Document:

Exhibit 10.53

 

Exhibit 10.53

 

 

 

First Omnibus Amendment

Dated as of March 30, 2005

Among

Tandem Health Care, Inc., 

as Guarantor

Tandem Health Care Of Ohio, Inc., 

as Lessee and Borrower,

Key Equipment Finance Inc. (formerly known as Key Corporate Capital Inc.), as prior

Administrative Agent and Individually as Prior Purchaser,

SELCO Service Corporation, 

as Lessor,

KeyBank National Association, 

as Administrative Agent and Individually as Purchaser and as WC Lender

 

 

 

 

First Omnibus Amendment

     This First Omnibus Amendment (this “Amendment”) is entered into as of March 30,
2005, among, Tandem Health
Care, Inc. a Pennsylvania corporation (the “Guarantor”), Tandem
Health Care of Ohio, Inc., an Ohio corporation (the
“Borrower”), the Guarantors signatory
hereto (each a “WC Guarantor” and collectively referred to as the “WC Guarantors”); Key
Equipment Finance Inc. (formerly known as Key Corporate Capital Inc.), individually as the
Prior Purchaser and also as the Prior Administrative Agent (as hereinafter defined); SELCO
Service Corporation, an Ohio corporation as Lessor (the “Lessor”) and KeyBank
National Association, a national banking association, individually as Purchaser and as a WC
Lender and also as Administrative Agent and Collateral Agent as provided herein amends those
certain Operative Documents Agreement (as such term is defined in Appendix A to that certain
Participation Agreement) dated as of December 30, 2004 (the “Participation Agreement”). All
capitalized terms used herein without definition shall have the same meanings herein as such terms
are defined in Appendix A of the Participation Agreement.

Witnesseth:

     Whereas, the parties hereto wish to amend the Operative Documents to (i) memorialize the
change of Administrative Agent from Key Corporate Capital Inc. to KeyBank National Association,
(ii) memorialize the assignment of all of Key Corporate Capital Inc.’s interest in and to any
Certificates to KeyBank National Association, (iii) implement and secure a working capital loan
facility, (iv) secure those obligations arising under any Hedging Agreement, and (v) modify
Schedule VI to the Participation Agreement to change the required Fixed Rent Payments; and

     Now, Therefore, in consideration of the mutual agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

     Section 1.
Substitution of Administrative Agent. Pursuant to Section 7.9 of the Receivables
Purchase Agreement, (a) Key Corporate Capital Inc. (now known as Key Equipment Finance, Inc.)
hereby resigns (and is hereby released from its duties and obligations) as Administrative Agent
under the Operative Documents, and (b) KeyBank National Association is hereby appointed (and
accepts) as the successor Administrative Agent under the Operative Documents and subject to the
terms of Section 7.9 of the Receivables Purchase Agreement.

     Section 2.
Assignment of Certificate. Key Corporate Capital Inc. hereby sells and assigns,
without recourse, to KeyBank National Association, and KeyBank National Association hereby assumes
from Key Corporate Capital Inc. a 100% interest in and to all of Key Corporate Capital Inc.’s
rights and obligations under the Operative Documents. KeyBank National Association shall hereafter
be party to and be bound by the terms and conditions of the Operative Documents as if it were an
original signatory thereto and have all of the rights and obligations
of a “Purchaser” and as a
“Participant” thereunder. Key Corporate Capital Inc. relinquishes its rights and is released from
its obligations under the Operative Documents.

 

 

First Omnibus Amendment

     Section 3. Amendment to Schedule VI of the Participation Agreement. From and after the
Amendment Effective Date the schedule of Fixed Rent Payments set forth on Schedule VI of the
Participation Agreement is hereby amended and restated in its entirety to read as set forth on
Exhibit A attached hereto.

     Section 4. Amendment to Section 7.6(a) of the Participation Agreement. From and after the
Amendment Effective Date Section 7.6(a) of the Participation Agreement is hereby amended and
restated in its entirety to read as follows:

     “(a) Subject to the terms of the Intercreditor Agreement, during the continuance of a
Lease Event of Default and subject to clause (b) below, all payments received and amounts
realized by the Lessor or the Administrative Agent, but excluding any Excluded Payments,
shall, if received by the Lessor, be promptly paid to the Administrative Agent without
reduction, set-off or counterclaim, and shall be distributed by the Administrative Agent in
the following order of priority:

     first, so much of such payment or amount as shall be required to pay or reimburse the
Administrative Agent and the Lessor for any tax, fees, expense, indemnification or other
loss incurred by the Administrative Agent or the Lessor (to the extent incurred in

connection with any duties as the Administrative Agent or Lessor, as
the case may be),
shall be distributed to the Administrative Agent and the Lessor without priority of one
over the other for their own accounts in accordance with the amount of such payment or
amount payable to such Person;

     second, so much of such payments or amounts as shall be required to pay the then
existing Participants the amounts payable to them pursuant to any expense reimbursement or
indemnification provisions of the Operative Documents shall be distributed to each such
Participant without priority of one over the other in accordance with the amount of such
payment or payments payable to each such Person;

     third, to the Purchasers and any other Person to whom any Hedging Liability is owed
for application to pay in full the Purchaser Balance and any Hedging Liability, pro rata
among the Purchasers and any such other Person without priority of one over the other in
the proportion that the Purchaser Balance of each such Purchaser and/or the Hedging
Liability owed to any such other Person bears to the aggregate Purchaser Balances of all
Purchasers plus all Hedging Liability and, in the case where the amounts so distributed
shall be insufficient to pay in full as aforesaid, then pro rata among the Purchasers and
any such other Person without priority of one over the other in the proportion that the
Purchaser Balance of each such Purchaser and/or the Hedging Liability owed to any such
other Person bears to the aggregate Purchaser Balances of all Purchasers plus all Hedging
Liability;

     fourth, an amount equal to the aggregate Lessor Balance shall be distributed to the
Lessor for application to pay in full the Participant Balance of Lessor;

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     fifth, to the Participants and the Administrative Agent for any other amounts payable
to them under the Operative Documents, pro rata based on the amounts payable; and

     sixth, the balance, if any, of such payment or amounts remaining thereafter shall be
promptly distributed to the Lessee, its successors and assigns, or to such other Person
lawfully entitled thereto.”

     Section 5. Amendment to Exhibits E, H, I, J, N, O and P of the Participation Agreement. From
and after the Amendment Effective Date each of Exhibits E, H, I, J, N, 0 and P of the
Participation Agreement is hereby amended and restated in its entirety to read as set forth on
Exhibits E, H, I, J, N, O and P attached hereto.

     Section 6. Addition of Various Definitions. From and after the Amendment Effective Date
Appendix A of the Participation Agreement is hereby amended to add the following definitions:

“Affected WC Lender” is defined in Section 1.10 of the Working Capital Loan Agreement.

“A/R” is defined in the Lessee Security Agreement and the Sublessee Security Agreement.

“Borrower” means Tandem Health Care of Ohio, Inc., as borrower under the Working Capital
Loan Agreement.

“Borrowing” means the total of WC Loans advanced on a single date. Borrowings of WC Loans
are made and maintained from the WC Lender. A Borrowing is “advanced” on the day WC Lender
advances funds comprising such Borrowing to the Borrower, as requested by the Borrower
pursuant to Section 1.4(a) of the Working Capital Loan Agreement.

