Document:

Exhibit 10.17

 

CHEM RX CORPORATION

 

SUBORDINATED NOTE

 

	
  $915,820.94

  	
   

  	
  October 26, 2007

  

 

 

FOR VALUE
RECEIVED, Chem Rx Corporation, a Delaware corporation (the “Borrower”),
hereby promises to pay to the order of The Jerry Silva 2007 Annuity Trust (the “Payee”),
or its successors or assigns, on April 30, 2015 (the “Maturity Date”),
the principal sum of $915,820.94, or such greater or lesser amount as may be
from time to time outstanding from the Payee to the Borrower, together with
interest thereon at the rate set forth below.

 

1.                                       Definitions.

 

1.1.                              Certain
Definitions. Except as the context otherwise requires, the following
capitalized terms are used in this Note with the meanings set forth in this Section 1.1:

 

“Credit Agreements” means
collectively, (i) the First Lien Credit and Guaranty Agreement, dated as
of October 26, 2007, among the Borrower, certain subsidiaries of the
Borrower, the lenders from time to time party thereto and Canadian Imperial
Bank of Commerce, New York Agency, as Administrative Agent and Collateral
Agent, and (ii) the Second Lien Credit and Guaranty Agreement, dated as of
October 26, 2007, among the Borrower, certain subsidiaries of the
Borrower, the lenders from time to time party thereto and Canadian Imperial
Bank of Commerce, New York Agency, as Administrative Agent and Collateral
Agent, in each case of (i) and (ii), as such agreement may be
amended, amended and restated, supplemented or otherwise modified from time to
time, including any agreement providing for the extension, renewal,
refinancing, refunding and replacement of all or any portion thereof (in the
case of any refinancing, refunding and replacement thereof, to the extent the
maturity thereof is on or prior to the Maturity Date).

 

“Loan Party” has the meaning given to
such term in the Credit Agreements.

 

“Senior Indebtedness” means all Obligations
(as defined in the Credit Agreements) (including, without limitation, all
interest accruing after the filing of any petition for the bankruptcy or
insolvency of any Loan Party, whether or not allowed as a claim), in each case
whether now existing or hereinafter arising.

 

“Subordinated Indebtedness” means all
outstanding principal of and accrued and unpaid interest on all indebtedness of
the Borrower evidenced by this Note.

 

“Termination Date” has the meaning
given to such term in the Credit Agreements.

 

 

2.                                       Interest
Payments; Prepayments.

 

2.1.                              Interest
Payments. This Note shall accrue interest at a rate of ten percent (10%) per
annum. Accrued interest shall be paid on this Note on the basis of a year of
360 days consisting of 12 thirty-day months, in respect of the period from and
including the date of the original issuance of this Note to and the first to
occur after the date hereof of December 31, March 31, June 30 or
September 30, and for each quarterly interest period thereafter (a “Quarterly
Interest Period”), which Quarterly Interest Periods shall commence on January 1,
April 1, July 1 and October 1 in each year and shall end on and
include the day immediately preceding the first day of the next Quarterly
Interest Period. Interest on this Note shall be payable on December 31, March 31,
June 30 and September 30 of each year, commencing on the first to
occur after the date hereof of December 31, March 31, June 30 or
September 30. Interest shall be paid in-kind (by increasing the
outstanding principal amount of this Note by the amount of such unpaid
interest, and thereafter the principal amount of this Note shall be deemed to
be such increased amount for all purposes hereunder, including the calculation
of interest) and not in cash.

 

2.2.                              Voluntary
Prepayments. Subject to the requirements of Section 4 below and to the
terms of the Credit Agreements, principal of and interest on this Note are
prepayable at any time and from time to time without penalty or premium, upon
prior written notice. Any prepayments shall be applied first to accrued and
unpaid interest, with the balance to principal.

 

2.3.                              Mandatory
Prepayments. Principal and interest on this Note shall be required to be
prepaid (and shall be permitted to be so prepaid, notwithstanding anything in
this Note (including Section 4) to the contrary) in full upon the
Termination Date in respect of all then outstanding Senior Indebtedness
(notwithstanding that immediately after such Termination Date, there would be
other Senior Indebtedness that refinanced, refunded or replaced such then
existing Senior Indebtedness), if at or prior to such time Borrower has
received at least $30,000,000 of net proceeds from the exercise of the Warrants
(as defined in the Credit Agreements) or any equity offering.

