Dear Mr. Jacobs:

CHEM RX CORPORATION

750 Park Place

Long Beach, NY 11561

June 12, 2008

Mr. Gary M. Jacobs

Dear Mr. Jacobs:

This Employment Letter sets forth the terms and conditions of your employment with Chem Rx Corporation (“Chem Rx”) and its subsidiaries from time to time (collectively, the “ Group ”).

1.       Employment . Unless your employment is terminated in accordance with Section 6 below, you agree to be employed, and Chem Rx agrees to employ you, commencing on June 12, 2008 (the “ Effective Date ”) and ending on June 11, 2011 (such period, as it may be extended pursuant to the next following sentence, is referred to as the “ Term ”). The foregoing notwithstanding, commencing on June 12, 2011 and on each one-year anniversary thereafter, the term shall automatically be extended for one additional year if both (a) not less than 60 days and not more than 90 days before the expiration of the then current term, you provide Chem Rx with written notice of your desire to extend the term, and (b) Chem Rx does not provide you with written notice, at least 30 days before the end of the then current term, of Chem Rx’s election not to extend the term. The portion of the Term during which you are actually employed by Chem Rx is referred to as the “ Employment Period ”.

(a)       You will be employed by Chem Rx as its Chief Financial Officer. In such capacity, you will report to the Chief Executive Officer of Chem Rx, and shall have such authority and perform such duties as are customary for a chief financial officer of a Delaware corporation or as may be assigned by the Chief Executive Officer and the Board of Directors of Chem Rx consistent with your position as Chief Financial Officer. You agree to comply with such lawful policies of Chem Rx as may be adopted from time to time. During the Employment Period, your principal place of employment will be at the Group’s headquarters in Long Beach, New York.

(b)       You agree to use your best efforts in the performance of your duties hereunder, to devote substantially all of your working time to the performance of such duties, to perform such duties faithfully, and while you remain employed, not to engage in any other business activity that is in conflict with your duties and obligations to the Group. The foregoing notwithstanding, Chem Rx acknowledges that (i) until June 30, 2008 you will devote a portion of your time to winding-up your duties at your current employer Karat Platinum Inc. (“ Karat ”), it being understood and agreed that no later than

July 1, 2008 you will commence your full-time employment with Chem Rx and on the earlier of July 15, 2008 or the date Karat files its Form 10-K with the Securities and Exchange Commission you shall resign all of your positions (including your positions as chief financial officer and chief operating officer) with Karat, (ii) you may continue to be a non-employee, non-officer advisor to Karat provided that such activity shall not interfere with the performance of your full-time employment with Chem Rx, (iii) you may continue to serve on the board of directors of Surge Components, Inc., (iv) you may continue to serve on the board of directors of and as an advisor to Gomez Family Enterprises Inc., and (v) you may continue to serve as an advisor to Bentley Associates L.P.; provided , however , that none of the foregoing shall prevent you from devoting substantially all of your working time to the performance of your duties hereunder. Any additional outside activities (including any increase in your duties and activities for any of the foregoing activities, such as, but without limitation, accepting any committee memberships on any board of directors on which you serve) shall be subject to prior written the approval of Chem Rx. You may also engage in the activities of (x) serving as an officer or director of, or otherwise participating in, non-profit educational, welfare, social, religious and civic organizations, and (y) managing personal and family investments, provided that such activities set forth in clauses (x) and (y) do not materially interfere with the performance and fulfillment of your duties and responsibilities hereunder.

(a)       During the Employment Period, Chem Rx will pay you a base salary (“ Base Salary ”) at an annual rate of $325,000, which will be reviewed on each anniversary date hereof and subject to upward adjustment based on the recommendation, review and approval of the Board of Directors of Chem Rx (the “ Board of Directors ”) (or a committee thereof) and payable in accordance with Chem Rx’s normal payroll practices.

(b)       For each calendar year that ends during the Employment Period, you will have the opportunity to earn a bonus (a “ Bonus ”) of up to sixty percent (60%) of the Base Salary earned by you during such year. The amount of your Bonus for any calendar year shall be determined in the sole discretion of the Board of Directors or a committee thereof, but shall not be less than $75,000 for each full year of your Employment Period (or, as applicable, a prorated lesser amount for shorter periods). Except as set forth in Section 6, to receive a Bonus, you must be employed on the last day of the calendar year for which a Bonus is awarded. Each Bonus shall be paid 90 days after the end of the applicable calendar year.

