As filed
with the Securities and Exchange Commission on June 22,
2010
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
BIOSCRIP, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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5912
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05-0489664
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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*and the Subsidiary Guarantors
listed on Schedule A hereto
(Exact name of registrants as
specified in their charters)
100 Clearbrook Road
Elmsford, New York
10523
(914) 460-1600
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Barry A. Posner
Executive Vice President,
Secretary and General Counsel
100 Clearbrook Road,
Elmsford, New York
10523
(914) 460-1600
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
With copies to:
E. William
Bates, II
Adam M. Freiman
King & Spalding
LLP
1185 Avenue of the
Americas
New York, NY
10036-4003
(212) 556-2100
Approximate date of commencement of proposed sale of the
securities to the public:
As soon as practicable
after this registration statement becomes effective.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer
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Accelerated
filer
þ
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Non-accelerated
filer
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Smaller reporting
company
o
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(Do not check if a smaller reporting company)
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)
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Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer)
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CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering
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Proposed Maximum Aggregate
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Registration
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Securities to be Registered
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Registered
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Price per Note
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Offering Price
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Fee
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10
1
/
4
% Senior
Notes due 2015
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$225,000,000(1)
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100%
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$225,000,000(1)
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$16,042.50
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Guarantees of
10
1
/
4
% Senior
Notes due 2015
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(2)
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(1)
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The registration fee has been
calculated pursuant to Rule 457(f)(2) under the Securities
Act of 1933, as amended (the Securities Act). The
proposed maximum offering price is estimated solely for the
purpose of calculating the registration fee.
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(2)
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Pursuant to Rule 457(n) of the
Securities Act, no registration fee is required for the
guarantees.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
*Schedule A
Table of Subsidiary Guarantors
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State or Other
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Jurisdiction of
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Incorporation or
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I.R.S. Employer
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Exact Name of Subsidiary Guarantor
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Organization
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Identification No.
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Applied Health Care, LLC
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Delaware
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76-0391906
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BioScrip Infusion Management, LLC
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Delaware
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26-1225438
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BioScrip Infusion Services, Inc.
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California
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48-1283527
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BioScrip Infusion Services, LLC
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Delaware
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52-1959962
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BioScrip Nursing Services, LLC
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New York
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13-4201328
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BioScrip PBM Services, LLC
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Delaware
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30-0208041
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BioScrip Pharmacy (NY), Inc.
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New York
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11-3160053
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BioScrip Pharmacy Services, Inc.
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Ohio
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34-1633456
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BioScrip Pharmacy, Inc.
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Minnesota
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41-1841437
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Bradhurst Specialty Pharmacy, Inc. d/b/a The Atrium Pharmacy
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New York
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26-1170850
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Cedar Creek Home Health Care Agency, Inc.
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Tennessee
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62-1358032
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Chronimed, LLC
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Minnesota
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41-1515691
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CHS Holdings, Inc. f/k/a/ Camelot Acquisition Corp.
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Delaware
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27-1909780
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Critical Homecare Solutions, Inc.
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Delaware
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20-5346819
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Deaconess Enterprises, LLC
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Ohio
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31-1201829
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Deaconess HomeCare, LLC
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Delaware
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31-1496561
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East Goshen Pharmacy, Inc.
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Pennsylvania
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23-2499158
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Elk Valley Health Services, Inc.
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Tennessee
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62-1204869
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Elk Valley Home Health Care Agency, Inc.
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Tennessee
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62-1193854
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Elk Valley Professional Affiliates, Inc.
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Tennessee
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62-1193858
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Gericare, Inc.
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Tennessee
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62-1160679
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Infusion Partners of Brunswick, LLC
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Georgia
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59-2966597
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Infusion Partners of Melbourne, LLC
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Georgia
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58-2021377
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Infusion Partners, LLC
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Ohio
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58-2102954
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Infusion Solutions, Inc.
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New Hampshire
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02-0390589
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Knoxville Home Therapies, LLC
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Tennessee
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62-1620048
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National Health Infusion, Inc.
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Florida
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65-0722240
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Natural Living, Inc. d/b/a BioScrip Pharmacy
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New York
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13-2921279
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New England Home Therapies, Inc.
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Massachusetts
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04-3519473
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Option Health, Ltd.
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Illinois
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42-1436658
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Professional Home Care Services, Inc.
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Delaware
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06-1353066
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Regional Ambulatory Diagnostics, Inc.
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Ohio
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31-1362349
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Scott-Wilson, Inc.
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Kentucky
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61-1163044
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South Mississippi Home Health, Inc.
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Mississippi
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64-0736426
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South Mississippi Home Health, Inc. Region I
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Mississippi
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64-0736425
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South Mississippi Home Health, Inc. Region II
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Mississippi
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64-0736424
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South Mississippi Home Health, Inc. Region III
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Mississippi
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64-0935599
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Specialty Pharma, Inc.
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Delaware
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36-4512148
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Wilcox Medical, Inc.
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Vermont
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03-0303137
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The
information in this prospectus is not complete and may be
changed. We may not complete the exchange offer until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
securities and it is not soliciting an offer to buy these
securities in any state where the offer is not permitted.
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SUBJECT TO COMPLETION, DATED
JUNE 22, 2010
Prospectus
Offer to Exchange
Up to $225,000,000 aggregate
principal amount
of our
10
1
/
4
% Senior
Notes due 2015
(which we refer to as the new
notes)
and the guarantees thereof
which have been registered
under the Securities Act of
1933, as amended,
for a like amount of our
outstanding
10
1
/
4
% Senior
Notes due 2015
(which we refer to as the old
notes)
and the guarantees
thereof.
The New
Notes:
The terms of the new notes are substantially identical to the
old notes, except that some of the transfer restrictions,
registration rights and additional interest provisions relating
to the old notes will not apply to the new notes as a result of
the exchange and registration contemplated by this exchange
offer.
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Maturity
The new notes will mature on
October 1, 2015.
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Interest
The new notes will bear interest at
a rate of
10
1
/
4
%
per annum. We will pay interest on the new notes semi-annually,
in arrears, on April 1 and October 1 of each year, beginning on
October 1, 2010.
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Guarantees
The new notes will be fully and
unconditionally guaranteed, jointly and severally, on a senior
unsecured basis by our existing and future direct and indirect
domestic restricted subsidiaries, including all of our domestic
subsidiaries in existence
on ,
2010.
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Ranking
In connection with our acquisition of
Critical Homecare Solutions Holdings, Inc., or CHS, we entered
into a new senior secured credit facility that provides for a
$100.0 million senior secured term loan facility, or the
Term Loan, and a $50.0 million senior secured revolving
credit facility, or the Revolver. We refer to the Revolver and
the Term Loan together as the New Credit Facility. The new notes
and the guarantees will rank equal in right of payment to all of
our and the guarantors future senior unsecured
indebtedness and rank senior in right of payment to all of our
future subordinated indebtedness. The new notes and the
guarantees will be effectively subordinated to our and the
guarantors existing and future secured indebtedness,
including the indebtedness under the New Credit Facility.
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Optional Redemption
On or after April 1,
2013, we may redeem some or all of the new notes at the
redemption prices set forth under Description of
Notes, plus accrued and unpaid interest to the date of
redemption. Prior to April 1, 2013, we may redeem up to 35%
of the aggregate principal amount of the notes (including new
notes and old notes) at the premium set forth under
Description of Notes, plus accrued and unpaid
interest on the new notes to the redemption date, with the net
cash proceeds of certain equity offerings. In addition, we may,
at our option, redeem some or all of the new notes at any time
prior to April 1, 2013, by paying a make whole
premium.
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Change of Control Offer
If we experience
certain
change-of-control
events, the holders of the new notes will have the right to
require us to purchase their new notes at a price in cash equal
to 101% of the principal amount thereof then outstanding, plus
accrued and unpaid interest to the date of purchase.
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Asset Sale Offer
Upon certain asset sales, we
may be required to offer to use the net proceeds of the asset
sale to purchase some of the new notes at 100% of the principal
amount thereof then outstanding, plus accrued and unpaid
interest to the date of purchase.
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The new notes will not be listed on any securities exchange or
included in any automated quotation system.
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The
Exchange Offer:
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The exchange offer will expire at 5:00 p.m., New York City
time,
on ,
2010, unless extended.
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The exchange offer is not subject to any conditions other than
that it not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange
Commission, or the SEC, or that there are no governmental
proceedings that would, in our judgment, reasonably impair our
ability to proceed with the exchange offer.
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Subject to the satisfaction or waiver of specified conditions,
we will exchange the new notes for all old notes that are
validly tendered and not withdrawn prior to the expiration of
the exchange offer.
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Tenders of old notes may be withdrawn at any time before the
expiration of the exchange offer.
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We will not receive any proceeds from the exchange offer.
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The exchange offer involves risks. See Risk
Factors beginning on page 15.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2010.
Table of
Contents
This prospectus incorporates important business and financial
information about us that is not included in or delivered with
this prospectus. This information is available without charge to
security holders upon written or oral request to BioScrip, Inc.,
100 Clearbrook Road, Elmsford, NY 10523, Attention: Corporate
Secretary, telephone number
(914) 460-1600.
In order to obtain timely delivery, you must request the
information no later
than ,
2010, which is five business days before the expiration date of
the exchange offer.
Each broker-dealer that receives new notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of the
new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act
of 1933, as amended, which we refer to as the Securities Act.
This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with
resales of new notes received in exchange for old notes where
the old notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities. We have
agreed to use our best efforts to keep the registration
statement of which this prospectus forms a part effective and to
amend and supplement this prospectus in order to permit this
prospectus to be lawfully delivered by all persons subject to
the prospectus delivery requirements of the Securities Act for
such period of time as such persons must comply with such
requirements in order to resell the new notes. We have also
agreed that we will make a reasonable number of copies of this
prospectus available to any broker-dealer for use in connection
with any such resale. See Plan of Distribution.
Industry
and Market Data
We have obtained the market and competitive position data used
throughout this prospectus from our own research, surveys or
studies conducted by third parties and industry or general
publications. Industry publications and surveys generally state
that they have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of
such information. While we believe that each of these studies
and publications is reliable, we have not independently verified
such data, and we do not make any representation as to the
accuracy of such information. Similarly, we believe our internal
research is reliable, but it has not been verified by any
independent sources.
Trademarks
and Service Marks
This prospectus may include trade names and trademarks of other
companies. Our use or display of other parties trade
names, trademarks or products is not intended to and does not
imply a relationship with, or endorsement or sponsorship of us
by, the trade name or trademark owners.
Cautionary
Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements relate to expectations,
beliefs, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not
historical facts or that necessarily depend upon future events.
In some cases, you can identify forward-looking statements by
terms such as may, will,
should, could, would,
expect, plan, anticipate,
believe, estimate, project,
predict, potential and similar forms of
these words and expressions. The forward-looking statements
contained in this prospectus reflect our current views about
future events, are based on assumptions, and are subject to
known and unknown risks and uncertainties. These forward looking
statements may include, but are not limited to:
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our expectations regarding our financial condition or results of
operations in future periods;
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our future sources of, and needs for, liquidity and capital
resources;
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our expectations regarding economic and business conditions;
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our expectations regarding the size and growth of the market for
our products and services;
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our business strategies and our ability to grow our business;
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the implementation or interpretation of current or future
regulations and legislation, particularly governmental oversight
of our business;
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our ability to maintain contracts and relationships with our
customers;
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our sales and marketing efforts;
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the status of material contractual arrangements, including the
negotiation or re-negotiation of such arrangements;
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the future capital expenditures required to be made by us to
support and grow our business;
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our ability to successfully complete the integration of CHS and
its subsidiaries into our overall business and realize the
anticipated cost saving and other synergies of the acquisition;
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our revenues following the merger;
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our high level of indebtedness;
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our ability to hire and retain key employees; and
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the outcome of lawsuits and governmental inquiries and
investigations.
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Many important factors could cause our actual results or
achievements to differ materially from any future results or
achievements expressed in or implied by our forward-looking
statements, including the factors listed below. Many of the
factors that will determine future events or achievements are
beyond our ability to control or predict. Certain of these are
important factors that could cause actual results or
achievements to differ materially from the results or
achievements reflected in our forward-looking statements,
including, but not limited to:
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risks associated with increased government regulation related to
the health care and insurance industries in general, and more
specifically, specialty pharmaceutical distribution
organizations;
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unfavorable general economic and market conditions;
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reductions in federal and state reimbursement;
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delays or suspensions of federal and state payments for services
provided;
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efforts to reduce healthcare costs and alternative health care
financing;
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existence of complex laws and regulations relating to our
business;
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ii
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satisfying financial covenants contained in our New Credit
Facility;
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availability of financing sources;
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declines and other changes in revenue due to expiration of
short-term contracts;
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our ability to hire and retain key employees;
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network lock-outs and decisions to in-source by health insurers;
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unforeseen problems arising from contract terminations;
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the outcome of lawsuits and governmental investigations;
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difficulties in the implementation and conversion of our new
pharmacy system;
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increases or other changes in our acquisition cost for our
products;
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increased competition from our competitors, including
competitors with greater financial, technical, marketing and
other resources, which could have the effect of reducing prices
and margins;
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the significant indebtedness incurred in completing the
acquisition may limit our ability to execute our business
strategy in the future and increase the risk of default under
our debt obligations; and
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changes in industry pricing benchmarks, particularly
average wholesale price, could adversely impact
prices we get reimbursed by our customers, including state
Medicaid programs, and the associated margins.
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The forward-looking statements contained in this prospectus
reflect our views and assumptions only as of the date of this
prospectus. The reader should not place undue reliance on
forward-looking statements. Except as required by law, we assume
no responsibility for updating any forward-looking statements.
Our actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or
contribute to such differences are discussed in the section
entitled Risk Factors beginning on page 15. We
qualify all of our forward-looking statements by these
cautionary statements. In addition, with respect to all of our
forward-looking statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
iii
SUMMARY
You should read the following summary together with the more
detailed information appearing in this prospectus, as well as
the financial statements and related notes thereto included in
or incorporated by reference into this prospectus. In this
prospectus, references to BioScrip, the
Company, we, us, and
our refer to BioScrip, Inc. and its subsidiaries on
a consolidated basis; references to CHS refer to
Critical Homecare Solutions Holdings, Inc. and its subsidiaries
on a consolidated basis; and BioScrips acquisition of CHS
is referred to as the merger or the
acquisition. In this prospectus, we sometimes
collectively refer to the acquisition, the offering of the old
notes, our entry into the New Credit Facility and the related
transactions as the Transactions and we refer to
this offering as the exchange offer. Additionally,
we refer to the agreement pursuant to which we agreed to acquire
CHS as the Merger Agreement.
Our
Company
We are a leading national provider of specialty pharmacy and
home care products and services that partners with patients,
physicians, hospitals, healthcare payors and pharmaceutical
manufacturers to provide clinical management solutions and
delivery of cost-effective access to prescription medications.
Our services are designed to improve clinical outcomes for
chronic and acute healthcare conditions while controlling
overall healthcare costs. As of May 31, 2010, we had a
total of 127 locations in 27 states plus the District of
Columbia, including 32 community pharmacy locations, 32 home
nursing locations, three mail service facilities and 60 home
infusion locations, including 17 contract affiliated infusion
pharmacies.
On March 25, 2010, we acquired CHS, a privately held
leading provider of home infusion and home nursing products and
services to patients suffering from chronic and acute medical
conditions. CHS was principally owned by funds managed by
Kohlberg & Company, L.L.C., or Kohlberg. Our
acquisition of CHS created one of the largest independent
specialty pharmacy and home infusion providers in the United
States, with a national network of specialty and home infusion
pharmacies and services with 120 points of service in
27 states plus the District of Columbia. As a result of the
acquisition, we expect to cross-sell all of our pharmacy service
offerings and our homecare services, enabling accelerated
pull-through opportunities with our existing payors, as well as
the addition of more than 450 payor relationships from CHS. The
acquisition also significantly expands our national footprint
with the addition of a strong regional and local management
team. In addition to broadening our clinical services
organization and expertise, the acquisition of CHS also
increases our focus on higher margin therapies. As we integrate
CHS into our operations, we expect to expand our overall profit
and operating margins. In connection with our acquisition of
CHS, we issued $225.0 million aggregate principal amount of
the old notes and entered into the New Credit Facility.
Below is a brief discussion of our business and operations as
reported in our financial statements on a segment basis.
Immediately upon consummating the acquisition of CHS, we began
integrating the operations of CHS into BioScrip. We believe that
our operations, organizational structure and related segment
reporting may change as a result of the acquisition. We are
currently evaluating how to review and evaluate the operating
performance of and allocate resources to the operating units
following the acquisition of CHS.
Prior to our acquisition of CHS, we historically operated in two
primary segments Specialty Pharmacy Services and
Traditional Pharmacy Services. Through our Specialty Pharmacy
Services segment, we deliver comprehensive support,
dispensing/distribution of specialized pharmaceuticals, patient
care management, data reporting and a range of other complex
therapy management services to patients with certain chronic
health conditions or multiple conditions. Specialty drugs are
high-cost injectable, infusible, inhalable or oral drugs that
require special handling (such as refrigeration) or compounding
prior to administration, and sometimes require close
professional monitoring during the course of administration and
often throughout treatment. Our pharmacies are full-service,
carrying both traditional and specialty medications and able to
treat patients with a variety of medical conditions. We believe
that care management programs deliver superior clinical outcomes
through enhanced medication compliance and patient retention, as
has been demonstrated in third-party clinical studies.
In our Traditional Pharmacy Services segment, we mainly provide
traditional mail order pharmacy fulfillment, and to a lesser
extent we administer prescription discount card programs and
fully-funded
1
pharmacy benefit management services. These services are
marketed to plan sponsors and are designed to promote
cost-effective, clinically appropriate pharmacy services through
our mail service distribution facility. Prescription discount
card programs are administered on behalf of commercial plan
sponsors, typically third party administrators, or TPAs, whereby
revenue is derived on a per claim basis from the dispensing
network pharmacy.
Through our home health business, most of which we acquired from
our acquisition of CHS, we provide home infusion therapy,
respiratory therapy and home medical equipment, skilled nursing
and therapy visits, private duty nursing services,
rehabilitation services, hospice and medical social services to
patients primarily in the eastern United States in the home
through our home health locations. Our platform provides
nationwide service capabilities and the ability to deliver
clinical management services that offer patients a high-touch,
community- and home-based care environment. Our core services
are provided in coordination with and under the direction of the
patients physician. Our home health professionals,
including pharmacists, nurses, respiratory therapists and
physical therapists, work with the physician to develop a plan
of care suited to the patients specific needs. Whether in
the home, physician office, ambulatory infusion center or other
alternate site of care, we provide products, services and
condition-specific clinical management programs tailored to
improve the care of individuals with complex health conditions
such as gastrointestinal abnormalities,
HIV/AIDS,
cancer, iron overload, multiple sclerosis, organ transplants,
rheumatoid arthritis, immune deficiencies and congestive heart
failure.
Industry
Overview
The U.S. healthcare industry is large and growing.
According to the Centers for Medicare and Medicaid, or CMS, the
U.S. federal agency which administers Medicare, Medicaid
and the Childrens Health Insurance Program, spending on
healthcare in the United States was estimated to be $2.5
trillion in 2009, or approximately 17.6% of U.S. gross
domestic product, and is projected to grow at a rate of 6.3% per
annum, to almost $4.4 trillion by 2018, or approximately 20.3%
of U.S. gross domestic product. Healthcare industry growth
is driven by several factors, including aging demographics,
increased use of prescription drugs, continued development and
adoption of new medical technologies and the continued
lengthening of expected life spans. Additionally, according to
research by Johns Hopkins University and the Population
Division, U.S. Census Bureau, the number of Americans
living with at least one chronic condition, acute illness or
infectious disease, the treatment of which account for
approximately 83% of total healthcare expenditures in the United
States, is projected to grow from an estimated 141 million
Americans in 2010, or approximately 45% of the
U.S. population, to a projected 171 million Americans
by 2030.
The specialty pharmacy industry is also large and fast growing,
with an estimated $60 billion in aggregate expenditures in
2008 and a projected growth rate of
15-20%
per
annum in the years from 2009 through 2012. That growth rate is
twice the national growth rate of traditional pharmacy
expenditures. Growth in the specialty pharmacy market is being
driven by a number of factors, including new product launches,
new indications for existing products, aging demographic trends
and an increase in the incidence of chronic medical conditions.
Additionally, projected growth in the specialty pharmacy
industry is partially attributable to the introduction of new
products from the significant specialty drug pipeline. According
to a report by the Pharmaceutical Research and Manufacturers of
America, there are estimated to be 633 specialty drugs in the
U.S. Food and Drug Administrations late stage
development pipeline addressing more than 100 diseases. The
majority of these are aimed at cancer and related conditions
with a significant number of drugs needing to be infused and the
vast majority requiring accompanying clinical programs.
The home healthcare sector is a rapidly growing component of the
U.S. healthcare industry which encompasses segments such as
home nursing, infusion therapy, respiratory therapy and durable
medical equipment. Home health, which CMS estimates to be an
approximately $70 billion component of estimated 2009
healthcare spending in the United States, is projected to grow
at 7.6% per annum from 2009 to 2018. Growth in the home health
sector is driven by many factors, including aging demographic
trends, an increase
2
in the incidence of chronic medical conditions, increasing costs
of institutional (such as hospitals) care, strong patient
preferences for home care and improved technology.
Home health is a critical element in controlling healthcare
costs, as it provides payors with a lower cost alternative to
traditional hospitalization, especially within infusion therapy.
The cost is, on average, 97.5% less than a traditional
short-term acute care hospital-based treatment and 76.6% less
than treatment received in a typical skilled nursing facility.
According to research by Johns Hopkins University and the
Population Division, U.S. Census Bureau, as a result of the
aging of the U.S. population, increased incidence of
chronic illnesses and various other demographic trends, a larger
number of patients tend to be on multiple therapy regimens,
which underscores the importance of customized and integrated
clinical care management programs that support all drug delivery
technologies.
Medicare currently provides limited reimbursement coverage for
home infusion therapy and does not currently reimburse home
infusion therapy providers for professional services,
specialized equipment or supplies required to properly
administer infusion pharmaceuticals in a home setting. The lack
of broad Medicare coverage has historically forced patients to
rely on hospitals and other settings for treatment. Given the
significant value proposition of receiving infusion
pharmaceuticals in the home setting compared to an acute care
hospital or skilled nursing facility, home infusion therapy is
one of the few segments of the healthcare industry that is
expected to benefit from Medicare reimbursement reform.
Because of these favorable trends in both the specialty
pharmacy, particularly home and alternate site infusion, and
home health industries, almost all of the larger, independent
specialty pharmacy and home infusion providers have been
acquired over the last several years by the large national
pharmacy benefit managers, or PBMs, and national retail pharmacy
chains. For example, since 2004, Medco Health Solutions
purchased Accredo Health Group, Express Scripts purchased
CuraScript, Walgreens purchased OptionCare and Apria Healthcare
Group purchased Coram. We believe that these larger competitors
have left a void in the market for an independent provider
having an extensive local presence that promotes high touch,
clinically focused programs. This recent consolidation has also
increased the number of experienced management professionals
looking for an independent platform to employ their years of
clinically focused experience and management skills.