“Borrowing Base” means, as of any time it is to be determined, 75% of the then outstanding
unpaid amount of Eligible Receivables; provided that the Borrowing Base shall be computed
only as against and on so much of the Collateral as is included on the Borrowing Base
Certificates furnished from time to time by the Borrower pursuant to the terms of the
Working Capital Loan Agreement and, if required by the WC Lender pursuant to any of the
terms of the Working Capital Loan Agreement or any WC Collateral Document, as verified by
such other evidence reasonably required to be furnished to the WC Lender pursuant to the
Working Capital Loan Agreement or pursuant to any such WC Collateral Document.

“Borrowing
Base Certificate” means the certificate in the form of Exhibit C to the Working
Capital Loan Agreement, or in such other form acceptable to the WC Lenders, to be delivered
to the WC Lender pursuant to Section 7.2 of the Working Capital Loan Agreement.

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“Collateral Agent” means KeyBank National Association or its successors and assigns, as collateral
agent, under the Intercreditor Agreement.

“Commercial
Receivable” is defined in the definition of Eligible
Receivables. 

“Credit
Event” means the advancing of any WC Loan.

“Eligible
Receivables ” means any A/R of the Borrower or any WC Guarantor in which the Collateral
Agent has a first priority perfected security interest and which complies with each of the
following requirements:

     (a)
it arises out of (i) the rendition of services fully performed by the Borrower or such
WC Guarantor and accepted by the account debtor on said A/R in the ordinary course of
business on ordinary trade terms (a “Commercial
Receivable”) or (ii) the rendition of
health care services fully performed by the Borrower or such WC Guarantor in respect of which
such Person is entitled to receive Medicare or Medicaid reimbursement (a “Medic Receivable
”);

     (b) all warranties of the Borrower and/or such WC Guarantor, as the case may be, in the
Operative Documents are true and correct in all material respects with respect thereto;

     (c) it has been identified to the WC Lender in the manner required by the Agent pursuant
to the Security Agreement;

     (d) [Intentionally Omitted];

     (e) it has not remained unpaid in whole or in part more than 120 days from and after its
due date;

     (f) [Intentionally Omitted];

     (g) it is net of any credit or allowance given by the Borrower or such WC Guarantor to
such account debtor;

     (h) it is not owing by an account debtor who (i) has become insolvent, (ii) is the
subject of any bankruptcy, arrangement, reorganization proceedings or other proceedings for
relief of debtors, (iii) has admitted its inability to pay its debt generally or has stopped
paying its debts generally or (iv) is an Affiliate of the Borrower or such WC Guarantor;

     (i) the account debtor is not principally located outside the continental United States
unless such A/R is secured by an irrevocable letter of credit issued by a commercial bank
located in the United States and which is on terms and conditions acceptable to the WC
Lender;

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     (j) except in the case of a Medic Receivable, it is not owing by the United States of
America or any department, agency or instrumentality thereof unless the WC Agent shall have
received evidence satisfactory to the WC Lender of compliance with the Assignment of Claims
Act;

     (k) [Intentionally Omitted]; and

     (l) it is not subject to any counterclaim or defense asserted by the account debtor
thereunder, nor is it subject to any offset or contra account payable to the account debtor
(in any case, unless the amount of such A/R is net of such counterclaim, defense, offset or
contra account established to the satisfaction of the WC Lender).

“Hedge
Provider” means KeyBank National Association.

“Hedging Agreements” means the                                         dated as of       
        
            
              between
KeyBank National Association, as Hedge Provider and the Lessee, any schedules, supplements and
confirmations thereto, and any replacements or renewals of any thereof.

“Hedging Liability” means the liability of the Lessee to any of the Purchasers, or the Hedge
Provider, or any Affiliates of such Purchasers or the Hedge Provider, in respect of any interest
rate (or rent) swap agreements, interest rate (or rent) cap agreements, interest rate (or rent)
collar agreements, interest rate (or rent) floor agreements, interest rate (or rent) exchange
agreements, foreign currency contracts, currency swap contracts, or other similar interest rate
(or rent) or currency hedging arrangements as the Lessee may from time to time enter into with any
one or more of the Purchasers party to the Participation Agreement or the Hedge Provider or their
Affiliates, including, without limitation, the Hedge Termination Value.

“Hedge Termination Value” means, in respect of any one or more Hedging Agreements, after taking
into account the effect of any legally enforceable netting agreement relating to such Hedging
Agreements, (a) for any date on or after the date such Hedging Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination value(s), and (b) for
any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market
value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other
readily available quotations provided by any recognized dealer in such Hedging Agreements (which
may include any Purchaser or any Affiliate thereof).

“Intercreditor Agreement” means the Intercreditor and Collateral Agency Agreement dated as of
March 30, 2005 among the Administrative Agent, the Collateral Agent, the Participants, the WC
Lender and the Hedge Provider.

“Lending Office” is defined in Section 10.4 of the Working Capital Loan Agreement.

“Medic Receivable” is defined in the definition of Eligible Receivables.

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“Medicaid” means that certain program of medical assistance, funded jointly by the federal
government and the states for impoverished individuals who are aged, blind and/or disabled, and
for members of families with dependent children, which program is more fully described in Title
XIX of the Social Security Act (42 U.S.C. §§1396 et seq.) and the regulations promulgated
thereunder.

“Medicare” means that certain federal program providing health insurance for eligible elderly and
other individuals, under which physicians, hospitals, skilled nursing homes, home health care and
other providers are reimbursed for certain covered services they provide to the beneficiaries of
such program, which program is more fully described in Title XVIII of the Social Security Act (42
U.S.C. §§1395 et seq.) and the regulations promulgated thereunder.

“Prior Administrative Agent” means Key Equipment Finance Inc. (formerly known as Key Corporate
Capital Inc.).

“Prior Purchaser” means Key Equipment Finance Inc. (formerly known as Key Corporate Capital Inc.).

“Receivables” means all “Receivables” (as defined in the Security Agreement) of the Borrower and
the WC Guarantors.

“Revolving Credit” means the credit facility for making WC Loans described in Sections 1.1 of the
Working Capital Loan Agreement.

“ROC”
is defined in Section 2.5 of the Receivables Purchase Agreement.

“Unused WC Commitments” means, at any time, the difference between the WC Commitments then in
effect and the aggregate outstanding principal amount of WC Loans.

“WC Collateral” means all properties, rights, interests and privileges from time to time subject
to the Liens granted to the Collateral Agent, or any security trustee therefor, by the WC
Collateral Documents.

“WC Collateral Documents” means the Mortgage, the Pledge Agreement, the other Security Documents,
and all other mortgages, deeds of trust, security agreements, pledge agreements, assignments,
financing statements and other documents as shall from time to time secure or relate to the WC
Obligations or any part thereof.

“WC Commitment” means, as to the WC Lender, the obligation of the WC Lender to make WC Loans under
the Working Capital Loan Agreement in an aggregate principal or face amount at any one time
outstanding not to exceed the amount set forth opposite the WC Lender’s name on Schedule 1
attached to the Working Capital Loan Agreement, as the same may be reduced or modified at any time
or from time to time pursuant to the terms of the Working Capital Loan Agreement.

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“WC Default” means any event or condition the occurrence of which would, with the passage of time
or the giving of notice, or both, constitute an WC Event of Default.

“WC Event of Default” means any event or condition identified as such in Section 9.1 of the
Working Capital Loan Agreement.

“WC Guarantor” is defined in the recitals of the Working Capital Loan Agreement.

“WC Interest Period” means the period commencing on the date a Borrowing is advanced and ending on
the last day of the month in which such Borrowing is advanced (or on the last day of the following
month if such WC Loan is advanced on the last day of a month); provided, however, that:

     (a) any WC Interest Period for a Borrowing that otherwise would end after the WC
Termination Date shall end on the WC Termination Date;

     (b) no WC Interest Period with respect to any portion of the WC Loans shall extend
beyond the WC Termination Date; and

     (c) whenever the last day of an Interest Period would otherwise be a day that is not a
Business Day, the last day of such Interest Period shall be extended to the next succeeding
Business Day.

