cardinal Health company from which the product was originally purchased
if the return is made within the timeframes and subject to the terms and
conditions described below:

RETURN MADE WITHIN:               NORMAL CREDIT AMOUNT:

1 - [***] from Invoice Date       [***] of original invoice amount paid by
                                  Buyer. This policy covers all ordering/filling
                                  errors.

More than [***]                   [***] of original contract or other "cost"
                                  paid by Buyer (i.e., not including any
                                  applicable mark-up and not to exceed actual
                                  amount paid).

"MERCHANTABLE CONDITION" will be determined by Cardinal Health based upon its
ability to return the item to its inventory for resale in the normal course of
its business without special preparation, testing, handling, or expense and will
exclude the following:

A.       Any item which has been used or opened, is a partial dispensing unit or
         unit of sale, is without all original packaging, labeling, inserts, or
         operating manuals, or that is stickered, marked, damaged, defaced, or
         otherwise cannot readily be resold by Cardinal Health for any reason.

B.       Short-dated (less than seven (7) months expiration dating), outdated,
         or seasonal product and items purchased on a "special order" basis,
         including non-stock and drop ship items.

C.       Any sterile or refrigerated merchandise, unless Cardinal Health is
         specially assured that such merchandise was properly stored and
         protected at all times and such merchandise is returned separately in a
         package marked as such and accompanied by a separate credit request
         form.

D.       Any low stability product, including [***](TM), [***](TM), or other
         products which are usually sensitive to temperature and handling
         conditions.

E.       Any product not intended for return to a wholesaler in accordance with
         the return policies of the applicable manufacturer.

UNMERCHANTABLE PRODUCT

Any item not eligible for return in accordance with Cardinal Health's General
Policy (above) will not be accepted for return without special written
authorization and will generally require return directly to the manufacturer. If
Cardinal Health does participate in the return process for any product not in
"merchantable condition," any return credit to the Buyer will be based upon the
actual credit issued by the manufacturer and will be subject to a minimum [***]
handling charge. Cardinal Health will work with third party return processors to
allow Buyer to realize value through returns of unmerchantable product. Upon
Buyer's request, Cardinal Health and Buyer will negotiate the terms of this
arrangement, which will include such terms as an administrative fee payable to
Cardinal Health, reconciliation and credits to Buyer's account.

CONTROLLED SUBSTANCES

Credit for the return of controlled substances requires a separate Merchandise
Return Authorization Form (the "MRA FORM") and must comply with all federal and
state procedures and requirements in addition to the terms and conditions
described herein.

<PAGE>

SHORTS AND DAMAGED MERCHANDISE

Claims of order shortages (e.g., invoiced but not received), damage and mispicks
must generally be reported within [***] from the applicable invoice date.
Controlled substance shortage claims must be reported immediately per DEA
requirements.

ONGOING ASSURANCE AND CARDINAL HEALTH CREDIT REQUEST FORM

Prior to returning any product to Cardinal Health, each Buyer must execute and
deliver to Cardinal Health an Ongoing Assurance verifying that all returned
merchandise has been kept under proper conditions for storage, handling, and
shipping. All requests for credit must be submitted via EOE, on the
CardinalCHOICE(R) system or by approved EDI interface. A fully completed MRA
Form must accompany all merchandise to be returned. A fully completed form
includes, but is not limited to, the following information: the invoice number
and invoice date for the merchandise to be returned.

SHIPPING OF RETURN GOODS

Return merchandise must be placed in a proper shipping container and, for
merchandise valued at more than $250, signed for by the driver when the product
is picked up. All MRA Forms will be reviewed by Cardinal Health for compliance
with its Returned Goods Policy. The acceptability, valuation, and acceptance of
any return is at the sole discretion of Cardinal Health and/or the manufacturer.
Any credit of similar offsets may be taken only as previously approved by
Cardinal Health (as evidenced by the issuance of a valid credit memo), and may
not be otherwise taken or deducted by the Buyer.

         OTHER RESTRICTIONS

This policy is subject to change without notice by Cardinal Health. This policy
is further subject to modification as may be deemed necessary or appropriate by
Cardinal Health to comply with applicable federal and/or state regulations, FDA
guidelines, state law, and other restrictions applicable to returned
merchandise.

