Exhibit 10.38

 

FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER

 

This FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER (this
“Amendment”), dated as of June 15, 2004, is by and among Option Care, Inc., a
Delaware corporation (“Option Care”) and its domestic subsidiaries party hereto
(collectively with Option Care, the “Borrowers”), JPMorgan Chase Bank and
LaSalle Bank National Association, as Lenders (the “Lenders”) and JPMorgan Chase
Bank, as administrative and collateral agent (the “Agent”).

 

W I T N E S S E T H :

 

WHEREAS, the Borrowers, JPMorgan Chase Bank, LaSalle Bank National Association,
Webster Bank and the Agent are parties to that certain Credit and Security
Agreement, dated as of March 29, 2002 (as amended from time to time, the “Credit
Agreement”);

 

WHEREAS, pursuant to an Assignment and Acceptance between JPMorgan Chase Bank
and Webster Bank dated as of the date hereof (the “Webster Assignment”),
JPMorgan Chase Bank is acquiring all right, title and interest of Webster Bank
in and to the Loans and the Revolving Credit Commitment of Webster Bank;

 

WHEREAS, the Borrowers have requested that the Lenders amend the Credit
Agreement to, among other things, reduce the aggregate amount of the Revolving
Credit Commitments to $20,000,000;

 

WHEREAS, the Borrowers have informed the Agent that pursuant an Asset Purchase
Agreement dated as of May 25, 2004, Option Care Enterprises, Inc. sold all of
the assets used in the clinical trial business conducted by Clinical Resource
Network, Inc. a Delaware corporation and subsidiary of Option Care Enterprises,
Inc., (“Clinical Resource Network”), to ClinTec Pharmaceuticals Support
Services, Inc. (such sale, the “Clinical Resource Sale”), in exchange for a
Non-Recourse Note issued on May 25, 2004 by ClinTec Pharmaceutical Support
Services, Inc. to Option Care Enterprises, Inc. in the original principal amount
of $164,000 (such note, the “Clinical Resource Promissory Note”); and

 

WHEREAS, the Agent and the Lenders have agreed to amend the Credit Agreement on
the terms and subject to the conditions provided herein;

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained in this Amendment, the Borrowers, the Lenders and the Agent hereby
agree as follows:

 

1.             Capitalized Terms.  Capitalized terms used herein shall have the
meanings set forth in the Credit Agreement.

 

2.             Amendment to Definition of Applicable Commitment Fee Rate. 
Effective as of June 1, 2004, the definition of Applicable Commitment Fee Rate
set forth in Section 1.01 of the Credit Agreement is hereby amended by deleting
such definition in its entirety and replacing it with the following:

 

“Applicable Commitment Fee Rate” means a rate of interest per year equal to
thirty-seven and one half (37.5) basis points.  Anything in this Agreement to
the contrary notwithstanding, after the occurrence and during the continuance of
any Event of Default, the Applicable Commitment Fee Rate shall equal forty-five
(45) basis points.”

 

3.             Amendment to Definition of Fixed Charge Coverage Ratio.  The
definition of “Fixed Charge Coverage Ratio” set forth in Section 1.01 of the
Credit Agreement is hereby amended by deleting such definition in its entirety
and replacing it with the following:

 

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“Fixed Charge Coverage Ratio” means, as of any date, the ratio of (a) (i) EBITDA
of the Borrowers and their Subsidiaries for the period of four Fiscal Quarters
most recently ended prior to such date (determined on a consolidated basis
without duplication in accordance with GAAP) minus (ii) the aggregate amount
paid by the Borrowers and their Subsidiaries in cash in respect of the current
portion of all income taxes for such period minus (iii) the aggregate amount of
all Non-Financed Capital Expenditures of the Borrower and their Subsidiaries
during such period, to (b) the sum for the Borrowers and their Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), of (i) the aggregate amount of Interest Expense for such period, (ii) the
aggregate amount of regularly scheduled payments of principal in respect of
Indebtedness for borrowed money (including the principal component of any
payments in respect of Capital Lease Obligations) paid or required to be paid
during such period, (iii) the aggregate amount of cash payments in respect of
Earn Out Obligations paid or required to be paid during such period and (iv) the
aggregate amount of cash dividends and distributions paid by the Borrowers and
their Subsidiaries during such period; provided, however, that for the Fiscal
Quarter ending September 30, 2003 and for any fiscal period thereafter which
includes such Fiscal Quarter, the Borrowers shall be permitted to add to the
numerator of such ratio an amount equal to the lesser of (x) the actual amount
of non-cash losses resulting from accounts receivable reserves and/or write-offs
recognized by the Borrowers during such Fiscal Quarter with respect to certain
uncollectible receivables of the Borrowers and (y) $7,000,000.”