“WC
Lender” KeyBank National Association, and its successors and assigns from time to time party to
the Working Capital Loan Agreement as lender thereunder.

“WC Loan” is defined in Section 1.1 of the Working Capital Loan Agreement.

“WC
Loan Documents” means the Working Capital Loan Agreement, the WC Notes, the Guaranty, the WC
Collateral Documents, and each other instrument or document to be delivered hereunder or
thereunder or otherwise in connection therewith.

“WC
Loan Margin” means 1.0%.

“WC
Notes” is defined in Section 1.8 of the Working Capital Loan Agreement.

“WC Obligations” means all obligations of the Borrower to pay principal and interest on the WC
Loans, all fees and charges payable thereunder, and all other payment obligations of the Borrower
arising under or in relation to any WC Loan Document, in each case whether now existing or
hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired.

“WC Termination Date” means March 30, 2006, or such earlier date on which the WC Commitments are
terminated in whole pursuant to Section 1.9, 9.2 or 9.3 of the Working Capital Loan Agreement or
such later date to which the WC Commitments are extended pursuant to Section 12.23 of the Working
Capital Loan Agreement.

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“Working Capital Loan Agreement” means the Working Capital Loan Agreement dated as of March
30, 2005 among Tandem Health Care of Ohio, Inc., as Borrower, KeyBank National Association,
as the WC Lender and the WC Guarantors party thereto.

     Section 7. Amendment of Various Definitions. From and after the Amendment Effective Date
Appendix A of the Participation Agreement is hereby amended by deleting the definitions of
“Assignment of Lease and Rent”, “Event of Default”, “Excepted Payment”, “Guaranteed Parties”,
“Guaranty”, “Indemnitee”, “Lessee Collateral”, “Lessee Stock Pledge”, “Material Default”, “Maximum
Recourse Amount”, “Mortgage”, “Operative Documents”, “Security Agreement”, “Sublessee Security
Agreement “ and “Sublessee Stock Pledge “ in their entirety and substituting the following in lieu
thereof:

“Assignment of Lease and Rent” means the Amended and Restated Assignment of Lease and Rent
dated as of March 30, 2005, from the Lessor, as assignor, to the Collateral Agent, as
assignee, as the same may be amended, supplemented, amended and restated or otherwise
modified from time to time and substantially in the form of Exhibit H to the Participation
Agreement.

“Event of Default” means a Lease Event of Default, a Receivables Purchase Agreement Event
of Default, a WC Event of Default or any “Event of Default” described in any other
Operative Document.

“Excepted Payments” means:

     (a) all indemnity payments (including indemnity payments made pursuant to Article
XIII of the Participation Agreement) to which the Administrative Agent, the Arranger,
the Lessor, any Purchaser, WC Lender or any of their respective Affiliates, agents,
officers, directors or employees is entitled;

     (b) any amounts (other than Basic Rent or amounts payable by Lessee pursuant to
Section 15.2 of the Master Lease or Articles XVI, XVIII or XX of the Master Lease)
payable under any Operative Document to reimburse the Administrative Agent,
the Arranger, the Lessor, any Purchaser, the WC Lender or any of their respective
Affiliates (including the reasonable expenses of the Administrative Agent, the
Arranger, the Lessor, any Purchaser, the WC Lender or such Affiliates incurred in
connection with any such payment) for performing or complying with any of the
obligations of Lessee under and as permitted by any Operative Document;

     (c) any insurance proceeds (or payments with respect to risks self-insured or
policy deductibles) under liability policies;

     (d) any insurance proceeds under policies maintained by any Participant;

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     (e) Transaction Expenses or other amounts or expenses paid or payable to or for the
benefit of the Administrative Agent, the Lessor, the Arranger, any Purchaser or the WC
Lender; and

     (f) any payments in respect to interest to the extent attributable to payments referred
to in clauses (a) through (e) above.

“Guaranteed Parties” means the Lessor, the Purchasers, the WC Lender and the Administrative Agent,
together with their respective successors and assigns.

“Guaranty” means the Amended and Restated Guaranty dated as of March 30, 2005, made by the
Guarantor in favor of each of the Guaranteed Parties, as the same may be amended, supplemented,
amended and restated or otherwise modified from time to time, substantially in the form of Exhibit
E to the Participation Agreement.

“Indemnitee” means the Lessor, each Purchaser, the WC Lender, the Hedge Provider and the
Administrative Agent.

“Lessee Collateral” shall mean all of the Lessee’s and each Sublessee’s right, title and interest
in and to each of the following, however arising and whether now existing or hereafter acquired or
arising:

     (a) the Properties;

     (b) any Permitted Sublease, assignment or Residency Agreement relating to any Property;

     (c) all business assets, including furniture, fixtures and equipment, inventory and all
other personal assets associated with the Properties; provided that there shall be excluded
from Lessee Collateral any equipment or personal property acquired after the Acquisition Date
and used at the Properties subject to leasing arrangements with finance companies so long as
(x) such equipment or personal property are not integral building systems or fixed equipment
and (y) the cost of the property so leased does not exceed $750,000;

     (d) all Receivables and rents generated by the Lessee Collateral described in clauses
(b) and (c) above;

     (e) all certificates of need, licenses, permits, provider agreements, Medicare and
Medicaid contracts and other instruments relating to the Properties;

     (f) the Consulting Contracts and any Management Contracts;

     (g) all books, manuals, logs, records and other information directly relating to the
maintenance, insurance or operation of the Properties;

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     (h) the stock of the Sublessees pledged pursuant to the Sublessee Stock Pledge;

     (i) any other Collateral not described above which is now or hereafter pledged by the
Lessee or any Sublessee to the Collateral Agent pursuant to any Security Document; and

     (j) all proceeds of and from any and all of the foregoing collateral (including
proceeds which constitute property of the types described in clauses (a) through (g) above
and, to the extent not otherwise included, all payments under insurance (whether or not the
Administrative Agent is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the foregoing
collateral.

“Lessee
Stock Pledge” means the Amended and Restated Stock Pledge Agreement dated as of March 30,
2005 from the Guarantor to the Collateral Agent, substantially in the form of Exhibit J to the
Participation Agreement.

“Material Default” means any Event of Default or any Lease Default under Section 16.1 (a), (b) or
(i) of the Master Lease or any WC Default under Section 9.1 (a), (g) or (h) of the Working Capital
Loan Agreement.

“Maximum
Recourse Amount” means, with respect to each Property, 78.704% of the Property Cost of
such Property.

“Mortgage” means the Amended and Restated Open-End Mortgage, Assignment of Leases and Rents and
Security Agreement dated as of March 30, 2005 from the Lessee and the Lessor to the Collateral
Agent relating to the Properties, substantially in the form of Exhibit N to the Participation
Agreement.

“Operative Documents” means the following:

     (a) the Participation Agreement;

     (b) the Master Lease;

     (c) each Lease Supplement;

     (d) the Receivables Purchase Agreement;

     (e) each Certifcate;

     (f) the Assignment of Lease and Rent;

     (g) each Deed and Bill of Sale;

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     (h) the Security Agreement;

     (i) the Financing Statements;

     (j) the Lessee Stock Pledge;

     (k) the Assignment of Certificates of Deposit (and the Certificates of Deposit);

     (i) the Mortgage;

     (m) the Guaranty;

     (n) each WC Note;

     (o) the Sublessee Stock Pledge;

     (p) the Sublessee Security Agreement;

     (q) the Working Capital Loan Agreement;

     (r) the Intercreditor Agreement; and

     (s) the Hedging Agreements.