<PAGE>

                   CARDINAL HEALTH RETURN GOODS AUTHORIZATION
                                ONGOING ASSURANCE

The undersigned Buyer ("BUYER") of one (1) or more of the Cardinal Health
companies identified below ("WHOLESALER," whether one (1) or more) hereby agrees
that this document is being delivered to confirm Buyer's compliance with
applicable federal, state, and local laws / guidelines concerning returned goods
and will apply to all returns by Buyer to Wholesaler from time to time and will
supersede any inconsistent provisions which may be contained in any credit
request, purchase order, or other documents pertaining to the supply
relationship between Buyer and Wholesaler.

1.       Buyer represents, warrants, and guarantees to Wholesaler that: (a) each
such return will be made only to the specific Wholesaler from which the item was
originally purchased; (b) each such return will be accompanied by Wholesaler's
credit request form (the "RETURN FORM"), which will specify both Buyer's and
Wholesaler's name and address, the date of the return, the quantity and
description of the product returned, and such other information as may
reasonably be requested on Wholesaler's Return Form; (c) Buyer will retain a
copy of each Return Form and related credit memo and make such documentation
available to the manufacturer and to authorized federal, state, and local law
enforcement officers upon request; (d) the credit claimed or accepted by Buyer
for any such return will not exceed the original purchase price paid to
Wholesaler; and (e) all merchandise returned to Wholesaler has been stored and
handled by Buyer in accordance with all applicable federal, state, and local
laws, manufacturer guidelines when disclosed to Buyer by the manufacturer or
wholesaler, and good trade practices, and such merchandise has not been
adulterated or misbranded by Buyer within the meaning of the Federal Food, Drug,
and Cosmetic Act and meets all FDA, state, and other applicable requirements and
guidelines.

2.       Buyer will indemnify and defend Wholesaler against and from any
expense, claim, liability, or penalty (including reasonable legal fees) arising
from any failure of Buyer to properly comply with the provisions specified in
this document.

3.       *The term "Cardinal Health" means the following pharmaceutical
distribution companies: Cardinal Health 106, Inc. (formerly known as James W.
Daly, Inc.), a Massachusetts corporation (Peabody, Massachusetts); Cardinal
Health 103, Inc. (formerly known as Cardinal Southeast, Inc.), a Mississippi
corporation (Madison, Mississippi); Cardinal Health 110, Inc. (formerly known as
Whitmire Distribution Corporation), a Delaware corporation (Folsom, California)
and any other subsidiary of Cardinal Health, Inc., an Ohio corporation ("CHI"),
as may be designated by CHI.

                                              _________________________________
                                                     Buyer's Name (Print)

                                              _________________________________
Dated:________________________ , 200_____      By Authorized Signature / Title

<PAGE>

                                                                     EXHIBIT E-2

                RETURNED GOODS POLICY FOR UNMERCHANTABLE PRODUCT

                                 GENERAL POLICY

Cardinal Health and Buyer have agreed to pursue a return process whereby
Cardinal Health will assist Buyer in receiving value for certain unmerchantable
Product. Product which may not be returned pursuant to Cardinal Health's
Standard Returned Goods Policy may be returned to an authorized manufacturer
through a third party pursuant to this policy. Products which are
"UNMERCHANTABLE" include, but are not limited to, those items which Cardinal
Health determines are not in "merchantable condition" (as defined in Cardinal
Health's Returned Goods Policy), and the following:

A.       Any item which has been used or opened, is a partial dispensing unit or
unit of sale, is without all original packaging, labeling, inserts or operating
manuals, or that is stickered, marked, damaged, defaced or otherwise cannot
readily be resold by Cardinal Health for any reason.

B.       Short-dated (less than seven (7) months expiration dating), outdated,
or seasonal product and items purchased on a "special order" basis, including
non-stock and drop ship items.

C.       Any sterile or refrigerated Merchandise, unless Cardinal Health is
specially assured that such Merchandise was properly stored and protected at all
times and such Merchandise is returned separately in a package marked as such
and accompanied by a separate credit request form.

D.       Any low stability product, including [***](TM), [***](TM), or other
products which are usually sensitive to temperature and handling conditions.

E.       Any product not intended for return to a wholesaler in accordance with
the return policies of the applicable manufacturer.