 

4.             Amendment to Definition of Letter of Credit Sublimit.  The
definition of Letter of Credit Sublimit set forth in Section 1.01 is hereby
amended by deleting such subsection in its entirety and replacing it with the
following:

 

“Letter of Credit Sublimit” means $2,500,000.”

 

5.             Amendment to Definition of Revolving Credit Commitments.  The
definition of Revolving Credit Commitments is hereby amended by deleting such
definition in its entirety and replacing it with the following:

 

“Revolving Credit Commitments” means, the commitments of the Lenders to make
Revolving Credit Loans to the Borrowers as in effect from time to time
hereunder.  The aggregate amount of Revolving Credit Commitments shall initially
equal $20,000,000 and may be reduced pursuant to § 2.10.”

 

6.             Amendment to Schedule 2.01(a).  The amended Schedule 2.01(a)
attached hereto is hereby incorporated into the Credit Agreement as of the date
hereof and each reference in the Credit Agreement to such Schedule shall be
deemed to refer to such Schedule attached hereto on and after the date hereof.

 

7.             Amendment to Section 7.11.  Section 7.11 of the Credit Agreement
is hereby amended by deleting such section in its entirety and replacing it with
the following:

 

“Section 7.11       Field Audits.  The Borrowers will permit the Agent to
conduct field audit examinations of, among other things, the Borrowers’ and
their Subsidiaries’ assets, liabilities, books, records, billing and collection
processes and management information systems once each Fiscal Year; provided
that (i) in the event that the sum of (x) the average outstanding principal
amount of all Loans plus (y) the average Letter of Credit Exposure

 

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exceeds $5,000,000 for a period of 30 consecutive days, the Agent shall
thereafter have the right to conduct field audit examinations twice each Fiscal
Year; and (ii) the Agent shall have the right to conduct field audit
examinations at times and with such frequencies as the Agent deems appropriate
upon the occurrence and during the continuance of a Default.  Each Lender shall
have the right to participate, in a manner reasonably acceptable to such Lender,
in such field audit examinations.  The Borrowers will reimburse the Agent for
the expense of each field audit examination at the Agent’s standard per diem
rate per person, plus out-of-pocket expenses.  In connection with such field
audits, the Borrowers will permit the Agent to make test verifications of the
Accounts with the Borrowers’ and their Subsidiaries’ customers.”

 

8.             Amendment to Section 8.04.  Section 8.04 of the Credit Agreement
is hereby amended by deleting such Section in its entirety and replacing it with
the following:

 

“Section 8.04.        Dividends and Stock Repurchases.  Declare or pay any
dividends, purchase, redeem, retire or otherwise acquire for value any of its
capital stock now or hereafter outstanding, or make any distribution of assets
to its stockholders as such whether in cash, assets or in obligations of the
Borrowers, or allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption or retirement of
any shares of its capital stock, or make any other distribution by reduction of
capital or otherwise in respect of any shares of its capital stock or permit any
Subsidiary to purchase or otherwise acquire for value any stock of the Borrowers
or another Subsidiary, except that:  (a) Option Care may declare and deliver
dividends and make distributions payable solely in common stock of Option Care;
(b) so long as no Default or Event of Default shall have occurred and be
continuing and no Default or Event of Default shall be caused thereby, Option
Care may declare and pay cash dividends and make cash distributions; provided
that the aggregate cash paid by Option Care during any fiscal year in respect of
dividends and distributions shall not exceed $2,500,000; (c) Option Care may
purchase or otherwise acquire shares of its capital stock for cash from
employees or directors in connection with the termination of their employment or
affiliation with Option Care and pursuant to employee stock redemption plans;
provided that the aggregate cash consideration paid by Option Care for all such
shares does not exceed $500,000 during any fiscal year; and (d) Option Care may
purchase, redeem or otherwise acquire shares of its capital stock from
stockholders (collectively, “Share Repurchases”); provided that (i) the
aggregate cash consideration paid by Option Care for all Share Repurchases after
the Effective Date shall not exceed $8,000,000, (ii) notwithstanding anything
set forth in Section 9.03 to the contrary, after giving effect to each Share
Repurchase, the Borrowers shall have Collateral Availability of not less than
$2,000,000 and (iii) after giving effect to each Share Repurchase, the Total
Leverage Ratio of the Borrowers shall not exceed 2.25 to 1.00 on a proforma
basis for the twelve months most recently ended.  In addition, if, as a result
of any proposed Share Repurchase, the aggregate cash consideration paid by
Option Care for all Share Repurchases after the Effective Date shall exceed
either (x) $4,000,000 or (y) $6,500,000, the Borrowers shall deliver to the
Agent not earlier than three (3) Banking Days prior to the consummation of such
Share Repurchase, a certificate of the CFO of Option Care in form reasonably
satisfactory to the Agent confirming compliance with the conditions set forth in
clauses (ii) and (iii) of clause (d) of this Section 8.04.”