 

3.                                       Default.
Each of the following events shall constitute an “Event of Default”: (x)
failure of the Borrower to make any payment of principal on this Note when due;
or (y) an Insolvency Event. Upon the occurrence and continuance of an
Event of Default, (a) the Payee may accelerate the maturity of this
Note, whereupon the unpaid principal of and accrued and unpaid interest on this
Note shall become immediately due and payable and (b) the Payee shall have
all rights and remedies available to it under law or in equity; provided,
however, for so long as the Termination Date in respect of all Senior
Indebtedness has not occurred, the Payee (in its capacity only as a holder of
Subordinated Indebtedness) shall not (i) exercise any right of setoff or
recoupment with respect to the Subordinated Indebtedness, (ii) commence or
join in the commencement of a proceeding against any Loan Party under any
bankruptcy, insolvency, liquidation, reorganization or other similar law, (iii) demand,
accept or obtain a lien or security interest to secure Subordinated
Indebtedness on any property of the Borrower or any other Loan Party, or (iv) accelerate
Subordinated Indebtedness or make any demand for payment upon any of the Loan
Parties or bring any suit, action or claim at law or in equity against any of
the Loan Parties for payment of any of the Subordinated Indebtedness.

 

2

 

4.                                       Subordination
of Subordinated Indebtedness. The Payee, for itself and its successors and
assigns, by acceptance hereof, covenants and agrees, for the benefit of the
holders of Senior Indebtedness from time to time, and the Borrower acknowledges
and agrees, that the Subordinated Indebtedness shall be subordinated and
subject and junior in right of payment, to the extent and in the manner set
forth in this Section 4, to all Senior Indebtedness.

 

4.1.                              Payments.
The Borrower shall not make any payment upon or in respect of this Note (other
than by way of the in-kind interest payments described in Section 2.1)
until the Termination Date in respect of all Senior Indebtedness has occurred; provided
that the Borrower may make prepayments of principal (including capitalized
interest) and payments of interest so long as at the time of, and after giving
effect to, any such payments, there would not be a breach of the Credit
Agreements.

 

4.2.                              Insolvency,
Liquidation etc. In the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization, reformation, readjustment, composition or other
similar proceeding relating to the Borrower or its creditors or its property,
or any proceeding for the liquidation, dissolution or other winding up of the
Borrower, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, or any assignment by the Borrower for the benefit of
creditors, or any other marshaling of the assets of the Borrower (each such
event or condition is referred to herein as an “Insolvency Event”), then
and in each such event (and without giving effect to any reduction or discharge
to any of the obligations of any of the Loan Parties as a result of or in
connection with the occurrence of any Insolvency Event with respect to any of
the Loan Parties, other than a reduction or discharge of the obligations of any
of the Loan Parties as a result of actual payment on such obligations):

 

(a)                                  the Termination Date
in respect of all Senior Indebtedness must occur before any payment or
distribution of any character, whether in cash, securities or other property,
shall be made on account of or applied to the Subordinated Indebtedness; and

 

(b)                                 any payment or
distribution of any character, whether in cash, securities or other property,
which would otherwise (but for this Section 4.2(b)) be payable or
deliverable in respect of the Subordinated Indebtedness shall be paid or
delivered directly to the holders of Senior Indebtedness (or a representative
thereof), until the Termination Date in respect of all Senior Indebtedness has
occurred.

 

(c)                                  The Payee agrees not
to initiate, prosecute or participate in any claim, action or other proceeding
challenging the enforceability, validity, perfection or priority of the Senior
Indebtedness or any liens and security interests in property securing the
Senior Indebtedness. The Payee also irrevocably authorizes and empowers the
administrative agents under the Credit Agreements, in the name of the Payee, to
demand, sue for, collect and receive any and all amounts owing under this Note
to the same extent as provided herein; provided that the Payee has not done so
on its own behalf within 15 days following the delivery to the Payee of a
written request of the administrative agents under the Credit Agreements. The
Payee agrees to execute, verify, deliver and file any proofs of claim in
respect of this Note requested by the administrative agents under the Credit
Agreements in connection with any such proceeding and hereby irrevocably
authorizes, empowers and appoints the administrative agents under the Credit

 

3

 

Agreements as its agent and attorney-in-fact to (i) execute,
verify, deliver and file such proofs of claim upon the failure of the Payee
promptly to do so prior to 15 days before the expiration of the time to file
any such proof of claim and (ii) vote such claim in any such proceeding
upon the failure of the Payee to do so prior to 10 days before the expiration
of the time to vote any such claim; provided the administrative agents shall
have no obligation to execute, verify, deliver, file and/or vote any such proof
of claim. In the event that an administrative agent votes any claim in
accordance with the authority granted hereby, the Payee shall not be entitled
to change or withdraw such vote.