Product in "unmerchantable condition" may generally be returned to vendors (a)
with which Cardinal Health has a current relationship, (b) are not either
insolvent or subject to a petition in bankruptcy, or (c) which do not have an
outstanding balance due Cardinal Health at the date on which such Product is
submitted for return (each such vendor, an "ACTIVE MANUFACTURER").
Unmerchantable Product may only be returned through a third party return
processor ("THIRD PARTY") in accordance with the terms and conditions described
in this policy. Cardinal Health will provide the Third Party selected by Buyer
with a current list of all Active Manufacturers. Any Third Party selected by
Buyer must enter into a Confidentiality Agreement, in a form acceptable to
Cardinal Health, prior to accepting any returns from Buyer.

                             PROCEDURES FOR RETURNS

Buyer and Cardinal Health will notify each Active Manufacturer of their
relationship as Buyer/wholesaler. Buyer will send all returns of unmerchantable
Product to its selected Third Party. The amount identified by the Third Party as
the amount to which Buyer is entitled in exchange for the return will be
determined in accordance with the return policy of the applicable Active
Manufacturer as described in the Third Party's database, which will reflect
Buyer's cost of goods purchased through Cardinal Health. Buyer will instruct the
Third Party to provide Cardinal Health with documentation (either in paper or
electronic format) to substantiate each debit memo submitted to Active
Manufacturers on behalf of Buyer.

<PAGE>

Buyer will instruct each Active Manufacturer to issue any and all credits to
Cardinal Health for Merchandise that was purchased by Buyer from Cardinal Health
and is returned through a Third Party in unmerchantable condition, and to
reference the debit memo number corresponding to the debit memo prepared by the
Third Party. Buyer and Cardinal Health acknowledge that Buyer will handle,
without Cardinal Health's involvement, all matters relating to returns to
manufacturers with which Buyer has a direct contracting relationship (whether or
not such manufacturer is an Active Manufacturer).

Buyer will pay the Third Party directly for all of such Third Party's fees. In
addition, Buyer will reimburse Cardinal Health for all costs billed by the Third
Party to Cardinal Health that relate to Buyer's returns hereunder, including,
but not limited to, processing fees, postage, delivery and destruction fees.

Each calendar month, Cardinal Health will be paid [***] of the net returns
received by Cardinal Health from all Active Manufacturers as a processing fee
(the "PROCESSING FEE") in accordance with the following procedure:

-        Cardinal Health will adjust Buyer's account upon the earlier of receipt
         of an actual credit from an Active Manufacturer, or within ninety (90)
         days following the date of a debit memo submitted to an Active
         Manufacturer. Buyer will not deduct from any amounts owed to Cardinal
         Health, any amounts relating to the return of Merchandise through a
         Third Party.

-        Each calendar month, Cardinal Health will (a) track credits due Buyer's
         account in the amount received by Cardinal Health from each Active
         Manufacturer during such month for Buyer's returns (or, if not received
         within ninety (90) days, the amount anticipated to be received as shown
         on the debit memo), and (b) adjust previously made credits to Buyer's
         account to reflect actual credits authorized to Cardinal Health for
         returned Product, so that a net credit may be determined.

-        Once per month, Cardinal Health will credit Buyer's account with the
         net amount due Buyer for all Third Party Returns activities during the
         previous month, less the Processing Fee.

With the monthly credit, Cardinal Health will provide Buyer with a report of all
Active Manufacturer credits and debit memos posted during such month. Cardinal
Health will not perform a detail line reconciliation of the amounts authorized
by Active Manufacturers as compared to the original debit memo.

Notwithstanding the foregoing, if the applicable Active Manufacturer (a) is in a
debit balance in Cardinal Health's accounts payable system, or (b) is subject to
a petition in bankruptcy or is deemed insolvent, then no credit will be issued
to Buyer, and the credit will accrue to Cardinal Health's benefit, until such
time as the Active Manufacturer is no longer in a debit balance, bankruptcy
proceeding or insolvent. In addition, the Third Party will be exclusively
responsible for resolving discrepancies relating to returned Product through
such Third Party.

To the extent that Buyer desires to return Product to a supplier which is not an
approved Active Manufacturer, Cardinal Health will credit Buyer's account only
after Cardinal Health receives payment either through check, money order or wire
transfer. If check, wire transfer or any other payment method is employed which
does not guarantee Cardinal Health immediately available funds, Cardinal Health
will credit Buyer's account only upon receiving such funds in Cardinal Health's
account. Buyer may not offset payments due from Buyer to Cardinal Health for
Product purchases against any amounts Buyer deems are due and owing pursuant to
this Third Party Returned Goods Policy.