“Security Agreement” means the Amended and Restate Security Agreement dated as of March 30,
2005 from the Lessee to the Collateral Agent, substantially in the form of Exhibit I to the
Participation Agreement.

“Sublessee Security Agreement” means the Amended and Restate Sublessee Security Agreement
dated as of March 30, 2005 from the Sublessees to the Collateral Agent, substantially in
the form of Exhibit P to the Participation Agreement.

“Sublessee
Stock Pledge” means the Amended and Restate Stock Pledge dated as of March 30,
2005 from the Sublessees to the Collateral Agent, substantially in the form of Exhibit O to
the Participation Agreement.

     Section 8. Amendments to Master Lease, (a) From and after the Amendment Effective Date
Section 16.1(h) of the Master Lease is hereby amended by deleting the same in its entirety and
substituting the following in lieu thereof:

“(h) (i) The Lessee or the Guarantor defaults (whether as primary obligor or as
guarantor or other surety) in any payment of principal of or interest under the
Working Capital Loan Agreement beyond any period of grace provided with respect
thereto, or (ii) the Guarantor or the Lessee fails to perform or observe any other
agreement, term or condition contained in the Working Capital Loan Agreement

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beyond any period of grace provided with respect thereto beyond any period of grace
provided with respect thereto.”

(b) From and after the Amendment Effective Date Sections 20.1(c) and (d) of the Master
Lease are hereby amended by deleting the same in their entirety and substituting the
following in lieu thereof:

“(c) On the date of the Lessee’s notice to the Lessor of the Lessee’s exercise of the
Remarketing Option, no WC Default, WC Event of Default, Lease Event of Default or
Lease Default shall exist, and, thereafter, no WC Default, WC Event of Default, Lease
Event of Default or Lease Default shall occur.

(d) On or prior to the Expiration Date all outstanding amounts under the WC Loan
shall have been paid in full and the WC Commitment shall have been terminated.”

     Section 9. Conditions Precedent. The conditions precedent set forth in Section 7 of the
Working Capital Loan Agreement are hereby incorporated herein in their entirety.

     Section 10.
Representations and Warranties. Guarantor, each WC Guarantor, Borrower and the
Lessee hereby represent and warrant to the Administrative Agent, the WC Lender, the Lessor and the
Purchasers as follows:

     (a) No Default or Event of Default has occurred and is continuing (or would result from
the amendment of the Master Lease, the Participation Agreement or the Working Capital Loan
Agreement contemplated hereby).

     (b) The execution, delivery and performance by the Guarantor, each WC Guarantor,
Borrower and the Lessee of this Amendment, the Master Lease, the Participation Agreement and
the Working Capital Loan Agreement (all as amended by this Amendment), as the case may be,
have been duly authorized by all necessary corporate and other action and do not and will
not require any registration with, consent or approval of, or notice to or action by, any
Person (including any Governmental Authority) in order to be effective and enforceable.

     (c) This Amendment, the Master Lease, the Participation Agreement and the Working
Capital Loan Agreement (all as amended by this Amendment) constitute the legal, valid and
binding obligations of the Guarantor, each WC Guarantor, Borrower and the Lessee, as
applicable, enforceable against it in accordance with their respective terms.

     (d) All representations and warranties of the Guarantor and the Lessee in the
Participation Agreement and Borrower and each WC Guarantor contained in the Working Capital
Loan Agreement are true and correct (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date and except that this subsection (d) shall be deemed instead to refer
to the last day of the most recent quarter and year for which financial statements

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     have then been delivered in respect of the representation and warranty made in Section
8.2(e) of the Participation Agreement.

     (e) Lessee, Borrower, Guarantor and each WC Guarantor is entering into this Amendment
on the basis of its own investigation and for its own reasons, without reliance upon any of
the Lessor, WC Lender, Purchaser, Agent, Administrative Agent or any other Person.

     (f) Lessee, Borrower, Guarantor and each WC Guarantor’s obligations under the Master
Lease, the Participation Agreement, the Working Capital Loan Agreement and under the other
Operative Documents are not subject to any defense, counterclaim, set- off, right of
recoupment, abatement or other claim.

     Section 11. Continuing Effectiveness; Ratification of Guaranties. As herein amended, the
Participation Agreement and each of the Operative Documents (including, without limitation, the
Guaranty and the Assignment of Certificate of Deposit) shall remain in full force and effect and
each of the agreements, guarantees and obligations contained therein (as amended hereby) is hereby
ratified and confirmed in all respects. After the Amendment Effective Date, all references to the
“Master Lease”, the “Agreement” or the “Working Capital Loan Agreement” in the Master Lease, the
Working Capital Agreement or the other Operative Documents respectively, shall refer to the Master
Lease and the Participation Agreement as amended hereby.

     Section 12. Counterparts. This Amendment may be executed in any number of counterparts and by
the different parties on separate counterparts, and each such counterpart shall be deemed to be an
original but all such counterparts shall together constitute one and the same Amendment.

     Section 13. Governing Law. This Amendment shall be a contract made under and governed by the
laws of the State of Ohio applicable to contracts made and to be performed entirely within such
state.

     Section 14. Successors and Assigns. This Amendment shall be binding upon the parties hereto
and their respective successors and assigns, and shall inure to the benefit of the parties hereto,
and their respective successors and assigns.

     Section 15. Effectiveness. The amendments set forth in Sections 1, 2, 3, 4, 5, 6, 7 and 8
above shall become effective on the date (the “Amendment Effective Date”) when (a) the
Administrative Agent shall have received counterparts of this Amendment executed by each
Purchaser, the WC Lender, Administrative Agent, Guarantor, Borrower, Lessee, each WC Guarantor,
and Lessor and (b) the requirements of Section 9 hereof are satisfied.

[Signature Pages to Follow]

-13-

 

First Omnibus Amendment

     This Amendment is entered into between us for the uses and purposes hereinabove set forth as
of the date first above written

	 	 	 	 	 	 	 
	Borrower and Lessee:	 	Tandem Health Care of Ohio, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	Guarantor:	 	Tandem Health Care, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Crestline, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of North Royalton, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Massillon, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	Signature Page
	 	 	 	 	 	 
	First Omnibus Amendment
	 	 	 	 	 	 

 

 

First Omnibus Amendment

	 	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Piketon, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Maumee, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Bellville Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Tallmadge, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	WC Guarantor:	 	Tandem Health Care of Mount Vernon, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	Its Chairman and CEO	 	 
	 
	 	 	 	 	 	 
	Signature Page
	 	 	 	 	 	 
	First Omnibus Amendment
	 	 	 	 	 	 

 

 

First Omnibus Amendment

	 	 	 	 	 	 	 
	Purchaser, WC Lender, and

Administrative Agent:	 	Keybank National Association, in its individual capacity as a Purchaser and as a
WC Lender and in its capacity as Administrative Agent
	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Florentina Djulvezan 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Florentina Djulvezan	 	 
	 

	 	 	 	Its Vice President	 	 
	 
	 	 	 	 	 	 
	Lessor:	 	SELCO Service Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Donald C. Davis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Donald C. Davis	 	 
	 

	 	 	 	Its Vice President	 	 
	 
	 	 	 	 	 	 
	Prior Purchaser and

Prior Administrative Agent:	 	Key
Equipment Finance Inc.  (formerly known as Key Corporate Capital Inc.) in its
individual capacity as a Purchaser and in its capacity as
Administrative Agent
	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Donald C. Davis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Donald C. Davis	 	 
	 

