Item 1.01. Entry into a Material Definitive Agreement
Registration Rights Agreement
In connection with the Mergers, the Company
and Omega Parent entered into a Registration Rights Agreement at the closing of the Mergers on August 6, 2019 (the “Registration
Rights Agreement”). The Registration Rights Agreement, among other things, grants customary registration rights to Omega
Parent, including demand registration rights, shelf registration rights and piggyback registration rights.
A description of the material terms of the
Registration Rights Agreement has been previously disclosed under the section “The Ancillary Agreements — Registration
Rights Agreement” to the Company’s definitive proxy statement on Schedule 14A, filed with the United States Securities
and Exchange Commission (the “Commission”) on June 26, 2019 and is incorporated herein by reference.
The foregoing summary does not purport to
be a complete description and is qualified in its entirety by reference to the full text of the Registration Rights Agreement,
which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Subject to certain limited
exceptions set forth in the Merger Agreement, including the ability to transfer, in the aggregate, an amount not to exceed
20% of the outstanding shares of Common Stock immediately following the closing of the Mergers in Rule 144 sales, Omega
Parent is prohibited from transferring, selling, exchanging, encumbering or disposing of any Common Stock issued to it in as
Merger Consideration or Escrowed Shares, each as defined below, for the period commencing on the closing date and ending on
the 12-month anniversary of the date of the Merger Agreement.
Director Nomination Agreement
In connection with the Mergers, the Company
and Omega Parent entered into a Director Nomination Agreement on August 6, 2019 (the “Director Nomination Agreement”).
The Director Nomination Agreement
provides that, from and after the closing of the Mergers until the date that Omega Parent and its affiliates cease to
beneficially own Common Stock representing at least 10% of the voting power of the then-outstanding Common Stock, Omega
Parent is entitled to nominate for election to the Company’s Board of Directors (the “Board”) or any committee of the
Board, a number of directors equal to the product obtained by multiplying (a) the percentage of the total voting power of the
then-outstanding Common Stock then beneficially owned by Omega Parent and its affiliates and (b) the authorized number of
directors on the Board, including any vacancies, with such product rounded up to the nearest whole number in all cases. The
Director Nomination Agreement also provides Omega Parent with the right to fill any vacancies created by the removal, death,
disability, disqualification or resignation from the Board of any of its nominees that is elected to the Board. In the
Director Nomination Agreement, the Company agrees to use its reasonable best efforts to ensure that any nominees designated
by Omega Parent in accordance with the Director Nomination Agreement are included in the Board’s slate of nominees to
the stockholders for each election of directors and that each nominee designated by Omega Parent is included in the proxy
statement prepared by management of the Company in connection with soliciting proxies for every meeting of the
stockholders at which directors are voted on for election.
The Director Nomination Agreement automatically
terminates on the date on which Omega Parent and its affiliates cease to beneficially own at least 10% of the total voting power
of the then outstanding Common Stock.
A description of the material terms of the
Director Nomination Agreement has been previously disclosed under the section “The Ancillary Agreements — Director
Nomination Agreement” on the Company’s definitive proxy statement on Schedule 14A, filed with the Commission on June
26, 2019 and is incorporated herein by reference.
The foregoing summary does not purport to
be a complete description and is qualified in its entirety by reference to the full text of the Director Nomination Agreement,
which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Secured Financing
In connection with the Mergers and to (among
other things) finance a portion of the Mergers, Option Care and the Company entered into (i) a first lien term loan credit agreement
among HC Group Holdings II, LLC (“HC II, LLC”), as the Initial Borrower prior to the debt assumption, BioScrip, as
Parent Borrower, upon the consummation of the debt assumption, the guarantors party thereto from time to time, Bank of America,
N.A., as the Administrative Agent, the lenders party thereto from time to time, and the other parties party thereto from time to
time, dated as of August 6, 2019 (the “First Lien Credit Agreement”), pursuant to which the Initial Borrower incurred
a $925 million senior secured first lien term loan facility (the “First Lien Term Loan Facility”); (ii) an ABL credit
agreement among HC II, LLC, as the Initial Borrower prior to the debt assumption, BioScrip, as Parent Borrower, upon the consummation
of the debt assumption, the other borrowers and guarantors party thereto from time to time, Bank of America, N.A., as the Administrative
Agent, Swing Line Lender and Issuing Bank, and the other parties party thereto from time to time, dated as of August 6, 2019 (the
“ABL Credit Agreement”), pursuant to which the lenders party thereto have made available a $150 million senior secured
first lien asset-based revolving credit facility and (iii) an indenture among HC II, LLC, as the Initial Issuer prior to the debt
assumption, BioScrip, as Parent Issuer, upon the consummation of the debt assumption, subsidiary issuers and guarantors party thereto
from time to time, and Ankura Trust Company, LLC, as the Trustee and Collateral Agent, dated as of August 6, 2019 (the “Second
Lien Notes Indenture”), pursuant to HC II, LLC issued $400 million aggregate principal amount of second lien notes. The Company,
Goldman Sachs Merchant Banking Division and Ares Management entered into a Note Purchase Agreement, dated August 6, 2019 (the “Note
Purchase Agreement”) pursuant to which Goldman Sachs Merchant Banking Division and Ares Management agreed to purchase the
second lien notes.
