**Exhibit 10.38**

 

**FIFTH AMENDMENT TO CREDIT ANDSECURITY AGREEMENT AND WAIVER**

 

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

 

**W I T N E S S E T H :**

 

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

 

WHEREAS, pursuant to an Assignment and Acceptance betweenJPMorgan Chase Bank and Webster Bank dated as of the date hereof (the “WebsterAssignment”), JPMorgan Chase Bank is acquiring all right, title andinterest of Webster Bank in and to the Loans and the Revolving CreditCommitment of Webster Bank;

 

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

 

WHEREAS, the Borrowers have informed the Agent that pursuantan 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 byClinical Resource Network, Inc. a Delaware corporation and subsidiary of OptionCare Enterprises, Inc., (“Clinical Resource Network”), to ClinTecPharmaceuticals Support Services, Inc. (such sale, the “Clinical ResourceSale”), in exchange for a Non-Recourse Note issued on May 25, 2004 by ClinTecPharmaceutical Support Services, Inc. to Option Care Enterprises, Inc. in theoriginal principal amount of $164,000 (such note, the “Clinical ResourcePromissory Note”); and

 

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

 

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

 

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

 

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

 

“Applicable CommitmentFee Rate” means a rate of interest per year equal to thirty-seven and onehalf (37.5) basis points.  Anything inthis Agreement to the contrary notwithstanding, after the occurrence and duringthe continuance of any Event of Default, the Applicable Commitment Fee Rateshall equal forty-five (45) basis points.”

 

3.             Amendment to Definition of FixedCharge Coverage Ratio.  Thedefinition of “Fixed Charge Coverage Ratio” set forth in Section 1.01 of theCredit Agreement is hereby amended by deleting such definition in its entiretyand 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 theperiod of four Fiscal Quarters most recently ended prior to such date(determined on a consolidated basis without duplication in accordance withGAAP) minus (ii) the aggregate amount paid by the Borrowers and theirSubsidiaries in cash in respect of the current portion of all income taxes forsuch period minus (iii) the aggregate amount of all Non-Financed CapitalExpenditures of the Borrower and their Subsidiaries during such period, to (b)the sum for the Borrowers and their Subsidiaries (determined on a consolidatedbasis without duplication in accordance with GAAP), of (i) the aggregate amountof Interest Expense for such period, (ii) the aggregate amount of regularlyscheduled payments of principal in respect of Indebtedness for borrowed money(including the principal component of any payments in respect of Capital LeaseObligations) paid or required to be paid during such period, (iii) theaggregate amount of cash payments in respect of Earn Out Obligations paid orrequired to be paid during such period and (iv) the aggregate amount of cashdividends and distributions paid by the Borrowers and their Subsidiaries duringsuch period; *provided, however,* that for the Fiscal Quarter endingSeptember 30, 2003 and for any fiscal period thereafter which includes suchFiscal Quarter, the Borrowers shall be permitted to add to the numerator ofsuch ratio an amount equal to the lesser of (x) the actual amount of non-cashlosses resulting from accounts receivable reserves and/or write-offs recognizedby the Borrowers during such Fiscal Quarter with respect to certainuncollectible receivables of the Borrowers and (y) $7,000,000.”

 

4.             Amendment to Definition ofLetter of Credit Sublimit.  Thedefinition of Letter of Credit Sublimit set forth in Section 1.01 is herebyamended by deleting such subsection in its entirety and replacing it with thefollowing:

 

“Letter of CreditSublimit” means $2,500,000.”

 

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

 

“Revolving CreditCommitments” means, the commitments of the Lenders to make Revolving CreditLoans to the Borrowers as in effect from time to time hereunder.  The aggregate amount of Revolving CreditCommitments 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) attachedhereto is hereby incorporated into the Credit Agreement as of the date hereofand each reference in the Credit Agreement to such Schedule shall be deemed torefer to such Schedule attached hereto on and after the date hereof.

 

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

 

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

 

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exceeds $5,000,000 for aperiod of 30 consecutive days, the Agent shall thereafter have the right toconduct field audit examinations twice each Fiscal Year; and (ii) the Agentshall have the right to conduct field audit examinations at times and with suchfrequencies as the Agent deems appropriate upon the occurrence and during thecontinuance of a Default.  Each Lendershall have the right to participate, in a manner reasonably acceptable to suchLender, in such field audit examinations. The Borrowers will reimburse the Agent for the expense of each fieldaudit examination at the Agent’s standard per diem rate per person, plusout-of-pocket expenses.  In connectionwith such field audits, the Borrowers will permit the Agent to make testverifications of the Accounts with the Borrowers’ and their Subsidiaries’ customers.”