	 	 	 	Its Vice President	 	 
	 
	 	 	 	 	 	 
	Signature Page
	 	 	 	 	 	 
	First Omnibus Amendment
	 	 	 	 	 	 

 

 

Exhibit A to
First 
Omnibus Amendment

Schedule VI to

Participation Agreement

Fixed Rent Payments

	 	 	 	 	 	 	 
	Fixed Rent	 	Amount Applied	 	Amount Applied	 	 
	 	 	 	 	to	 	 
	Payment Date	 	to Capital	 	Lessor Amounts	 	Total
	 
	31-Jan-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	28-Feb-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Mar-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Apr-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-May-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Jun-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jul-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Aug-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Sep-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Oct-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Nov-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Dec-05
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jan-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	28-Feb-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Mar-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Apr-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-May-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Jun-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jul-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Aug-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Sep-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Oct-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Nov-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Dec-06
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jan-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	28-Feb-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Mar-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Apr-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-May-07
	 	$50,000.00	 	$0.00	 	$50,000.00

 

 

	 	 	 	 	 	 	 
	Fixed Rent	 	Amount Applied	 	Amount Applied	 	 
	 	 	 	 	to	 	 
	Payment Date	 	to Capital	 	Lessor Amounts	 	Total
	 
	30-Jun-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jul-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Aug-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Sep-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Oct-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Nov-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Dec-07
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jan-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	29-Feb-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Mar-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Apr-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-May-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Jun-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jul-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Aug-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Sep-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Oct-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Nov-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Dec-08
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jan-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	28-Feb-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Mar-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Apr-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-May-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Jun-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Jul-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Aug-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Sep-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Oct-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	30-Nov-09
	 	$50,000.00	 	$0.00	 	$50,000.00
	31-Dec-09
	 	$50,000.00	 	$0.00	 	$50,000.00Exhibit 10.54

 

Exhibit 10.54

ORIGINAL           

CONFIDENTIAL           

Cardinal Health

&

Laurel Pharm, LLC.

Prime Vendor Agreement

March 15,
2004

 

 

PRIME VENDOR AGREEMENT

     This Prime Vendor Agreement (the “Agreement”) is made March 15, 2004 between
Laurel Pharm, LLC. (“Buyer”) and Cardinal Health* (“Cardinal”), who hereby agree as
follows:

	1.	 	Designation as Primary Wholesaler

     During the term of this Agreement, Buyer will designate Cardinal as the primary
wholesale pharmaceutical supplier to all pharmacies, now owned, managed or operated
by Buyer (collectively, the “Facilities” and
individually, a “Facility”). A current
list of the Facilities is attached hereto as Exhibit A. Additional facilities may be made
parties to this Agreement from time to time subject to the prior approval of Buyer and
Cardinal.

	2.	 	Sale of Merchandise

     Buyer
will purchase from Cardinal during the term of this Agreement its Primary
Requirements of pharmaceuticals (“Rx Products”) and, may, at its option, purchase
certain other inventory carried by Cardinal (“Non-Rx Products” and, together with Rx
Products, collectively the “Merchandise”) for delivery directly to the Facilities. The
term “Primary Requirements” means that Buyer will purchase for each Facility all of
its requirements of Rx Merchandise from Cardinal. Cardinal 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 purchased under this
Agreement in an amount equal to Cardinal’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’s Cost” will mean the manufacturer’s published
wholesale acquisition cost for Merchandise at the date of Cardinal’s invoice to the
Facility, adjusted to reflect any then-applicable contract pricing, but without
reduction for cash discounts; and (b) the term “Qualified Purchases” will mean all purchases
made and paid for by Buyer and/or the Facilities 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. Manufacturer off-invoice quantity
discounts and promotional allowances will be made available consistent with Cardinal’s normal
and customary practices.

     The purchase price for selected Merchandise, including but not limited to
multisource pharmaceuticals, 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-

	 	 	 	 	 
	 

	 	2
	 	Laurel Pharm, LLC.

 

 

pharmaceutical Merchandise will not be based upon the Cardinal’s Cost-plus pricing
described above but will instead be net-billed in accordance with the terms and
conditions established by Cardinal (including applicable mark-up) for such Merchandise.
Merchandise described in this paragraph is sometimes referred to as
“Specially Priced
Merchandise.” Buyer may, but will have no obligation to, purchase any specified
volume or percentage of its requirements for Specially Priced Merchandise (except
generics).

     The pricing specified in the Pricing Matrix does not reflect administrative fees for
membership in any group purchasing organization (a
“GPO”). If any Facility
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 the CardinalCHOICE®
pharmacy system or other electronic order entry system approved by Cardinal to
qualify for the pricing specified in the Pricing Matrix. Non-electronically transmitted
orders are subject to Cardinal’s Cost plus 10% pricing (excluding Schedule II and emergency
orders).

	4.	 	Payment Terms

     (a) Generally. The payment terms initially applicable to Buyer will be jointly
determined by Cardinal and Buyer based on Buyer’s payment preferences (among the
selections offered in this section and the Pricing Matrix), the historical purchasing
and weighted average payment data for Buyer (“Matrix Slotting
Data”) and credit
considerations deemed relevant by Cardinal. Buyer will deliver to Cardinal the Matrix
Slotting Data not less than 30 days prior to its initial purchases of Merchandise under
this Agreement. Following the determination of Buyer’s initial payment terms, all payments
for the Merchandise will be due in accordance with those terms unless and until
otherwise agreed by Buyer and Cardinal. Buyer may from time to time (but not more often than
once per calendar quarter) request that its payment terms be changed to one of the
options set forth in Subsection (b) as to future Merchandise purchases, subject to Cardinal’s
prior written consent. In such event, Buyer acknowledges and agrees that Buyer’s Cost of
Goods may be adjusted by Cardinal to reflect Buyer’s new payment terms and credit
considerations deemed relevant to Cardinal.

     (b) Optional Extended Payment Terms. Subject to Subsection (a), Buyer may
elect to cause Cardinal to receive payment as described below.

     (i) Fifteen Days from Invoice Date. If Buyer selects this payment
option, Buyer will cause Cardinal to receive payment in full within fifteen
(15) days of the invoice date of the invoice.

     (ii) Thirty Days from Invoice Date. If Buyer selects this payment option,
Buyer will cause Cardinal to receive payment in full within thirty (30) days of
the invoice date of the invoice.

	 	 	 	 	 
	 

	 	3
	 	Laurel Pharm, LLC.

 

 

     (c) Prepayment Terms. If Buyer is utilizing Prepayment Terms, in addition to
the requirements set forth under “Optional Extended Payment Terms” above, Buyer will,
at least five (5) business days prior to the effective date of this Agreement, make an
advance payment to Cardinal. The advance payment will be held by Cardinal as a deposit
(the “Deposit”), and Cardinal shall have a security interest in the Deposit to secure
payment of all of Buyer’s obligations, now existing, and arising in the future, under this
Agreement. The Deposit will be in an amount equal to the good faith estimate, as
mutually agreed by Buyer and Cardinal as described below.

          (i) Thirty Day Prepayment. If Buyer selects this pre-payment
option, the Buyer agrees to a Deposit amount equaling forty-five (45) days of Buyer
purchases. Buyer further agrees to pay open Cardinal invoices within fifteen (15) days of
the invoice date.

          (ii) Fifteen Day Prepayment. If Buyer selects this pre-payment
option, the Buyer agrees to a Deposit amount equaling thirty (30) days of Buyer
purchases. Buyer further agrees to pay open Cardinal invoices within fifteen (15) days of
the invoice date.