 

(d)                                 The Senior
Indebtedness shall continue to be treated as Senior Indebtedness and the
provisions of this Note shall continue to govern the relative rights and
priorities of the lenders under the Credit Agreements and the Payee even if all
or part of the Senior Indebtedness or the security interests securing the
Senior Indebtedness are subordinated, set aside, avoided, invalidated or
disallowed in connection with any such proceeding, and this Note shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness or
any representative of such holder.

 

4.3.                              Turnover.
In the event any direct or indirect payment or distribution shall be received
by the Payee in contravention of the provisions of Section 4, then such
payment or distribution shall be held in trust for and shall be promptly paid
over or delivered to the holders of Senior Indebtedness (or a representative
thereof), for the benefit of the holders of Senior Indebtedness, until the
Termination Date in respect of all Senior Indebtedness has occurred.

 

4.4.                              Non-impairment
of Payee’s Creditor Status. Nothing otherwise contained in this Section 4
is intended to or shall impair, as among the Borrower, its creditors other than
the holders of Senior Indebtedness, and the holder of Subordinated
Indebtedness, the obligations of the Borrower, which are, subject to the terms
of Section 4, absolute and unconditional, to pay the Subordinated
Indebtedness, as and when the same shall become due and payable in accordance
with its terms, or to affect the relative rights of the holder of Subordinated
Indebtedness and creditors of the Borrower other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the Payee from
exercising all rights permitted it hereunder upon the acceleration of the
Subordinated Indebtedness to the extent permitted under Section 3, subject
to the rights, if any, under this Section 4 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Borrower
received upon the exercise of any such remedy.

 

4.5.                              Non-Waiver
of Rights. No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act, in good faith,
by any such holder, or by any non-compliance by the Borrower with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof any
such holder may have or be charged with otherwise.

 

4.6.                              Benefits
to Holders of Senior Indebtedness. The subordination and related provisions
set forth in Section 4 are for the benefit of, and shall be enforceable
by, the holders of Senior Indebtedness and their representatives.

 

4

 

5.                                       Miscellaneous.

 

5.1.                              Amendment.
This Note may only be amended by the Payee, the Borrower and, prior to the
Termination Date of all Senior Indebtedness, the administrative agents under
the Credit Agreements.

 

5.2.                              Successors
and Assigns. This Note shall be binding upon and inure to the benefit of
the successors and permitted assigns of the Borrower and the Payee. Borrower may not
assign or delegate this Note to any other party without the written consent of
the Payee; provided that the Payee may, upon written notice given to the
Borrower, assign all or any portion of this Note to family members of the Payee
or to trusts, partnerships or other entities formed for the benefit of the
Payee or such family members primarily for estate or family planning purposes. The
Payee may, upon written notice given to the Borrower, assign all or any portion
this Note to any party, and such party shall be recognized as the Payee
hereunder to the extent of such assignment. Any such sale, assignment, pledge,
disposition or transfer shall not be effective unless, prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the administrative agents under the Credit Agreements an agreement pursuant
to which it agrees to be bound to the subordination provisions contained in
this Note, in form and substance reasonably satisfactory to the
administrative agents under the Credit Agreements and such transferee. Notwithstanding
the failure of any transferee to execute or deliver such an agreement, the
subordination effected hereby shall survive any sale, assignment, pledge,
disposition or other transfer of all or any portion of this Note, and the terms
of this Note shall be binding upon the successors and assigns of the Payee.

 

5.3.                              Governing
Law. This Note shall be governed by and construed in accordance with the
laws of the State of New York.

 

5.4.                              Costs
and Expenses. The Borrower shall pay or reimburse the Payee for all costs,
fees and expenses (including, without limitation reasonable legal fees)
incurred by the Payee in connection with the enforcement of his/her/its rights
under this Note.

 

[Remainder of Page Intentionally
Left Blank]

 

5

 

The Borrower
has caused this Note to be executed in its name by its duly authorized officer
as of the date first written above.

 

	
   

  	
  CHEM RX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ J. Jay Lobell

  
	
   

  	
   

  	
  Name: J. Jay Lobell

  
	
   

  	
   

  	
  Title: DirectorExhibit 10.18

 

 

Managed Healthcare Associates, Inc.