Our
Strengths
We believe that our company has a number of competitive
strengths, including:
Attractive
Independent and Local Competitive Position with Significant
National Platform and Infrastructure
As of May 31, 2010, we had a total of 127 locations in
27 states plus the District of Columbia, including 32
community pharmacy locations, 32 home nursing locations, three
mail service facilities and 60 home infusion locations,
including 17 contract affiliated infusion pharmacies. Our model
combines local presence with effective, comprehensive clinical
programs for multiple therapies and all delivery technologies
(oral, injectable and infusible). We also have the capabilities
and payor relationships to distribute specialty pharmaceuticals
to all 50 states. We have more than 1,000 MCO relationships
and are one of the few home health and specialty pharmacy
providers that can offer a truly national, integrated and
comprehensive approach to MCOs, which generally favor fully
integrated vendors who can provide high-touch specialty pharmacy
solutions to their patients.
Diversified
Payor Base with Limited Reliance on Government
Payors
On a combined basis, approximately 71% and 67% of our pro forma
revenue for the year ended December 31, 2009 and the three
months ended March 31, 2010, respectively, was from
non-government payors. Additionally, although Medicare and
Medicaid represent a larger percentage of our overall revenues
as a result of our acquisition of CHS, we believe that we
further diversified our overall business exposure to revenue
concentration, as our overall exposure to Medicare and Medicaid
is diversified among various therapies and conditions, thereby
minimizing risk in any one therapy area. Regarding commercial
payors, no
3
single payor represented more than 13% of our pro forma revenue
for both the year ended December 31, 2009 or the three
months ended March 31, 2010, with the top five payors
comprising 31% of our pro forma revenue for either the year
ended December 31, 2009 and the three months ended
March 31, 2010. Most of our top payors, including the top
payor, are PBMs, which have a diversified base of end users. Our
diverse range of disease-state therapy regimens offered through
our clinical management programs allows us to further mitigate
reimbursement risk. We believe that our historical
under-penetration of the Medicare and Medicaid markets provides
us with significant opportunities for growth with limited risk.
Effective
Care Management Clinical Programs that Produce Positive Clinical
Outcomes
We have diversified, comprehensive and effective clinical
programs across numerous therapeutic areas, including: chronic
kidney disease; Crohns disease; deep vein thrombosis;
Gauchers disease; growth hormone deficiency; hemophilia;
Hepatitis C; HIV/AIDS; immune deficiency; infertility; multiple
sclerosis; oncology; osteoarthritis; psoriasis; rheumatoid
arthritis; organ transplant; ulcerative colitis; respiratory
syncytical virus; infection control; and nutrition
abnormalities. We have clinical programs that are designed to
improve patient adherence and retention. We handle all specialty
pharmaceutical delivery technologies, oral, injectable and
infusible. We believe that we have earned a positive reputation
among all of our stakeholders patients, physicians,
payors and pharmaceutical manufacturers by providing
superior service and favorable clinical outcomes. We believe
that our independent platform provides the specialty
pharmaceuticals and the necessary programs and services for
better and more efficient clinical outcomes for our clients.
Attractive
and Diversified Therapeutic Coverage within the Home Infusion
Market
Our infusion business provides high value traditional infusion
therapies with accompanying clinical management and home care.
Our infusion product offerings and services are designed to
treat chronic conditions, such as total parenteral nutritional,
cancer and hemophilia, which comprise over 19% of our pro forma
infusion revenue for both the year ended December 31, 2009
and the three months ended March 31, 2010, and have
significantly higher margins than our specialty infusion
products and services. In addition to the long-term treatment
associated with these chronic conditions, these conditions
require ongoing caregiver counseling and education regarding
patient treatment and ongoing monitoring to encourage patients
to comply with the prescribed therapy, including programs for
enteral and total parenteral nutrition and pediatric infusion.
Our clinical management programs offer a number of multiple
disease-state therapy regimens, increasing the number of
opportunities to cross-sell services and technologies.
Experienced
Management Team with Recognized Financial Sponsor
Support
We have a strong and well-respected management team with a
diverse background in the healthcare industry, with a common
focus on the specialty pharmacy and home infusion industries.
The team also has prior experience at leading healthcare
companies such as OptionCare, Coram Healthcare, Hemophilia
Resources of America, Caremark and Walgreens. Combined, the team
has over 200 years of relevant industry experience and over
75 years of combined tenure at BioScrip. Our President and
Chief Operating Officer, Richard Smith, has over 17 years
of home health experience in increasingly senior positions at
various public and private healthcare companies, and is
overseeing the integration of the CHS platform into our existing
network. After the acquisition, several key members of the CHS
management team have continued with our company and will support
achievement of our long-term strategic goals. Also following the
acquisition, funds managed by Kohlberg and other minority
stockholders, which we refer to as the Former CHS Stockholders,
beneficially own approximately 30% of our common equity
(inclusive of warrants and options), and Kohlberg is the largest
single beneficial owner of our shares. Upon completion of the
acquisition, Kohlberg appointed two members to our Board of
Directors. Kohlberg is a leading U.S. private equity firm.
Our
Strategy
Since our acquisition of CHS, our management has been
implementing both its strategic plan as well as a detailed
merger integration plan to achieve and expand the synergistic
benefits of the acquisition. Management has also commenced
executing on its plan to seize organic revenue growth
opportunities by cross-selling
4
products and services through our expanded geographic footprint
and payor contract base. Our long-term goal is to be the leading
independent provider of specialty pharmacy and home health
services in the United States. We intend to achieve these goals
and objectives as follows:
Continuing
to Focus on Core High-Value Therapies
We will continue to focus on delivering high value therapies,
such as anti-infective, total parenteral and enteral nutrition
therapies, as well as expanding our portfolio of high-value
chronic therapies. We have significant clinical experience in
managing patients afflicted with these conditions, which we
deliver on a local basis to patients in their homes due to the
complexity and frequency of pharmaceutical administration and
need for continued professional monitoring. In other cases,
where appropriate, we deliver oral, injectable and infusible
products on a national or regional basis.
Continuing
to Operate a Local Clinical Model that Emphasizes Customized
Care Management
Our infusion branches utilize a coordinated team approach,
comprised of nurses, therapists and pharmacists designed to
administer locally and monitor the medical care of our patient
population that frequently suffers from chronic diseases. These
local teams provide customized patient care management, which we
believe assures patient responsiveness to their plan of care,
better quality care and a personal touch that our patients have
come to expect.
Focusing
on the Integration of CHSs Business
Our team has extensive experience managing and integrating
infusion businesses. We have worked closely with CHSs
former management to implement a seamless transition through a
detailed, cross-functional integration plan led by Richard
Smith, our President and Chief Operating Officer. We believe
that the complexity of a systems integration is mitigated by the
fact that all of our and CHSs infusion locations use the
same clinical management and accounts receivables software and
that the reimbursement, pharmacy and clinical teams are
experienced working with that software. We have not experienced,
and do not anticipate, any systems disruption or patient
disruptions, because no facilities will be merged except for a
small BioScrip satellite branch. Local CHS businesses continue
to operate under their brands used prior to the acquisition, and
field operations will be left intact. This strategy is intended
to minimize revenue risk and disruptions to our business.
Achieving
Cost Synergies and Targeting Cross-Selling
Opportunities
We anticipate cost savings synergies and margin expansion from
the acquisition of CHS. By combining our and CHSs
platforms, we intend to eliminate significant overlap and
redundancy in corporate overhead and infrastructure in order to
achieve annualized cost savings of approximately
$5.0 million. We also have begun combining CHSs
purchasing volume with our purchasing volume, leveraging the
increased scale of our operations, purchasing volume and
medication distribution in order to achieve contractual
annualized cost of revenue synergies of approximately
$3.0 million. In addition to these cost savings, we believe
that there are potential significant synergies that can be
achieved through up-selling and cross-selling products and
services, as described below.
Leveraging
Our Combined Relationships with National MCOs
Our business requires us to maintain strong relations with local
and regional referral sources, patients and managed care payors.
We intend to leverage our collective current relationships,
geographic coverage, clinical expertise and reputation, as well
as corporate infrastructure, regulatory expertise and contacts,
in order to expand our relationships with national MCOs and
pursue national contracts with these organizations. Our sales
and marketing strategy focuses on continuing and ultimately
expanding these relationships. Additionally, we have begun to
focus on organic revenue growth opportunities by cross-selling
products and services through our expanded geographic footprint
and payor contract base. In addition to BioScrips more
than 600 payor relationships, we gained over 450 new MCO
relationships through our acquisition of CHS. These new
5
contracts will increase our opportunity to cross-sell all
services on a national level and showcase clinically proven care
management programs, which we believe will accelerate
pull-through opportunities as new treatment and pharmaceutical
technologies become available. CHS also offers clinical disease
management for home care therapies, providing the opportunity to
enhance our relationships with, and make the combined company
attractive to, MCOs. As a result of the acquisition, we have
approximately 140 sales representatives and over 1,000 MCO
relationships.
Selectively
Pursuing Acquisitions of Other Independent Home Infusion Therapy
Providers in Contiguous and Other Strategic
Markets
We believe that a substantial portion of the home infusion
market consists of small, independent home infusion providers,
and we believe that industry dynamics in the currently
fragmented home infusion market favor consolidated providers and
the operational efficiencies that come with scale. Following the
integration of CHS, we plan to selectively pursue strategic
add-on acquisitions of other independent home care providers
with established track records in markets contiguous to our
existing operations. We believe acquisitions in contiguous
markets can be efficiently integrated into our existing
operations and added to our existing managed care contracts and
payor and patient platforms.
Post-Acquisition
Accounting Treatment
The aggregate consideration paid by us in connection with the
merger was provisionally allocated to CHSs assets and
liabilities based on their fair values, with any excess being
treated as goodwill. These amounts are subject to change as
additional information on asset and liability valuations becomes
available. We have consolidated CHSs assets, liabilities
and results of operations with our assets, liabilities and
results of operations after the consummation of the merger.
Corporate
Information
BioScrip was incorporated in Delaware on March 22, 1996
under the name MIM Corporation and changed its name to BioScrip,
Inc. in 2005. Our principal executive offices are located at 100
Clearbrook Road, Elmsford, New York 10523 and our telephone
number is
(914) 460-1600.
BioScrips common stock has been publicly traded since 1996
and is listed on the Nasdaq Global Market under the symbol
BIOS.
6
The
Exchange Offer
The following summary contains basic information about the
exchange offer and is not intended to be complete. For a more
detailed description of the terms and conditions of the exchange
offer, please refer to the section entitled The Exchange
Offer.
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The Exchange Offer
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We are offering to exchange $1,000 principal amount of the new
notes, which have been registered under the Securities Act, for
each $1,000 principal amount of the old notes, which have not
been registered under the Securities Act. We issued the old
notes on March 25, 2010.
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In order to exchange your old notes, you must promptly tender
them before the expiration date (as described in this
prospectus). All old notes that are validly tendered and not
validly withdrawn will be exchanged. We will issue the new notes
on or promptly after the expiration date.
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You may tender your old notes for exchange in whole or in part
in denominations of $2,000 and integral multiples of $1,000 in
excess thereof.
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Registration Rights Agreement
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We sold the old notes on March 25, 2010 to
Jefferies & Company, Inc., the initial purchaser.
Simultaneously with that sale, we signed a registration rights
agreement with the initial purchaser relating to the old notes
that requires us to conduct the exchange offer.
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Subject to certain limitations, you have the right under the
registration rights agreement to exchange your old notes for new
notes. The exchange offer is intended to satisfy such right.
After the exchange offer is complete, you will no longer be
entitled to any exchange or registration rights with respect to
your old notes.
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For a description of the procedures for tendering old notes, see
The Exchange Offer Procedures for Tendering
Old Notes.
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Consequences of Failure to Exchange
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If you do not exchange your old notes for new notes in the
exchange offer, you will still have the restrictions on transfer
provided in the old notes and in the indenture that governs both
the old notes and the new notes. In general, the old notes may
not be offered or sold unless registered or exempt from
registration under the Securities Act, or in a transaction not
subject to the Securities Act and applicable state securities
laws. We do not plan to register the old notes under the
Securities Act. See Risk Factors Risks Related
to the Exchange Offer If you do not exchange your
old notes for new notes, your ability to sell your old notes
will be restricted.
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Expiration Date
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The exchange offer will expire at 5:00 p.m., New York City
time,
on ,
2010, unless we extend it. In that case, the expiration date
will be the latest date and time to which we extend the exchange
offer.
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See The Exchange Offer Expiration Date;
Extensions; Amendments.
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Conditions to the Exchange Offer
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The exchange offer is subject to customary conditions, some of
which we may waive. For more information, see The Exchange
Offer Conditions to the Exchange Offer.
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7
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Procedures for Tendering Old Notes
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If you hold old notes through The Depository Trust Company,
or DTC, and wish to participate in the exchange offer, you must
comply with the Automated Tender Offer Program procedures of
DTC. See The Exchange Offer Procedures for
Tendering Old Notes. If you are not a DTC participant, you
may tender your old notes by book-entry transfer by contacting
your broker, dealer or other nominee or by opening an account
with a DTC participant, as the case may be. By accepting the
exchange offer, you will represent to us that, among other
things:
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any new notes that you receive will be acquired in
the ordinary course of your business;
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you are not engaging in or intending to engage in a
distribution of the new notes and you have no arrangement or
understanding with any person or entity, including any of our
affiliates, to participate in the distribution of the new notes;
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if you are a broker-dealer that will receive new
notes for your own account in exchange for old notes that were
acquired as a result of market-making activities, that you will
deliver a prospectus, as required by law, in connection with any
resale of the new notes; and
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you are not our affiliate as defined in
Rule 405 under the Securities Act, or, if you are an
affiliate, you will comply with any applicable registration and
prospectus delivery requirements of the Securities Act.
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Withdrawal Rights
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You may withdraw the tender of your old notes at any time before
the expiration date. To do this, you should deliver a written
notice of your withdrawal to the exchange agent according to the
withdrawal procedures described in the section The
Exchange Offer Withdrawal Rights.
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Exchange Agent
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The exchange agent for the exchange offer is U.S. Bank National
Association. The address, telephone number and facsimile number
of the exchange agent are provided in the section The
Exchange Offer Exchange Agent, as well as in
the letter of transmittal.
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Use of Proceeds
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We will not receive any cash proceeds from the issuance of the
new notes. See the section Use of Proceeds.
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United States Federal Income Tax Consequences
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Your exchange of the old notes for new notes in the exchange
offer will not be a taxable event for U.S. federal income tax
purposes. Accordingly, you will not recognize any taxable gain
or loss as a result of the exchange. See the section
Material United States Federal Income Tax
Considerations.
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8
Summary
Description of the New Notes
The summary below describes the principal terms of the new
notes. The terms of the new notes are identical in all material
respects to the terms of the old notes, except that the
registration rights and related liquidated damages provisions
and the transfer restrictions applicable to the old notes are
not applicable to the new notes. The new notes will evidence the
same debt as the old notes and will be governed by the same
indenture. Certain of the terms described below are subject to
important limitations and exceptions. See the section entitled
Description of Notes in this prospectus for a more
detailed description of the terms of the new notes and the
indenture governing the new notes. In this subsection,
we, us and our refer only to
BioScrip, Inc., as issuer of the notes, and not to any of our
subsidiaries.
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Issuer
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BioScrip, Inc.
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Securities Offered
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$225.0 million aggregate principal amount of
10
1
/
4
% Senior
Notes due 2015.
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Maturity Date
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October 1, 2015.
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Interest Rate
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We will pay interest on the new notes at an annual interest rate
of
10
1
/
4
%.
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Interest Payment Dates
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We will make interest payments on the new notes semi-annually in
arrears on each April 1 and October 1, beginning on
October 1, 2010. Interest will accrue from the issue date
of the old notes.
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Guarantees
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The new notes will be fully and unconditionally guaranteed,
jointly and severally, on a senior unsecured basis by our
existing and future direct and indirect domestic restricted
subsidiaries, including all of our domestic subsidiaries in
existence
on ,
2010.
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Ranking
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The new notes and the guarantees will rank equal in right of
payment with all of our and the guarantors future senior
unsecured indebtedness and rank senior in right of payment to
all of our and the guarantors future subordinated
indebtedness. The new notes and the guarantees will be
effectively subordinated to our and the guarantors
existing and future secured indebtedness, including the
indebtedness under the New Credit Facility.
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Optional Redemption
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On or after April 1, 2013, we may redeem some or all of the
new notes at the redemption prices set forth under
Description of Notes Optional
Redemption, plus accrued and unpaid interest to the date
of redemption. Prior to April 1, 2013, we may redeem up to
35% of the aggregate principal amount of the notes (including
new notes and old notes) at the premium set forth under
Description of Notes Optional
Redemption, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds of certain equity
offerings. In addition, we may, at our option, redeem some or
all of the new notes at any time prior to April 1, 2013, by
paying the make whole premium set forth under
Description of Notes Optional Redemption.
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Change of Control Offer
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If we undergo a Change of Control (as defined in
Description of Notes Certain
Definitions), the holders of the new notes will have the
right to require us to purchase their new notes at a price in
cash equal to 101% of their principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
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Asset Sale Proceeds
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Upon certain Asset Sales (as defined in Description of
Notes Certain Definitions), we may be required
to use the net proceeds to offer to purchase new notes at 100%
of their principal amount, plus accrued and unpaid interest to
the date of purchase.
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Certain Covenants
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The indenture governing the new notes, among other things,
limits our ability and the ability of our domestic restricted
subsidiaries to:
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incur or guarantee additional indebtedness or issue
certain preferred stock;
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transfer or sell assets;
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make certain investments;
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pay dividends or distributions, redeem subordinated
indebtedness or make other restricted payments;
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create or incur liens;
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incur dividend or other payment restrictions
affecting certain subsidiaries;
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issue capital stock of our subsidiaries;
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consummate a merger, consolidation or sale of all or
substantially all of our assets; and
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enter into transactions with affiliates.
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These covenants will be subject to a number of important
exceptions and qualifications. See Description of
Notes Certain Covenants.
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Book-Entry Form
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Initially, the new notes will be represented by one or more
global notes in definitive, fully registered form deposited with
a custodian for, and registered in the name of, a nominee of DTC.
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No Public Market
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The new notes will not be listed on any securities exchange or
included in any automated quotation system.
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For more
information about the new notes, see Description of
Notes in this prospectus.
You
should refer to Risk Factors for an explanation of
certain risks related to investing in the new notes.
10
Selected
Historical Consolidated Financial Data
The following table sets forth our selected historical
consolidated financial data. The selected historical
consolidated financial data as of and for the fiscal years ended
December 31, 2005, 2006, 2007, 2008 and 2009 have been
derived from our audited consolidated financial statements as of
such dates and for such periods, which, in the case of our
audited consolidated financial statements as of
December 31, 2008 and 2009 and for each of the years in the
three-year period ended December 31, 2009, are incorporated
by reference into this prospectus. The selected historical
consolidated financial data as of and for the three months ended
March 31, 2009 and 2010 have been derived from our
unaudited consolidated financial statements as of such dates and
for such periods which are incorporated by reference into this
prospectus and which, in our opinion, reflect all adjustments,
consisting of normal accruals, necessary for a fair presentation
of the information as of the dates and for such periods
presented. Our results of operations for the three months ended
March 31, 2010 may not be indicative of results that
may be expected for the full year. The selected consolidated
financial data presented below should be read in conjunction
with, and is qualified by reference to, our historical financial
statements and related notes and Managements
Discussion and Analysis of Financial Condition and Results of
Operations incorporated by reference into this prospectus.
As of March 31, 2010, we do not have any independent assets
or operations and, as a result, our direct and indirect
subsidiaries (other than minor subsidiaries), each being 100%
owned by us, are fully and unconditionally, jointly and
severally providing guarantees on a senior unsecured basis to
the new notes. We and each of our guarantor subsidiaries are
subject to restrictive covenants under the New Credit Facility.
The New Credit Facility ranks senior to each subsidiarys
guarantee of the new notes and could restrict our ability to
obtain funds from the guarantor subsidiaries.