Cardinal Health may modify this Third Party Returned Goods Policy in its
reasonable discretion from time to time.<PAGE>
                                                                   EXHIBIT 10.06

                            2001 AMENDED AND RESTATED
                        1998 INCENTIVE STOCK OPTION PLAN
                          OF SURETY CAPITAL CORPORATION

         This is the 2001 Amended and Restated 1998 incentive Stock Option Plan
(the "Plan") of SURETY CAPITAL CORPORATION, a Delaware corporation (the
"Company"), under which incentive stock options (the "Options") may be granted
to employees of the Company and/or its subsidiaries to purchase shares of the
Company's $0.01 par value common stock (the "Common Stock"). Options granted
pursuant to the Plan are intended to be "incentive stock options" within the
meaning of Section 422 of the Code (as defined below).

         SECTION 1. PURPOSE. The purpose of the Plan is to permit selected
employees of the company and/or its subsidiaries (now existing or hereafter
acquired) to acquire a proprietary interest in the Company, thereby providing
them with an additional incentive for further promoting the success of the
Company's business operations and to encourage them to remain as employees of
the Company and/or its subsidiaries.

         SECTION 2. ADMINISTRATION OF PLAN. The Plan will be administered by the
Stock Option Committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors"). The Committee shall consist of two (2) or
more members of the Board of Directors. Each member of the Committee must be a
director of the Company who is ineligible to receive a grant of Options under
the Plan. Subject to the provisions of the Plan, the Committee will have
authority in its discretion: (a) to select the individuals to whom and the time
or times at which Options will be granted under the Plan, to determine the
number of shares subject to each Option granted under the Plan and the exercise
price thereof, to determine the terms, conditions, restrictions and other
provisions of such Options, and, subject to the restrictions imposed by SECTION
16, to cancel Options granted under the Plan; (b) to construe and interpret the
Plan and all Options granted under the Plan; (c) to prescribe, amend and rescind
rules and regulations relating to the Plan; and (d) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations and interpretations made by the Committee will be binding and
conclusive on all persons to whom Options are granted under the Plan and on
their legal representatives and beneficiaries. In administering the Plan, the
Committee shall act by majority vote of its then members, by meeting or by
writing filed without a meeting. The Committee shall maintain and keep adequate
records concerning the Plan and concerning its proceedings and acts in such form
and detail as the Committee may decide.

         SECTION 3. SHARES SUBJECT TO PLAN. Subject to adjustment as provided in
SECTION 10, the number and kind of shares which may be offered and sold under
the Plan is 500,000 shares of common Stock. If any Option granted under the Plan
is forfeited, expires or is cancelled for any reason without having been
exercised in full, the unpurchased shares of Common Stock subject thereto will
(unless the Plan has been terminated) again be available for other Options to be
granted under the Plan. Shares which are the subject of Options under the Plan
may be made available from authorized and unissued stock or treasury stock of
the Company.

<PAGE>
         SECTION 4. SELECTION OF OPTIONEES. Options may be granted under the
Plan to present and future employees of the Company and/or its subsidiaries
(whether now existing or hereafter acquired), all such persons being hereafter
referred to as "Optionees." In determining the persons to whom Options will be
granted and the number of shares of Common Stock to be covered by each Option,
the Committee may take into account the nature of the services rendered by such
persons, their present and potential contributions to the success of the Company
and such other factors as the Committee in its discretion may deem relevant. An
Optionee who has been granted an Option under the Plan may be granted an
additional Option or Options under the Plan if the Committee so determines.

         SECTION 5. OPTION PRICE. Options granted under the Plan will be subject
to such exercise price as may be determined by the Committee, except that in no
event may such exercise price be less than the fair market value of the Common
Stock on the date of the grant (the "Option Price"). In determining such fair
market value, the Committee shall use the average of the closing bid and asked
prices if such Common Stock is traded on the over-the-counter market, or the
closing price on a securities exchange (except that if there was no trading in
such Common Stock on the date of the grant, the closing price on the earliest
preceding day during which there was trading in such Common Stock shall be
used). If the Common Stock is not publicly traded, the Board of Directors shall
make a good faith effort and attempt to determine the fair market value based on
such factors as recent sales prices, book value, etc. Notwithstanding what is
stated above, in the event an Option is granted to a person who, at the time the
Option is granted, owns stock of the Company possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
then the Option Price must be at least one hundred ten percent (110%) of the
fair market value of the Common Stock at the time such Option is granted.