 

MHA 2000 Member Agreement

 

This Agreement is entered into this 5th day of July, 1995
between Managed Healthcare Associates, Inc. of Florham Park, NJ and BJK/Chem RX
(herein referred to as the MHA 2000 “Provider”) with offices at, 3700
Oceanside, RD, Oceanside, NY

 

Realizing the special needs and objectives of our larger LTC Providers,
MHA has launched its MHA 2000 that offers additional incentives based on
program commitment, volume, and enhanced professional service. Listed below are
the services provided by MHA and the MHA 2000 Member commitments.

 

I.                                       Services
Performed by MHA:

 

a.               MHA will negotiate special volume based
incentives and market share rebate programs, geared towards the committed MHA
2000 Member.

 

b.              MHA will institute a “Preferred Rebate”
Processing Program in cooperation with the participating MHA 2000
Pharmaceutical Manufacturers and Wholesalers.

 

c.               MHA will provide personal corporate
support to the branch level of our MHA 2000 Providers.

 

d.              MHA will have a dedicated Professional
Account Representative (PAR) both internal and external to handle and expedite
the day to day business issues that develop.

 

e.               MHA will provide Drug Utilization
Information analysis to its MHA 2000 members. This service will include cash
flow improvement, management of most profitable RX items and Clinical Education
Services.

 

100 Campus Drive, P.O. Box 789, Florham Park, New Jersey 07932-9200  (201) 966-9200  Fax (201) 966-5529

 

 

 

II.                                   MHA
2000 Provider Commitments:

 

a.               BJK/CHEM RX and all of it’s locations
agree that Managed Healthcare Associates will act as it’s sole and exclusive
LTC Group Purchasing Organization for pharmaceutical products. This will not
limit the ability of the provider to enter into agreements of its own or
utilize other group contracts that are not available from MHA, except for
provision c.

 

b.              MHA 2000 Provider agrees to the
confidential nature of our pricing program. Any reproduction or information
sharing of these confidential prices and programs can be deemed grounds for
contract termination.

 

c.               MHA 2000 Provider agrees to a contract
utilization rate of a minimum of 70% on MHA 2000 contracts.

 

d.              MHA 2000 Provider agrees to a periodic
contract compliance audit to further enhance the cost savings derived from participation
in the MHA 2000 Program.

 

e.               MHA 2000 Provider agrees that products
purchased under the MHA 2000 program are solely for eligible patients with the “own
use” definition in the Portland Retailers Case (425 US 1 - 1976).

 

III.                               Program
Termination:

 

a.               MHA 2000 Provider may terminate this
agreement at any time by giving MHA Headquarters ninety (90) days written
notice of it’s intention to succeed.

 

b.              MHA reserves the right to terminate this
agreement if any of the MHA 2000 Provider commitments are not being complied
to, as per the section entitled “Provider Commitments”.

 

c.               Termination shall not affect the rights
and obligations of the parties occurring prior to the effective date of such
termination.

 

This agreement shall be effective upon execution by both parties and
shall be in effect for a period of two (2) years with an automatic renewable
feature upon the anniversary date of aforementioned agreement.

 

	
  Managed Healthcare Associates, Inc.

  	
   

  	
  Provider

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  /s/ Raymond Schwartz

  	
   

  	
  Name:

  	
  /s/ Mark Baldinger

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  V.P.O

  	
   

  	
  Title:

  	
  VICE PRESIDENT, COO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  7/11/95

  	
   

  	
  Date:

  	
  7/5/95

  	
   

  

 

 

NEW ADDENDUM TO MEMBERSHIP AGREEMENT

 

THIS ADDENDUM TO MEMBERSHIP AGREEMENT is
made and entered into this 1st day of April, 2005 (“Addendum”), by and between
MANAGED HEALTH CARE ASSOCIATES, INC., a New Jersey corporation and ChemRx a
New York corporation (“Member”).

 

WHEREAS, the parties hereto are parties to a Membership Agreement dated
July 5th, 1995. (“Membership Agreement”); and

 

WHEREAS, the parties hereto desire to continue the arrangement under
the Membership Agreement as specifically amended and modified herein.

 

NOW, THEREFORE, intending to be legally bound hereby, the parties
hereby agree as follows:

 

1.                                       The
Membership Agreement is hereby specifically amended as follows:

 

A.                                   The following
additional terms and provisions shall be included in the Membership Agreement,
effective as of the date and year first above written:

 

(i)                                     Member hereby
agrees to engage MHA as its EXCLUSIVE group purchasing organization. Member
warrants that all group purchasing organization purchases of products and
services made on its behalf shall be under MHA-negotiated contracts. For the
purposes of this Addendum, group purchasing organization purchases do not
include purchases made through a wholesaler’s generic drug source program or
generic purchases from any distributor or direct.