 

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9.             Amendment to Section 9.03.  Section 9.03 of the Credit Agreement
is hereby amended by deleting such Section in its entirety and replacing it with
the following:

 

“Section 9.03         Minimum Collateral Availability.  The Borrowers shall not
permit the Collateral Availability at any time to be less than $2,000,000.”

 

10.           Special Representations and Warranties with respect to the
Clinical Resource Sale.  The Borrowers hereby represent and warrant to the Agent
and each Lender that (i) the assets sold by Option Care Enterprises, Inc. in
connection with the Clinical Resource Sale constitute all of the assets used by
Clinical Resource Network in the conduct of its business prior to the Clinical
Resource Sale; (ii) the principal amount of the Clinical Resource Promissory
Note represents the total amount of the Borrowers’ investment in Clinical
Resource Network and no revenues or Accounts were generated by Clinical Resource
Network in the conduct of its business; (iii) no Accounts or inventory were
sold, leased, assigned or otherwise transferred by Option Care Enterprises, Inc.
in connection with the Clinical Resource Sale and (iv) after giving effect to
the Clinical Resource Sale, Clinical Resource Network no longer conducts
business and does not own or hold any property or assets.

 

11.           Waiver with respect to Dissolution of Clinical Resource Network,
Inc.  The Borrowers have informed the Agent that they wish to dissolve Clinical
Resource Network.  Based upon the representations set forth in Section 10
hereof, the Agent and the Lenders hereby waive the provisions of Sections 8.02
and 10.01(e)(3) to the extent necessary to permit the Borrowers to dissolve
Clinical Resource Network.

 

12.           Effectiveness.  This Amendment shall be not deemed effective until
the Agent receives (i) the Webster Assignment duly executed by Webster Bank and
(ii) duly executed copies of this Amendment from the Lenders and the Borrowers.

 

13.           Assignment of Clinical Resource Promissory Note.  Within 30 days
after the effective date of this Amendment, Option Care Enterprises, Inc. shall
deliver to the Agent an assignment of the Clinical Resource Promissory Note to
the Agent for the benefit of the Lenders in form and substance satisfactory to
the Agent.  Such assignment shall provide that all payments of principal and
interest payable to or received by Option Care Enterprises, Inc. under the
Clinical Resource Promissory Note shall be paid directly to the Agent for the
benefit of the Lenders.

 

14.           LaSalle Blocked Account Agreement.  Within 30 days after the
effective date of this Amendment, the Borrowers, LaSalle Bank National
Association and the Agent shall execute and deliver a tri-party blocked account
agreement in form and substance satisfactory to the Agent with respect to the
bank account maintained by the Borrowers at LaSalle Bank National Association.

 

15.           Representations and Warranties; Events of Default.  Each Borrower
hereby represents and warrants to the Agent and each Lender that to such
Borrower’s knowledge:  (i) except as otherwise disclosed in the schedules
attached to the Credit Agreement, all of the representations and warranties of
the Borrowers set forth in the Credit Agreement are true and correct in all
material respects with the same force and effect as if made on and as of the
date of this Amendment; (ii) there exists no Default or Event of Default; and
(iii) no material litigation proceedings or investigations relating to any of
the Borrowers are pending.