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Three Months Ended
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Fiscal Year Ended December 31,
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March 31,
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2005(1)
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2006(2)
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2007
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2008
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2009
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2009
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2010
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(In thousands, except ratios and per share amounts)
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Statement of Operations Data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue(3)
|
|
$
|
1,072,895
|
|
|
$
|
1,151,940
|
|
|
$
|
1,197,732
|
|
|
$
|
1,401,911
|
|
|
$
|
1,329,525
|
|
|
$
|
325,749
|
|
|
$
|
335,068
|
|
Cost of revenue
|
|
|
956,519
|
|
|
|
1,033,884
|
|
|
|
1,060,717
|
|
|
|
1,259,741
|
|
|
|
1,171,703
|
|
|
|
289,759
|
|
|
|
296,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
116,376
|
|
|
$
|
118,056
|
|
|
$
|
137,015
|
|
|
$
|
142,170
|
|
|
$
|
157,822
|
|
|
$
|
35,990
|
|
|
$
|
38,918
|
|
Merger related expenses(4)
|
|
|
4,575
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
1,774
|
|
|
|
|
|
|
|
5,040
|
|
Selling, general and administrative expenses
|
|
|
96,630
|
|
|
|
115,258
|
|
|
|
120,147
|
|
|
|
125,202
|
|
|
|
131,946
|
|
|
|
30,327
|
|
|
|
36,354
|
|
Bad debt expense
|
|
|
12,814
|
|
|
|
12,443
|
|
|
|
5,119
|
|
|
|
4,667
|
|
|
|
8,636
|
|
|
|
1,380
|
|
|
|
3,650
|
|
Amortization of intangibles
|
|
|
6,395
|
|
|
|
6,538
|
|
|
|
2,898
|
|
|
|
1,936
|
|
|
|
|
|
|
|
|
|
|
|
176
|
|
Goodwill and intangible impairment(5)
|
|
|
25,165
|
|
|
|
|
|
|
|
|
|
|
|
93,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
392
|
|
|
|
3,018
|
|
|
|
3,270
|
|
|
|
2,711
|
|
|
|
1,920
|
|
|
|
594
|
|
|
|
3,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
$
|
(29,595
|
)
|
|
$
|
(19,259
|
)
|
|
$
|
5,581
|
|
|
$
|
(86,228
|
)
|
|
$
|
13,546
|
|
|
$
|
3,689
|
|
|
$
|
(9,471
|
)
|
Tax (benefit) provision
|
|
|
(5,748
|
)
|
|
|
19,030
|
|
|
|
2,264
|
|
|
|
(12,196
|
)
|
|
|
(40,553
|
)
|
|
|
404
|
|
|
|
(2,302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income(6)(7)
|
|
$
|
(23,847
|
)
|
|
$
|
(38,289
|
)
|
|
$
|
3,317
|
|
|
$
|
(74,032
|
)
|
|
$
|
54,099
|
|
|
$
|
3,285
|
|
|
$
|
(7,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per basic share
|
|
|
(0.70
|
)
|
|
|
(1.03
|
)
|
|
|
0.09
|
|
|
|
(1.93
|
)
|
|
|
1.39
|
|
|
|
0.08
|
|
|
|
(0.18
|
)
|
Net (loss) income per diluted share
|
|
|
(0.70
|
)
|
|
|
(1.03
|
)
|
|
|
0.09
|
|
|
|
(1.93
|
)
|
|
|
1.36
|
|
|
|
0.08
|
|
|
|
(0.18
|
)
|
Weighted average shares outstanding used in computing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic (loss) income per share
|
|
|
34,129
|
|
|
|
37,304
|
|
|
|
37,647
|
|
|
|
38,417
|
|
|
|
38,985
|
|
|
|
38,709
|
|
|
|
40,825
|
|
diluted (loss) income per share
|
|
|
34,129
|
|
|
|
37,304
|
|
|
|
38,491
|
|
|
|
38,417
|
|
|
|
39,737
|
|
|
|
38,787
|
|
|
|
40,825
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Fiscal Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2005(1)
|
|
|
2006(2)
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands, except ratios and per share amounts)
|
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,245
|
|
Receivables, less allowance for doubtful accounts
|
|
|
127,880
|
|
|
|
135,139
|
|
|
|
128,969
|
|
|
|
158,649
|
|
|
|
151,113
|
|
|
|
144,612
|
|
|
|
179,212
|
|
Inventory
|
|
|
25,873
|
|
|
|
33,471
|
|
|
|
33,598
|
|
|
|
45,227
|
|
|
|
51,256
|
|
|
|
39,040
|
|
|
|
60,406
|
|
Property and equipment, net
|
|
|
9,232
|
|
|
|
10,409
|
|
|
|
11,742
|
|
|
|
14,748
|
|
|
|
15,454
|
|
|
|
14,714
|
|
|
|
22,514
|
|
Working capital
|
|
|
67,488
|
|
|
|
37,023
|
|
|
|
49,213
|
|
|
|
58,844
|
|
|
|
91,078
|
|
|
|
63,210
|
|
|
|
178,766
|
|
Line of credit
|
|
|
7,427
|
|
|
|
52,895
|
|
|
|
33,778
|
|
|
|
50,411
|
|
|
|
30,389
|
|
|
|
36,114
|
|
|
|
|
|
Deferred tax asset valuation allowance establishment or
reversal(7)
|
|
|
|
|
|
|
(25,664
|
)
|
|
|
|
|
|
|
|
|
|
|
44,839
|
|
|
|
|
|
|
|
|
|
Total assets(5)
|
|
|
298,629
|
|
|
|
305,456
|
|
|
|
296,822
|
|
|
|
246,957
|
|
|
|
287,220
|
|
|
|
227,177
|
|
|
|
714,563
|
|
Total debt
|
|
|
7,427
|
|
|
|
52,895
|
|
|
|
33,778
|
|
|
|
50,411
|
|
|
|
30,389
|
|
|
|
36,114
|
|
|
|
319,318
|
|
Stockholders equity
|
|
|
195,765
|
|
|
|
161,833
|
|
|
|
166,203
|
|
|
|
95,537
|
|
|
|
155,793
|
|
|
|
99,566
|
|
|
|
256,288
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(8)
|
|
|
|
|
|
|
|
|
|
|
2.71
|
x
|
|
|
|
|
|
|
8.06
|
x
|
|
|
7.21
|
x
|
|
|
|
|
Pro forma ratio of earnings to fixed charges(8)(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.41
|
x
|
|
|
|
|
|
|
|
|
Net debt(10)
|
|
|
5,906
|
|
|
|
52,895
|
|
|
|
33,778
|
|
|
|
50,411
|
|
|
|
30,389
|
|
|
|
36,114
|
|
|
|
282,073
|
|
EBITDA(11)
|
|
|
(19,288
|
)
|
|
|
(5,387
|
)
|
|
|
15,941
|
|
|
|
(77,124
|
)
|
|
|
20,499
|
|
|
|
5,394
|
|
|
|
(4,642
|
)
|
Adjusted EBITDA(11)
|
|
|
(14,713
|
)
|
|
|
(2,800
|
)
|
|
|
18,945
|
|
|
|
(72,539
|
)
|
|
|
25,692
|
|
|
|
6,170
|
|
|
|
2,685
|
|
|
|
|
(1)
|
|
Includes Chronimed, Inc. beginning March 2005.
|
|
(2)
|
|
Includes Intravenous Therapy Services, Inc. beginning March 2006.
|
|
(3)
|
|
Certain PBM customer contracts ended in or prior to 2007.
Revenue related to these contracts was $154.8 million,
$76.8 million and $15.0 million in 2005, 2006 and
2007, respectively. Revenue in 2008 includes Competitive
Acquisition Program, or CAP, revenue of $71.2 million. The
CAP program ended December 31, 2008. Revenue in 2008 also
includes UHC HIV/AIDS and solid organ transplant services of
$116.6 million from contracts which ended in the first half
of 2009. 2009 revenue includes $23.3 million related to
these UHC HIV/AIDS contracts.
|
|
(4)
|
|
Expenses in 2009 and the three months ended March 31, 2010
reflect merger and integration expenses related to our
acquisition of CHS on March 25, 2010. Expenses in 2005 and
2006 reflect merger, integration and re-branding expenses
related to our acquisition of Chronimed, Inc. on March 12,
2005.
|
|
(5)
|
|
2005 includes a $6.6 million charge related to write-off of
non-compete agreements, trade names and customer lists due to
our rebranding strategy in the Specialty Pharmacy Services
segment, and an $18.6 million charge related to goodwill
impairment in the Traditional Pharmacy Services segment. 2008
includes a $90.0 million charge related to an impairment of
goodwill and a $3.9 million charge related to the write-off
of intangible assets.
|
|
(6)
|
|
2005 includes a $4.3 million charge, net of tax, to reflect
an increase in the allowance for doubtful accounts receivable
created by lower than expected collections during the
integration period following our acquisition of Chronimed, Inc.
|
|
(7)
|
|
2006 includes a $25.7 million income tax charge for the
establishment of a valuation allowance recorded against deferred
tax assets. 2009 includes a $44.8 million tax benefit
relating to the reversal of the valuation allowance on deferred
tax assets.
|
|
(8)
|
|
Calculated as income (loss) before income taxes, plus fixed
charges, divided by fixed charges. Fixed charges include
interest costs incurred and estimated interest within rental
expense. Earnings before taxes were insufficient to cover fixed
charges by $30.0 million, $22.3 million and
$88.9 million for the fiscal years ended December 31,
2005, 2006 and 2008, respectively. Earnings before taxes were
insufficient to
|
12
|
|
|
|
|
cover fixed charges by $12.6 million for the three months
ended March 31, 2010 and by $16.9 million for the
three month pro forma period ended March 31, 2010.
|
|
(9)
|
|
Reflects the ratio of earnings to fixed charges after giving
effect to the Transactions.
|
|
(10)
|
|
Net debt is defined as total debt less cash and cash equivalents.
|
|
(11)
|
|
EBITDA represents net income before interest expense, net, tax
benefit provision, and depreciation and amortization. Adjusted
EBITDA represents EBITDA as further adjusted for acquisition and
integration related costs (excluding finance fees), bad debt
expense associated with the termination of the CAP program on
December 31, 2009, a civil settlement with the U.S. Office
of The Inspector General, or OIG, and stock-based compensation
expense.
|
|
|
|
EBITDA and Adjusted EBITDA are supplemental measures of our
performance and our ability to service debt that are not
required by, or presented in accordance with, GAAP. EBITDA and
Adjusted EBITDA are not measurements of our financial
performance under GAAP and should not be considered as
alternatives to net income or any other performance measures
derived in accordance with GAAP, or as alternatives to cash flow
from operating activities as measures of our liquidity.
|
|
|
|
Our measurement of EBITDA and Adjusted EBITDA may not be
comparable to similarly titled measures of other companies. We
have included information concerning EBITDA and Adjusted EBITDA
in this prospectus because we believe that such information is
used by certain investors as one measure of a companys
historical ability to service debt. We believe this measure is
frequently used by securities analysts, investors and other
interested parties in the evaluation of high yield issuers, many
of which present EBITDA and Adjusted EBITDA when reporting their
financial results. Our presentation of EBITDA and Adjusted
EBITDA should not be construed as an inference that our future
results will be unaffected by unusual or nonrecurring items.
|
|
|
|
EBITDA and Adjusted EBITDA have limitations as analytical tools,
and you should not consider them in isolation, or as a
substitute for analysis of our operating results or cash flows
as reported under GAAP. Some of these limitations are:
|
|
|
|
they do not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual
commitments;
|
|
|
|
they do not reflect changes in, or cash requirements
for, our working capital needs;
|
|
|
|
they do not reflect the significant interest expense
or the cash requirements necessary to service interest or
principal payments on our debt;
|
|
|
|
although depreciation is a non-cash charge, the
assets being depreciated will often have to be replaced in the
future, and EBITDA and Adjusted EBITDA do not reflect any cash
requirements for such replacements;
|
|
|
|
they are not adjusted for all non-cash income or
expense items that are reflected in our statements of cash
flows; and
|
|
|
|
other companies in our industry may calculate these
measures differently than we do, limiting their usefulness as
comparative measures.
|
|
|
|
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as measures of discretionary cash available to
us to invest in the growth of our business. We compensate for
these limitations by relying primarily on our GAAP results and
using EBITDA and Adjusted EBITDA only for supplemental purposes.
Please see our financial statements, including the related
notes, as well as the unaudited pro forma combined financial
information of BioScrip, contained or incorporated by reference
into this prospectus.
|
13
|
|
|
|
|
The following tables reconcile our net income to EBITDA and
Adjusted EBITDA for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Fiscal Year Ended December 31,
|
|
|
March 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Net (loss) income
|
|
$
|
(23,847
|
)
|
|
$
|
(38,289
|
)
|
|
$
|
3,317
|
|
|
$
|
(74,032
|
)
|
|
$
|
54,099
|
|
|
$
|
3,285
|
|
|
$
|
(7,169
|
)
|
Interest expense, net
|
|
|
392
|
|
|
|
3,018
|
|
|
|
3,270
|
|
|
|
2,711
|
|
|
|
1,920
|
|
|
|
594
|
|
|
|
3,169
|
|
Tax (benefit) provision
|
|
|
(5,748
|
)
|
|
|
19,030
|
|
|
|
2,264
|
|
|
|
(12,196
|
)
|
|
|
(40,553
|
)
|
|
|
404
|
|
|
|
(2,302
|
)
|
Depreciation and amortization
|
|
|
9,915
|
|
|
|
10,854
|
|
|
|
7,090
|
|
|
|
6,393
|
|
|
|
5,033
|
|
|
|
1,111
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
(19,288
|
)
|
|
$
|
(5,387
|
)
|
|
$
|
15,941
|
|
|
$
|
(77,124
|
)
|
|
$
|
20,499
|
|
|
$
|
5,394
|
|
|
$
|
(4,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and integration related costs, excluding finance fees
|
|
|
4,575
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
1,774
|
|
|
|
|
|
|
|
5,040
|
|
Bad debt expense related to CAP contract termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,483
|
|
OIG settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
2,529
|
|
|
|
3,004
|
|
|
|
3,790
|
|
|
|
3,419
|
|
|
|
776
|
|
|
|
804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
(14,713
|
)
|
|
$
|
(2,800
|
)
|
|
$
|
18,945
|
|
|
$
|
(72,539
|
)
|
|
$
|
25,692
|
|
|
$
|
6,170
|
|
|
$
|
2,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
14
RISK
FACTORS
Any investment in the new notes involves a high degree of
risk. You should carefully consider the risks described below
and all of the information contained in this prospectus before
deciding whether to invest in the new notes. The risks and
uncertainties described below are not the only risks and
uncertainties that we face. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial
may also impair our business operations. If any of those risks
actually occurs, our business, financial condition and results
of operations would suffer. The risks discussed below also
include forward-looking statements and our actual results may
differ substantially from those discussed in these
forward-looking statements. See Cautionary Note Regarding
Forward-Looking Statements in this prospectus.
Risks
Related to Our Business
We may
not realize the anticipated benefits of our acquisition of CHS
because of integration difficulties.
Integrating the operations of the businesses of CHS successfully
or otherwise realizing any of the anticipated benefits of the
merger with CHS, including anticipated cost savings and
additional revenue opportunities, involves a number of potential
challenges. The failure to meet these integration challenges
could seriously harm our financial condition and results of
operations.
Realizing the benefits of the merger will depend in part on the
integration of information technology, or IT, operations and
personnel. These integration activities are complex and
time-consuming and we may encounter unexpected difficulties or
incur unexpected costs, including:
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our inability to achieve the cost savings and operating
synergies anticipated in the merger, including synergies
relating to increased purchasing efficiencies and a reduction in
costs associated with the merger, which would prevent us from
achieving the positive earnings gains expected as a result of
the merger;
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diversion of management attention from ongoing business concerns
to integration matters;
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difficulties in consolidating and rationalizing IT platforms and
administrative infrastructures;
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complexities associated with managing the geographic separation
of the combined businesses and consolidating multiple physical
locations where management may determine consolidation is
desirable;
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difficulties in integrating personnel from different corporate
cultures while maintaining focus on providing consistent, high
quality customer service;
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challenges in demonstrating to customers of BioScrip and to
customers of CHS that the merger will not result in adverse
changes in customer service standards or business focus; and
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possible cash flow interruption or loss of revenue as a result
of change of ownership transitional matters.
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We may not successfully integrate the operations of the
businesses of CHS in a timely manner, and we may not realize the
anticipated net reductions in costs and expenses and other
benefits and synergies of the merger with CHS to the extent, or
in the time frame, anticipated. The anticipated net reductions
in costs and expenses are projections that are uncertain, and
are based on assumptions and preliminary information which may
prove to be inaccurate. In addition to the integration risks
discussed above, our ability to realize these net reductions in
costs and expenses and other benefits and synergies could be
adversely impacted by practical or legal constraints on our
ability to combine operations.
If we
are unable to manage our growth profitably after the merger is
completed, our business and financial results could
suffer.
Our future financial results will depend in part on our ability
to profitably manage our growth on a combined basis with CHS.
Management will need to maintain existing customers and attract
new customers, recruit, retain and effectively manage employees,
as well as expand operations and integrate customer support and
financial control systems. We expect to spend approximately
$3.0 million of integration-related capital expenditures in
the first 12 months after completion of the merger and to
incur $5.0 million of integration-
15
related expenses during
that 12-month
period. If the integration-related expenses and capital
expenditure requirements are greater than anticipated, or if we
are unable to manage our growth profitably after the merger, our
financial condition and results of operations may suffer.
A
shortage of qualified registered nursing staff and other
caregivers could adversely affect our ability to attract, train
and retain qualified personnel and could increase operating
costs after the merger.
Our business relies significantly on its ability to attract and
retain caregivers who possess the skills, experience and
licenses necessary to meet the requirements of its patients. We
compete for personnel with other providers of the services we
provide. Our ability to attract and retain caregivers after the
merger will depend on several factors, including our ability to
provide these caregivers with attractive assignments and
competitive benefits and salaries. There can be no assurance
that we will be successful in any of these areas. In addition,
there are occasional shortages of qualified healthcare personnel
in some of the markets in which we operate. As a result, we may
face higher costs to attract caregivers and we may have to
provide them with more attractive benefit packages than
originally anticipated, either of which could cause our
profitability to decline. Finally, if we expand our operations
into geographic areas where healthcare providers historically
have unionized or unionization occurs in our existing geographic
areas, we cannot assure you that negotiating collective
bargaining agreements will not have a negative effect on our
ability to timely and successfully recruit qualified personnel.
If we are unable to attract and retain caregivers, the quality
of our services may decline and we could lose patients and
referral sources.
Subject
to certain limitations, the Former CHS Stockholders and certain
former optionholders of CHS may sell our common stock beginning
September 26, 2010, which could cause our stock price to
decline.
The shares of our common stock that the Former CHS Stockholders
and certain former optionholders of CHS received in connection
with the merger with CHS are restricted, but such Former CHS
Stockholders and former optionholders may sell the shares of our
common stock under certain circumstances. We have entered into a
stockholders agreement with the Former CHS Stockholders
and certain former optionholders of CHS, pursuant to which we
have agreed to register their shares of our common stock with
the SEC in order to facilitate sales of those shares. The sale
of a substantial number of our shares by such parties or our
other stockholders within a short period of time could cause our
stock price to decline, making it more difficult for us to raise
funds through future offerings of our common stock or acquire
other businesses using our common stock as consideration.
The
continuing pressure on the global credit and financial markets
could materially and adversely affect our business and results
of operations.
The ongoing global financial crisis continues to result in
severely diminished liquidity and credit availability,
volatility in consumer confidence, declines in economic growth,
increases in unemployment rates and an ongoing uncertainty about
market stability. The effect of these actions could reduce
enrollment in governmental programs or benefits available to be
enrolled.
Limited or expensive access to credit could also reduce the
ability of the patients we serve to pay deductibles and
co-insurance. Higher unemployment rates and significant
employment layoffs and downsizings may lead to lower numbers of
patients enrolled in employer-provided plans. The adverse
economic conditions could also cause employers to stop offering,
or limit, certain healthcare coverage, or the program designs
associated with the coverage, as an employee benefit or cause
them to offer this coverage on a voluntary, employee-funded
basis as a means to reduce their operating costs, leaving the
patients ability to pay in question and increasing the
likelihood that compliance to drug therapies will be interrupted.
During an economic downturn, federal and state budgets could be
adversely affected, resulting in reduced or delayed
reimbursements or payments by the federal and state government
healthcare coverage programs in which we participate, including
Medicare, Medicaid and other federal or state assistance plans,
and changes adversely affecting our revenues and financial
results could be implemented to agreements already negotiated
with the government. Government programs could also slow or
temporarily suspend payments on Medicaid obligations, negatively
impacting our cash flow and increase our working capital needs
and interest payments.
16
Competition
in the pharmaceutical and home healthcare services industries
could reduce profit margins.
The pharmaceutical and home healthcare services industries are
very competitive. Our competitors include large and
well-established companies that may have greater financial,
marketing and technological resources than we do.
The specialty pharmacy industry is highly competitive. Some of
our competitors are under common control with, or ownership by,
pharmaceutical wholesalers and distributors, MCOs, PBMs or
retail pharmacy chains and may be better positioned with respect
to the cost-effective distribution of pharmaceuticals. In
addition, some of our competitors may have secured long-term
supply or distribution arrangements for prescription
pharmaceuticals necessary to treat certain chronic disease
states on price terms substantially more favorable than the
terms currently available to us. As a result of such
advantageous pricing, we may be less price competitive than some
of these competitors with respect to certain pharmaceutical
products. Our competitive position could also be adversely
affected by any inability to obtain access to new biotech
pharmaceutical products.
Changes
in industry pricing benchmarks could adversely affect our
financial performance.
Contracts with our clients generally use certain published
benchmarks to establish pricing for the reimbursement of
prescription medications dispensed by us. These benchmarks
include average wholesale price, which we refer to as AWP,
wholesale acquisition cost, which we refer to as WAC, and
average manufacturer price. Most of our contracts utilize the
AWP benchmark.
As a result of the settlement of
class-action
lawsuits brought against First DataBank and Medi-Span, effective
September 26, 2009, First DataBank and Medi-Span agreed to
reduce the
mark-up
factor applied to WAC, on which AWP is based, from 1.25 to 1.20
for the approximately 1,400 drug codes that were the subject of
the lawsuits. These AWP publishers also similarly reduced the
mark-up
factor on all other national drug codes on which they had marked
up AWP. This voluntary reduction affected approximately 18,000
national drug codes. First DataBank and Medi-Span also have
indicated that, within the next two years, they will discontinue
publication of AWP information. In response to this change, a
number of PBMs and third-party payors made adjustments to
existing contracts with network pharmacy providers in order to
preserve the economic structure of those agreements. The
majority of the state Medicaid agencies and certain national
health insurers did not make any such adjustments, the
consequence of which is lowered reimbursement levels. The impact
of the AWP settlement was to reduce our gross margins beginning
in the fourth quarter of 2009. We estimated the impact of this
change on our revenues and gross margins to be approximately
$6.8 million on an annual basis.
Client
demands for enhanced service levels or possible loss or
unfavorable modification of contracts with clients or providers
could pressure our margins.
As our clients face the continued rapid growth in prescription
drug costs, they may demand additional services and enhanced
service levels to help mitigate the increase in spending. We
operate in a very competitive environment, and we may not be
able to increase our fees to compensate for these increased
services, which could put pressure on our margins.
Our contracts with clients generally do not have terms longer
than three years and often may be terminated by the client on
relatively short notice. From time to tome, our clients will
generally seek bids from other PBM or specialty providers in
advance of the expiration of their contracts. If several of
these clients elect not to extend their relationship with us,
and we are not successful in generating sales to replace the
lost business, our future business and operating results could
be materially and adversely affected. In addition, we believe
the managed care industry is undergoing substantial
consolidation, and another party that is not our client could
acquire some of our managed care clients. In such case, the
likelihood such client would renew its contract with us could be
reduced.
There are approximately 56,000 retail pharmacies in the United
States. All major retail chain pharmacies and a vast majority of
independent pharmacies participate in our pharmacy network. The
top ten retail pharmacy chains represent approximately 65% of
the total number of stores and over 80% of prescriptions filled
in our network. Our contracts with retail pharmacies, which are
non-exclusive, are generally terminable
17
on relatively short notice. If one or more of the top pharmacy
chains elects to terminate its relationship with us, our
members access to retail pharmacies and our business could
be materially adversely affected. In addition, many large
pharmacy chains either own PBMs today, or could attempt to
acquire a PBM in the future. Ownership of PBMs by retail
pharmacy chains could have material adverse effects on our
relationships with such pharmacy chains and on our consolidated
results of operations, consolidated financial position
and/or
consolidated cash flow from operations.
Existing
and new government legislative and regulatory action could
adversely affect our business and financial
results.
We are subject to numerous federal, state and local laws and
regulations. See Government Regulation in this
prospectus. Changes in these regulations may require extensive
changes to our systems and operations that may be difficult to
implement. Untimely compliance or noncompliance with applicable
laws and regulations could adversely affect the continued
operation of our business, including, but not limited to:
imposition of civil or criminal penalties; suspension of
payments from government programs; loss of required government
certifications or approvals; loss of authorizations to
participate in or exclusion from government reimbursement
programs, such as the Medicare and Medicaid programs; or loss of
licensure. The regulations to which we are subject include, but
are not limited to, Anti-Kickback laws; federal and state
self-referral laws; the Health Insurance Portability and
Accountability Act of 1996, as amended, or HIPAA; regulations of
the U.S. Food and Drug Administration, or FDA,
U.S. Federal Trade Commission and U.S. Drug
Enforcement Administration; and regulations of various state
regulatory authorities. In that regard, our business, financial
position and results of operations could be affected by one or
more of the following:
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federal and state laws and regulations governing the purchase,
distribution, management, dispensing and reimbursement of
prescription drugs and related services, whether at retail,
wholesale or mail, and applicable licensing requirements;
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the frequency and rate of approvals by the FDA of new brand
named and generic drugs, or of
over-the-counter
status for brand name drugs;
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FDA regulation affecting the retail or PBM industry;
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rules and regulations issued pursuant to HIPAA and the Health
Information Technology for Economic and Clinical Health Act,
which we refer to as the HITECH Act, and other federal and state
laws affecting the use, disclosure and transmission of health
information, such as state security breach laws and state laws
limiting the use and disclosure of prescriber information;
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administration of the Medicare Prescription Drug Benefit Plan,
including legislative changes
and/or
the
CMS rulemaking and interpretation;
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government regulation of the development, administration, review
and updating of formularies and drug lists;
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state laws and regulations establishing or changing prompt
payment requirements for payments to retail pharmacies;
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federal and state laws governing the reimbursement of home
health services and licensed health agencies;
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managed care reform and plan design legislation; and
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direct regulation of pharmacies or PBMs by regulatory and
quasi-regulatory bodies.