 

(ii)                                  In consideration for
this exclusive arrangement, MHA agrees to waive all membership fees during the
Amended and Renewal Terms (as hereinafter defined). In addition, MHA agrees to
provide Member with such items as set forth on Exhibit A attached hereto.

 

A-1

 

B.                                     The provisions of
the Membership Agreement regarding term and termination are hereby amended,
effective as of the date and year first above written, as follows:

 

(i)                                     The term of the
Membership Agreement is hereby deleted and replaced in its entirety, effective
as of the date and year first above written, as follows:

 

“The initial term of the Membership Agreement shall be April 1, 2005
through June 30, 2006 (“Amended Term”). The Membership Agreement, including
this Addendum, shall be automatically renewed for additional one-year periods
unless at least thirty (30) days prior to the expiration of the Amended Term or
any Renewal Term, MHA or Member shall provide written notice to the other of
its desire to not renew the Membership Agreement.

 

2.                                       Except
as amended pursuant to Section 1 of this Addendum and only to the extent
amended hereby, all other terms and conditions of the Membership Agreement
shall remain in full force and effect. If there are any conflicts between the
terms of this Addendum, any previous addendum, or the Membership Agreement, the
terms of this Addendum shall control.

 

A-2

 

IN WITNESS WHEREOF, the parties hereto have executed this Addendum as
of the day and year first set forth above.

 

 

	
   

  	
  MANAGED HEALTH CARE ASSOCIATES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Raymond Schwartz

  	
   

  
	
   

  	
   

  	
  Name: Raymond Schwartz

  
	
   

  	
   

  	
  Title: VPO

  
	
   

  	
   

  
	
   

  	
  Chem RX

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Baldinger

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark Baldinger

  
	
   

  	
   

  	
  Title:

  	
  VP COO

  
					

 

A-3

 

EXHIBIT A

 

This Exhibit Shall Remain Confidential And Not Be Disclosed To Any
Third Party Without The Prior Written Consent Of MHA & Member Except In
Accordance With The Membership Agreement.

 

In addition to the consideration stated in paragraph 1 (ii) of this
Addendum, MHA will pay Member a rebate of 25% of all administrative fees
actually collected by MHA for Member’s contract purchases through MHA’s
portfolio of products and services with approved manufacturers and wholesalers.
MHA will pay $25,000 at the end of each month, beginning on or around April 30th,
2005. Beginning on or around September 30, 2005 MHA will conduct quarterly
reconciliations and will add or deduct the amount required to pay exactly 25%
of all collected admin fees and provide members with documentation as to how
numbers were arrived. MHA will then continue to pay $25,000 per month and
conduct quarterly reconciliations on or around December 31, 2005, March 31st,
2006, and every quarter thereafter through the duration of the contract. MHA
will adjust the monthly cash number as it becomes clear that Member’s earned
administrative fees warrant such an increase or decrease. Should Member’s sales
through MHA contracts “C Sales” become in excess of $100 million annually ($25
million per quarter) MHA will adjust the rebate percentage to 33% of administrative
fees actually collected by MHA.

 

Within thirty (30) days following the end of each quarter, MHA shall
provide Member with a document, whose final content and appearance shall be
acceptable to both parties that details, by vendor, the amount of actual fees.

 

MHA agrees that Member’s engaging in “direct contracts” with vendors is
not a violation of this agreement. Member agrees to make best efforts to have
all contracts with vendors run through MHA’s purchasing program and to create a
fair and equitable business relationship between Member and MHA when approached
by vendors for direct contracts.

 

Member may redirect its IV solutions business to another vendor if and
only if all of the following apply:

 

•                  The agreement is
direct with a vendor that does not involve loading that vendor’s portfolio with
any wholesales that service Member’s purchasing of other, non IV products.

 

•                  The pricing is
materially better than MHA’s pricing for the same or similar items.

 

•                  The total
aggregate amount of product purchased through this other entity is less than
$500,000 per year.

 

A-4

 

AMENDMENT TO NEW ADDENDUM TO MEMBERSHIP
AGREEMENT

 

THIS AMENDMENT TO NEW ADDENDUM TO MEMBERSHIP
AGREEMENT (“Amendment”) is made and entered into this
1st of June 2006 (the “Effective Date”), by and between MANAGED
HEALTH CARE ASSOCIATES, INC., a New Jersey corporation (“MHA”) and BJK, Inc.,
dba Chem Rx, at New York corporation (“Member”).