          (iii) 7 Day Prepayment. If Buyer selects this payment option, the
Buyer agrees to make a Deposit amount equaling sixteen and a half (16.5) days of Buyer
purchases. Buyer further agrees to pay open Cardinal invoices by weekly statement.

     At the end of each calendar quarter, beginning with the first full calendar quarter
after Cardinal receives the Deposit, Cardinal will produce a statement which compares
the Deposit with the average dollar volume of Merchandise purchased from Cardinal for
each payment cycle during that calendar quarter (“Average
Volume”). If the Average
Volume exceeds the Deposit, Cardinal will send a copy of the statement to Buyer
requesting payment of the difference. Buyer will, within 10 days of the date of such
statement, pay the difference to Cardinal and the difference will be added to the Deposit
upon receipt by Cardinal. If the Average Volume is less than the Deposit, Cardinal will
send a copy of the statement to Buyer with payment of the difference in the form of check
or credit memo as mutually determined by Buyer and Cardinal.

     (d) Cost of Goods Adjustments. At the end of each calendar quarter, Cardinal
will evaluate Buyer’s payment history based on actual weighted average payment days
and average Qualified Monthly Purchases. Prospective adjustments to the then-
applicable Cost of Goods will be made as appropriate. No retroactive adjustment will be
applied with respect to purchases by Buyer, absent bad faith on the part of Buyer.

     (e) Service Charges. All payments for Merchandise delivered and services
provided by Cardinal will be made to the applicable servicing division specified in
Cardinal’s invoice (or as otherwise specified by Cardinal) by electronic funds transfer or
other method acceptable to Cardinal so as to provide Cardinal with good funds by the due
date. Buyer will pay a service charge calculated at the rate of 1.5% per month (or the
maximum rate allowed by law, if such rate is less than 1.5% per month) on any amount

	 	 	 	 	 
	 

	 	4
	 	Laurel Pharm, LLC.

 

 

not paid by Buyer to Cardinal 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, unless such invoices are put in “dispute” by the
customer. To put an invoice in “dispute” means that service charges will not be assessed
on the outstanding invoice until a resolution has been reached, in a reasonable time frame.
Failure or delay by Cardinal to bill Buyer for any such service charge will not waive
Cardinal’s right to receive the same. Cardinal retains the right to place Buyer on C.O.D.
status, and/or refuse orders or cease its supply relationship with Buyer if Cardinal has
not received payment when due for Merchandise delivered or services provided to Buyer, or
based upon credit considerations deemed relevant by Cardinal.

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

	5.	 	Ordering and Delivery

     Cardinal will deliver the Merchandise F.O.B. destination to the Facilities and
exercise its good faith efforts to provide an efficient delivery schedule designed to
meet the mutual needs of Cardinal and the Facilities, in accordance with Cardinal’s general
delivery schedules established from time to time by the applicable Cardinal servicing
division (exclusive of holidays, etc.). All deliveries will be accompanied by an
invoice and all delivery costs (not including emergency deliveries) absorbed by Cardinal.
Facilities having Qualified Monthly Purchases in excess of $ 25,000 will be eligible
to receive one delivery per day, six (6) days per week, except Facilities located outside
of the contiguous United States or other Facilities mutually agreed upon by the parties
from time to time. Buyer will incur a separate delivery charge, not to exceed Cardinal’s
actual cost, for additional deliveries. Delivery schedules and purchase order deadlines may
be reviewed and changed from time to time as mutually agreed upon by Cardinal and Buyer.
Cardinal will make every reasonable effort to accommodate individual order entry and
delivery requirements. It is possible, depending on the servicing Cardinal 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) 9:30am

     Buyer will submit all orders, except for orders for Schedule II drugs, for all
Merchandise to Cardinal via electronic order entry using equipment supplied by
Cardinal to Buyer or other mutually agreeable electronic means. Any such equipment supplied by
Cardinal will be returned to Cardinal by Buyer upon the expiration or termination of
this Agreement for any reason or prior to termination or expiration if Cardinal reasonably
believes its proprietary rights are threatened. In the event that electronic order
entry is temporarily interrupted for reasons beyond the control of Buyer or Cardinal, 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 center or given
to the delivery driver. Schedule II orders will be delivered within one (1) day of
Cardinal’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 until such time that the delivery driver physically
delivers the DEA Form 222
to

	 	 	 	 	 
	 

	 	5
	 	Laurel Pharm, LLC.

 

 

the applicable Cardinal Health center. Notwithstanding the foregoing, no Schedule
II orders will be delivered other than in compliance with DEA regulations.

	6.	 	Other Services

     Cardinal will provide comprehensive support services to Buyer and the
Facilities in accordance with Cardinal’s customary terms and practices for institutional
customers. A list of those programs, services, and reports is attached as Exhibit C to this
Agreement.

	7.	 	Emergency Deliveries

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

	8.	 	Contract Administration

     Cardinal will recognize and administer manufacturer contracts between Buyer and
any manufacturer (collectively, “Manufacturer Contracts”) subject to their continued
validity in accordance with applicable laws and subject to such credit considerations
concerning the applicable manufacturers as Cardinal may consider appropriate; however,
if manufacturers’ chargebacks for contract items submitted by Cardinal are disallowed,
uncollectable, or unreconcilable, then the applicable charge will be billed back to
Buyer. Cardinal reserves the right, at any time, to decline to sell or carry any
manufacturer’s merchandise, based upon credit considerations deemed relevant to Cardinal. Buyer will
notify Cardinal of all Manufacturer Contracts. In addition, Buyer or the Facilities
will provide Cardinal 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 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’s inventory management requirements, Buyer will
provide Cardinal with respect to each Facility 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 Facility. To the extent Robinson Patman Act exception for “own use” is applicable,
all purchases under this Agreement by Buyer will be for the Facilities’ “own use” as
that term is defined in judicial or legislative interpretation, and Buyer will comply with
applicable manufacturers’ pricing criteria and policies.

	 	 	 	 	 
	 

	 	6
	 	Laurel Pharm, LLC.

 

 

	9.	 	Service Level

     Cardinal will exercise all reasonable efforts to provide the Facilities with an
aggregate average monthly service level on Rx Products of at least 95% calculated quarterly
in accordance with the standards and procedures specified in Exhibit D.

	10.	 	Returned Goods Policy

     Cardinal will accept Merchandise for return from Members in accordance with the
Standard Cardinal Returned Goods Policy (the “Cardinal Returns Policy”) in effect from time
to time during the term of this Agreement. A current copy of the Cardinal Returns Policy is
attached as Exhibit E. In addition to the terms and conditions described in the Cardinal
Returns Policy, Cardinal will be entitled to a returned goods processing fee (determined in
accordance with the Cardinal Returns Policy).

	11.	 	Term

     The initial term of this Agreement will be for a period of three (3) years
beginning November 13, 2003 (the “Commencement Date”). 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 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 or similar credit considerations, Cardinal may terminate this Agreement
immediately. No termination notice from Buyer to Cardinal will be effective until such time
as Cardinal has received payment for all amounts due from Buyer. Following the initial
term, this agreement will automatically renew for successive one (1) year terms, unless one
party gives notice in writing to the other within 30 days of the then current term.

	12.	 	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

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

 

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.

	13.	 	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) and related interest and penalties in connection with or arising out
of the transactions contemplated by this Agreement. If Cardinal pays any such amounts which
Buyer is obligated to pay under this section, then Buyer will promptly reimburse Cardinal in
an amount equal to the amount so paid by Cardinal.