First Lien Term Loan
On August 6, 2019, Omega, as initial borrower
(prior to the debt assumption, as the “Initial Borrower”), the Company, as parent borrower (following the debt assumption,
as the “Parent Borrower” and, together with the Initial Borrower, the “Borrowers”), certain subsidiaries
of Omega and the Company as guarantors (the “Guarantors”) and Bank of America, N.A., as administrative agent (in such
capacity, the “Administrative Agent”), entered into the First Lien Credit Agreement. Capitalized terms used in this
description of the First Lien Credit Agreement in this Item 1.01 but not defined herein have the meaning assigned to such terms
in the First Lien Credit Agreement.
Borrowings under the First Lien Term Loan
Facility will bear interest at a rate equal to, at the option of the Parent Borrower, either (i) the then applicable Eurocurrency
Rate plus an Applicable Rate of 4.50% or (ii) the then applicable Base Rate plus an Applicable Rate of 3.50%;
provided
that,
in each case, the respective Applicable Rates shall be subject to a 25 basis point step-down if either (x) the First Lien Net Leverage
Ratio is less than or equal to 3.70:1.00 or (y) the Term B Loans have a B1 rating from Moody’s and a B rating from S&P.
The Parent Borrower is also required to pay customary agency fees under the First Lien Credit Agreement.
The First Lien Credit Agreement requires
scheduled quarterly payments on the First Lien Term Loan Facility in annual amounts equal to 0.25% of the original principal amount
of the First Lien Term Loan Facility outstanding on August 6, 2019 (the “Closing Date”) commencing with the last day
of the second full fiscal quarter after the Closing Date with the balance paid at maturity.
In addition, the First Lien Term Loan Facility
requires the Parent Borrower to prepay outstanding term loan borrowings, subject to certain exceptions, with:
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50% (which percentage will be reduced if the Parent Borrower
attains certain leverage ratios) of the Parent Borrower’s annual excess cash flow;
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100% of the net cash proceeds of all non-ordinary course
asset sales and other dispositions of property; and
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100% of the net cash proceeds of any issuance or incurrence
of debt, other than proceeds from debt permitted under the First Lien Credit Agreement. The Parent Borrower may, with limited
exceptions, voluntarily repay outstanding loans under the First Lien Term Loan Facility at any time, without prepayment premium
or penalty, subject to customary “breakage” costs with respect to Eurocurrency Rate Loans.
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All obligations under the First Lien Term
Loan Facility are unconditionally guaranteed by each of the Parent Borrower’s existing and future direct and indirect material,
wholly owned domestic subsidiaries, subject to certain exceptions. The obligations are secured by first priority security interest
in each of the Parent Borrower’s subsidiaries’ capital stock (subject to certain exceptions) and substantially all
of the Parent Borrower’s and the other Loan Party’s property and assets (other than the ABL Priority Collateral), (the
“Term Loan Priority Collateral”), in each case subject to certain exceptions, and a second priority security interest
in the ABL Priority Collateral (as defined below).
The First Lien Credit Agreement contains
certain customary affirmative covenants and events of default. The negative covenants in the First Lien Credit Agreement include,
among other things, limitations (none of which are absolute) on the Parent Borrower’s and its Restricted Subsidiaries’
ability to:
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incur additional debt or issue certain preferred shares;
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create liens on certain assets;
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make certain loans or investments (including acquisitions);
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pay dividends on or make distributions in respect of
its capital stock or make other restricted payments;
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consolidate, merge, sell or otherwise dispose of all
or substantially all of its assets;
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enter into certain transactions with its affiliates;
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change the nature of its business;
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modify the terms of certain debt or organizational agreements.
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The lenders and their affiliates have in
the past engaged, and may in the future engage, in transactions with and perform services, including commercial banking, financial
advisory and investment banking services, for the Parent Borrower and its affiliates in the ordinary course of business for which
they have received or will receive customary fees and expenses.
The First Lien Term Loan matures on August
6, 2026.