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Pending
and future litigation and governmental inquiries or
investigations could subject us to significant monetary damages
and/or require us to change our business
practices.
We are subject to risks relating to litigation and other
proceedings in connection with our operations, including the
dispensing of pharmaceutical products by our mail service,
wholesale operations infusion services and community pharmacies.
See Business Legal Proceedings in this
prospectus for a list of material proceedings pending against
us. We can give no assurance that an adverse outcome in one or
more of
18
these suits would not have a material adverse effect on our
results of operations, financial position
and/or
cash
flow from operations, or would not require us to make material
changes to our business practices. We are presently responding
to several subpoenas and requests for information from
governmental agencies. We confirm from time to time while
responding to these subpoenas and requests that we are not a
target or a potential subject of those investigations and
requests, but we cannot predict with certainty what the outcome
of any of the foregoing might be. In addition to potential
monetary liability arising from these suits and proceedings, we
are incurring costs in the defense of the suits and in providing
documents to government agencies. Many of the current pending
claims and associated costs are covered by insurance, but
certain other costs are not insured, such as deductibles on each
claim and claims outside the scope of our insurance coverage.
There can be no assurance that such costs will not increase
and/or
become material in the future. Pending and future litigation and
governmental inquiries or investigations could subject us to
significant monetary damages
and/or
require us to change our business practices.
We may
be subject to liability claims for damages and other expenses
that are not covered by insurance or which exceed our
coverage.
A successful product or professional liability claim in excess
of our insurance coverage could harm our financial condition and
results of operations. Various aspects of our business may
subject us to litigation and liability for damages, including
the provision of PBM services and the operation of our
pharmacies. For example, a prescription drug dispensing error
could result in a patient receiving the wrong or incorrect
amount of medication, leading to personal injury or death. Our
business, financial condition and results of operations could
suffer if we pay damages or defense costs in connection with a
claim that is outside the scope or exceeds the coverage of any
applicable contractual indemnity or insurance coverage.
We
purchase substantially all of our pharmaceutical products from
one vendor and a disruption in our purchasing arrangements could
adversely impact our business.
We purchase substantially all of our prescription products,
subject to certain minimum periodic purchase levels and
excluding purchases of therapeutic plasma products, from a
single wholesaler, AmerisourceBergen Drug Corporation, which we
refer to as ABDC, pursuant to a prime vendor agreement. The term
of this agreement extends until August 2014, subject to
extension for up to two additional years. Any significant
disruption in our relationship with ABDC, or in ABDCs
supply of products to us, would make it difficult and possibly
more costly for us to continue to operate our business until we
are able to execute a replacement wholesaler agreement. There
can be no assurance that we would be able to find a replacement
wholesaler on a timely basis or that such wholesaler would be
able to fulfill our demands on similar financial terms. If we
are unable to identify a replacement on substantially similar
financial terms, our results of operations, financial condition
and cash flows may be materially adversely affected.
Loss
of relationships with one or more pharmaceutical manufacturers
and changes in payments made by pharmaceutical manufacturers
could adversely affect our business and financial
results.
We have contractual relationships with pharmaceutical
manufacturers that provide discounts on drugs dispensed from our
mail service and community pharmacies, and pay service fees for
other programs and services that we provide. Our business and
financial results could be adversely affected if:
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we were to lose relationships with one or more key
pharmaceutical manufacturers;
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discounts decline due to changes in utilization of specified
pharmaceutical products by healthcare payors, including MCOs,
government-funded
and/or
operated programs, TPAs and self-funded employer groups, which
we collectively refer to as Plan Sponsors, and other clients;
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legal restrictions are imposed on the ability of pharmaceutical
manufacturers to offer rebates, administrative fees or other
discounts or to purchase our programs or services; or
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pharmaceutical manufacturers choose not to offer rebates,
administrative fees or other discounts or to purchase our
programs or services.
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19
Failure
to develop new products, services and delivery channels may
adversely affect our business.
We operate in a highly competitive environment. We develop new
products and services from time to time to assist our clients.
If we are unsuccessful in developing innovative products and
services, our ability to attract new clients and retain existing
clients may suffer.
Technology is also an important component of our business as we
continue to utilize new and better channels to communicate and
interact with our clients, members and business partners. If our
competitors are more successful than us in employing this
technology, our ability to attract new clients, retain existing
clients and operate efficiently may suffer.
The
success of our business depends on maintaining a well-secured
business and technology infrastructure.
We are dependent on our infrastructure, including our
information systems, for many aspects of our business
operations. A fundamental requirement for our business is the
secure storage and transmission of personal health information
and other confidential data. Our business and operations may be
harmed if we do not maintain our business processes and
information systems in a secure manner, and continually maintain
and improve the integrity of our confidential information.
Although we have developed systems and processes that are
designed to protect information against security breaches,
failure to protect such information or mitigate any such
breaches may adversely affect our operating results.
Malfunctions in our business processes, breaches of our IT
systems or the failure to maintain effective and
up-to-date
IT systems could disrupt our business operations, result in
customer and member disputes, damage our reputation, expose us
to risk of loss or litigation, result in regulatory violations,
increase administrative expenses or lead to other adverse
consequences.
Problems
in the implementation and conversion of our new pharmacy system
could result in additional expense.
We have committed significant financial and other resources to
migrate to a new pharmacy dispensing, clinical management and
accounts receivable management system designed to streamline our
business processes, provide improved data reporting, data
management and scalability and improve cash posting, billing and
collections. Delays in the implementation of this system could
result in higher operating costs, additional charges for system
design changes or delays in the execution of our strategic plan
due to our inability to scale our current operating systems.
Our
failure to maintain controls and processes over billing and
collecting could have a significant negative impact on our
results of operations and financial condition.
The collection of accounts receivable is a significant challenge
and requires constant focus and involvement by management and
ongoing enhancements to information systems and billing center
operating procedures. If we are unable to properly bill and
collect our accounts receivable, our results could be materially
and adversely affected. While management believes that controls
and processes are satisfactory, there can be no assurance that
accounts receivable collectability will remain at current levels.
Efforts
to reduce healthcare costs and alter healthcare financing
practices could adversely affect our business.
During the past several years, the U.S. healthcare industry
has been subject to increased governmental regulation at both
the federal and state levels. Certain proposals have been made
at the federal and state government levels in an effort to
control healthcare costs, including proposing to lower
reimbursement under Medicaid and Medicare programs. These
proposals include single payor government funded
health care and price controls on prescription drugs. If these
or similar efforts are successful our business and operations
could be materially adversely affected. In addition, changing
political, economic and regulatory influences may affect
healthcare financing and reimbursement practices. If the current
healthcare financing and reimbursement system changes
significantly, our business could be materially adversely
affected. Congress recently enacted
20
sweeping legislation to reform the U.S. healthcare system.
See Government Regulation in this prospectus. In
addition, the Obama administration has submitted a 2010 federal
budget that emphasizes maintaining patient choice, reducing
inefficiencies and costs, increasing prevention programs,
improving coverage portability and universality, and improving
quality of care. Health reform and administration budget
proposals may also increase government involvement in healthcare
providers reimbursement under Medicare and Medicaid, or
otherwise change the way in which our clients do business. Plan
Sponsors may react to this environment and the uncertainty
surrounding it by reducing or delaying purchases of clinical
services, cost control mechanisms and other related services
that we provide. We cannot predict what effect, if any, these
proposals may have on our business. Other legislative or
market-driven changes in the healthcare system that we cannot
anticipate could also materially adversely affect our results of
operations, financial position
and/or
cash
flow from operations.
Prescription
volumes may decline, and our net revenues and profitability may
be negatively impacted, when products are withdrawn from the
market or when increased safety risk profiles of specific drugs
result in utilization decreases.
We process significant volumes of pharmacy claims for brand-name
and generic drugs from our mail service and community
pharmacies. When products are withdrawn from the market, or when
increased safety risk profiles of specific drugs or classes of
drugs result in utilization decreases, physicians may cease
writing or reduce the numbers of prescriptions written for these
higher-risk drugs. In cases where there is no acceptable
prescription drug therapeutic equivalent or generic alternative
for these prescription drugs, our prescription volumes, and thus
our revenues, profitability and cash flows, may decline.
The
loss of a relationship with one or more Plan Sponsors could
negatively impact our business.
Where we do not have preferred or exclusive arrangements with
Plan Sponsors, our contracts for reimbursement with Plan
Sponsors are often on a perpetual or evergreen
basis. These evergreen contracts are subject to termination by a
Plan Sponsors written notice. The required notice varies
by contract and is typically 30 to 90 days. Depending on
the amount of revenues generated by any single Plan Sponsor or
more than one Plan Sponsor in the aggregate, one or more
terminations could have a material and adverse effect on our
results of operations and financial performance.
Network
lock-outs by health insurers and PBMs could adversely affect our
financial results.
Many Plan Sponsors and PBMs continue to create exclusive
specialty and other networks which limit a members access
to a mail service facility or network of preferred pharmacies.
To the extent our pharmacies are excluded from these networks,
we are unable to dispense medications to those members and bill
for prescriptions to those members insurance carriers. If
Plan Sponsors and PBMs continue to pursue this strategy and we
are locked out from dispensing specialty medications to members
of exclusive networks, our financial condition and results of
operations could be adversely affected.
Our
issuance of common stock in the merger will increase the risk
that we could experience an ownership change in the
future that could significantly limit our ability to utilize our
net operating losses.
As of March 31, 2010, BioScrip had net operating losses, or
NOLs, for U.S. federal income tax purposes of approximately
$18.0 million. Our ability to utilize our NOLs to offset
future taxable income may be significantly limited if we
experience an ownership change as defined in
Section 382 of the Internal Revenue Code of 1986, as
amended, which we refer to as the Code. In general, an ownership
change will occur if there is a cumulative change in our
ownership by 5-percent shareholders that exceeds
50 percentage points over a rolling three-year period. A
corporation that experiences an ownership change will generally
be subject to an annual limitation on its pre-ownership change
NOLs equal to the value of the corporation immediately before
the ownership change, multiplied by the long-term tax-exempt
rate (subject to certain adjustments). The annual limitation for
a taxable year would be increased by the amount of any
recognized built-in gains for such year and the
amount of any unused annual limitation in a prior year.
21
We did not experience an ownership change upon the issuance of
common stock in the merger. However, the issuance of common
stock in the merger, together with other issuances of common
stock during the applicable three-year period, could cause an
ownership change under Section 382 of the Code. As a
result, the issuance of our common stock in the merger will
increase the risk that BioScrip could experience an ownership
change during the three-year period following the merger.
Risks
Related to the New Notes
The
significant indebtedness incurred to complete the acquisition
imposed operating and financial restrictions on us which,
together with the resulting debt service obligations, may
significantly limit our ability to execute our business strategy
and increase the risk of default under our debt
obligations.
We incurred an aggregate of approximately $325.0 million of
indebtedness (not including up to $50.0 million that would
also be available under our new revolving credit facility) in
connection with the acquisition. The terms of our new credit
facilities require us to comply with certain financial
covenants, including a maximum total leverage ratio and a
minimum fixed charge coverage ratio. In addition, the terms of
our new indebtedness also include certain covenants restricting
or limiting our ability to, among other things:
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incur indebtedness or liens;
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make investments or capital expenditures;
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engage in mergers, acquisitions or asset sales;
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declare dividends or redeem or repurchase capital stock;
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modify our organizational documents; and
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change our fiscal year.
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These covenants may adversely affect our ability to finance
future operations or limit our ability to pursue certain
business opportunities or take certain corporate actions. The
covenants may also restrict our flexibility in planning for
changes in our business and the industry and make us more
vulnerable to economic downturns and adverse developments.
Our ability to meet our cash requirements, including our debt
service obligations, will be dependent upon our ability to
substantially improve our operating performance, which will be
subject to general economic and competitive conditions and to
financial, business and other factors affecting our operations,
many of which are or may be beyond our control. In addition, the
New Credit Facility has interest payments that are subject to
variable interest rates and are therefore dependent upon future
fluctuations in interest rates, which are beyond our control. We
expect to use cash flow from operations to pay our expenses and
amounts due under the new notes and our other outstanding
indebtedness. We cannot provide assurance that our business
operations will generate sufficient cash flows from operations
to fund these cash requirements and debt service obligations. If
our operating results, cash flow or capital resources prove
inadequate, or if interest rates increase significantly, we
could face substantial liquidity problems and might be required
to dispose of material assets or operations to meet our debt and
other obligations. If we are unable to service our debt, we
could be forced to reduce or delay planned expansions and
capital expenditures, sell assets, restructure or refinance our
debt or seek additional equity capital, and we may be unable to
take any of these actions on satisfactory terms or in a timely
manner. Further, any of these actions may not be sufficient to
allow us to service our debt obligations or may have an adverse
impact on our business. Our failure to generate sufficient
operating cash flow to pay our debts or to successfully
undertake any of these actions could have a material adverse
effect on us.
In addition, the degree to which we may be leveraged as a result
of the indebtedness incurred in connection with the merger or
otherwise could:
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materially and adversely affect our ability to obtain additional
financing for working capital, capital expenditures,
acquisitions, debt service requirements or other purposes;
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make us more vulnerable to general adverse economic, regulatory
and industry conditions;
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limit our flexibility in planning for, or reacting to, changes
and opportunities in the markets in which we compete;
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place us at a competitive disadvantage compared to our
competitors that have less debt or could require us to dedicate
a substantial portion of our cash flow to service our debt;
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make it more difficult for us to satisfy our obligations with
respect to the new notes;
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reduce the funds available to us for operations and other
purposes;
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limit our ability to fund the repurchase of the new notes upon a
change of control; or
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restrict us from making strategic acquisitions or exploiting
other business opportunities.
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The
new notes are not secured by our assets or those of our
guarantor subsidiaries.
The new notes and the related guarantees are our and our
guarantor subsidiaries general unsecured obligations and
are effectively subordinated in right of payment to all of our
and our guarantor subsidiaries secured indebtedness and
obligations, including all indebtedness under the New Credit
Facility. If we become insolvent or are liquidated, or if
payment under any of the instruments governing our secured debt
is accelerated, the lenders under those instruments will be
entitled to exercise the remedies available to a secured lender
under applicable law and pursuant to the instruments governing
such debt. Accordingly, our secured indebtedness and
obligations, including all indebtedness under the New Credit
Facility, is effectively senior to the new notes to the extent
of the value of the collateral securing that indebtedness. In
that event, because the new notes and the guarantees will not be
secured by any of our assets, it is possible that our remaining
assets might be insufficient to satisfy claims of holders of the
new notes in full or at all.
As of March 31, 2010, we had approximately $100.0 aggregate
principal amount of secured indebtedness outstanding under the
New Credit Facility. Additionally, under the terms of our prime
vendor agreement with ABDC, we granted ABDC a secured lien in
all of our inventory as well as the proceeds thereof. Any
additional borrowings pursuant to our existing or future credit
facilities would also be secured indebtedness, if incurred.
Although the indenture governing the new notes contains
limitations on the amount of additional indebtedness that we may
incur, under certain circumstances the amount of such
indebtedness could be substantial and, under certain
circumstances, such indebtedness may be secured indebtedness.
Despite
our substantial indebtedness, we may still incur significantly
more debt. This could exacerbate the risks associated with our
substantial leverage.
We may be able to incur substantial additional indebtedness,
including additional secured indebtedness, in the future.
Although the indenture governing the new notes and the New
Credit Facility contain restrictions on the incurrence of
additional debt, these restrictions are subject to a number of
qualifications and exceptions and, under certain circumstances,
debt incurred in compliance with these restrictions, including
secured debt, could be substantial. The New Credit Facility
permits, among other things, revolving credit borrowings of up
to $50.0 million. Adding additional debt to current debt
levels could exacerbate the leverage-related risks described
above.
To
service our indebtedness and other obligations, we will require
a significant amount of cash. Our ability to generate cash
depends on many factors beyond our control.
Our ability to make payments on and to refinance our
indebtedness, including the new notes, and to fund working
capital needs and planned capital expenditures will depend on
our ability to generate cash in the future. A significant
reduction in our operating cash flows resulting from changes in
economic conditions, increased competition or other events
beyond our control could increase the need for additional or
alternative sources of liquidity and could have a material
adverse effect on our business, financial condition, results of
operations, prospects and our ability to service our debt and
other obligations.
We cannot assure you that our business will generate sufficient
cash flows from operations or that future borrowings will be
available to us under the New Credit Facility or otherwise in an
amount sufficient to enable
23
us to pay our indebtedness, including our indebtedness under the
New Credit Facility and the new notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of
our indebtedness, including the new notes, on or before the
maturity of the debt. We cannot assure you that we will be able
to refinance any of our indebtedness on commercially reasonable
terms or at all.
If we
default on our obligations to pay our indebtedness, we may not
be able to make payments on the new notes.
Any default under the agreements governing our indebtedness,
including a default under the New Credit Facility, that is not
waived by the required lenders, and the remedies sought by the
holders of such indebtedness, could prevent us from paying
principal, premium, if any, and interest on the new notes and
substantially decrease the market value of the new notes. If we
are unable to generate sufficient cash flow and are otherwise
unable to obtain funds necessary to meet required payments of
principal, premium, if any, and interest on our indebtedness, or
if we otherwise fail to comply with the various covenants,
including financial and operating covenants, in the instruments
governing our indebtedness (including covenants in the New
Credit Facility and the indenture governing the new notes), we
could be in default under the terms of the agreements governing
such indebtedness. In the event of such default, the holders of
such indebtedness could elect to declare all the funds borrowed
thereunder to be due and payable, together with accrued and
unpaid interest, the lenders under the New Credit Facility could
elect to terminate their commitments thereunder, and cease
making further loans and institute foreclosure proceedings
against our assets, and we could be forced into bankruptcy or
liquidation. If our operating performance declines, we may in
the future need to obtain waivers from the required lenders
under the New Credit Facility or holders of other indebtedness
to avoid being in default. If we breach our covenants under the
New Credit Facility or any other indebtedness and seek a waiver,
we may not be able to obtain a waiver from the required lenders.
If this occurs, we would be in default under the New Credit
Facility or such other indebtedness, the lenders could exercise
their rights, as described above, and we could be forced into
bankruptcy or liquidation.
The
new notes may impose significant operating and financial
restrictions, which may prevent us from pursuing our business
strategies or favorable business opportunities.
Subject to a number of important exceptions, the indenture
governing the new notes and the New Credit Facility may limit
our ability to:
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incur or guarantee additional indebtedness or issue certain
preferred stock;
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transfer or sell assets;
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make certain investments;
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pay dividends or distributions, redeem subordinated indebtedness
or make other restricted payments;
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create or incur liens;
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incur dividend or other payment restrictions affecting certain
subsidiaries;
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issue capital stock of our subsidiaries;
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consummate a merger, consolidation or sale of all or
substantially all of our assets; and
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enter into transactions with affiliates.
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Consequently, the restrictions contained in the indenture
governing the new notes and the New Credit Facility may prevent
us from taking actions that we believe would be in the best
interest of our business, and may make it difficult for us to
successfully execute our business strategy or effectively
compete with companies that are not similarly restricted.
Additionally, the terms of the New Credit Facility require us to
comply with certain financial covenants, including a maximum
total leverage ratio and a minimum fixed charge coverage ratio.
We cannot assure you that we will meet those tests or that the
lenders under the New Credit Facility will waive any failure to
meet those tests.
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A breach of any of these covenants or the inability to comply
with the required financial ratios could result in a default
under the New Credit Facility or the indenture governing the new
notes, as applicable. If any such default occurs, the lenders
under the New Credit Facility and the holders of the new notes
may elect to declare all of their respective outstanding debt,
together with accrued interest and other amounts payable
thereunder, to be immediately due and payable. The lenders under
the New Credit Facility also have the right in these
circumstances to terminate any commitments they have to provide
further borrowings. If we were unable to pay such amounts, the
lenders under the New Credit Facility could proceed against the
collateral pledged to them. We will pledge a substantial portion
of our assets to the lenders under the New Credit Facility. In
such an event, we cannot assure you that we would have
sufficient assets to pay amounts due on the new notes. As a
result, you may receive less than the full amount you would
otherwise be entitled to receive on the new notes.
We may
not be able to satisfy our obligations to holders of the new
notes upon a Change of Control or Asset Sale.
Upon the occurrence of a Change of Control, holders of the new
notes will have the right to require us to purchase the new
notes at a price equal to 101% of the principal amount of such
new notes, plus any accrued and unpaid interest to the date of
purchase. See Description of Notes Repurchase
at the Option of Holders Change of Control.
In addition, upon the occurrence of an Asset Sale, holders of
the new notes may, under certain circumstances, have the right
to require us to purchase a portion of the new notes at a price
equal to 100% of the principal amount of such new notes, plus
any accrued and unpaid interest to the date of purchase. See
Description of Notes Repurchase at the Option
of Holders Asset Sales.
We cannot assure you that, if a Change of Control offer or Asset
Sale offer is made, we will have available funds sufficient to
pay the Change of Control purchase price or Asset Sale purchase
price for any or all of the new notes that might be delivered by
holders of the new notes seeking to exercise the Change of
Control put right or Asset Sale put right. If we are required to
purchase new notes pursuant to a Change of Control offer or
Asset Sale offer, we would be required to seek third-party
financing to the extent we do not have available funds to meet
our purchase obligations. There can be no assurance that we will
be able to obtain such financing on acceptable terms to us or at
all. Accordingly, none of the holders of the new notes may
receive the Change of Control purchase price or Asset Sale
purchase price for their new notes. Our failure to make or
consummate the Change of Control offer or Asset Sale offer, or
to pay the Change of Control purchase price or Asset Sale
purchase price when due, will give the holders of the new notes
the rights described in Description of Notes
Events of Default and Remedies.
In addition, the events that constitute a Change of Control or
Asset Sale under the indenture governing the new notes may also
be events of default under the New Credit Facility. These events
may permit the lenders under the New Credit Facility to
accelerate the debt outstanding thereunder and, if such debt is
not paid, to enforce security interests in our specified assets,
thereby limiting our ability to raise cash to purchase the new
notes and reducing the practical benefit of the
offer-to-purchase
provisions to the holders of the new notes.
The
trading prices of the new notes will be directly affected by our
ratings with major credit rating agencies, the prevailing
interest rates being paid by companies similar to us, and the
overall condition of the financial and credit
markets.
The trading prices of the new notes in the secondary market will
be directly affected by our ratings with major credit rating
agencies, the prevailing interest rates being paid by companies
similar to us, and the overall condition of the financial and
credit markets. It is impossible to predict the prevailing
interest rates or the condition of the financial and credit
markets. Credit rating agencies continually revise their ratings
for companies that they follow, including us. Any ratings
downgrade could adversely affect the trading price of the new
notes or the trading market for the new notes, to the extent a
trading market for the new notes
25
develops. The condition of the financial and credit markets and
prevailing interest rates have fluctuated in the past and are
likely to fluctuate in the future.