(c)       Upon the Effective Date, you will be granted an option to purchase 50,000 shares of common stock of Chem Rx (an “Option Award”), which option will have an exercise price equal to the closing market price of the common stock on the Effective Date, and will become exercisable in three equal installments on the first, second and third annual anniversaries of the Effective Date, in each case, provided that you are still employed by Chem Rx on the applicable date. You will be entitled to receive an additional Option Award of 50,000 shares on the first annual anniversary of the Effective

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Date, provided that you are still employed by Chem Rx on such anniversary date, subject to the same vesting schedule. Each Option Award will be subject to the execution and delivery of a stock option contract consistent with that used by Chem Rx for its other senior executives, and will be subject to the Chem Rx Corporation 2007 Incentive Compensation Plan. Any additional stock option grants for any calendar year shall be determined in the sole discretion of the Board of Directors or a committee thereof.

(a)        Benefits . You shall participate in all medical and dental benefit plans (with spousal and dependent coverage) and pension plans available to other senior executives of Chem Rx generally. Chem Rx will pay the entire premium for each such medical and dental benefit plan. Nothing in this Employment Letter shall restrict Chem Rx’s ability to change or terminate any or all of its benefit plans and programs from time to time, provided that such change affects all participants in the plans, nor shall anything in this Employment Letter prevent any such change from affecting you. If you die during the Employment Period, Chem Rx will pay the COBRA premiums for the continuation of medical insurance coverage for your spouse and dependents for a period of 18 months following the date of death or such shorter period as your spouse and dependents may be eligible for COBRA coverage (it being understood that to the extent such payment would constitute a taxable benefit, Chem Rx may make applicable withholding with respect to such taxable benefit from any amounts otherwise payable to your estate upon your death).

(b)        Reimbursement of Expenses . Chem Rx shall reimburse you for your reasonable expenses incurred in the performance of your duties hereunder. You shall submit proof of all expenses (including, in the case of reimbursement, proof of payment) in conformity with the regular policies and practices of Chem Rx for its senior executives, but in no event shall you be permitted to submit a claim for reimbursement more than three years after your separation from service with the Group.

(c)        Auto Allowance . Chem Rx will pay you an auto allowance of $800 a month during the Term. Chem Rx may satisfy any withholding tax obligation it may have under applicable law with respect to such allowance.

5.          Vacation . You shall be entitled to four (4) weeks paid vacation time during each year of the Employment Period, which shall be taken as mutually determined by you and the Chief Executive Officer of Chem Rx.

(a)        Death . Your employment will terminate upon your death. Your beneficiaries will be entitled to (i) any earned but unpaid Base Salary, (ii) any Bonus earned with respect to a completed period but not yet paid, (iii) unreimbursed business expenses submitted in accordance with Section 4(b), and (iv) any amounts accrued and payable under the terms of any of the Group’s benefit plans (collectively the “ Accrued Obligations ”). In addition, your beneficiaries will be entitled to the Prorated Bonus. For purposes of this Employment Letter, “ Prorated Bonus ” means the Bonus to which you

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would have been entitled had you remained employed until the end of the calendar year in which such termination occurs, multiplied by a fraction, the numerator of which is the number of days that you were employed during such calendar year, and the denominator of which is 365. Any payments under this provision shall be made 30 days after the date of your death, except that payment of the Prorated Bonus, if any, shall be made 90 days after the end of the calendar year in which termination occurs and amounts payable under any of the Group’s benefit plans shall be paid in accordance with the terms of such plans.

(b)        Disability . Chem Rx may terminate your employment by reason of your Disability. “ Disability ” means your inability to perform your essential job functions by reason of a physical or mental impairment for a period of 120 consecutive days (or an aggregate of 180 days) within a period of 365 consecutive days as determined by an independent physician reasonably approved by you (or your representative) and Chem Rx. Upon such termination, you will be entitled to the Accrued Obligations and the Prorated Bonus. Any payments to you under this provision shall be made 30 days after the date on which your employment is terminated, except that payment of the Prorated Bonus, if any, shall be made 90 days after the end of the calendar year in which termination occurs and amounts payable under any of the Group’s benefit plans shall be paid in accordance with the terms of such plans. Payment of the Prorated Bonus shall be conditional upon your continuing compliance, other than any isolated, insubstantial and inadvertent failure to comply that is not in bad faith, with the restrictive covenants contained in Section 7, as well as your execution, delivery and nonrevocation of release of claims in favor of Chem Rx, in substantially the form attached as Exhibit A (the “ Release ”).

(c)        Termination for Cause . Chem Rx may terminate your employment during the Term for Cause. “ Cause ” means your (i) commission of an act that constitutes common law fraud or a felony, commission of any other crime involving moral turpitude, or commission of any other tortious or unlawful act causing material harm to the business, standing or reputation of the Group without the good faith belief that such conduct was in the best interests of Chem Rx, (ii) material breach of this Employment Letter, after Chem Rx has given you 10 days written notice and an opportunity to cure such breach to the extent curable, (iii) your willful failure or refusal to perform your material duties or obligations under this Employment Letter, including, without limitation, willful refusal to abide by the reasonable directions of the Board of Directors or any reasonable policy adopted by the Board of Directors, in each case after Chem Rx has given you 10 days written notice and an opportunity to cure such failure or refusal to the extent curable, (iv) willful misconduct or gross negligence in the performance of your duties under this Employment Letter and (v) material misappropriation or embezzlement of any property of the Group. Chem Rx shall not characterize any termination of your employment as a termination for Cause unless (i) you are given written notice of the conduct that constitutes Cause and (ii) you are given an opportunity to be heard before the Board of Directors with counsel of your choosing. If your employment is terminated for Cause, you will only be entitled to the Accrued Obligations.