         SECTION 6. TERM OF OPTIONS. All Options which may be granted pursuant
to the Plan must be granted within ten (10) years from the Effective Date.
Subject to earlier termination as provided in SECTION 7, each Option granted
pursuant to the Plan must be exercised within ten (10) years after the date of
granting of such Option or such shorter period of time as determined by the
Committee; provided however, in the event an Option is granted to a person who,
at the time the Option is granted, owns stock of the Company possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, such Option shall not be exercisable in full or in part
after the expiration of five (5) years from the date such Option is granted.

         SECTION 7. TERMS AND CONDITIONS RELATING TO EMPLOYMENT.

         (a) A primary reason for the Company's granting of the Options under
the Plan is to encourage each Optionee to remain an employee of the Company
and/or its subsidiaries. Accordingly, if an Optionee voluntarily or
involuntarily terminates his employment with the Company and/or its subsidiaries
for any reason whatsoever, whether with or without cause, other than as a result
of death or permanent and total disability within the meaning of Section 22 (e)
(3) of the Code, such Optionee may exercise his Options, to the extent vested on
the date of termination of employment, at any time within three (3) months
following the date of such termination of employment (but in no event later than
the termination date of the Options), after which period the Options shall
expire. Under no circumstances may any Options of an Optionee

                                       2
<PAGE>
be in any way affected by any change of the Optionee's activities, title or
position within the group consisting of the Company and/or its subsidiaries.

         (b) If an Optionee dies while in the employ of the Company and/or its
subsidiaries, or within three (3) months following the date of termination of
his employment with the Company and/or its subsidiaries, any Options of the
Optionee, to the extent vested on the date of death of the Optionee, may be
exercised by an heir or devisee who acquired the Options directly from the
Optionee through the latter's will or pursuant to the applicable laws of descent
and distribution or by the personal representative of the deceased Optionee's
estate at any time within one (1) year after the date of such Optionee's death
(but in no event later than the termination date of the Options), after which
period the Options shall expire.

         (c) In the case of an Optionee who becomes permanently and totally
disabled within the meaning of Section 22 (e) (3) of the Code while in the
employ of the Company and/or its subsidiaries, any Options of such Optionee, to
the extent vested on the date when such Optionee becomes disabled, may be
exercised by the Optionee or the Optionee's personal representative at any time
within one (1) year after such Optionee ceases employment (but in no event later
than the termination date of the Options), after which period the Options shall
expire.

         SECTION 8. ACCELERATION OR VESTING AND OTHER TERMS.

         (a) Anything herein to the contrary notwithstanding, each Option shall
become fully vested upon the occurrence of a Change in Control of the Company. A
"Change in Control of the Company" shall be deemed to have occurred if (1) any
"person" (as such term is used in SECTIONS 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities; (2) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds (2/3rds) of the directors then in office who were directors
at the beginning of the period; (3) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least seventy-five (75%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (4) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition of all or substantially all of its assets.

         (b) Subject to the provisions of this Plan and applicable securities,
tax and other laws and regulations, Options may be granted at such time or times
and pursuant to such terms and conditions as may be determined by the Committee
during the period this Plan is in effect. Each Option granted under the Plan
shall be evidenced by a Stock Option Agreement between the

                                       3
<PAGE>
Company and the Optionee which shall set forth such terms and conditions. Stock
Option Agreements shall contain such provisions, restrictions, and conditions as
are not inconsistent with this Plan, but need not be identical. The provisions
of this Plan shall be set forth in full or incorporated by reference in each
Stock Option Agreement.

         (c) The Committee may, in its discretion, include in any Option granted
under the Plan a condition that the Optionee shall agree to remain in the employ
of, and to render services to, the Company or any of its subsidiaries for a
period of time (specified in the Stock Option Agreement) following the date the
Option is granted. No such agreement shall impose upon the Company or any of its
subsidiaries, however, any obligation to employ the Optionee for any period of
time.

         SECTION 9. METHOD OF EXERCISING OPTIONS.