ABL Credit Agreement
On August 6, 2019, the Borrowers, the
Guarantors and the Administrative Agent, entered into the ABL Credit Agreement pursuant to which certain financial
institutions provided an asset based loan revolving credit facility (the “ABL Facility”) with aggregate
commitments of $150 million (including a letter of credit sub-facility and swing line loan sub-facility). Capitalized terms
used in this description of the ABL Credit Agreement but not defined herein in this description of the ABL Credit Facility in
this Item 1.01 have the meaning assigned to such terms in the ABL Credit Agreement.
Borrowings under the ABL Facility will bear
interest at a rate equal to, at the option of the Parent Borrower, either (i) the then applicable Eurocurrency Rate plus an Applicable
Rate of 2.50% or (ii) the then applicable Base Rate plus an Applicable Rate of 1.50%;
provided
that, in each case, the respective
Applicable Rates shall be subject to a (x) 25 basis point step-up if Historical Excess Availability as a percentage of the Line
Cap is less than 33.33% or (y) 25 basis point step-down if Historical Excess Availability as a percentage of the Line Cap is greater
than or equal to 66.66%.
In addition to paying interest on outstanding
principal under the ABL Facility, the Parent Borrower is required to pay a commitment fee at a rate equal to 0.250% or 0.375% per
annum based on average daily revolving credit exposure under the ABL Facility in respect of the unutilized commitments thereunder.
The Parent Borrower is also required to pay customary agency fees under each ABL Facility as well as letter of credit participation
fees computed at a rate per annum equal to the Applicable Rate for Eurocurrency Rate Loans on the dollar equivalent of the daily
stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing
fees and charges and a fronting fee computed at a rate equal to 0.125% per annum on the daily stated amount of each letter of credit
under the ABL Facility.
The ABL Facility requires the Parent Borrower
to prepay outstanding revolving credit borrowings, subject to certain exceptions, if the Total Revolving Credit Exposure exceeds
the Line Cap.
The Parent Borrower may voluntarily repay
outstanding loans under the ABL Facility at any time, without prepayment premium or penalty.
All obligations under the ABL Facility are
unconditionally guaranteed by each of the Parent Borrower’s existing and future direct and indirect material, wholly owned
domestic subsidiaries, subject to certain exceptions. The obligations are secured by first priority security interest on of each
the Parent Borrower’s and each of its subsidiaries’ inventory, accounts receivable, cash, deposit accounts and certain
assets and property related thereto (the “ABL Priority Collateral”), in each case subject to certain exceptions, and
a third priority security interest in the Term Loan Priority Collateral.
The ABL Facility matures on August 6, 2024.
Second Lien Notes Indenture
On August 6, 2019, prior to the consummation
of the Mergers, Omega, as initial issuer (prior to the debt assumption, the “Initial Issuer”), the Company, as parent
issuer (following the debt assumption, the “Parent Issuer” and, together with the Initial Issuer, the “Issuers”),
the Guarantors and Ankura Trust Company, LLC, as trustee (in such capacity, the “Ankura Trustee”) and collateral agent
(in such capacity, the “Ankura Collateral Agent”), entered into an indenture (the “Indenture”) with respect
to the Senior Secured Second Lien PIK Toggle Floating Rate Notes due 2027 (the “Notes”). Capitalized terms used in
this description of the Indenture in this Item 1.01 but not defined herein have the meaning assigned to such terms in the
Indenture.
Pursuant to the terms of the Indenture,
the Issuers will pay interest, at the option of the Parent Issuer, (i) in cash at a floating rate equal to the sum of the LIBOR
rate plus 8.75% per annum (the “Applicable Rate”), or (ii) for any interest period ending on or prior to August 6,
2020, 100% in kind (the “100% PIK Option”), or (iii) for any interest period ending on or prior to August 6, 2021,
50% in kind, with the other 50% to be paid in cash (the “50% PIK Option”);
provided
that if the Parent Issuer
elects the 100% PIK Option in any interest period, the applicable interest rate for such interest period will be the Applicable
Rate plus an additional 1.00% per annum, and
provided further
that if the Parent Issuer elects the 50% PIK Option in any
interest period, the applicable interest rate for such interest period will be the Applicable Rate plus an additional 0.50% per
annum, with 50% of such interest for such period to be paid by the Issuer in kind and the other 50% to be paid in cash. Interest
is payable quarterly in arrears on the 6th day of each November, February, May and August, commencing November 6, 2019. The Notes
mature on August 6, 2027.