A
subsidiary guarantee could be voided if it constitutes a
fraudulent transfer under U.S. bankruptcy or similar state law,
which would prevent the holders of the new notes from relying on
that subsidiary to satisfy claims.
The new notes will be guaranteed by our domestic restricted
subsidiaries. The guarantees may be subject to review under
U.S. federal bankruptcy law and comparable provisions of
state fraudulent conveyance laws if a bankruptcy or another
similar case or lawsuit is commenced by or on behalf of our or a
guarantor subsidiarys unpaid creditors or another
authorized party. Under these laws, if a court were to find
that, at the time any guarantor subsidiary issued a guarantee of
the new notes, either it issued the guarantee to delay, hinder
or defraud present or future creditors or it received less than
reasonably equivalent value or fair consideration for issuing
the guarantee and at the time:
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it was insolvent or rendered insolvent by reason of issuing the
guarantee;
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it was engaged, or about to engage, in a business or transaction
for which its remaining unencumbered assets constituted
unreasonably small capital to carry on its business;
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it intended to incur, or believed that it would incur, debts
beyond its ability to pay as they mature; or
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it was a defendant in an action for money damages, or had a
judgment for money damages docketed against it if, in either
case, after final judgment, the judgment is unsatisfied, then
the court could void the obligations under the guarantee,
subordinate the guarantee of the new notes to other debt or take
other action detrimental to holders of the new notes.
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We cannot be sure as to the standard that a court would use to
determine whether a guarantor subsidiary was solvent at the
relevant time, or, regardless of the standard that the court
uses, that the issuance of the guarantees would not be voided or
that the guarantees would not be subordinated to other debt. If
such a case were to occur, the guarantee could also be subject
to the claim that, since the guarantee was incurred for our
benefit, and only indirectly for the benefit of the guarantor
subsidiary, the obligations of the applicable guarantor
subsidiary were incurred for less than fair consideration. A
court could thus void the obligations under the guarantee,
subordinate the guarantee to the applicable guarantor
subsidiarys other debt or take other action detrimental to
holders of the new notes. If a court were to void a guarantee,
you would no longer have a claim against the guarantor
subsidiary. Sufficient funds to repay the new notes may not be
available from other sources, including the remaining guarantor
subsidiaries, if any. In addition, the court might direct you to
repay any amounts that you already received from or are
attributable to the guarantor subsidiary.
Each subsidiary guarantee contains a provision intended to limit
the guarantor subsidiarys liability to the maximum amount
that it could incur without causing the incurrence of
obligations under its subsidiary guarantee to be a fraudulent
transfer. This provision may not be effective to protect the
subsidiary guarantees from being voided under fraudulent
transfer law.
Our
subsidiary guarantors may be unable to fulfill their obligations
under their guarantees.
The ability of our subsidiary guarantors to make any required
payments under their guarantees depends on our future
performance, which will be affected by financial, business,
economic, and other factors, many of which we cannot control.
Such subsidiaries businesses may not generate sufficient
cash flow from operations in the future and their anticipated
growth in revenue and cash flow may not be realized, either or
both of which could result in their being unable to honor their
guarantees or to fund other liquidity needs. If such
subsidiaries do not have enough money, they may be required to
refinance all or part of their then-existing debt, sell assets,
or borrow more money. They may not be able to accomplish any of
these alternatives on terms acceptable to them, or at all. In
addition, the terms of existing or future debt agreements,
including the New Credit Facility and the indenture governing
the new notes, may restrict such subsidiaries from adopting any
of these alternatives. The failure of our subsidiaries to
generate sufficient cash flow or to achieve any of
26
these alternatives could materially and adversely affect the
value of the new notes and the ability of such subsidiaries to
pay the amounts due under their guarantees, if any.
Risks
Related to the Exchange Offer
If you
do not exchange your old notes for new notes, your ability to
sell your old notes will be restricted.
If you do not exchange your old notes for new notes in the
exchange offer, you will continue to be subject to the
restrictions on transfer described in the legend on your old
notes. The restrictions on transfer of your old notes arise
because we issued the old notes in a transaction not subject to
the registration requirements of the Securities Act and
applicable state securities laws. In general, you may only offer
to sell the old notes if they are registered under the
Securities Act and applicable state securities laws or offered
or sold pursuant to an exemption from those requirements. If you
are still holding any old notes after the expiration date of the
exchange offer and the exchange offer has been consummated, you
will not be entitled to have those old notes registered under
the Securities Act or to any similar rights under the
registration rights agreement, subject to limited exceptions, if
applicable. After the exchange offer is completed, we will not
be required, and we do not intend, to register the old notes
under the Securities Act. In addition, if you do exchange your
old notes in the exchange offer for the purpose of participating
in a distribution of the new notes, you may be deemed to have
received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. To the extent old notes are tendered and accepted
in the exchange offer, the trading market, if any, for the old
notes would be adversely affected.
Your
ability to transfer the new notes may be limited by the absence
of an active trading market, and there is no assurance that any
active trading market will develop for the new
notes.
There is no established public market for the new notes. We do
not intend to list the new notes on any securities exchange or
automated quotation system. We cannot assure you that an active
market for the new notes will develop or, if developed, that it
will continue. Historically, the market for non-investment grade
debt, such as the new notes, has been subject to disruptions
that have caused substantial volatility in the prices of
securities similar to the new notes. We cannot assure you that
the market, if any, for the new notes will be free from similar
disruptions, and any such disruptions may adversely affect the
prices at which you may sell your new notes.
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THE
EXCHANGE OFFER
Purpose
and Effect of the Exchange Offer
We have entered into a registration rights agreement with the
initial purchaser of the old notes. Under the registration
rights agreement, we agreed, among other things, to:
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file a registration statement with the SEC relating to an offer
to exchange the old notes for new notes no later than
June 23, 2010;
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use all commercially reasonable efforts to cause the
registration statement relating to the exchange offer to be
declared effective on or prior to September 21, 2010;
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use our best efforts to keep the registration statement relating
to the exchange offer effective through the consummation of the
exchange offer in accordance with its terms; and
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commence the exchange offer and use all commercially reasonable
efforts to exchange new notes for all old notes tendered in the
exchange offer on or prior to 30 business days after the date on
which the registration statement related to the exchange offer
is declared effective.
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A copy of the registration rights agreement has been filed as an
exhibit to our Current Report on
Form 8-K
filed with the SEC on March 31, 2010, which report is
incorporated by reference elsewhere in this prospectus. See
Incorporation of Certain Documents and Where
You Can Find More Information.
The new notes will have terms substantially identical to the old
notes except that the new notes will not contain terms with
respect to transfer restrictions and registration rights and
additional interest payable in the circumstances described
below. Old notes in an aggregate principal amount of
$225,000,000 were issued on March 25, 2010.
In addition, pursuant to the registration rights agreement,
under the circumstances set forth below, we will file a shelf
registration statement with respect to the resale of the old
notes and we will use our commercially reasonable efforts to
cause the shelf registration statement to be declared effective
on or prior to October 22, 2010, and to keep the shelf
registration statement effective until the earlier of
March 25, 2012 and the date that all old notes covered by
the shelf registration statement have been sold as contemplated
in the shelf registration statement or there cease to be any
outstanding old notes. These circumstances include if:
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we and the guarantors are not required to file the registration
statement related to the exchange offer;
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we are not permitted to consummate the exchange offer by
applicable law or SEC policy; or
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within 20 business days following the consummation of the
exchange offer, any holder of the old notes notifies us that:
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it is prohibited by applicable law or SEC policy from
participating in the exchange offer;
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it may not resell the new notes acquired in the exchange offer
to the public without delivering a prospectus (other than by
reason of such holders status as an affiliate of BioScrip)
and the prospectus contained in the registration statement
relating to the exchange offer is not appropriate or available
for such resales; or
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it is a broker-dealer and owns old notes acquired directly from
us or one of our affiliates.
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The registration statement of which this prospectus forms a part
was filed in compliance with our obligations under the
registration rights agreement. We will incur additional interest
expense if, among other things:
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neither the registration statement relating to the exchange
offer nor the shelf registration statement has been filed on or
prior to the applicable filing deadline;
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neither the registration statement relating to the exchange
offer nor the shelf registration statement is declared effective
on or prior to the applicable effectiveness deadline; or
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the exchange offer is not consummated on or before the 30th
business day after the effective date of the registration
statement relating to the exchange offer.
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Each holder of old notes that wishes to exchange such old notes
for transferable new notes in the exchange offer will be
required to make the following representations:
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any new notes to be received by it will be acquired in the
ordinary course of its business;
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it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of
Securities Act) of the new notes;
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it is not an affiliate, as defined in Rule 405
under the Securities Act, of us or any guarantor;
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if such holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, the distribution of the
new notes; and
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if such holder is a broker-dealer, that it will receive new
notes for its own account in exchange for old notes that were
acquired as a result of market-making activities or other
trading activities and such holder will acknowledge that it will
deliver a prospectus in connection with any resale of such new
notes.
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In addition, each broker-dealer that receives new notes for its
own account in exchange for old notes, where such old notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities, must, in the absence of
an exemption, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with
secondary resales of new notes and cannot rely on the position
of the SEC staff set forth in Exxon Capital Holdings
Corporation, Morgan Stanley & Co.,
Incorporated or similar no-action letters. See Plan
of Distribution.
Resale of
New Notes
Based on interpretations of the SEC staff set forth in no-action
letters issued to unrelated third parties, we believe that new
notes issued in the exchange offer in exchange for old notes may
be offered for resale, resold and otherwise transferred by any
exchange note holder without compliance with the registration
and prospectus delivery provisions of the Securities Act, if:
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such holder is not an affiliate of ours within the
meaning of Rule 405 under the Securities Act;
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such new notes are acquired in the ordinary course of the
holders business; and
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the holder does not intend to participate in the distribution of
such new notes.
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Any holder who tenders in the exchange offer with the intention
of participating in any manner in a distribution of the new
notes:
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cannot rely on the position of the staff of the SEC set forth in
Exxon Capital Holdings Corporation or similar
interpretive letters; and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction.
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If, as stated above, a holder cannot rely on the position of the
staff of the SEC set forth in Exxon Capital Holdings
Corporation or similar interpretive letters, any effective
registration statement used in connection with a secondary
resale transaction must contain the selling security holder
information required by Item 507 of
Regulation S-K
under the Securities Act.
This prospectus may be used for an offer to resell, for the
resale or for other retransfer of new notes only as specifically
set forth in this prospectus. With regard to broker-dealers,
only broker-dealers that acquired the old notes as a result of
market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that
receives new notes for its own account in exchange for old
notes, where such old notes were acquired by such broker-dealer
as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus
in connection with any resale of the new notes.
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Please read the section captioned Plan of
Distribution for more details regarding these procedures
for the transfer of new notes. We have agreed to use our best
efforts to keep the registration statement of which this
prospectus forms a part effective and to amend and supplement
this prospectus in order to permit this prospectus to be
lawfully delivered by all persons subject to the prospectus
delivery requirements of the Securities Act for such period of
time as such persons must comply with such requirements in order
to resell the new notes. We have also agreed that we will make a
reasonable number of copies of this prospectus available to any
selling holders of the new notes or broker-dealer for use in
connection with any resale of the new notes.
Terms of
the Exchange Offer
Upon the terms and subject to the conditions set forth in this
prospectus, we will accept for exchange any old notes properly
tendered and not withdrawn prior to the expiration date. We will
issue a like principal amount of new notes in exchange for each
$2,000 principal amount of old notes surrendered under the
exchange offer. We will issue $1,000 integral multiple amount of
new notes in exchange for each $1,000 integral multiple amount
of old notes surrendered under the exchange offer. Old notes may
be tendered only in denominations of $2,000 and integral
multiples of $1,000 in excess thereof.
The form and terms of the new notes will be substantially
identical to the form and terms of the old notes except the new
notes will be registered under the Securities Act, will not bear
legends restricting their transfer and will not provide for any
additional interest upon our failure to fulfill our obligations
under the registration rights agreement to file, and cause to
become effective, a registration statement. The new notes will
evidence the same debt as the old notes. The new notes will be
issued under and entitled to the benefits of the same indenture
that authorized the issuance of the outstanding old notes.
Consequently, both series of notes will be treated as a single
class of debt securities under the indenture.
The exchange offer is not conditioned upon any minimum aggregate
principal amount of old notes being tendered for exchange.
As of the date of this prospectus, $225,000,000 aggregate
principal amount of the old notes are outstanding. There will be
no fixed record date for determining registered holders of old
notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the
provisions of the registration rights agreement, the applicable
requirements of the Securities Act and the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act,
and the rules and regulations of the SEC. Old notes that are not
tendered for exchange in the exchange offer will remain
outstanding and continue to accrue interest and will be entitled
to the rights and benefits such holders have under the indenture
relating to the old notes.
We will be deemed to have accepted for exchange properly
tendered old notes when we have given oral notice (which is
subsequently confirmed in writing) or written notice of the
acceptance to the exchange agent. The exchange agent will act as
agent for the tendering holders for the purposes of receiving
the new notes from us and delivering new notes to such holders.
Subject to the terms of the registration rights agreement, we
expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes not
previously accepted for exchange, upon the occurrence of any of
the conditions specified below under the caption
Conditions to the Exchange Offer.
Holders who tender old notes in the exchange offer will not be
required to pay brokerage commissions or fees, or transfer taxes
with respect to the exchange of old notes. We will pay all
charges and expenses, other than those transfer taxes described
below, in connection with the exchange offer. It is important
that you read the section labeled Fees and
Expenses below for more details regarding fees and
expenses incurred in the exchange offer.
Expiration
Date; Extensions; Amendments
The exchange offer for the old notes will expire at
5:00 p.m., New York City time,
on , 2010, unless we
extend it in our sole discretion.
30
In order to extend the exchange offer, we will notify the
exchange agent orally or in writing of any extension. We will
notify in writing or by public announcement the registered
holders of old notes of the extension no later than
9:00 a.m., New York City time, on the business day after
the previously scheduled expiration date.
We reserve the right, in our sole discretion:
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to delay accepting for exchange any old notes in connection with
the extension of the exchange offer;
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|
to extend the exchange offer or to terminate the exchange offer
and to refuse to accept old notes not previously accepted if any
of the conditions set forth below under
Conditions to the Exchange Offer have
not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
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subject to the terms of the registration rights agreement, to
amend the terms of the exchange offer in any manner, provided
that in the event of a material change in the exchange offer,
including the waiver of a material condition, we will extend the
exchange offer period, if necessary, so that at least five
business days remain in the exchange offer following notice of
the material change.
|
Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by written
notice or public announcement thereof to the registered holders
of old notes. If we amend the exchange offer in a manner that we
determine to constitute a material change, we will promptly
disclose such amendment in a manner reasonably calculated to
inform the holders of old notes of such amendment, provided that
in the event of a material change in the exchange offer,
including the waiver of a material condition, we will extend the
exchange offer period, if necessary, so that at least five
business days remain in the exchange offer following notice of
the material change. If we terminate this exchange offer as
provided in this prospectus before accepting any old notes for
exchange or if we amend the terms of this exchange offer in a
manner that constitutes a fundamental change in the information
set forth in the registration statement of which this prospectus
forms a part, we will promptly file a post-effective amendment
to the registration statement of which this prospectus forms a
part. In addition, we will in all events comply with our
obligation to make prompt delivery of new notes for all old
notes properly tendered and accepted for exchange in the
exchange offer.
Without limiting the manner in which we may choose to make
public announcements of any delay in acceptance, extension,
termination or amendment of the exchange offer, we shall have no
obligation to publish, advertise, or otherwise communicate any
such public announcement, other than by issuing a timely press
release to a financial news service.
Conditions
to the Exchange Offer
Despite any other term of the exchange offer, we will not be
required to accept for exchange, or exchange any new notes for,
any old notes, and we may terminate the exchange offer as
provided in this prospectus before accepting any old notes for
exchange if in our reasonable judgment:
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the exchange offer, or the making of any exchange by a holder of
old notes, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
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any action or proceeding has been instituted or threatened in
any court or by or before any governmental agency with respect
to the exchange offer that, in our judgment, would reasonably be
expected to impair our ability to proceed with the exchange
offer.
|
In addition, we will not be obligated to accept for exchange the
old notes of any holder that has not made:
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|
the representations described under Purpose
and Effect of the Exchange Offer,
Procedures for Tendering Old Notes and
Plan of Distribution; and
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31
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such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make
available to us an appropriate form for registration of the new
notes under the Securities Act.
|
We expressly reserve the right, at any time or at various times
on or prior to the scheduled expiration date of the exchange
offer, to extend the period of time during which the exchange
offer is open. Consequently, we may delay acceptance of any old
notes by giving written notice of such extension to the
registered holders of the old notes. During any such extensions,
all old notes previously tendered will remain subject to the
exchange offer, and we may accept them for exchange unless they
have been previously withdrawn. We will return any old notes
that we do not accept for exchange for any reason without
expense to their tendering holder promptly after the expiration
or termination of the exchange offer.
We expressly reserve the right to amend or terminate the
exchange offer on or prior to the scheduled expiration date of
the exchange offer, and to reject for exchange any old notes not
previously accepted for exchange, upon the occurrence of any of
the conditions to termination of the exchange offer specified
above. We will give written notice or public announcement of any
extension, amendment, non-acceptance or termination to the
registered holders of the old notes as promptly as practicable.
In the case of any extension, such notice will be issued no
later than 9:00 a.m., New York City time on the business
day after the previously scheduled expiration date.
These conditions are for our sole benefit and we may, in our
sole discretion, assert them regardless of the circumstances
that may give rise to them or waive them in whole or in part at
any or at various times except that all conditions to the
exchange offer must be satisfied or waived by us prior to
acceptance of your notes. If we fail at any time to exercise any
of the foregoing rights, that failure will not constitute a
waiver of such right. Each such right will be deemed an ongoing
right that we may assert at any time or at various times prior
to the expiration of the exchange offer. Any waiver by us will
be made by written notice or public announcement to the
registered holders of the notes and any such waiver shall apply
to all the registered holders of the notes.
In addition, we will not accept for exchange any old notes
tendered, and will not issue new notes in exchange for any such
old notes, if at such time any stop order is threatened or in
effect with respect to the registration statement of which this
prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939, as amended.
Procedures
for Tendering Old Notes
Only a holder of old notes may tender such old notes in the
exchange offer. If you are a DTC participant that has old notes
which are credited to your DTC account by book-entry and which
are held of record by DTCs nominee, as applicable, you may
tender your old notes by book-entry transfer as if you were the
record holder. Because of this, references herein to registered
or record holders include DTC.
If you are not a DTC participant, you may tender your old notes
by book-entry transfer by contacting your broker, dealer or
other nominee or by opening an account with a DTC participant,
as the case may be.
To tender old notes in the exchange offer:
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you must comply with DTCs Automated Tender Offer Program,
or ATOP, procedures described below; and
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the exchange agent must receive a timely confirmation of a
book-entry transfer of the old notes into its account at DTC
through ATOP pursuant to the procedure for book-entry transfer
described below, along with a properly transmitted agents
message, before the expiration date.
|
Participants in DTCs ATOP program must electronically
transmit their acceptance of the exchange by causing DTC to
transfer the old notes to the exchange agent in accordance with
DTCs ATOP procedures for transfer. DTC will then send an
agents message to the exchange agent. With respect to the
exchange of the
32
old notes, the term agents message means a
message transmitted by DTC, received by the exchange agent and
forming part of the book-entry confirmation, which states that:
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DTC has received an express acknowledgment from a participant in
its ATOP that is tendering old notes that are the subject of the
book-entry confirmation;
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the participant has received and agrees to be bound by the terms
and subject to the conditions set forth in this
prospectus; and
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we may enforce the agreement against such participant.
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Delivery of an agents message will also constitute an
acknowledgment from the tendering DTC participant that the
representations described below in this prospectus are true and
correct and when received by the exchange agent will form a part
of a confirmation of book-entry transfer in which you
acknowledge and agree to be bound by the terms of the letter of
transmittal.
In addition, each broker-dealer that receives new notes for its
own account in exchange for old notes, where such old notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such
new notes. See Plan of Distribution.
Guaranteed
Delivery Procedures
If you desire to tender outstanding notes pursuant to the
exchange offer and (1) time will not permit your letter of
transmittal, certificates representing such outstanding notes
and all other required documents to reach the exchange agent on
or prior to the expiration date, or (2) the procedures for
book-entry transfer (including delivery of an agents
message) cannot be completed on or prior to the expiration date,
you may nevertheless tender such notes with the effect that such
tender will be deemed to have been received on or prior to the
expiration date if all the following conditions are satisfied:
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you must effect your tender through an eligible guarantor
institution;
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a properly completed and duly executed notice of guaranteed
delivery, substantially in the form provided by us herewith, or
an agents message with respect to guaranteed delivery that
is accepted by us, is received by the exchange agent on or prior
to the expiration date as provided below; and
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|
a book-entry confirmation of the transfer of such notes into the
exchange agent account at DTC as described above, together with
a letter of transmittal (or a manually signed facsimile of the
letter of transmittal) properly completed and duly executed,
with any signature guarantees and any other documents required
by the letter of transmittal or a properly transmitted
agents message, are received by the exchange agent within
three New York Stock Exchange, Inc. trading days after the date
of execution of the notice of guaranteed delivery.
|
The notice of guaranteed delivery may be sent by hand delivery,
facsimile transmission or mail to the exchange agent and must
include a guarantee by an eligible guarantor institution in the
form set forth in the notice of guaranteed delivery.
Book-entry
Transfer
The exchange agent will make a request to establish an account
with respect to the old notes at DTC for purposes of the
exchange offer promptly after the date of this prospectus; and
any financial institution participating in DTCs system may
make book-entry delivery of old notes by causing DTC to transfer
such old notes into the exchange agents account at DTC in
accordance with DTCs procedures for transfer.
Withdrawal
Rights
Except as otherwise provided in this prospectus, you may
withdraw your tender of old notes at any time before
5:00 p.m., New York City time, on the expiration date.
33
To withdraw a tender of old notes in any exchange offer, the
applicable exchange agent must receive a letter or facsimile
notice of withdrawal at its address set forth below under
Exchange Agent before the time indicated
above. Any notice of withdrawal must:
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specify the name of the person who deposited the old notes to be
withdrawn;
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|
identify the old notes to be withdrawn including the certificate
number or numbers and aggregate principal amount of old notes to
be withdrawn or, in the case of old notes transferred by
book-entry transfer, the name and number of the account at DTC
to be credited and otherwise comply with the procedures of the
relevant book-entry transfer facility; and
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|
specify the name in which the old notes being withdrawn are to
be registered, if different from that of the person who
deposited the notes.
|
We will determine in our sole discretion all questions as to the
validity, form and eligibility, including time of receipt, of
notices of withdrawal. Our determination will be final and
binding on all parties. Any old notes withdrawn in this manner
will be deemed not to have been validly tendered for purposes of
the exchange offer. We will not issue new notes for such
withdrawn old notes unless the old notes are validly retendered.