         (a) Provided all of the provisions of the Plan have been fully complied
with, each Option may be exercised by forwarding to the Company's business
office in Hurst, Texas, by certified letter, a written instrument stating that
the Option is being exercised and giving the number of shares of Common Stock
with respect to which the Option is being exercised. Such written instrument
shall be signed by the person exercising the Option and shall be accompanied by
a certified check or cashier's check for the full amount of the Option Price.
In lieu of paying the Option Price in cash, and subject to the ability of the
Company to repurchase its Common Stock, the Optionee may tender and deliver to
the Company with proper stock powers and required endorsement so many shares of
Common Stock previously acquired, owned and held by the Optionee for at least
seven (7) months, which have a fair market value as of the date of exercise of
the Option equal to the Option Price. In the event a person or persons other
than an Optionee attempts to exercise the Option, such written statement mailed
to the Company shall demonstrate compliance with SECTION 11 hereof and be
accompanied by such proof of right to ownership as is required by applicable law
to be given to transfer agents in connection with the transfer of securities.
The Company shall issue a certificate representing the shares being received
upon exercise of the Option. All shares represented by any such certificate
shall be fully paid and non-assessable. Subject to the limitations set forth in
the Plan, each Option may be exercised at one time or in parts on several
successive occasions; however, each Option may not be exercised in an amount
less than one hundred shares at any one time (unless such exercise is being made
as to the entire number of shares of Common Stock which may be purchased
pursuant to the Option).

         (b) The aggregate fair market value (determined at the time the Option
is granted) of the Common Stock with respect to which such Options are
exercisable for the first time during any calendar year under the Plan, or under
any other plan of the Company or a corporation which is a parent or subsidiary
of the Company, as those terms are defined in Sections 424 (e) and (f),
respectively, of the Code, shall not exceed $100,000, with respect to any
Optionee. The Committee may grant in any one calendar year Options to any
Optionee respecting Common Stock having a fair market value in excess of
$100,000; provided, however, that the Options granted therein shall be subject
to successive annual rights of exercise such that Common Stock having a fair
market value not in excess of $100,000 is first subject to exercise under the
Stock Option Agreement during any one calendar year and to the extent such
limitation is exceeded, such Option shall be treated as an option which is not
an incentive stock option.

                                       4
<PAGE>
         (c) If an Optionee sells or otherwise disposes of Common Stock received
upon exercise of an incentive stock option on or before the later of (A) the
date two (2) years after the date of grant, and (B) the date one year after the
exercise of the incentive stock option (in either case a "Disqualifying
Disposition"), the Optionee must immediately notify the Company in writing of
such disposition. The Optionee may be subject to income tax withholding by the
Company in the income recognized by the Optionee from the Disqualifying
Disposition.

         SECTION 10. CHANGES IN CAPITAL STRUCTURE.

         (a) In the event any change occurs in the number of shares of Common
Stock outstanding as a result of any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares, split-up, split-off, spin-off, liquidation or other similar change in
capitalization, or any distribution to holders of Common Stock other than cash
dividends, the number or kind of shares of Common Stock that may be issued
under the Plan pursuant to SECTION 3, including shares of Common Stock covered
by existing Options, shall be automatically adjusted to preserve the
proportionate interests of the Optionees in the Company as represented by their
outstanding Options, and the proportionality of the share pool under the Plan in
relation to the total number of shares of Common Stock outstanding.

         (b) If the outstanding shares of the Common Stock shall be changed into
or become exchangeable for a different number or kind of shares of stock or
other securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of Common Stock that may be issued under the Plan pursuant to SECTION 3,
including shares of Common Stock covered by existing Options, the number and
kind of shares of stock or other securities into which each outstanding share of
Common Stock shall be so changed or for which each such share of Common Stock
shall become exchangeable.

         (c) In case of any adjustment or substitution as provided for in
SECTIONS 10(a) or 10(b), the aggregate Option Price for all shares of Common
Stock subject to each then outstanding Option prior to such adjustment or
substitution shall be the aggregate Option Price for all shares of stock or
other securities (including any fraction) into which such shares of Common Stock
shall have been converted or which shall have been substituted for such shares
of Common Stock. Any new per share Option Price shall be carried to at least
three decimal places with the last decimal place rounded upwards to the nearest
whole number.

         (d) If the outstanding shares of Common Stock shall be changed in value
by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of Common Stock, the Committee shall make any adjustments to any then
outstanding Options which it determines are equitably required to prevent
dilution or enlargement of the rights of the Optionees which would otherwise
result from any such transaction.