The Notes are senior secured obligations
of the Issuers. The Issuers’ joint and several obligations under the Notes and the Indenture are jointly and severally guaranteed
(the “Guarantees”) by each wholly-owned domestic restricted subsidiary of the Parent Issuer that the Parent Issuer
has caused or will cause to become a Guarantor pursuant to the terms of the Indenture. In addition, the Issuers, the Guarantors
and the Collateral Agent have entered into collateral documents dated the Closing Date (the “Collateral Documents”).
Pursuant to the Collateral Documents, the Issuers’ obligations under the Indenture and the Notes and the Guarantors’
Guarantees are secured by a third priority security interest in the ABL Priority Collateral and a second priority security interest
in the Term Loan Priority Collateral.
The Parent Issuer may redeem the Notes at
its option, in whole or in part, at any time and from time to time from and after the Closing Date for a redemption price equal
to:
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if redeemed during the twelve-month period beginning on August 6, 2019, 103% of the principal amount thereof;
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if redeemed during the twelve-month period beginning on August 6, 2020, 102% of the principal amount thereof;
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if redeemed during the twelve-month period beginning on August 6, 2021, 101% of the principal amount thereof; and
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if redeemed on or after August 5, 2022, 100% of the principal amount thereof;
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in each case, plus accrued and unpaid interest, if any, on the
Notes redeemed to, but excluding, the applicable redemption date.
The Parent Issuer is obligated to make an
offer to purchase all outstanding Notes in cash at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest,
if any, to but excluding the date of purchase, upon a change of control.
The Indenture requires the Parent Issuer
and its restricted subsidiaries, as applicable, to comply with certain other covenants including, but not limited to, covenants
that, subject to certain exceptions, limit the Parent Issuer’s and the restricted subsidiaries’ ability to: (i) incur
additional indebtedness; (ii) grant liens; (iii) engage in certain sale/leaseback, merger, consolidation or asset sale transactions;
(iv) make certain investments; (v) pay dividends or make distributions; (vi) engage in affiliate transactions and (vii) change
the nature of their business.
The Indenture provides for certain customary
events of default.
Note Purchase Agreement
On August 6, 2019, prior to the consummation
of the Mergers, Omega and the Company entered into a note purchase agreement (the “Note Purchase Agreement”) among
Omega as Initial Issuer, the Company as Parent Issuer, the Guarantors party thereto and the purchasers named therein (the “Purchasers”)
relating to the sale of $400 million aggregate principal amount of the Notes to the Purchasers on the Closing Date in a private
placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).
The Note Purchase Agreement contains customary representations, warranties, covenants and closing conditions.
A portion of the net proceeds from the sale
of the Notes and borrowings under the First Lien Term Loan will be used to pay all outstanding borrowings and redeem all outstanding
notes of Omega and the Company and terminate or satisfy and discharge all related credit agreements and indentures. In connection
with the Mergers, the Company satisfied and discharged its obligations under the (i)
Indenture,
dated as of February 11, 2014
governing its outstanding 8.875% Senior Notes due 2021 (ii)
first
lien note purchase agreement, dated June 29, 2017, pursuant to which the Company issued first lien senior secured notes and (ii)
a second lien note purchase agreement, dated June 29, 2017 pursuant to which the Company (a) issued second lien senior secured
notes and (b) had the ability to draw upon and issue second lien delayed draw senior secured notes. Omega redeemed all outstanding
notes and satisfied and discharged its obligations under the Indenture, dated as of April 7, 2015, governing its Senior Secured
Second Lien Floating Rate Notes
due
2023. Omega also repaid all
borrowings under and terminated its
credit agreements governing it $80 million revolving credit facility, $415 million
first lien term loan and $150 million second lien term loan.
The foregoing summary does not purport to
be a complete description and is qualified in its entirety by reference to the full text of the First Lien Term Loan Credit Agreement,
the ABL Credit Agreement, the Second Lien Notes Indenture and the Note Purchase Agreement, copies of which are attached hereto
as Exhibits 10.3, 10.4, 4.1, and 10.5, respectively, and each is incorporated herein by reference.
Amendment to Tax Asset Protection Plan
On August 5, 2019, the Company
entered into an Amendment to its Tax Asset Protection Plan (the “Amendment”) between the Company and American
Stock Transfer & Trust Company, LLC (the “Rights Agent”) that amends the Tax Asset Protection Plan dated
August 11, 2016, (the “TAPP”) between the Company and the Rights Agent.
The Amendment amends the definition of “Final
Expiration Date” under the TAPP to mean 12:01 A.M. on August 6, 2019.
The foregoing description of the Amendment
is qualified in its entirety by reference to the full text of the Amendment, attached hereto as Exhibit 4.2 and incorporated herein
by reference.