 

WHEREAS, the parties hereto are parties to a Membership Agreement dated
July 5 1995 (“Membership Agreement”), as amended by that certain addendum,
including most recently, the New Addendum to Membership Agreement, dated April
1, 2005 (“Addendum”); and

 

WHEREAS, the parties hereto desire to continue the arrangement under
the Membership Agreement, as specifically further amended and modified herein.

 

NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:

 

1.                                       MHA
and Member hereby agree that as of the Effective Date, the Addendum shall be
specifically amended as follows:

 

A.                                   The
Second sentence of Section 1.A.ii) of the Addendum shall be deleted in its
entirety and without any force or effect. Such amendment to the Addendum shall
be without any liability to or further obligation of MHA.

 

B.                                     Section
1.B.i) of the Addendum is hereby deleted and replaced in its entirety,
effective as of the Effective Date, with the following:

 

“The term of this Membership Agreement shall be June 1, 2006 through
May 31, 2009 (the “Amended Term”). This Membership Agreement, as amended, shall
be automatically renewed for additional one (1) year periods (each, a “Renewal
Term”) unless at least sixty (60) days prior to the expiration of the Amended
Term or any Renewal Term, either party provides to the other party written
notice of its desire to not renew this Membership Agreement.”

 

C.                                     The
following additional terms and provisions shall be included in the Membership
Agreement, effective as of the Effective Date:

 

i)                                         Member
shall be eligible to receive certain rebates (as defined under the discounts
safe harbor at 42 C.F.R. § 1001.952(h)) on the purchase of products and
services (“Products and Services”) purchased under MHA negotiated vendor
agreements, in accordance with the terms and conditions set forth on Exhibit A
attached hereto and incorporated by reference herein.

 

2.                                       Except
as amended pursuant to Section 1 of this Amendment and only to the extent
amended hereby, all other terms and conditions of the Membership Agreement and
the 

 

 

Addendum (or any previous addendum to the extent not subsequently
amended or modified), shall remain in full force and effect. If there are any
conflicts between the terms of this Amendment, the Membership Agreement or the
Addendum (or any previous addendum), the terms of this Amendment shall control.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first set forth above.

 

 

	
   

  	
  MANAGED HEALTH CARE ASSOCIATES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Stephen J. Andrew

  	
   

  
	
   

  	
   

  	
  Name: Stephen J. Andrew

  	
   

  
	
   

  	
   

  	
  Title: COO & CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BJK, INC., DBA CHEM RX

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Evan Selzer

  	
   

  
	
   

  	
   

  	
  Name: Evan Selzer

  	
   

  
	
   

  	
   

  	
  Title: Director of Purchasing

  	
   

  

 

 

EXHIBIT A

 

Product and Services Rebates

 

1.                                       Calculation
of Rebates.  Member shall be eligible
to receive from MHA certain quarterly rebates (“Rebates”) for Purchases (as
hereinafter defined) of Products and Services made under Approved Vendor
Agreements (as hereinafter defined) during each calendar quarter of the Amended
Term. The Rebates shall be equal to 36% of the administrative fees received by
MHA for Member’s purchases of Products and Services (collectively, “Purchases”)
on Approved Vendor Agreements during the applicable calendar quarter. “Approved
Vendor Agreements” shall mean MHA-negotiated vendor, supplier or distributor
(each, a “Vendor”) agreements under which Member Purchases are credited to MHA
for purposes of determining MHA’s administrative fees thereunder.

 

2.                                       Payment
of Rebates.  Payment of Rebates shall
be made to Member on a quarterly calendar year basis and will be based on
Purchases made during the immediately preceding calendar quarter; provided,
however, that the Purchases for such immediately preceding calendar quarter
have been credited to Member’s account and the corresponding administrative fees
for such Purchases have been received by MHA.