     If and to the extent any discounts, credits, rebates or other purchase incentives are
paid or applied by Cardinal with respect to the Merchandise purchased under this Agreement,
then applicable provisions of the Medicare/Medicaid and state health care fraud and
abuse/anti-kickback laws (collectively, “fraud and abuse
laws”) may require disclosure of
the applicable price reduction on Buyer’s claim or cost reports for reimbursement from
governmental or other third parties. Buyer and Cardinal agree to comply with all applicable
provisions of the fraud and abuse laws and to indemnify and hold each other harmless for
any failure to do so.

	14.	 	Force Majeure

     Cardinal’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. During the period of any such delay or failure, Buyer
may purchase the Primary Requirements for the affected Facilities from others, but will
recommence purchasing from Cardinal upon cessation of such delay or failure.

	15.	 	Records and Audit

     Cardinal will maintain records pertaining to the pharmaceutical products
purchased by Buyer under this Agreement as required by applicable FDA requirements. Not
more than once in any twelve (12) month period, and following sixty (60) days’ advance
written notice to Cardinal, Buyer will have the right to appoint one (1) or more of its
employees to review those relevant records applicable to its pharmaceutical purchases for
the sole purpose of verifying compliance with the pricing terms of this Agreement. Any such
review will be limited to twelve (12) months of historical information as of the date such
review begins and will be subject to a confidentiality agreement prepared by Cardinal and
signed by the Buyer and its employee(s) who will have access to the information prior to
beginning the review.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

 

	16.	 	Return of Hardware/Software

     Upon termination of this Agreement for any reason, Buyer’s rights as a licensee of the
CardinalCHOICE®, CardinalCHOICE®-HQ or other Cardinal software will automatically expire,
and Buyer will promptly return such software and any related hardware not purchased by Buyer
to a return location specified by Cardinal.

	17.	 	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 nor Buyer may assign its obligations under this Agreement
without the written consent of the other; provided, however, that Cardinal 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.

	18.	 	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.

	19.	 	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.

	20.	 	Announcements

     Both Buyer and Cardinal Health will not issue any press release or other public
announcement, verbally or in writing, referring to Cardinal or buyer any entity which is
controlled by or under common control with Cardinal Health, Inc., or Buyer’s control
without Buyer or Cardinal’s prior written consent and advice of counsel. Buyer will provide
Cardinal’s Senior Vice-President, Health Systems Sales and Marketing, 7000 Cardinal Place,
Dublin, Ohio 43017, with a written copy of any such press release or other public
announcement no less than seventy-two (72) hours prior to Buyer’s intent to issue such
release or announcement. Buyer is responsible for confirming in writing that Cardinal’s
Senior Vice-President, Retail Sales and Marketing has received any such proposed press
release. Any such press release or other public announcement proposed by Buyer will be
subject to Cardinal’s revision and final approval. Nothing contained herein will limit the
right of Cardinal to issue a press release if, in the opinion of Cardinal’s counsel, such
press release is required pursuant to state or federal securities laws, rules or
regulations.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

 

	21.	 	Arbitration

     Any dispute, controversy or claim arising out of this Agreement shall be settled by
mandatory binding arbitration in accordance with this Section. Any arbitration under this
Section shall be conducted in accordance with the American Health Lawyers Association
Alternative Dispute Resolution Service Rules of Procedure for Arbitration, and judgment upon the
award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The
place of arbitration shall be Orlando, Florida. The arbitrators shall decide legal issues
pertaining to the dispute, controversy or claim pursuant to the laws of the State of Florida.
Subject to the control of the arbitrators, or as the parties may otherwise mutually agree, the
parties shall have the right to conduct reasonable discovery pursuant to the Federal Rules of
Civil Procedure. The arbitrators shall not have the authority to award punitive damages, but
shall have authority to award equitable relief. THE PARTIES UNDERSTAND THAT THEY ARE KNOWINGLY
AND WILLINGLY EXPRESSLY WAIVING A RIGHT TO JURY TRIAL CONCERNING ANY MATTERS RELATING TO THIS
AGREEMENT.

	 	 	 	 	 	 	 
	Laurel Pharm, LLC.	 	Cardinal Health*
	800 Concourse Parkway South	 	7000 Cardinal Place
	Suite 200	 	Dublin, Ohio 43017
	Maitland, FL 32751	 	Telecopy: (614) 757-6000
	 
	 	 	 	 	 	 
	By:

	 	/s/ Erin Rivas
	 	By:
	 	/s/ Jeff Hooper
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Title Vice President of Purchasing	 	Title Director of Sales
	Date March 15, 2004	 	Date March 15, 2004

 

*
The term
“Cardinal Health” will include the following affiliated operating companies:
Cardinal Syracuse, Inc., a New York corporation (Syracuse, New York); Williams Drug Distributors,
Inc., a Delaware corporation (Zanesville, Ohio); Marmac Distributors, Inc., a Connecticut
corporation (Hartford, Connecticut); James W. Daly, Inc., a Massachusetts corporation (Peabody,
Massachusetts); National PharmPak Services, Inc., an Ohio corporation
(Zanesville, Ohio); Ohio
Valley-Clarksburg, Inc., a Delaware corporation (Wheeling, West Virginia); Cardinal Southeast,
inc. a Mississippi corporation (Madison, Mississippi); Whitmire Distribution Corporation, a
Delaware corporation (Folsom, California); Cardinal Health Systems, Inc., an Ohio corporation; and
any other subsidiary of Cardinal Health, Inc., an Ohio corporation
(“CHI”), as may be designated
by CHI.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

 

EXHIBIT A

Facilities

Laurel Pharm, LLC. d/b/a CoastalMed, Coastal Med of Palmetto

933 10th Street

Palmetto, Florida 34221

Laurel Pharm, LLC d/b/a CoastalMed, Coastal Med of Panama City

440 North Cove Boulevard

Panama City, Florida 32401

	 	 	 	 	 
	 
	 
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	 	Laurel Pharm, LLC. 

 

 

EXHIBIT B

Pricing

This Pricing offered is based on the assumption that Buyer will purchase a minimum of
$50,000 per month from Cardinal. If monthly volumes fall below these minimum purchase
commitments for three (3) consecutive months, the Pricing may be subject to change.

Laurel Pharm, Inc.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	30 Day	 	 	15 Day	 	 	7 Day	 	 	7 Day	 	 	15 Day	 	 	30 Day	 
	 	 	Prepay	 	 	Prepay	 	 	Prepay	 	 	Pay(*)	 	 	Pay(*)	 	 	Pay(*)	 
	Qualified Monthly Purchases	 	(-30 DSO)	 	 	(-15 DSO)	 	 	(-4
DSO)	 	 	(7
DSO)	 	 	(15
DSO)	 	 	(30
DSO)	 
	Less than $750,000	 	Renegotiate

	$750,000 - $999,999
	 	 	-3.00	 	 	 	-2.75	 	 	 	-2.55	 	 	 	-2.35	 	 	 	-2.05	 	 	 	-1.40	 
	$1,000,000 - $1,499,999
	 	 	-3.05	 	 	 	-2.80	 	 	 	-2.60	 	 	 	-2.40	 	 	 	-2,10	 	 	 	-1.45	 
	$1,500,000 - $1,999,999
	 	 	-3.10	 	 	 	-2.85	 	 	 	-2.65	 	 	 	-2.45	 	 	 	-2.15	 	 	 	-1.50	 
	$2,000,000 - $2,499,999
	 	 	-3.15	 	 	 	-2.90	 	 	 	-2.70	 	 	 	-2.55	 	 	 	-2.20	 	 	 	-1.55	 
	$2,500,000 - $2,999,999
	 	 	-3.25	 	 	 	-3,00	 	 	 	-2.80	 	 	 	-2.65	 	 	 	-2.25	 	 	 	-1.60	 
	$3,000,000 - $3,999,999
	 	 	-3.35	 	 	 	-3.10	 	 	 	-2.90	 	 	 	-2.75	 	 	 	-2.30	 	 	 	-1.65	 
	$4,000,000 - $ABOVE
	 	 	-3.45	 	 	 	-3.20	 	 	 	-3.00	 	 	 	-2.85	 	 	 	-2.35	 	 	 	-1.70	 

 

			
	*	 	Extended Payment Terms: Subject to approval by Cardinal’s Financial Services Department.