(d)        Termination by Chem Rx without Cause . Chem Rx may terminate your employment during the Term for any or no reason. If Chem Rx terminates your

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employment during the Term without Cause or if your employment during the Term is terminated by reason of your death or Disability, then, in addition to the Accrued Obligations, and in lieu of any other severance benefits otherwise payable under any Chem Rx policy or otherwise, subject to the limitations set forth below, Chem Rx shall pay or provide you: (1) an amount equal to your annual Base Salary, payable over the one-year period following termination of your employment in accordance with Chem Rx’s normal payroll practices; (2) an amount equal to the minimum annual Bonus of $75,000, payable over the one-year period following termination of your employment in accordance with Chem Rx’s normal payroll practices; and (3) one year of continued medical, dental and other benefits that may be in effect on the date of termination of your employment, provided that if Chem Rx’s plans do not permit you to participate on this basis, Chem Rx will provide such benefits outside of the plans and provided that if you become employed during this period and are eligible for comparable coverage from your new employer, Chem Rx shall cease providing such benefits. Your right to the payments and benefits set forth in clauses (1) through (3) above (collectively the “ Severance Benefits ”) shall be conditional upon your continuing compliance, other than any insubstantial failure to comply that is not in bad faith, with the restrictive covenants contained in Section 7, as well as your execution, delivery and nonrevocation of the Release. If you fail to comply with the restrictive covenants set forth in Section 7 or to timely deliver the Release so that the Revocation Period (as such term is defined in the Release) has expired before the earliest date that the applicable Severance Benefits would otherwise be paid under this Section 6(d), you will forfeit all Severance Benefits (including the provision of benefits under clause (3) above); provided , however , that Chem Rx shall not take any action to discontinue the Severance Benefits for this reason unless it has given you 10 days written notice and an opportunity to cure such breach to the extent curable. If you are eligible for cash payments under clause (1) and you are a “specified employee” under Section 409A of the Internal Revenue Code of 1986 and the regulations promulgated thereunder (collectively, the “Code”), any portion of the payments that either do not qualify under the “short-term deferral rule” or exceed two times the lesser of (A) your “annualized compensation” for the calendar year preceding your termination of employment (in each case, as those terms are defined under Section 409A of the Code), or (B) the maximum amount that may be taken into account under Section 401(a)(17) of the Code for the year in which you terminate employment, shall be delayed until the first day of the seventh month following your termination of employment, or if earlier, your death. If you are eligible for cash payments under clauses (2) and/or (3), such payments shall be made at the times as set forth above under clauses (2) and/or (3), respectively, except that, to the extent necessary to avoid adverse consequences to you under Section 409A of the Code, any such payments shall be delayed, if later than the payment dates set forth in clauses (2) and (3) above, until the first day of the seventh month following your termination of employment, or if earlier, your death. Furthermore, Chem Rx shall not be required to make, and you shall not be required to receive, any severance or other payment or benefit under Section 6 hereof at such time as the making of such payment or the provision of such benefit or the receipt thereof shall result in a tax to you arising under Section 409A of the Code. The parties agree that for purposes of Code Section 409A and Treasury Regulation 1.409A-

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2(b)(2)(iii), amounts payable under clause (1) shall be treated as a right to a series of separate payments.

(e)        Termination by You for Good Reason . You may terminate your employment during the Term for Good Reason. “ Good Reason ” means (i) any material breach by Chem Rx of its obligations under this Employment Letter, (ii) any material diminution of your duties, status, reporting lines or authority or (iii) a relocation of your principal place of employment more than 50 miles from its location in Long Beach, New York as of the date hereof. However, none of the foregoing events or conditions will constitute Good Reason unless (w) you provide Chem Rx with a written objection of the event or condition within 30 days following the initial existence of the condition, (x) Chem Rx does not reverse or otherwise cure the event or condition to the extent curable within 30 days of receiving that written objection (y) you resign your employment within 30 days following the expiration of that cure period, and (z) your termination of employment occurs within one year following the initial existence of one or more of the conditions described in the previous sentence. If you terminate your employment for Good Reason, you shall be treated as if your employment were terminated by Chem Rx without Cause during the Term pursuant to Section 6(