 

3.                                       Purchasing
Reports and Payment Adjustments.  The
parties acknowledge and agree that the crediting and final reporting of Member
Purchases to MHA generally occur three to six months after Member’s Purchases
are made under an Approved Vendor Agreement. Accordingly, to account for the
lag in such crediting and reporting, payment of Rebates for a particular
calendar quarter will initially be estimated (“Estimated Rebates”) at $28,000
per month. As soon as the final crediting and reporting of Member’s Purchases
under the Approved Vendor Agreement and corresponding administrative fees
earned by MHA on such Purchases for the applicable quarter are available to
MHA, it shall calculate the actual Rebates (“Actual Rebates”) earned by Member
for such quarter. In the event the amount of the Estimated Rebates paid to
Member is less than the amount of the Actual Rebates owed to Member hereunder,
then MHA shall issue a rebate check for the difference to Member during the next
following quarterly rebate payment cycle. Conversely, in the event the amount
of the Estimated Rebates paid to Member is more than the amount of the Actual
Rebates owed to Member, then the difference shall be deducted from Rebates due
and owing to Member during the next following quarterly rebate payment cycle.
Records maintained by MHA concerning Member’s Purchases and the administrative
fees received by MHA for such Purchases shall control in the event of any
dispute between the parties regarding the amount of any Rebates due to Member
hereunder.

 

4.                                       Compliance
with Law.  Member and MHA each agree
that it will comply with all applicable laws, including the disclosure and
reporting obligations under 42 U.S.C. § 1320a-7b(b), the regulations
promulgated thereunder, including, without limitation, the discounts safe
harbor regulations at 42 C.F.R. § 1001.952(h) and comparable state laws and
regulations. The parties acknowledge and agree that the terms of the Membership
Agreement, as amended, are commercially reasonable and have been negotiated in
an arms-length transaction. Member represents and warrants that, except as
otherwise permitted or required by applicable federal or state law, Member
shall not influence or attempt to influence the prescribing practices of
practitioners regarding the ordering of Products and Services covered by the
Membership

 

 

Agreement, as amended. Moreover, it is acknowledged by the parties
hereto that a central purpose of this arrangement is for Member to achieve
price savings and cost-reduction and to promote quality patient care through
increased access to competitive products and services.

 

5.                                       Responsibilities
of MHA and Member.  MHA agrees that
Member’s engaging in “direct contracts” with Vendors is not a violation of this
Membership Agreement. Member agrees to make best efforts to have all contracts
with Vendors run through MHA’s purchasing program and to create a fair and
equitable business relationship between Member and MHA when approached by
Vendors for direct contracts. Additionally, Member may redirect its IV
solutions business to another vendor if and only if all of the following
conditions apply:

 

•                  The agreement is
direct with a vendor that does not involve loading that vendor’s portfolio with
any wholesalers that service Member’s purchasing of other, non IV products;

 

•                  The pricing is
materially better than MHA’s pricing for the same or similar items

 

 

ADDENDUM TO MEMBERSHIP AGREEMENT

 

THIS ADDENDUM TO MEMBERSHIP AGREEMENT
is made and entered into this 27th day of June, 2006 (“Addendum”),
by and between MANAGED HEALTH CARE ASSOCIATES, INC., a New Jersey corporation (“MHA”)
and ChemRx New Jersey LLC, a Limited Liability Company organized under the laws
of the state of New Jersey (“Member”).

 

WHEREAS, the parties hereto are parties to a Membership Agreement dated
June 29, 2006 (“Membership Agreement”); and

 

WHEREAS, the parties hereto desire to continue the arrangement under
the Membership Agreement as specifically amended and modified herein.

 

NOW, THEREFORE, intending to be legally bound hereby, the parties
hereby agree as follows:

 

1.                                       MHA
and Member hereby agree that the Membership Agreement is specifically amended
as follows, such amendments to take effect upon the date and year first above
written:

 

A.                                   The
following additional terms and provisions shall be added to and included in the
Membership Agreement:

 

i)                                         For
and in consideration of the mutual promises and covenants contained in this
Addendum and the Membership Agreement and other good and valuable
consideration, Member hereby agrees to engage MHA as its exclusive group
purchasing organization. Accordingly, Member warrants that all group purchasing
organization purchases of products and services (“Products and Services”) made
on its behalf shall be under MHA-negotiated vendor contracts. For the purposes
of this Addendum and the Membership Agreement, group purchasing organization
purchases do not include purchases made through a wholesaler’s generic drug
source program.

 

B.                                     Section
11 of the Membership Agreement concerning the payment of membership dues shall
be deleted and be without any force or effect.

 

C.                                     The
provisions of the Membership Agreement regarding term and termination are
hereby amended as follows:

 

i)                                         Any
provisions of the Membership Agreement that permit the Member to terminate the
Membership Agreement without cause shall be deleted in their entirety and shall
be without force or effect.