If Qualified Monthly Purchases average less than $ 500 thousand for
three (3) consecutive months, the Supply Pricing Matrix may be
subject to change.

	 	 	 	 	 
	 
	 
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	 	Laurel Pharm, LLC. 

 

 

EXHIBIT C

Other
Services

Programs and Services

	 	Ø	 	Cardinal.com
	 
	 	Ø	 	Hand Held PDT Ordering Units
	 
	 	Ø	 	Shelf Labels
	 
	 	Ø	 	Price Stickers

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

EXHIBIT D

Service Level Definition

     For purposes of this Agreement, the service level percentage will be calculated by
dividing total lines of Rx Products shipped by the number of lines of Rx Products ordered.
The following items will be excluded from the service level calculation:

	 	1.	 	Manufacturer back orders/temporary outs;
	 
	 	2.	 	Non-stock and/or discontinued items due to non-movement or discontinuation by
manufacturer;
	 
	 	3.	 	Rx Products shipped within two (2) working days of initial order (including
those filled by an affiliate of Cardinal), which will instead be counted as a line filled;
	 
	 	4.	 	Items where a Facility has failed to provide accurate usage figures;
	 
	 	5.	 	Items where a Facility’s historical demand is exceeded by 125% over the
preceding two (2) months; and
	 
	 	6.	 	Same item ordered more than once within three (3) days.

     The service level guaranty in this Agreement for Buyer will commence ninety (90) days
following the later of the Commencement Date or Cardinal’s receipt of accurate usage data.
The service level guaranty for Facilities added to this Agreement after the Commencement Date
will commence sixty (60) days following receipt by Cardinal of accurate usage data. This will
allow Cardinal to gain usage information and adjust inventory levels appropriately.

     Upon Buyer’s request, if Cardinal does not meet its service level for any quarter, Cardinal
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 at least forty-five (45) 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 in disposing of any excess inventory of Merchandise previously stocked at
Buyer’s or a Facility’s request. Failure to comply with these notice requirements will entitle
Cardinal to discontinue the service level guaranty to the Facilities until ninety (90) days
after delivery of accurate usage data for the new items.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

EXHIBIT E

Cardinal Health Returned Goods Policy

(Hospitals, Charitable Institutions, and Other Health Care Entities)

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 time frames and subject to
the terms and conditions
described below:

	 	 	 	 	 
	 	 	Return Made Within	 	Normal Credit Amount
	 

	 	1-10 Business Days
	 	100% of original invoice amount paid by customer (i.e.,
the customer’s contract or other “cost” plus
the applicable
mark-up). This policy covers all
ordering/filling errors if
identified and returned within 10 business
days.
	 
	 	 	 	 
	 

	 	10 Business Days -45 Calendar Days
	 	100% of original contract or other “cost” paid by
customer
(i.e., not including any applicable mark-up and not to
exceed actual amount paid).
	 
	 	 	 	 
	 

	 	45-180 Calendar Days
	 	75% of original contract or other “cost” paid by customer
	 

	 	 	 	(i.e., not including any applicable mark-up
and not to exceed actual amount paid).
	 
	 	 	 	 
	 

	 	More than 180 Calendar Days
	 	Will not be accepted for return
(since contract pricing files
are not generally maintained beyond 6 months,
verification
of original pricing, as mandated by FDA
guidelines, cannot
be assured).

“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 for any reason.
	 
	 	 
	B.

	 	Short-dated (less than 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 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 EpogenTM, EminaseTM, 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’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 does participate in the
return process for any product not in “merchantable condition”, any return credit to the customer
will be based upon the actual
credit issued by the manufacturer and will be subject to a minimum 25% handling charge.

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.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

Shorts and Damaged Merchandise

Claims of order shortages (e.g., invoiced but not received) and damage must generally be reported
within five business days from
the applicable invoice date. Controlled substance shortage claims must be reported immediately per
DEA requirements, Pricing
and other errors/mistakes must be reported within 10 business days from the invoice date.

Notice to Manufacturer

Upon approval of the return by Cardinal Health, the customer will be responsible to: (a) promptly
forward a copy of the credit
memo and MRA Form to the applicable manufacturer; (b) retain a copy of the credit memo and MRA
Form; and (c) make such
copies available to the manufacturer and to the authorized federal, state, and local law
enforcement officers upon request, all as
required pursuant to FDA guidelines.

Ongoing Assurance and Cardinal Credit Request Form

Prior to returning any product to Cardinal, each customer must execute and deliver to Cardinal 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® 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 & invoice date for the merchandise to be returned.

Other Restrictions

This policy is subject to change with sixty (60) days written notice by Cardinal Health. Subject
to the foregoing notice
requirements, 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.

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

 

Cardinal Health Returned Goods Authorization

Ongoing Assurance

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

1. Customer represents, warrants, and guarantees to Wholesaler that: (a) each such return shall be
made only to the
specific Wholesaler from which the item was originally purchased; (b) each such return shall be
accompanied by Wholesaler’s
credit request form (the “Return Form”), which shall specify both Customer’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) Customer shall 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 Customer for any such return shall not exceed the original
purchase price paid to Wholesaler,
and (e) all merchandise returned to Wholesaler has been stored and handled by Customer in
accordance with all applicable
federal, state, and local laws, manufacturer guidelines when disclosed to customer by the
manufacturer or wholesaler, and good
trade practices, and such merchandise has not been adulterated or misbranded by customer within the
meaning of the Federal
Food, Drug, and Cosmetic Act and meets all FDA, state, and other applicable requirements and
guidelines.

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

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

4. *The term “Cardinal Health” shall include the following affiliated operating companies:
Cardinal Syracuse, Inc., a New York corporation (Syracuse, New York); Williams Drug Distributors, Inc., a Delaware corporation
(Zanesville, Ohio); Marmac Distributors, Inc., a Connecticut corporation (Hartford, Connecticut); James W. Daly, Inc.,
a Massachusetts corporation (Peabody, Massachusetts); National PharmPak Services, Inc., an Ohio corporation (Zanesville, Ohio);
Ohio Valley-Clarksburg, Inc., a Delaware corporation (Wheeling, West Virginia); Cardinal Southeast, Inc. a Mississippi
corporation (Madison, Mississippi); Whitmire Distribution Corporation, a Delaware corporation (Folsom, California);
Cardinal Health Systems, Inc., an Ohio corporation; and any other subsidiary of Cardinal Health, Inc., an Ohio corporation (“CHI”),
as may be designated by CHI.

	 	 	 
	 

	 	/s/ Erin Rivas
	 

	 	 
	 

	 	Customer’s Name (Print)
	 
	 	 
	Dated: March 15, 2004

	 	/s/ Erin Rivas/ Vice President of Purchasing
	 

	 	 
	 

	 	By Authorized Signature/Title

	 	 	 	 	 
	 

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	 	Laurel Pharm, LLC.

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