We will return to you any old notes that you have tendered but
that we have not accepted for exchange without cost as soon as
practicable after withdrawal, rejection of tender or termination
of the exchange offer. You may retender properly withdrawn old
notes by following one of the procedures described above at any
time before the expiration date.
Exchange
Agent
We have appointed U.S. Bank National Association as
exchange agent for the exchange offer of old notes.
You should direct questions and requests for assistance and
requests for additional copies of this prospectus to the
exchange agent addressed as follows:
By mail:
U.S. Bank National Association
Corporate Trust Services
Attn: Specialized Finance
60 Livingston Avenue
St. Paul, MN 55107
By facsimile:
(651) 495-8158
Confirm:
1-800-934-6802
Attention: Specialized Finance
Questions:
1-800-934-6802
Fees and
Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make
additional solicitations by telephone or in person by our
officers and regular employees and those of our affiliates.
We have not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offer. We will,
however, pay the exchange agent reasonable and customary fees
for its services and reimburse it for its related reasonable
out-of-pocket
expenses.
Our expenses in connection with the exchange offer include:
34
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fees and expenses of the exchange agent and trustee;
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accounting and legal fees;
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printing costs; and
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related fees and expenses.
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Transfer
Taxes
We will pay all transfer taxes, if any, applicable to the
exchange of old notes under the exchange offer. The tendering
holder, however, will be required to pay any transfer taxes,
whether imposed on the registered holder or any other person, if:
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certificates representing old notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the
registered holder of old notes tendered; or
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a transfer tax is imposed for any reason other than the exchange
of old notes under the exchange offer.
|
If satisfactory evidence of payment of such taxes is not
submitted, the amount of such transfer taxes will be billed to
that tendering holder.
Consequences
of Failure to Exchange
Holders of old notes who do not exchange their old notes for new
notes under the exchange offer, including as a result of failing
to timely deliver old notes to the exchange agent, together with
all required documentation, will remain subject to the
restrictions on transfer of such old notes:
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as set forth in the legend printed on the old notes as a
consequence of the issuance of the old notes pursuant to the
exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable
state securities laws; and
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otherwise as set forth in the offering memorandum distributed in
connection with the private offering of the old notes.
|
In addition, holders of old notes who do not exchange their old
notes for new notes under the exchange offer will no longer have
any registration rights or be entitled to liquidated damages
under the registration rights agreement.
In general, you may not offer or sell the old notes unless they
are registered under the Securities Act, or if the offer or sale
is exempt from registration under the Securities Act and
applicable state securities laws. Except as required by the
registration rights agreement, we do not intend to register
resales of the old notes under the Securities Act. Based on
interpretations of the SEC staff, new notes issued pursuant to
the exchange offer may be offered for resale, resold or
otherwise transferred by their holders, other than any such
holder that is our affiliate within the meaning of
Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the
Securities Act, provided that the holders acquired the new notes
in the ordinary course of the holders business and the
holders have no arrangement or understanding with respect to the
distribution of the new notes to be acquired in the exchange
offer. Any holder who tenders old notes in the exchange offer
for the purpose of participating in a distribution of the new
notes:
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cannot rely on the applicable interpretations of the
SEC; and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction.
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After the exchange offer is consummated, if you continue to hold
any old notes, you may have difficulty selling them because
there will be fewer old notes outstanding.
35
Accounting
Treatment
We will record the new notes in our accounting records at the
same carrying value as the old notes, as reflected in our
accounting records on the date of exchange. Accordingly, we will
not recognize any gain or loss for accounting purposes in
connection with the exchange offer.
Other
Participation in the exchange offer is voluntary, and you should
carefully consider whether to accept. You are urged to consult
your financial and tax advisors in making your own decision on
what action to take.
We may in the future seek to acquire untendered old notes in the
open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. We have no present
plans to acquire any old notes that are not tendered in the
exchange offer or to file a registration statement to permit
resales of any untendered old notes.
36
USE OF
PROCEEDS
This exchange offer is intended to satisfy our obligations under
the registration rights agreement. We will not receive any
proceeds from the exchange offer. You will receive, in exchange
for old notes tendered by you and accepted by us in the exchange
offer, new notes in the same principal amount. The old notes
surrendered in exchange for the new notes will be retired and
cancelled and cannot be reissued. Accordingly, the issuance of
the new notes will not result in any increase of our outstanding
debt or the receipt of any additional proceeds.
37
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information
has been prepared to assist you in your analysis of the
financial effects of the Transactions. The unaudited pro forma
combined financial information was prepared using the historical
audited and unaudited statements of operations of BioScrip and
CHS. This information should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial
statements and accompanying notes of BioScrip and CHS
incorporated by reference into this prospectus.
The accompanying unaudited pro forma combined financial
information gives effect to the merger with CHS, including a
purchase price of $236 million in cash, which was used to
retire approximately $129.0 million of CHS debt and to pay
approximately $14.6 million in merger-related expenses
incurred by CHS. As of the closing date, the fair value of the
BioScrip common stock was $91.6 million and the fair value
of the warrants and options was $12.3 and $2.8 million,
respectively. Total amounts paid to execute the merger with CHS
were $349.8 million. The pro forma adjustments reflect
estimates of the fair value of assets and liabilities acquired
which may be adjusted during the measurement period allowed
under generally accepted accounting principles and, as such, the
fair values and their resulting pro forma adjustments are still
considered preliminary. The effect of the changes to the pro
forma statement of operations could be material. The unaudited
pro forma financial information is not necessarily indicative of
the combined results of operations that might have been achieved
for the dates or periods indicated, nor is it necessarily
indicative of the results of operations that may occur in the
future.
The unaudited pro forma combined statement of operations for the
twelve months ended December 31, 2009 assumes that the
merger with CHS took place on January 1, 2009 and combines
BioScrips and CHSs audited consolidated statements
of operations for the twelve months ended December 31, 2009.
The unaudited pro forma combined statement of operations for the
three months ended March 31, 2010 combines BioScrips
unaudited consolidated statement of operations for the three
months ended March 31, 2010, which includes six days of
operating results of CHS for the period after completion of the
merger, and the unaudited results of operations of CHS for the
period January 1, 2010 through March 25, 2010, the
date the merger was consummated.
38
BIOSCRIP,
INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
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|
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|
BioScrip
|
|
|
CHS
|
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|
|
|
|
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Preliminary
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
December 31, 2009
|
|
|
December 31, 2009
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except for per share amounts)
|
|
|
Revenue
|
|
$
|
1,329,525
|
|
|
$
|
254,067
|
|
|
|
|
|
|
$
|
1,583,592
|
|
Cost of revenue
|
|
|
1,171,703
|
|
|
|
124,763
|
|
|
|
|
|
|
|
1,296,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
157,822
|
|
|
|
129,304
|
|
|
|
|
|
|
|
287,126
|
|
Selling, general and administrative expenses
|
|
|
131,946
|
|
|
|
91,261
|
|
|
|
|
|
|
|
223,207
|
|
Bad debt expense
|
|
|
8,636
|
|
|
|
5,790
|
|
|
|
|
|
|
|
14,426
|
|
Acquisition and integration expenses
|
|
|
1,774
|
|
|
|
638
|
|
|
|
(638
|
)(A)
|
|
|
1,774
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
397
|
|
|
|
2,871
|
(B)
|
|
|
3,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
15,466
|
|
|
|
31,218
|
|
|
|
(2,233
|
)
|
|
|
44,451
|
|
Interest expense, net
|
|
|
1,920
|
|
|
|
7,280
|
|
|
|
22,248
|
(C)
|
|
|
31,448
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
13,546
|
|
|
|
23,938
|
|
|
|
(24,481
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)
|
|
|
13,003
|
|
Tax (benefit) provision
|
|
|
(40,553
|
)
|
|
|
9,208
|
|
|
|
(9,672
|
)(D)
|
|
|
41,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
54,099
|
|
|
$
|
14,730
|
|
|
$
|
(14,809
|
)
|
|
$
|
54,020
|
|
Cumulative preferred stock dividends
|
|
|
|
|
|
|
(1,918
|
)
|
|
|
1,918
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
|
$
|
54,099
|
|
|
$
|
12,812
|
|
|
$
|
(12,891
|
)
|
|
$
|
54,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholder per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.39
|
|
|
$
|
0.14
|
|
|
|
|
|
|
$
|
1.05
|
|
Diluted
|
|
$
|
1.36
|
|
|
$
|
0.12
|
|
|
|
|
|
|
$
|
1.02
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,985
|
|
|
|
90,898
|
|
|
|
|
|
|
|
51,641
|
|
Diluted
|
|
|
39,737
|
|
|
|
105,132
|
|
|
|
|
|
|
|
52,703
|
|
See accompanying notes to unaudited pro forma combined financial
information including Note 6
for an explanation of the preliminary pro forma adjustments
39
BIOSCRIP,
INC.
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
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|
|
|
|
|
|
|
|
|
BioScrip
|
|
|
CHS
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
for the Period from
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
January 1, 2010
|
|
|
Preliminary
|
|
|
|
|
|
|
Ended
|
|
|
through
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
March 31, 2010
|
|
|
March 25, 2010
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except for per share amounts)
|
|
|
Revenue
|
|
$
|
335,068
|
|
|
$
|
60,779
|
|
|
|
|
|
|
$
|
395,847
|
|
Cost of revenue
|
|
|
296,150
|
|
|
|
32,340
|
|
|
|
|
|
|
|
328,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
38,918
|
|
|
|
28,439
|
|
|
|
|
|
|
|
67,357
|
|
Selling, general and administrative expenses
|
|
|
36,354
|
|
|
|
21,567
|
|
|
|
|
|
|
|
57,921
|
|
Bad debt expense
|
|
|
3,650
|
|
|
|
1,089
|
|
|
|
|
|
|
|
4,739
|
|
Acquisition and integration expenses
|
|
|
5,040
|
|
|
|
14,810
|
|
|
|
(14,810
|
)(A)
|
|
|
5,040
|
|
Amortization of intangible assets
|
|
|
176
|
|
|
|
83
|
|
|
|
558
|
(B)
|
|
|
817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,302
|
)
|
|
|
(9,110
|
)
|
|
|
14,252
|
|
|
|
(1,160
|
)
|
Interest expense, net
|
|
|
3,169
|
|
|
|
3,033
|
|
|
|
1,660
|
(C)
|
|
|
7,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(9,471
|
)
|
|
|
(12,143
|
)
|
|
|
12,592
|
|
|
|
(9,022
|
)
|
Tax (benefit) provision
|
|
|
(2,302
|
)
|
|
|
(3,451
|
)
|
|
|
2,023
|
(D)
|
|
|
(3,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,169
|
)
|
|
$
|
(8,692
|
)
|
|
$
|
10,569
|
|
|
$
|
(5,292
|
)
|
Cumulative preferred stock dividends
|
|
|
|
|
|
|
(634
|
)
|
|
|
634
|
(E)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders
|
|
$
|
(7,169
|
)
|
|
$
|
(9,326
|
)
|
|
$
|
11,203
|
|
|
$
|
(5,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common stockholder per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.18
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
$
|
(0.10
|
)
|
Diluted
|
|
$
|
(0.18
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
$
|
(0.10
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
40,825
|
|
|
|
90,898
|
|
|
|
|
|
|
|
52,921
|
|
Diluted
|
|
|
40,825
|
|
|
|
106,090
|
|
|
|
|
|
|
|
52,921
|
|
See accompanying notes to unaudited pro forma combined financial
information including Note 6
for an explanation of the preliminary pro forma adjustments
40
BIOSCRIP,
INC.
NOTES TO
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
|
|
1.
|
Description
of Transaction
|
On January 24, 2010, the Company entered into the Merger
Agreement with CHS Holdings, Inc. (formerly known as Camelot
Acquisition Corp.), CHS and the Former CHS Stockholders. CHS was
at that time a privately held company that is a leading provider
of home infusion and home nursing services and products to
patients suffering from chronic and acute medical conditions.
Pursuant to the Merger Agreement, at the effective time of the
merger, CHS merged with the Merger Sub. As a result of the
merger, the separate corporate existence of CHS ceased and CHS
Holdings, Inc. continues as the surviving corporation of the
merger and as a wholly-owned subsidiary of BioScrip.
On March 25, 2010, upon consummation of the merger, the
Company:
|
|
|
|
|
repaid the outstanding indebtedness of CHS, which was
$121.8 million (net of CHSs cash) at March 25,
2010, and entered into the New Credit Facility;
|
|
|
|
paid cash consideration of $99.6 million and paid
merger-related expenses incurred by CHS in connection with the
acquisition of $14.6 million;
|
|
|
|
issued 13.1 million shares of BioScrip common stock, of
which 2.7 million shares are being held in escrow to fund
indemnification claims, if any;
|
|
|
|
issued warrants to acquire 3.4 million shares of BioScrip
common stock, exercisable at $10.00 per share and having a
five-year term; and
|
|
|
|
rolled over options to acquire 0.7 million shares of
BioScrip common stock.
|
The unaudited pro forma combined financial information is based
on the historical financial statements of BioScrip and CHS and
prepared and presented pursuant to the regulations of the
Securities and Exchange Commission regarding pro forma financial
information. The 2010 unaudited pro forma combined financial
information includes CHSs unaudited statement of
operations for the period from January 1, 2010 through
March 25, 2010, the date the merger was consummated.
BioScrip historical financial information includes the unaudited
statement of operations for the three months ended
March 31, 2010, which includes six days of operating
results of CHS for the period after completion of the merger.
The pro forma adjustments include the application of the
acquisition method under Accounting Standards Codification (ASC)
Topic 805, Business Combinations, with respect to the merger.
ASC Topic 805 requires, among other things, that identifiable
assets acquired and liabilities assumed be recognized at their
fair values as of the acquisition date. ASC Topic 805 also
allows a measurement period during which fair values may be
assessed after the acquisition date.
Under ASC Topic 820, Fair Value Measurements and Disclosures,
fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. ASC 820 specifies a hierarchy of
valuation techniques based on the nature of the inputs used to
develop the fair value measures. This is an exit price concept
for the valuation of the asset or liability. In addition, market
participants are assumed to be unrelated buyers and sellers in
the principal or the most advantageous market for the asset or
liability. Fair value measurements for an asset assume the
highest and best use by these market participants. Many of these
fair value measurements can be highly subjective and it is also
possible that other professionals, applying reasonable judgment
to the same facts and circumstances, could develop and support a
range of alternative estimated amounts.
Total merger-related transaction costs incurred by BioScrip were
$22.3 million through March 31, 2010, which includes
approximately $13.4 million of costs associated with the
issuance of debt. Under ASC Topic 805, merger-related
transaction costs not associated with the debt, such as
advisory, legal, valuation and other
41
BIOSCRIP,
INC.
NOTES TO
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION (Continued)
professional fees, are excluded from components of consideration
and are expensed in the periods in which the costs are incurred.
Transaction costs associated with the issuance of debt are
amortized over the life of the debt.
The unaudited pro forma combined statement of operations for the
twelve months ended December 31, 2009 includes merger
related transaction costs of approximately $1.8 million
incurred by BioScrip. The unaudited pro forma combined statement
of operations for the three months ended March 31, 2010
includes merger related transaction costs of approximately
$5.0 million and finance related fees of approximately
$2.25 million incurred by BioScrip during the three months
ended March 31, 2010.
The historical consolidated financial information has been
adjusted in the unaudited pro forma combined financial
information to give effect to pro forma events that are
(1) directly attributable to the merger, (2) factually
supportable, and (3) expected to have a continuing impact
on the combined results. The pro forma financial information
does not reflect revenue opportunities and cost savings that we
expect to realize after the merger with CHS. No assurance can be
given with respect to the estimated revenue opportunities and
operating cost savings that are expected to be realized as a
result of the merger with CHS. The pro forma financial
information also does not reflect non-recurring charges related
to integration activity or exit costs that may be incurred by
BioScrip or CHS in connection with the merger.
Certain CHS amounts have been reclassified to conform to
BioScrips method of financial presentation. These
reclassifications had no effect on previously reported net
income. There were no material transactions between BioScrip and
CHS during the periods presented in the unaudited pro forma
combined financial information that would need to be eliminated.
Upon completion of the merger, BioScrip began a detailed review
of CHSs accounting policies and procedures. As a result of
that review, BioScrip has reclassified certain expenses between
cost of revenue and selling, general and administrative
expenses. The impact of the reclassification was immaterial to
the statement of operations. BioScrip may identify additional
differences between the accounting policies and procedures of
the two companies that, when conformed, may have a material
impact on the future operating results. Further differences from
unifying the accounting policies of the combined companies may
be identified before BioScrips quarterly report on
Form 10-Q
for the three months ended June 30, 2010 is filed and are
not reflected in adjustments to pro forma combined financial
information at this time.
|
|
4.
|
Value of
Consideration Transferred and Purchase Price to be
Allocated
|
The consideration transferred to effect the merger and the
aggregate purchase price to be allocated is presented in the
table below.
|
|
|
|
|
Fair value of equity consideration:
|
|
|
|
|
BioScrip common stock issued (13.1 million shares)
|
|
$
|
91,614
|
|
BioScrip warrants issued (warrants to acquire 3.4 million
shares of common stock)
|
|
|
12,268
|
|
Rollover options (716,086 options)
|
|
|
2,802
|
|
Cash paid to CHS stockholders
|
|
|
99,626
|
|
|
|
|
|
|
Total consideration conveyed to CHS stockholders
|
|
$
|
206,310
|
|
Cash paid for merger-related expenses incurred by CHS
|
|
|
14,566
|
|
Assumption and repayment of CHS debt
|
|
|
128,952
|
|
|
|
|
|
|
Total amounts paid to execute the merger with CHS
|
|
$
|
349,828
|
|
|
|
|
|
|
42
BIOSCRIP,
INC.
NOTES TO
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION (Continued)
|
|
5.
|
Assets
Acquired and Liabilities Assumed
|
The following is a discussion of the adjustments made in
connection with the preparation of the unaudited pro forma
combined financial information. Each of these adjustments
represents very preliminary estimates of the fair values of
CHSs assets and liabilities and periodic amortization of
such adjustments to the extent applicable.
The following is a preliminary estimate of the assets acquired
and the liabilities assumed by BioScrip upon the merger,
reconciled to the consideration transferred:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Book value of CHS net assets acquired as of March 25, 2010:
|
|
|
|
|
Tangible assets acquired, net
|
|
$
|
5,877
|
|
Intangible assets acquired
|
|
$
|
25,200
|
|
Goodwill
|
|
$
|
304,185
|
|
Debt assumed and repaid
|
|
$
|
(128,952
|
)
|
|
|
|
|
|
Equity and cash consideration
|
|
$
|
206,310
|
|
|
|
|
|
|
Goodwill
:
Goodwill is calculated as the
excess of fair value of the consideration as of the merger date
expected to be transferred over the values assigned to the
identifiable assets acquired and liabilities assumed. Goodwill
is not amortized but rather is subject to an annual impairment
test.
Intangible assets
:
Intangible assets
acquired include trademarks, trade names, customer relationships
and certificates of need which were valued at their current fair
value as of the date of acquisition.
Income taxes
:
No adjustments to the tax
basis of CHSs assets and liabilities are expected as a
result of the merger.
|
|
6.
|
Adjustments
to Unaudited Pro Forma Combined Statements of
Operations:
|
(A) Reflects the elimination of CHS acquisition and
integration expenses incurred in the periods presented.
(B) Amortization of intangible assets adjustments:
|
|
|
|
|
|
|
|
|
|
|
Twelve
|
|
|
Three
|
|
|
|
Months
|
|
|
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Amortization of intangible assets
|
|
$
|
3,268
|
|
|
$
|
817
|
|
Elimination of CHS amortization of intangible assets
|
|
|
(397
|
)
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
Total amortization of intangible assets
|
|
$
|
2,871
|
|
|
$
|
558
|
|
|
|
|
|
|
|
|
|
|
43
BIOSCRIP,
INC.
NOTES TO
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION (Continued)
(C) Interest and deferred financing costs adjustments:
|
|
|
|
|
|
|
|
|
|
|
Twelve
|
|
|
Three
|
|
|
|
Months
|
|
|
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Interest and deferred financing costs
|
|
$
|
31,448
|
|
|
$
|
7,862
|
|
Elimination of CHS interest and deferred financing costs related
to prior debt
|
|
|
(7,280
|
)
|
|
|
(3,033
|
)
|
Elimination of BioScrip interest and deferred financing costs
related to prior line of credit
|
|
|
(1,920
|
)
|
|
|
(3,169
|
)
|
|
|
|
|
|
|
|
|
|
Total adjustments to interest expense, net
|
|
$
|
22,248
|
|
|
$
|
1,660
|
|
|
|
|
|
|
|
|
|
|
BioScrip funded the cash component of the merger consideration
and repayment of CHS long-term debt by issuing the old notes and
entering into the New Credit Facility. The old notes accrue
interest at 10.25% per annum and the Term Loan accrues interest
at a base rate or Eurodollar rate plus an applicable margin of
3.0%, with the base rate and Eurodollar rate having a floor of
3.0%. As of May 31, 2010, the Term Loan accrued interest at
6.0% per annum.
A change of one percentage point in the rates associated with
the Term Loan would result in a change of approximately
$1.0 million per annum to the pre-tax pro forma earnings.
Costs incurred in connection with the issuance of merger related
debt will be deferred and amortized over the term of the debt.
The amount of these costs was $13.4 million as of
March 31, 2010.
(D) Reflects the income tax effects of pro forma
adjustments at the expected combined statutory rate. Fifty
percent of the integration expenses are assumed to be
non-deductible
for income taxes and are excluded from the pro forma adjustment
tax effect.
(E) Reflects the elimination of CHS preferred stock
dividends.
44
BUSINESS
Overview
We are a leading national provider of specialty pharmacy and
home care products and services that partners with patients,
physicians, hospitals, healthcare payors and pharmaceutical
manufacturers to provide clinical management solutions and
delivery of cost-effective access to prescription medications.
Our services are designed to improve clinical outcomes for
chronic and acute healthcare conditions while controlling
overall healthcare costs. As of May 31, 2010, we had a
total of 127 locations in 27 states plus the District of
Columbia, including 32 community pharmacy locations, 32 home
nursing locations, three mail service facilities and 60 home
infusion locations, including 17 contract affiliated infusion
pharmacies.
On March 25, 2010, we acquired CHS, a privately held
leading provider of home infusion and home nursing products and
services to patients suffering from chronic and acute medical
conditions. Our acquisition of CHS created one of the largest
independent specialty pharmacy and home infusion providers in
the United States, with a national network of specialty and home
infusion pharmacies and services with over 120 points of service
in 27 states plus the District of Columbia. As a result of
the acquisition, we expect to cross-sell all of our pharmacy
service offerings and our homecare services, enabling
accelerated pull-through opportunities with our existing payors,
as well as the addition of more than 450 payor relationships
from CHS. The acquisition also significantly expands our
national footprint with the addition of a strong regional and
local management team. In addition to broadening our clinical
services organization and expertise, the acquisition of CHS also
increases our focus on higher margin therapies. As we integrate
CHS into our operations, we expect to expand our overall profit
and operating margins. In connection with our acquisition of
CHS, we issued $225.0 million aggregate principal amount of
the old notes and entered into the New Credit Facility.
Below is a brief discussion of our business and operations as
reported in our financial statements on a segment basis.