 

ii)                                      The
term of the Membership Agreement is hereby deleted and replaced in its entirety
as follows:

 

The initial term of the Membership Agreement shall begin on            1,
200    and terminate on May 31, 2009 (“Amended Term”). The

 

 

Membership Agreement, including this Addendum, shall be automatically
renewed for additional one-year periods (each additional one-year period, a “Renewal
Term”), unless at least sixty (60) days’ prior to the expiration of the Amended
Term or any Renewal Term, MHA or Member shall provide written notice to the
other of its desire to not renew the Membership Agreement.

 

D.                                    The
following additional terms and provisions shall be included in the Membership
Agreement, effective as of the Amended Term:

 

i)                                         Member
shall eligible to receive certain rebates (as defined under the discounts safe harbor
at 42 C.F.R. § 1001.952(h)) on the purchase of products and services (“Products
and Services”) purchased under MHA negotiated vendor agreements, in accordance
with the terms and conditions set forth on Exhibit A attached hereto and
incorporated by reference herein.

 

ii)                                      In
the event that any provision of this Addendum or the Membership Agreement is
determined to be contrary to applicable law, either party hereto may
immediately terminate this Addendum and the Membership Agreement or amend the
contrary provision in accordance with such applicable law and continue to
perform its obligations hereunder and there under.

 

2.                                       Except
as amended pursuant to Section 1 of this Addendum and only to the extent
amended hereby, all other terms and conditions of the Membership Agreement
shall remain in full force and effect. If there are any conflicts between the
terms of this Addendum, any previous addendum, or the Membership Agreement, the
terms of this Addendum shall control.

 

IN WITNESS WHEREOF, the parties hereto have executed this Addendum as
of the day and year first set forth above.

 

	
   

  	
  MANAGED HEALTH CARE ASSOCIATES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen J. Andrew

  	
   

  
	
   

  	
   

  	
  Name: Stephen J. Andrew

  
	
   

  	
   

  	
  Title: Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  ChemRx of New Jersey, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Segal

  	
   

  
	
   

  	
   

  	
  Name: Michael Segal

  
	
   

  	
   

  	
  Title: President

  

 

 

Agreement, as amended. Moreover, it is acknowledged by the parties
hereto that a central purpose of this arrangement is for Member to achieve
price savings and cost-reduction and to promote quality patient care through
increased access to competitive products and services.

 

5.                                       Responsibilities
of MHA and Member.  MHA agrees that
Member’s engaging in “direct contracts” with Vendors is not a violation of this
Membership Agreement. Member agrees to make best efforts to have all contracts
with Vendors run through MHA’s purchasing program and to create a fair and
equitable business relationship between Member and MHA when approached by
Vendors for direct contracts. Additionally, Member may redirect its IV
solutions business to another vendor if and only if all of the following
conditions apply:

 

•                  The agreement is
direct with a vendor that does not involve loading that vendor’s portfolio with
any wholesalers that service Member’s purchasing of other, non IV products;

•                  The pricing is
materially better than MHA’s pricing for the same or similar items

 

 

 

1st AMENDMENT TO

 

MHA LONG TERM CARE NETWORK, INC.

 

PARTICIPATING PROVIDER AGREEMENT

 

The participating LTC Pharmacy Agreement between MHA Long Term Care
Network, Inc. (“Network”) and ChemRx of New
Jersey, LLC (“LTC Pharmacy”) (“Agreement”) is hereby amended, effective

 

Exhibit A, which provides for an administrative fee equal to Five
($.05) Cents for each claim LTC Pharmacy submits and which is successfully
adjudicated is deleted and replaced in its entirety with the following new
Exhibit A:

 

EXHIBIT A

 

FEES DUE TO NETWORK

 

LTC Pharmacy shall pay Network an administrative fee equal to Three
($.03) Cents for each claim LTC Pharmacy submits and which is successfully
adjudicated and paid by a Third Party Payor which has contracted with Network (“Administrative Fee”).

 

LTC Pharmacy agrees that a Third Party Payor may withhold the amount of
the above administrative fee from the payments otherwise due to LTC Pharmacy
from the Third-Party Payor and may pay the administrative fee directly to
Network.

 

In the event a Third-Party Payor does not withhold the amount of the
administrative fee, LTC Pharmacy shall pay Network the administrative fee
within 30 days of Network’s bill for such administrative fee.

 

Except as set forth above, the Agreement remains in full force and
effect.

 

	
  Dated:

  	
   

  	
  , 2006

  	
   

  
	
   

  	
   

  
	
   

  	
  MHA Long Term Care Network, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas A. Present

  	
   

  
	
   

  	
   

  	
  Douglas A. Present

  	
   

  
	
   

  	
   

  	
  CEO-MHA LTC Network, Inc.

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