 

8.             Amendment to Section 8.04.  Section 8.04 of the Credit Agreement ishereby amended by deleting such Section in its entirety and replacing it withthe 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 orhereafter outstanding, or make any distribution of assets to its stockholdersas such whether in cash, assets or in obligations of the Borrowers, or allocateor otherwise set apart any sum for the payment of any dividend or distributionon, or for the purchase, redemption or retirement of any shares of its capitalstock, or make any other distribution by reduction of capital or otherwise inrespect of any shares of its capital stock or permit any Subsidiary to purchaseor otherwise acquire for value any stock of the Borrowers or anotherSubsidiary, except that:  (a) OptionCare may declare and deliver dividends and make distributions payable solely incommon stock of Option Care; (b) so long as no Default or Event of Defaultshall have occurred and be continuing and no Default or Event of Default shallbe caused thereby, Option Care may declare and pay cash dividends and make cashdistributions; provided that the aggregate cash paid by Option Careduring any fiscal year in respect of dividends and distributions shall notexceed $2,500,000; (c) Option Care may purchase or otherwise acquire shares ofits capital stock for cash from employees or directors in connection with the terminationof their employment or affiliation with Option Care and pursuant to employeestock redemption plans; provided that the aggregate cash considerationpaid by Option Care for all such shares does not exceed $500,000 during anyfiscal year; and (d) Option Care may purchase, redeem or otherwise acquireshares of its capital stock from stockholders (collectively, “ShareRepurchases”); provided that (i) the aggregate cash considerationpaid by Option Care for all Share Repurchases after the Effective Date shallnot exceed $8,000,000, (ii) notwithstanding anything set forth in Section 9.03to the contrary, after giving effect to each Share Repurchase, the Borrowersshall have Collateral Availability of not less than $2,000,000 and (iii) aftergiving effect to each Share Repurchase, the Total Leverage Ratio of theBorrowers shall not exceed 2.25 to 1.00 on a proforma basis for the twelvemonths most recently ended.  Inaddition, if, as a result of any proposed Share Repurchase, the aggregate cashconsideration paid by Option Care for all Share Repurchases after the EffectiveDate shall exceed either (x) $4,000,000 or (y) $6,500,000, the Borrowers shalldeliver to the Agent not earlier than three (3) Banking Days prior to theconsummation of such Share Repurchase, a certificate of the CFO of Option Carein form reasonably satisfactory to the Agent confirming compliance with theconditions set forth in clauses (ii) and (iii) of clause (d) of this Section8.04.”

 

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

 

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

 

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

 

11.           Waiver with respect to Dissolutionof Clinical Resource Network, Inc. The Borrowers have informed the Agent that they wish to dissolveClinical Resource Network.  Based uponthe representations set forth in Section 10 hereof, the Agent and the Lendershereby waive the provisions of Sections 8.02 and 10.01(e)(3) to the extentnecessary to permit the Borrowers to dissolve Clinical Resource Network.

 

12.           Effectiveness.  This Amendment shall be not deemed effectiveuntil the Agent receives (i) the Webster Assignment duly executed by WebsterBank and (ii) duly executed copies of this Amendment from the Lenders and theBorrowers.

 

13.           Assignment of Clinical ResourcePromissory Note.  Within 30 daysafter the effective date of this Amendment, Option Care Enterprises, Inc. shalldeliver to the Agent an assignment of the Clinical Resource Promissory Note tothe Agent for the benefit of the Lenders in form and substance satisfactory tothe Agent.  Such assignment shallprovide that all payments of principal and interest payable to or received byOption Care Enterprises, Inc. under the Clinical Resource Promissory Note shallbe paid directly to the Agent for the benefit of the Lenders.

 

14.           LaSalle Blocked Account Agreement.  Within 30 days after the effective date ofthis Amendment, the Borrowers, LaSalle Bank National Association and the Agentshall execute and deliver a tri-party blocked account agreement in form andsubstance satisfactory to the Agent with respect to the bank account maintainedby the Borrowers at LaSalle Bank National Association.

 

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

 

16.           Miscellaneous.

 

(a)           The Credit Agreement, as amended bythis Amendment, and each of the other Facility Documents shall remain in fullforce 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 ofany right, power or remedy of the Agent or the Lenders under the FacilityDocuments, nor constitute a waiver of any provision of the Facility Documentsexcept as specifically set forth herein.

 

(b)           Each of the Borrowers herebyratifies, affirms, acknowledges and agrees that the Credit Agreement and theother Facility Documents represent the valid, enforceable and collectibleobligations of each Borrower, and each Borrower further acknowledges that thereare no existing claims, defenses, personal or otherwise, or rights of setoffwhatsoever with respect to the Credit Agreement or any of the other FacilityDocuments.  Each Borrower hereby agreesthat this Amendment in no way acts as a release or relinquishment of the Lienssecuring the Obligations, and such Liens are hereby ratified and confirmed byeach Borrower in all respects.

 

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

 

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IN WITNESS WHEREOF, the parties have causedthis Fifth Amendment to Credit and Security Agreement to be executed anddelivered by their proper and duly authorized officers as of the date firstabove written.  

 

**BORROWERS**

** **

**OPTIONCARE, INC., a Delaware corporation,OPTION CARE, INC., a California corporationMANAGEMENT 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 corporationOPTION CARE HOSPICE, INC. OPTION CARE ENTERPRISES, INC., a    Pennsylvania corporationOPTION 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**

** **

**OPTIONCARE, INC.**

** **

**CreditAgreement**

 

**Listof 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 | % |
|                                   |        |                                           |            |                                               |             |  |

 

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