Immediately upon consummating the acquisition of CHS, we began
integrating the operations of CHS into BioScrip. We believe that
our operations, organizational structure and related segment
reporting may change as a result of the acquisition. We are
currently evaluating how to review and evaluate the operating
performance of and allocate resources to the operating units
following the acquisition of CHS.
Prior to our acquisition of CHS, we historically operated in two
primary segments Specialty Pharmacy Services and
Traditional Pharmacy Services. Through our Specialty Pharmacy
Services segment, we deliver comprehensive support,
dispensing/distribution of specialized pharmaceuticals, patient
care management, data reporting and a range of other complex
therapy management services to patients with certain chronic
health conditions or multiple conditions. Specialty drugs are
high-cost injectable, infusible, inhalable or oral drugs that
require special handling (such as refrigeration) or compounding
prior to administration, and sometimes require close
professional monitoring during the course of administration and
often throughout treatment. Our pharmacies are full-service,
carrying both traditional and specialty medications and able to
treat patients with a variety of medical conditions. We believe
that care management programs deliver superior clinical outcomes
through enhanced medication compliance and patient retention, as
has been demonstrated in third-party clinical studies.
In our Traditional Pharmacy Services segment, we mainly provide
traditional mail order pharmacy fulfillment, and to a lesser
extent we administer prescription discount card programs and
fully-funded pharmacy benefit management services. These
services are marketed to plan sponsors and are designed to
promote cost-effective, clinically appropriate pharmacy services
through our mail service distribution facility. Prescription
discount card programs are administered on behalf of commercial
plan sponsors, typically TPAs, whereby revenue is derived on a
per claim basis from the dispensing network pharmacy.
Through our home health business, most of which we acquired from
our acquisition of CHS, we provide home infusion therapy,
respiratory therapy and home medical equipment, skilled nursing
and therapy visits, private duty nursing services,
rehabilitation services, hospice and medical social services to
patients primarily in the eastern United States in the home
through our home health locations. Our platform provides
nationwide service capabilities and the ability to deliver
clinical management services that offer patients a high-touch,
community- and home-based care environment. Our core services
are provided in coordination with and under
45
the direction of the patients physician. Our home health
professionals, including pharmacists, nurses, respiratory
therapists and physical therapists, work with the physician to
develop a plan of care suited to the patients specific
needs. Whether in the home, physician office, ambulatory
infusion center or other alternate site of care, we provide
products, services and condition-specific clinical management
programs tailored to improve the care of individuals with
complex health conditions such as gastrointestinal
abnormalities,
HIV/AIDS,
cancer, iron overload, multiple sclerosis, organ transplants,
rheumatoid arthritis, immune deficiencies and congestive heart
failure.
Our
Strengths
We believe that our company has a number of competitive
strengths, including:
Attractive
Independent and Local Competitive Position with Significant
National Platform and Infrastructure
As of May 31, 2010, we had a total of 127 locations in
27 states plus the District of Columbia, including 32
community pharmacy locations, 32 home nursing locations, three
mail service facilities and 60 home infusion locations,
including 17 contract affiliated infusion pharmacies. Our model
combines local presence with effective, comprehensive clinical
programs for multiple therapies and all delivery technologies
(oral, injectable and infusible). We also have the capabilities
and payor relationships to distribute specialty pharmaceuticals
to all 50 states. We have more than 1,000 MCO relationships
and are one of the few home health and specialty pharmacy
providers that can offer a truly national, integrated and
comprehensive approach to MCOs, which generally favor fully
integrated vendors who can provide high-touch specialty pharmacy
solutions to their patients.
Diversified
Payor Base with Limited Reliance on Government
Payors
On a combined basis, approximately 71% and 67% of our pro forma
revenue for the year ended December 31, 2009 and the three
months ended March 31, 2010, respectively, was from
non-government payors. Additionally, although Medicare and
Medicaid represent a larger percentage of our overall revenues
as a result of our acquisition of CHS, we believe that we
further diversified our overall business exposure to revenue
concentration, as our overall exposure to Medicare and Medicaid
is diversified among various therapies and conditions, thereby
minimizing risk in any one therapy area. Regarding commercial
payors, no single payor represented more than 13% of our pro
forma revenue for either the year ended December 31, 2009
or the three months ended March 31, 2010, with the top five
payors comprising 31% of our pro forma revenue for both the year
ended December 31, 2009 and the three months ended
March 31, 2010. Most of our top payors, including the top
payor, are PBMs, which have a diversified base of end users. Our
diverse range of disease-state therapy regimens offered through
our clinical management programs allows us to further mitigate
reimbursement risk. We believe that our historical
under-penetration of the Medicare and Medicaid markets provides
us with significant opportunities for growth with limited risk.
Effective
Care Management Clinical Programs that Produce Positive Clinical
Outcomes
We have diversified, comprehensive and effective clinical
programs across numerous therapeutic areas, including: chronic
kidney disease; Crohns disease; deep vein thrombosis;
Gauchers disease; growth hormone deficiency; hemophilia;
Hepatitis C; HIV/AIDS; immune deficiency; infertility; multiple
sclerosis; oncology; osteoarthritis; psoriasis; rheumatoid
arthritis; organ transplant; ulcerative colitis; respiratory
syncytical virus; infection control; and nutrition
abnormalities. We have clinical programs that are designed to
improve patient adherence and retention. We handle all specialty
pharmaceutical delivery technologies, oral, injectable and
infusible. We believe that we have earned a positive reputation
among all of our stakeholders patients, physicians,
payors and pharmaceutical manufacturers by providing
superior service and favorable clinical outcomes. We believe
that our independent platform provides the specialty
pharmaceuticals and the necessary programs and services for
better and more efficient clinical outcomes for our clients.
46
Attractive
and Diversified Therapeutic Coverage within the Home Infusion
Market
Our infusion business provides high value traditional infusion
therapies with accompanying clinical management and home care.
Our infusion product offerings and services are designed to
treat chronic conditions, such as total parenteral nutritional,
cancer and hemophilia, which comprise over 19% of our pro forma
infusion revenue for both the year ended December 31, 2009
and the three months ended March 31, 2010, and have
significantly higher margins than our specialty infusion
products and services. In addition to the to the long-term
treatment associated with these chronic conditions, these
conditions require ongoing caregiver counseling and education
regarding patient treatment and ongoing monitoring to encourage
patients to comply with the prescribed therapy, including
programs for enteral and total parenteral nutrition and
pediatric infusion. Our clinical management programs offer a
number of multiple disease-state therapy regimens, increasing
the number of opportunities to cross-sell services and
technologies.
Experienced
Management Team with Recognized Financial Sponsor
Support
We have a strong and well-respected management team with a
diverse background in the healthcare industry, with a common
focus on the specialty pharmacy and home infusion industries.
The team also has prior experience at leading healthcare
companies such as OptionCare, Coram Healthcare, Hemophilia
Resources of America, Caremark and Walgreens. Combined, the team
has over 200 years of relevant industry experience and over
75 years of combined tenure at BioScrip. Our President and
Chief Operating Officer, Richard Smith, has over 17 years
of home health experience in increasingly senior positions at
various public and private healthcare companies, and is
overseeing the integration of the CHS platform into our existing
network. After the acquisition, several key members of the CHS
management team have continued with our company and will support
achievement of our long-term strategic goals. Also following the
acquisition, the Former CHS Stockholders beneficially own
approximately 30% of our common equity (inclusive of warrants
and options), and Kohlberg is the largest single beneficial
owner of our shares. Upon completion of the acquisition,
Kohlberg appointed two members to our Board of Directors.
Kohlberg is a leading U.S. private equity firm.
Our
Strategy
Since our acquisition of CHS, our management has been
implementing both its strategic plan as well as a detailed
merger integration plan to achieve and expand the synergistic
benefits of the acquisition. Management has also commenced
executing on its plan to seize organic revenue growth
opportunities by cross-selling products and services through our
expanded geographic footprint and payor contract base. Our
long-term goal is to be the leading independent provider of
specialty pharmacy and home health services in the United
States. We intend to achieve these goals and objectives as
follows:
Continuing
to Focus on Core High-Value Therapies
We will continue to focus on delivering high value therapies,
such as anti-infective, total parenteral and enteral nutrition
therapies, as well as expanding our portfolio of high-value
chronic therapies. We have significant clinical experience in
managing patients afflicted with these conditions, which we
deliver on a local basis to patients in their homes due to the
complexity and frequency of pharmaceutical administration and
need for continued professional monitoring. In other cases,
where appropriate, we deliver oral, injectable and infusible
products on a national or regional basis.
Continuing
to Operate a Local Clinical Model that Emphasizes Customized
Care Management
Our infusion branches utilize a coordinated team approach,
comprised of nurses, therapists and pharmacists designed to
administer locally and monitor the medical care of our patient
population that frequently suffers from chronic diseases. These
local teams provide customized patient care management, which we
believe assures patient responsiveness to their plan of care,
better quality care and a personal touch that our patients have
come to expect.
47
Focusing
on the Integration of CHSs Business
Our team has extensive experience managing and integrating
infusion businesses. We have worked closely with CHSs
former management to implement a seamless transition through a
detailed, cross-functional integration plan led by Richard
Smith, our President and Chief Operating Officer. We believe
that the complexity of a systems integration is mitigated by the
fact that all of our and CHSs infusion locations use the
same clinical management and accounts receivables software and
that the reimbursement, pharmacy and clinical teams are
experienced working with that software. We have not experienced,
and do not anticipate, any systems disruption or patient
disruptions, because no facilities will be merged except for a
small BioScrip satellite branch. Local CHS businesses continue
to operate under their brands used prior to the acquisition, and
field operations will be left intact. This strategy is intended
to minimize revenue risk and disruptions to our business.
Achieving
Cost Synergies and Targeting Cross-Selling
Opportunities
We anticipate cost savings synergies and margin expansion from
the acquisition of CHS. By combining our and CHSs
platforms, we intend to eliminate significant overlap and
redundancy in corporate overhead and infrastructure in order to
achieve annualized cost savings of approximately
$5.0 million. We also have begun combining CHSs
purchasing volume with our purchasing volume, leveraging the
increased scale of our operations, purchasing volume and
medication distribution in order to achieve contractual
annualized cost of revenue synergies of approximately
$3.0 million. In addition to these cost savings, we believe
that there are potential significant synergies that can be
achieved through up-selling and cross-selling products and
services, as described below.
Leveraging
Our Combined Relationships with National MCOs
Our business requires us to maintain strong relations with local
and regional referral sources, patients and managed care payors.
We intend to leverage our collective current relationships,
geographic coverage, clinical expertise and reputation, as well
as corporate infrastructure, regulatory expertise and contacts,
in order to expand our relationships with national MCOs and
pursue national contracts with these organizations. Our sales
and marketing strategy focuses on continuing and ultimately
expanding these relationships. Additionally, we have begun to
focus on organic revenue growth opportunities by cross-selling
products and services through our expanded geographic footprint
and payor contract base. In addition to BioScrips more
than 600 payor relationships, we gained over 450 new MCO
relationships through our acquisition of CHS. These new
contracts will increase our opportunity to cross-sell all
services on a national level and showcase clinically proven care
management programs, which we believe will accelerate
pull-through opportunities as new treatment and pharmaceutical
technologies become available. CHS also offers clinical disease
management for home care therapies, providing the opportunity to
enhance our relationships with, and make the combined company
attractive to, MCOs. As a result of the acquisition, we have
approximately 140 sales representatives and over 1,000 MCO
relationships.
Selectively
Pursuing Acquisitions of Other Independent Home Infusion Therapy
Providers in Contiguous and Other Strategic
Markets
We believe that a substantial portion of the home infusion
market consists of small, independent home infusion providers,
and we believe that industry dynamics in the currently
fragmented home infusion market favor consolidated providers and
the operational efficiencies that come with scale. Following the
integration of CHS, we plan to selectively pursue strategic
add-on acquisitions of other independent home care providers
with established track records in markets contiguous to our
existing operations. We believe acquisitions in contiguous
markets can be efficiently integrated into our existing
operations and added to our existing managed care contracts and
payor and patient platforms.
48
Post-Acquisition
Accounting Treatment
The aggregate consideration paid by us in connection with the
merger was provisionally allocated to CHSs assets and
liabilities based on their fair values, with any excess being
treated as goodwill. These amounts are subject to change as
additional information on asset and liability valuations becomes
available. We have consolidated CHSs assets, liabilities
and results of operations with our assets, liabilities and
results of operations after the consummation of the merger.
Products
and Services
Pharmacy
Services
Specialty
Pharmacy Services
Specialty Pharmacy Services are provided locally through our
BioScrip community pharmacies for patients requiring infused
medications either in the home or at a variety of sites
including our ambulatory treatment centers and regionally
through our infusion pharmacies.
We own and operate 95 specialty pharmacies, which include
community pharmacies, mail order pharmacies and infusion
pharmacies. While all of our locations are able to carry both
traditional and specialty medications and are able to treat
people with a variety of diseases and medical conditions, we
focus on serving patient populations with chronic and acute
health conditions, including:
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Growth Hormones, Thyroid Cancer
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Sickle Cell Anemia/Thalassemia, Myelodysplastic Syndromes,
Bleeding Disorders/Hemophilia
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Multiple Sclerosis, Neuropathies
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In office infusions, Oral Oncolytics, supportive medications
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Rheumatology/Orthopedic
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Rheumatoid Arthritis, Osteoarthritis, Osteoporosis
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Solid Organ, Bone Marrow Transplant
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HIV/AIDS, Hepatitis A, B & C, RSV
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The patients we service typically have prescription or medical
drug coverage through commercial insurance, Medicare, Medicaid
and/or
other
governmental programs, and we are primarily reimbursed by the
patients insurer at a contracted rate or our usual
and customary rate for the specific drug
and/or
service provided to the customer. Our Specialty Pharmacy
Services programs are designed to optimize the therapeutic
outcomes for patients while achieving Plan Sponsors
and/or
pharmaceutical manufacturers program goals. These goals
include appropriate utilization of therapies, improved patient
compliance and adherence rates, reduced expenditures through
discounted drug rates and utilization reporting. Our software
and data management tools permit Plan Sponsors, pharmaceutical
manufacturers and physicians to: (i) access utilization
data to manage better healthcare outcomes and (ii) measure
cost, utilization, prescribing and other pharmacy trends.
49
Medication Dispensing and Distribution.
We
carry a full range of prescription medications and are able to
dispense nearly all prescription medications for acute and
chronic diseases and conditions. As a specialty pharmacy
provider our mail and community pharmacy locations carry high
cost, hard to find and hard to handle medications that are
generally more expensive or more complex than medications
carried by retail or traditional pharmacies.
Special shipping and handling techniques in compliance with a
manufacturers specific requirements are often employed,
including refrigerated shipping with dry-ice packs. When
necessary, we provide the drug product along with supplies and
equipment needed for administration.
Our pharmacies also deliver medications to physicians
offices for patient in-office administration. The majority of
our business is patient-specific dispensing, whereby we receive
a prescription for a medication and bill the appropriate party
or parties for reimbursement of the drug, which may include Plan
Sponsors, manufacturers
and/or
the
patient. In some instances we deliver drugs on a wholesale basis
directly to qualified healthcare professionals or institutions,
including physicians and in some cases other specialty pharmacy
providers or wholesalers.
Billing and Coordination of Benefits.
Our
pharmacies offer comprehensive billing, patient reimbursement
and coordination of benefits, which we refer to as COB, services
under both a patients pharmacy and medical benefits. Our
pharmacy locations are contracted with nearly all federal and
state governmental benefit programs including Medicare,
Medicaid, and state benefit programs such as AIDS Drug
Assistance Programs, as well as other Ryan White-funded
programs. In addition, our pharmacies participate in most of the
pharmacy networks, as well as with MCOs directly.
Our comprehensive COB services help patients with multiple
sources of insurance
and/or
government assistance handle complex insurance billing and
reimbursement challenges. Retail pharmacies and many of our
competitors in the specialty pharmacy arena do not typically
provide COB services; we believe providing these services
differentiates us from our competitors. We facilitate
comprehensive assistance to patients through third party sources
in order to identify financial assistance programs and obtain
funding for patients who are unable to afford their
out-of-pocket
expenditures, including co-payments. We also work with a variety
of assistance organizations and pharmaceutical manufacturers to
obtain this type of funding on behalf of our patients.
Co-payments and coinsurance payments are diligently pursued for
collection as required unless approved financial hardship
exemptions are in effect.
Specialty Therapy Management.
We design and
administer clinical programs to maximize the benefits of
pharmaceutical utilization as a tool in achieving pharmaceutical
therapy goals for certain targeted disease states. Our programs
focus on preventing high-risk adverse events through the
appropriate use of pharmaceuticals while eliminating unnecessary
or duplicate therapies. Key components of these programs include
patient education and training, integration of care between
pharmacy and medical health disciplines, monitoring of patient
compliance, measurement of the care process and quality, and
providing feedback for continuous improvement in achieving
therapy goals. The goal of these services is to improve patient
outcomes and lower overall healthcare costs.
Our
bioscripcare
tm
patient care programs are designed to address the changing
nature of chronic patient care by providing the optimal
structure of patient care through consistent assessment and
intervention, ongoing education and patient support, and
adherence and persistence management, which results in improved
patient quality of life and outcomes. Also, as part of our
normal business operations for refill management, we initiate
monthly telephonic interactions with patients during which we
gather robust data intended to improve patient specific and, in
general, overall health outcomes.
Our programs incorporate Healthcare Effectiveness Data and
Information Set, National Committee for Quality Assurance
measures and Disease Management Association of America: The Care
Continuum Alliance guidelines. Measurement, analysis, as well as
improvement and repetition are key components of our regular
program reviews. Our programs remain dynamic through our focus
on continual improvement. Some of the components of the programs
are described below:
50
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Professional Intervention
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Most of the disease states and conditions for which we dispense
medications require complex, multi-drug regimens for treatment,
many of which have potential or actual adverse side effects and
adverse drug interactions. Our pharmacists review prescriptions
presented for a patient against that patients medical
history, his or her past and current medication usage, and
clinical references known to us in order to insure that the
therapy selected is clinically appropriate. If our pharmacists
find a potential or actual problem they contact the prescriber
or patient to discuss that patients case and alternative
medications.
Our pharmacists and clinical staff stay informed about new
medications and changing treatment protocols which are utilized
in our target disease states and conditions.
Due to the complexity of the regimens associated with the
medications we dispense and the need to educate patients on the
importance of compliance and proper dosing and administration,
we make great efforts to help our patients, including their
caregivers, understand how their drug regimen may affect their
health status and lifestyle. We routinely consult with each
patient when they receive a prescription from us. We consult on
what each medication is for, how it works, and what adverse side
effects are most likely to occur, as well as potential
interactions between or among multiple medications. Our goal is
to fully inform each patient in order to prevent missed doses,
delayed starts, and loss of other healthcare treatment options
in some cases. We also provide patients with information
concerning how medications might influence their lifestyle and
give them recommendations on how to fit drug therapies into
alternative schedules and travel plans.
With respect to injectible specialty medications we dispense,
which we teach patients how to prepare their medications for
administration, how to inject themselves, and how to deal with
any reactions that may occur. We often have the patient
administer their first dose in the pharmacy so they gain comfort
and confidence in taking the medications when they get home. Our
pharmacists are always available by telephone for patient
questions.
Our pharmacies also provide physicians, patients and their
caregivers with a broad range of written educational materials.
We create some of those materials and receive others from
pharmaceutical manufacturers and
not-for-profit
organizations. We promote local and national disease-related
events.
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Adherence and Persistence Management
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Adherence
is defined as taking medications on
a timely basis, as and when prescribed for example,
twice daily.
Persistence
is defined as taking
a regimen of medications for the length of time prescribed.
People with the diseases and conditions we treat often struggle
with both of these self-management issues, because their
medications are often difficult to take and require months or
years of use.
Adherence and persistence are key factors in achieving optimal
medication effectiveness and our pharmacists and professional
staffs are active with patients, caregivers and physicians in an
effort to ensure the highest success rates. From the start of
therapy and throughout a patients treatment cycle we
continually impress upon the patient the importance of adherence
and persistence through initial teaching sessions and ongoing
communications with each medication refill. We provide refill
reminders to alert people when a prescription refill is due or
to take their daily medication regimen. We proactively contact
patients in instances of missed refills and alert physicians and
other healthcare providers when the patient cannot be located.
We reinforce these activities with nurse-based adherence
management and therapy optimization programs for select
conditions that carry a higher risk of complications or
treatment failures. The management methodology applied to each
specific therapy constantly evolves to reflect such things as
new available treatments, revised treatment guidelines, and
other market developments. Since the inception of these
programs, we have observed results that indicate the achievement
of higher compliance rates as compared to industry averages and
other documented and available metrics.
51
Traditional
Pharmacy Services
Our Traditional Pharmacy Services business consists mainly of
traditional mail order pharmacy fulfillment, and, to a lesser
extent, prescription discount card programs and integrated PBM
services. These services are designed to offer employers, MCOs,
TPAs, and other Plan Sponsors cost-effective delivery of
pharmacy benefit plans including the low cost distribution of
mail services for plan members who receive traditional
maintenance medications. Traditional Pharmacy Services available
to our customers include the following:
Mail Order Pharmacy Dispensing.
Our
traditional mail service pharmacy provides patients with
medications, primarily via home delivery from our national
distribution center located in Columbus, Ohio. Customers may
order prescriptions by mail, phone or Internet, while ensuring
accuracy. For our partners, mail service provides enhanced
formulary compliance capabilities as well as the ability to
utilize appropriate generic medications, all designed to help
save money for Plan Sponsors and patients while maintaining high
levels of patient satisfaction.
Prescription Discount Card Programs.
We
administer numerous cash card or discount card programs on
behalf of consumer marketing organizations and, to a lesser
extent, other Plan Sponsors. Those cards may be
stand-alone pharmacy discount programs or bundled
with other healthcare discount arrangements. Under those
discount programs, individuals who present a discount card at
one of our participating network pharmacies or who order
medications through one of our mail service pharmacies receive
prescription medications at a discounted price as compared to
the retail or cash price.
Clinical Services, Formulary and Benefit
Design.
We work closely with our Plan Sponsors to
offer formularies and benefit plan designs that meet their
specific program requirements. Formulary design assists in
controlling program costs to the extent consistent with accepted
medical and pharmacy practices and applicable law, primarily
through three principal techniques: (i) tiered co-pay or
percentage coinsurance designs, which provide lower co-pays for
formulary preferred medications and higher co-pays for
non-preferred medications, or charge a percentage of the
prescription price to the member at different percentages based
on the preferred or non-preferred status of a drug;
(ii) generic substitution, which involves the selection of
a generic drug as a cost-effective alternative to its
bio-equivalent brand name drug;
and/or
(iii) therapeutic interchange, which involves the selection
of a lower cost brand name drug as an alternative to a higher
priced brand name drug within a therapeutic class. Formulary
rebates on brand name drugs are negotiated with drug
manufacturers based on the drugs preferred status and are
typically shared with Plan Sponsors. We do not manage a rebate
program on our own. Rather, our rebates are managed and
administered by a third party vendor.