 

16.           Miscellaneous.

 

(a)           The Credit Agreement, as amended by this Amendment, and each of
the other Facility Documents shall remain in full force and effect and are
hereby ratified and confirmed in all respects.  The

 

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execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Agent or the Lenders under the
Facility Documents, nor constitute a waiver of any provision of the Facility
Documents except as specifically set forth herein.

 

(b)           Each of the Borrowers hereby ratifies, affirms, acknowledges and
agrees that the Credit Agreement and the other Facility Documents represent the
valid, enforceable and collectible obligations of each Borrower, and each
Borrower further acknowledges that there are no existing claims, defenses,
personal or otherwise, or rights of setoff whatsoever with respect to the Credit
Agreement or any of the other Facility Documents.  Each Borrower hereby agrees
that this Amendment in no way acts as a release or relinquishment of the Liens
securing the Obligations, and such Liens are hereby ratified and confirmed by
each Borrower in all respects.

 

(c)           THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

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IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to Credit and
Security Agreement to be executed and delivered by their proper and duly
authorized officers as of the date first above written. 

 

BORROWERS

 

OPTION CARE, INC., a Delaware corporation,
OPTION CARE, INC., a California corporation
MANAGEMENT BY INFORMATION, INC.
OPTION CARE HOME HEALTH OF CALIFORNIA, INC.
OPTION CARE OF OKLAHOMA, INC.
OPTIONET, INC.
HOME HEALTH OF OPTION CARE, INC.
OPTION CARE ENTERPRISES, INC., a
    Delaware corporation
OPTION CARE HOSPICE, INC.
OPTION CARE ENTERPRISES, INC., a
    Pennsylvania corporation
OPTION CARE OF DENVER, INC.
OPTION HOME HEALTH, INC.
OPTIONMED, INC.
EXCEL HEALTHCARE, L.L.C.
REHAB OPTIONS, INC.
NORTH COUNTY HOME I.V., INC.
SPRINGVILLE PHARMACY INFUSION
    THERAPY, INC.
INFUSION SPECIALTIES, INC.
OPTION CARE OF NEW YORK, INC.
OPTION CARE ENTERPRISES OF NEW
    YORK, INC.

 

 

 

By:

 

 

 

Name:

Richard M. Smith

 

Title:

President and Chief Operating Officer

 

 

 

 

 

 

 

By:

 

 

 

Name:

Joseph P. Bonaccorsi

 

Title:

Secretary

 

 

[Signature Page to Fifth Amendment to

Credit and Security Agreement]

 

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OPTION CARE HOME HEALTH, L.L.C.

 

 

 

By:

 

 

 

Name:

Richard M. Smith

 

Title:

President and Chief Operating Officer

 

 

 

 

 

 

By:

 

 

 

Name:

Joseph P. Bonaccorsi

 

Title:

Secretary

 

 

 

 

 

 

By

Option Care Enterprises, Inc., a member

 

 

 

 

 

 

By:

 

 

 

Name:

Richard M. Smith

 

Title:

President and Chief Operating Officer

 

 

 

 

 

 

By:

 

 

 

Name:

Joseph P. Bonaccorsi

 

Title:

Secretary

 

 

 

 

 

 

 

CLINICAL RESOURCE NETWORK, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name:

Gail Adinamis

 

Title:

President

 

 

 

 

 

 

By:

 

 

 

Name:

Joseph Bonaccorsi

 

Title:

Secretary

 

[Signature Page to Fifth Amendment to

Credit and Security Agreement]

 

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AGENT AND LENDER:

 

 

 

JPMORGAN CHASE BANK, in its capacities as Administrative and Collateral Agent
and Lender

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

[Signature Page to Fifth Amendment to

Credit and Security Agreement]

 

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ADDITIONAL LENDER:

 

 

 

LASALLE BANK NATIONAL ASSOCIATION

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

Title:

 

[Signature Page to Fifth Amendment to

Credit and Security Agreement]

 

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Schedule 2.01(a)

 

to

 

OPTION CARE, INC.

 

Credit Agreement

 

List of Lenders and Commitments

 

Name of Lender

 

Revolving Credit
Commitment
Amount

 

Revolving Credit
Commitment
Percentage

 

JPMorgan Chase Bank

 

13,333,333.34

 

66.6666667

%

 

 

 

 

 

 

LaSalle Bank National Association

 

6,666,666.66

 

33.3333333

%

 

 

 

 

 

 

Total

 

$

20,000,000

 

100.0000000

%

 

10

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