         (e) No adjustment or substitution provided for in this SECTION 10 shall
require the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.

                                       5
<PAGE>
         (f) Except as provided in this SECTION 10, an Optionee shall have no
rights by reason of issuance by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

         SECTION 11. NONTRANSFERABILITY. No Option may be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Each Option is exercisable,
during the lifetime of an Optionee, only by the Optionee. Any attempted
assignment, transfer, pledge, hypothecation or other encumbrance of any Option
contrary to the provisions hereof, and any execution, attachment or similar
process upon any Option, will be null, void and of no effect.

         SECTION 12. RIGHTS AS STOCKHOLDER No Optionee may have any rights as a
stockholder with respect to any shares of Common Stock covered by these Options
until the date of issuance of a stock certificate to such Optionee for such
shares after exercise. Except as is otherwise provided in SECTION 10, no
adjustment will be made for dividends (ordinary or extraordinary and whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.

         SECTION 13. COMPANY'S OBLIGATIONS. The Company agrees to maintain at
all times sufficient authorized Common Stock to meet the requirements of the
Plan. The proceeds received by the Company from the sale of the Common Stock
pursuant to these Options shall be used for general corporate purposes. The
Company further agrees to pay all fees and expenses necessarily incurred by the
Company in connection with these Options. Although the Company shall in no event
be obligated to register any securities covered hereby pursuant to the
Securities Act of 1933, as amended (the "Act"), it will use its best efforts to
comply with all laws and regulations which, in the opinion of the Company's
counsel, are applicable thereto. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority deemed necessary by counsel
for the Company for the lawful issuance and sale of Common Stock hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
Common Stock as to which the requisite authority has not been obtained.

         SECTION 14. REQUIREMENTS OF LAW.

         (a) The Company shall not be required to sell or issue any shares of
Common Stock subject to the Options if the issuance of such shares shall
constitute a violation of any provision of any law or regulation of any
governmental authority. Specifically, in connection with the Act, upon exercise
of an Option, unless a registration statement under the Act is in effect with
respect to the shares of Common Stock covered by the Option, the Company shall
not be required to issue such shares of Common Stock unless the Company has
received an opinion of counsel that registration of such shares is not required.
Any reasonable determination in this connection by the Company shall be final,
binding and conclusive. If required by the Act or applicable state law in the
opinion of counsel for the Company, an appropriate legend shall be placed on
certificates representing shares of Common Stock issued pursuant to the exercise
of an Option.

                                       6
<PAGE>
         (b) As a condition to the exercise of any portion of an Option, the
Company may require the Optionee exercising such Option to represent and warrant
at the time of such exercise that any shares of Common Stock acquired at
exercise are being acquired only for investment and without any present
intention to sell or distribute such shares, if, in the opinion of counsel for
the Company, such a representation is required under the Act or any other
applicable law, regulation or rule of any governmental agency.

         SECTION 15. RELIANCE ON REPORTS. Each member of the Committee and each
member of the Board of Directors shall be fully justified in relying or acting
in good faith upon any report made by the independent public accountants of the
Company and its subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or of
the Board of Directors be liable for any determination made or other action
taken or any omission to act in reliance upon any such report or information or
for any action, including the furnishing of information, taken or failure to
act, if in good faith.

         SECTION 16. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors
may at any time amend, alter or terminate the Plan, except that no amendment,
alteration or termination may be made which would impair the rights of any
Optionee under any option previously granted without such Optionee's consent,
and except that no amendment, alteration or termination may be made which,
without the further approval of the stockholders, would: (a) increase the
aggregate number of shares of Common Stock as to which Options may be granted
under the Plan, except as provided in SECTION 10; (b) change the class of
employees eligible to receive options; (c) change the manner of determining the
minimum Option Price; or (d) extend the term of the Plan or the period during
which Options may be granted or exercised under the Plan.

         SECTION 17. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding Options granted under the Plan, or
accept the surrender of outstanding Options (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution therefor
(to the extent not theretofore exercised), including canceling outstanding
Options and reissuing new Options at a lower Option Price in the event that the
fair market value per share of Common Stock at any time prior to the date of
exercise falls below the Option Price of Options granted pursuant to the Plan.
Notwithstanding the foregoing, however, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan.

                                       7

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