Many commercial Plan Sponsors do not restrict coverage to a
specific list of pharmaceuticals and are said to have no
formulary or an open formulary that generally covers
all drugs approved by the FDA except for certain classes of
excluded pharmaceuticals, such as certain vitamins and
cosmetics, experimental, investigative or
over-the-counter
drugs. Other Plan Sponsors utilize a restricted or
closed formulary. We actively involve our clinical
staff with a Plan Sponsors Pharmacy and Therapeutics
Committee, which we refer to as the P&T Committee, to
assist with the design of clinically appropriate formularies in
order to control pharmacy costs. Typically, the P&T
Committee consists of a Plan Sponsors physicians,
pharmacists and others, including independent healthcare
professionals. The ultimate composition and approval of the
formulary resides with the Plan Sponsor. The primary method for
assuring formulary compliance on behalf of a Plan Sponsor is by
managing pharmacy reimbursement to ensure that non-formulary
drugs are not dispensed, or dispensed with higher co-payments,
subject to certain limited exceptions. Closed formularies
typically identify a limited number of drugs for preferred
status within each therapeutic class to be the preferred drug
agent in order to treat most medical conditions appropriately.
Provision is also made for coverage of non-formulary or
non-preferred drugs, other than certain excluded products, when
documented to be clinically appropriate for a particular member.
Since non-formulary drugs are rejected for coverage by our
real-time point of sale system, we employ procedures to override
restrictions on non-formulary medications for a particular
member and period of treatment when necessary.
Drug Usage Evaluation.
Drug usage is evaluated
on a concurrent, prospective
and/or
retrospective basis utilizing our real-time point of sale system
and information systems for multiple drug interactions,
duplication of therapy, step therapy protocol enforcement,
minimum/maximum dose range edits, compliance with prescribed
utilization levels and early refill notification. In addition,
we maintain a drug utilization review
52
program through which select medication therapies are reviewed
and data is collected, analyzed and reported for management
applications. At the request of Plan Sponsors our clinical
pharmacy team also provides clinical reviews of a patients
prescription history and medical condition, and our clinical
pharmacist provides analysis and recommendations for the
patients future treatment.
Pharmacy Data Services.
Our proprietary
software and data management tools permit Plan Sponsors to
access key industry measures, which are updated daily and
delivered through secure internet-based access. Plan Sponsors
often monitor these key measures associated with their members
in order to review the effectiveness and success of our
Traditional Pharmacy Services programs. In addition, we also
build custom reporting systems to support specific customer
projects.
Home
Health
Home
Infusion Therapy
We are a leading provider of home infusion therapy services in
the United States. Home infusion therapy involves the
preparation, delivery, administration and clinical monitoring of
pharmaceutical treatments that are administered to a patient via
intravenous (into the vein), subcutaneous (into the fatty layer
under the skin), intramuscular (into the muscle) and
intra-spinal (into the membranes around the spinal cord)
methods. These methods are employed when a physician determines
that the best outcome can be achieved through utilization of one
or more of these therapies provided through one or more of the
routes of administration described above.
Diseases commonly requiring infusion therapy include infections
that are unresponsive to oral antibiotics, cancer and
cancer-related pain, dehydration and gastrointestinal diseases
or disorders that prevent normal functioning of the
gastrointestinal tract. Other conditions treated with infusion
therapies may include chronic diseases such as congestive heart
failure, Crohns disease, hemophilia, immune deficiencies,
multiple sclerosis, rheumatoid arthritis, growth disorders and
genetic enzyme deficiencies, such as Gauchers or
Pompes disease.
Our home infusion therapy services primarily involve the
intravenous administration of medications treating a wide range
of acute and chronic conditions, such as infections, nutritional
deficiencies, various immunologic and neurologic conditions,
pain and palliative care and cancer. Our services are usually
provided in the patients home, but may also be provided at
out patient clinics, the physicians office or at one of
our ambulatory infusion centers. We receive payment for our home
health services and medications pursuant to provider agreements
with government sources, such as Medicare and Medicaid programs,
MCOs and other commercial insurance.
We provide a wide array of home infusion therapy products and
services to meet the diverse needs of physicians, patients and
payors. The therapies most commonly provided are listed below:
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Therapy Type
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Description
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Antiinfective, Antiviral, and Antifungal Therapy
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Providing intravenous medication for infections related to
diseases such as HIV/AIDS, wounds, cancer, osteomyelitis,
pneumonia, cellulitis and other infections of the kidney and
urinary tract.
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Enteral Nutrition
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Delivering enteral nutritional formulas by a NG-tube,
J-tube,
G-tube, PEG or other access, directly into the stomach or small
bowel.
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Total Parenteral Nutrition
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Providing life-sustaining nutrients intravenously to patients
with digestive or gastro-intestinal diseases, most of whom
suffer from chronic conditions.
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Chemotherapy
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Administering pharmaceuticals intravenously or orally to destroy
cancer cells; we also provide BEAM Therapy, a four day
pre-chemotherapy treatment given in advance of stem cell
transplantation.
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Intravenous Immune Globulins (IVIG) Therapy
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Administrating blood derivative products to patients with immune
deficiency or altered immune status, who usually must receive
therapy for life.
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53
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Therapy Type
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Description
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Pain Management
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Providing analgesic pharmaceuticals by intravenous or continuous
injection therapy, delivered by a pump, to reduce pain and to
manage symptoms resulting from either malignant or nonmalignant
diseases.
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Hemophilia
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Hemophilia is an inherited disease in which the blood does not
clot. People with hemophilia lack or have low levels of one of
two blood-clotting substances, known as factor VIII and factor
IX. As a result, they may bleed for a long time after an injury.
They may also experience internal bleeding, especially in the
joints. Our Hemophilia therapy management program provides
training, clinical management, patient training and life saving
products and services to support the needs of this patient
population.
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Respiratory Syncytial Virus (RSV) Prevention
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RSV is a major cause of respiratory disease in young children
and infants. Treatment commonly consists of monthly injections
of
Synagis
®
,
a specialty pharmaceutical distributed throughout the RSV
season, which lasts from approximately October through
April.
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Respiratory Therapy/Home Medical Equipment
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Providing oxygen systems, continuous or bi-level positive airway
pressure devices, nebulizers, home ventilators, respiratory
devices, respiratory medications and other medical equipment.
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Patients generally are referred to us by physicians, hospital
discharge planners, MCOs and other referral sources. Our
medications are compounded and dispensed under the supervision
of a registered pharmacist in a pharmacy clean room. The therapy
is typically administered in the patients home by a
registered nurse or trained caregiver. Depending on the
preferences of the patient or the payor, these services may also
be provided at one of our ambulatory infusion centers, a
physicians office or another alternate site.
We currently have relationships with a large number of MCOs and
other third party payors to provide specialty pharmacy products
and services, including infusion therapy services. These
relationships are provided primarily at a local or regional
level. A key element of our business strategy is to leverage our
relationships, geographic coverage, clinical expertise and
reputation in order to gain national contracts with payors. Our
infusion services contracts typically provide for us to receive
a fee for preparing and delivering medications to patients in
their homes. Pricing is typically negotiated in advance on the
basis of AWP minus some percentage of contractual discount, or
ASP, plus some percentage of contractual discount, which is the
typical means of negotiating pricing in the industry. In
addition, we typically receive a per diem payment for the
service component of care provided to patients in connection
with infusion services and a visit rate for the associated
skilled nursing provided.
Home
Nursing
We conduct our home nursing and therapy services operations
through licensed and Medicare-certified agencies. Our healthcare
professionals provide medically necessary healthcare services to
adult and pediatric patients in their homes, including those
suffering from chronic and acute illnesses, those in recovery
from surgical procedures and those who require monitoring or
care for other reasons. Our key services and program offerings
are skilled nursing; wound care; oncology nursing and infusion
nursing; rehabilitation services, which includes physical
therapy; occupational therapy and speech language pathology;
medical social services; and home health aid services. Our
services are provided by trained nurses, physical, occupational
and speech therapists, infusion specialists, wound care
specialists and social workers. Our home nursing offerings also
include private duty nursing care, in which our nurses provide
services on an hourly or shift basis, and intermittent nursing
care, in which our nurses provide services on an irregular basis
or for a limited period of time. Our nurses provide medical care
to these patients through pain and symptom management, wound
treatment and management, medication management, infusion
therapy services, skilled assessment and observations of
patients through home visits and telemonitoring and education to
patients and family caregivers.
54
Our typical home nursing location employs registered nurses,
licensed practical nurses, physical, occupational and speech
therapists, infusion specialists and wound care specialists.
Most of our home nursing services are provided to beneficiaries
of government sponsored programs. The majority of our skilled
home nursing services are reimbursed by Medicare, based on the
prospective payment system rates per episode, which
vary by the complexity of patient condition. Typically, we
receive predetermined payment based on a
60-day
episode of skilled nursing care, assuming the nurses have made a
minimum of five visits to the patient during that period. Our
pediatric and adult private duty nursing services are generally
billed on an hourly basis and are reimbursed primarily through
one of a number of MCOs contracted by the TennCare program to
administer these services on behalf of state residents who
qualify for such benefits. TennCare is our largest Medicaid
customer. The services are reimbursed on a per diem basis based
on pre-established guidelines and payment schedules.
Suppliers
Effective August 25, 2009, we entered into a prime vendor
agreement with ABDC under which we purchase from ABDC
substantially all of our prescription products, subject to
certain minimum periodic purchase levels and excluding purchases
of therapeutic plasma products and products under which we are
the preferred or the exclusive distributor of a product
purchased directly from a manufacturer. Under the prime vendor
agreement, we also participate in ABDCs PRxO
Generics
tm
Program and purchase from ABDC a specified percentage of our
requirements for generic pharmaceuticals. Pricing of
pharmaceutical products under the agreement is generally based
on published WAC, less certain discounts, rebates and other
adjustments that vary with the type of products being purchased.
As a result of our acquisition of CHS, we entered into an
amendment to the prime vendor agreement to modify the scope of
the security interest in the collateral granted under the prime
vendor agreement to provide ABDC with a lien on our and our
subsidiaries inventory, accounts and proceeds. Also in
connection with the acquisition, Jefferies Finance LLC, as agent
for the first priority secured parties, and ABDC entered into an
intercreditor agreement pursuant to which ABDC has subordinated
the lien securing our obligations under the prime vendor
agreement to the liens securing the New Credit Facility.
Information
Technology
In each of the last three years, our investment in information
technology has increased as we continue to upgrade our core
infrastructure and systems. In 2009, we continued our focus on
the migration to a new integrated accounts receivable, pharmacy
dispensing and clinical management system for the specialty
pharmacy business. We believe that this new system will yield
increased efficiencies and improved controls when dispensing or
transferring prescriptions and provide improved data and
management reporting. The new system, in conjunction with other
information technology infrastructure improvements, will enhance
our product and service offerings to payors, physicians and
pharmaceutical companies. In 2010, we continue to focus on
migrating to our new platform, as well as leveraging new
technology solutions to transform how we interface with our
patients, referral sources and valued partners.
We bill payors and track all of our accounts receivable through
computerized billing systems. These systems allow our billing
staff the flexibility to review and edit claims in the system
before they are submitted to payors. Claims are submitted to
payors either electronically or through the mail. We utilize
electronic claim submission whenever possible to expedite claim
review and payment, and to minimize errors and omissions.
Sales and
Marketing
We have approximately 140 sales representatives and over 1,000
MCO payor relationships. Our sales and marketing efforts are
focused on payors, manufacturers, patients and physicians, and
are driven by dedicated managed markets, pharmaceutical
relations and physician sales teams. Our sales and marketing
strategies seek to develop strong relationships with key
referral sources, such as physicians, hospital discharge
planners, case managers, long-term care facilities and other
healthcare professionals, primarily through regular contact with
the referral sources. Contracts with healthcare payors,
including MCOs, are an integral component for sales
55
success. Additionally, contracting with pharmaceutical
manufacturers for distribution and management services for newly
approved
and/or
marketed specialty medications continues to contribute to our
revenue growth.
Intellectual
Property
We own and use a variety of trademarks, trade names and service
marks, including BIOSCRIP, BIOSCRIPCARE, SCRIPMINE, SCRIP
PHARMACY, ADIMA, SCRIP PBM, INFOSCRIP, MD STAR, CRITICAL
HOMECARE SOLUTIONS, CHS CRITICAL HOMECARE SOLUTIONS, INFUSION
PARTNERS, Infusion Care, INFUSION SOLUTIONS, INC., INFUSION CARE
SYSTEMS, NE-HT, WILCOX HOME INFUSION and Deaconess HomeCare,
each of which has either been registered at the state or federal
level or is being used pursuant to common law rights.
Competition
We believe we have been able to successfully compete based on
our reputation, the strength of our growing presence in the
eastern United States and our ability to effectively market our
services at the national, regional and local levels and that
these factors place us in a strong position against existing and
potential competitors.
Pharmacy
Services
We face substantial competition within the pharmaceutical
healthcare services industry and the past year has seen even
more consolidation among PBMs, specialty pharmacy providers and
pharmaceutical wholesalers. We expect to see this trend continue
in the coming year and it is uncertain what effect, if any,
these consolidations will have on us or the industry as a whole.
The industry also includes a number of large, well-capitalized
companies with nationwide operations and capabilities in the
specialty services and PBM services arenas, such as CVS Caremark
Corporation, Express Scripts, Inc., Medco Health Solutions Inc.,
Walgreen Company, Apria Healthcare Group Inc. and many smaller
organizations that typically operate on a local or regional
basis. In the Specialty Pharmacy Services business, we compete
with several national and regional specialty pharmaceutical
distribution companies that have substantial financial resources
and which also provide products and services to the chronically
ill such as CVS Caremark, Express Scripts, Medco Health
Solutions and Walgreens.
Some of our Specialty Pharmacy Services competitors are under
common control with, or are owned by, pharmaceutical wholesalers
and distributors or retail pharmacy chains and may be better
positioned with respect to the cost-effective distribution of
pharmaceuticals. Some of our primary competitors, such as US
Bioservices, an AmerisourceBergen Specialty Group company, may
have a substantially larger market share in many of our
specialty disease therapies than our existing market share.
Moreover, some of our competitors may have secured long-term
supply or distribution arrangements for prescription
pharmaceuticals necessary to treat certain chronic disease
states on price terms substantially more favorable than the
terms currently available to us. As a result of such
advantageous pricing, we may be less price competitive than some
of these competitors with respect to certain pharmaceutical
products. However, we do not believe that we compete strictly on
the selling price of particular products or services in either
of our pharmacy services businesses; rather, we offer customers
the opportunity to lower overall pharmaceutical and medical
costs through therapy management while receiving high quality
care.
Home
Health
We believe that competition in our home infusion business lines
is based on quality of care and reputation. Our national
competitors include Option Care, Inc. (a subsidiary of Walgreen
Co.), Apria Healthcare Group Inc. (which includes its
subsidiary, Coram, Inc.), Critical Care Systems, Inc. (a
subsidiary of Medco Health Solutions, Inc.) and Omnicare, Inc.
Within each market, however, our main competitors continue to be
local independent providers, as the industry remains highly
fragmented. There are only a small number of regional
competitors, none of which we believe are currently a
competitive threat within our geographic service areas.
56
The home nursing market also tends to be dominated by local
providers. With respect to our home nursing services, we compete
primarily with Gentiva Health Services, Inc., Almost Family,
Inc., Amedisys, Inc. and LHC Group, Inc. on a national level.
The home nursing segment is highly fragmented with many
competing local providers in our areas of service.
Properties
Our executive offices are located in Elmsford, New York, and we
maintain corporate offices in Eden Prairie, Minnesota and
Conshohocken, Pennsylvania. Our mail service operations are
located in Columbus, Ohio; Lake Success, New York; and Burbank,
California. Our community pharmacies are located in numerous
major metropolitan locations across the United States. We
currently lease all of our properties from third parties under
various lease terms expiring over periods extending through
2019, in addition to a number of non-material
month-to-month
leases. Our property locations are as follows:
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Corporate Offices
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Community and Infusion Pharmacies and Home Nursing
Locations(3)
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Conshohocken, PA(1)
Elmsford, NY
Eden Prairie, MN
Mail Operations
Columbus, OH(2)
Burbank, CA(3)
Lake Success, NY(3)
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Alabama
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Indiana
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Birmingham(5)
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Indianapolis (two locations)
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California
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Kentucky
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Burbank
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Lexington
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San Diego
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Louisiana
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San Francisco(5)
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Baton Rouge
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Sherman Oaks
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Covington Area
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West Hollywood
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Elmwood
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Connecticut
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Maine
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Berlin
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Lewiston
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Cromwell
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Maryland
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Milford
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Baltimore
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Vernon
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Massachusetts
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District of Columbia
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Boston
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Washington, D.C.
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Southborough
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Florida
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Michigan
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Ft. Lauderdale
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Auburn Hills
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Miami Beach
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Minnesota
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Melbourne
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Minneapolis
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North Venice
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Mississippi
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Orlando
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Biloxi (two locations)
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Pompano Beach
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Brookhaven (two locations)
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St. Petersburg
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Columbia
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Tampa Bay
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Gulfport
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West Palm Beach
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Hattiesburg (four locations)(4)
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Georgia
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Jackson
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Atlanta
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Laurel
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Brunswick
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Lucedale (two locations)
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Savannah
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Magee
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Illinois
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Meridian
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Chicago
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Natchez
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Moline
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Pascagoula
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Community and Infusion Pharmacies and Home Nursing
Locations(3)
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Mississippi (continued)
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Tennessee
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Pearl
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Baxter
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Picayune
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Fayetteville (four locations)
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Vicksburg
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Jackson
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Waynesboro
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Knoxville
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Missouri
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Lexington
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Kansas City
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Memphis (two locations)
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St. Louis
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Mt. Juliet
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Nevada
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Nashville (two locations)
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Las Vegas(5)
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Oneida
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New Hampshire
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Savannah
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Bedford
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Selmer
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Concord
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Waynesboro (two locations)
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Pembroke
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Texas
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New Jersey
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Dallas (two locations)
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Morris Plains
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Grand Prairie
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New York
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Houston (two locations)
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Bronx
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Vermont
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Hawthorne
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Rutland
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Lake Success(5)
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Williston
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New York
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Washington
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Ohio
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Seattle(5)
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Akron
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Wisconsin
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Cincinnati
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Milwaukee
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Sylvania
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Pennsylvania
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Philadelphia
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Pittsburgh
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West Chester
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(1)
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Facility also provides administrative support to infusion and
home nursing operations.
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(2)
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Facility houses operations for both Specialty Pharmacy Services
and Traditional Pharmacy Services operations.
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(3)
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Facility houses operations for Specialty Pharmacy Services or
home nursing operations.
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(4)
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In addition to nursing services, the facility also provides
hospice services, warehouse services and administrative support,
each in a separate location.
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(5)
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Facility provides both community pharmacy and infusion services
in the same location.
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Legal
Proceedings
The sellers of a company, Northland Pharmacy, acquired by a
BioScrip subsidiary are claiming a right to additional purchase
price of at least $5.64 million in connection with an earn
out provision in the stock purchase agreement regarding the
acquisition. The sellers, named DiCello, first sued in federal
court in Ohio in July 2007, but the court stayed the case and
directed arbitration of the disagreement by the accounting firm
KPMG, LLP, as the stock purchase agreement provides. We deny
owing the sellers any additional purchase price. The parties
have made extensive filings as directed by the arbitrator and
are waiting for either the
58
arbitrators decision or instructions as to further
proceedings in the matter. We are confident in our position and
do not believe an adverse ruling is likely; however, there can
be no assurance that an adverse ruling will not be rendered. If
the arbitrator rules in favor of DiCello, such ruling could have
a material adverse effect on our business, operations or
financial position.
On March 31, 2009, Professional Home Care Services, Inc.,
or PHCS, which is one of the subsidiaries we acquired through
our acquisition of CHS, was sued by Alexander Infusion, LLC, a
New York-based home infusion company, in the Supreme Court of
the State of New York. The complaint alleges principally breach
of contract arising in connection with PHCSs failure to
consummate an acquisition of Alexander Infusion after failing to
satisfy the conditions to PHCSs obligation to close.
Alexander Infusion has sued for $2.5 million in damages. We
believe Alexander Infusions claims to be without merit and
intend to continue to defend against the allegations vigorously.
Furthermore, under the Merger Agreement, subject to certain
limits, the Former CHS Stockholders agreed to indemnify us in
connection with any losses arising from claims made in respect
of the acquisition agreement entered into between PHCS and
Alexander Infusion.
On September 18, 2008, a complaint was filed in federal
court in New Mexico, naming BioScrip Pharmacy Services, Inc., a
subsidiary of ours, as a defendant. The action is captioned
Hope Huerta as Next Friend and Parent of Blanca M. Valdez, a
minor v. Spectrum Chemicals and Laboratory Products, et.
al.,
1:08-cv-00853 (D. NM). The complaint alleges that our
and the other defendants actions are responsible for
alleged injuries to the plaintiff due to the administration of
medication that allegedly had been recalled by the manufacturer,
Spectrum Chemicals, and was dispensed by us. The complaint
asserts various tort causes of action, including but not limited
to, strict products liability and negligence, breach of
warranties and violations of New Mexico statutes. The complaint
seeks unspecified money damages, including punitive damages. We
have answered the complaint denying the material allegations. We
intend to deny the allegations and defend the action vigorously.
We have filed a motion for summary judgment and are awaiting the
courts ruling.
Employees
As of June 9, 2010, we had 2,294 full-time, 139
limited full-time, 180 part-time and 1,039 per diem
employees, including 278 licensed pharmacists. Limited full-time
employees work 30 hours per week. Per diem employees are
defined as those available on an as-needed basis. None of our
employees are represented by any union and, in our opinion,
relations with our employees are satisfactory.
59
GOVERNMENT
REGULATION
The healthcare industry is subject to extensive regulation by a
number of governmental entities at the federal, state and local
level. The healthcare regulatory landscape is also subject to
frequent change. Laws and regulations in the healthcare industry
are extremely complex and, in many instances, the industry does
not have the benefit of significant regulatory or judicial
interpretation. Moreover, our business is impacted not only by
those laws and regulations that are directly applicable to us
but also by certain laws and regulations that are applicable to
our payors, vendors and referral sources. While our management
believes that we are in substantial compliance with all of the
existing laws and regulations applicable to us stated below,
such laws and regulations are subject to rapid change and often
are uncertain in their application. As controversies continue to
arise in the healthcare industry, federal and state regulation
and enforcement priorities in this area may increase, the impact
of which cannot be predicted. There can be no assurance that we
will not be subject to scrutiny or challenge under one or more
of these laws or that any such challenge would not be
successful. Any such challenge, whether or not successful, could
have a material adverse effect upon our business and results of
operations. In addition, the new health reform legislation
enacted in March 2010 will have considerable but uncertain
impact on the financing and delivery of health care and
conceivably could have a material adverse effect on our business.
Among the various federal and state laws and regulations which
may govern or impact our current and planned operations are the
following:
Medicare
and Medicaid Reimbursement
Many of the products and services that we provide are reimbursed
by Medicare and Medicaid and are therefore subject to extensive
government regulation. Medicare is a federally funded program
that provides health insurance coverage for qualified persons
age 65 or older and for some disabled persons with certain
specific conditions. The Medicare Program currently consists of
four parts: Medicare Part A, which covers, among other
things, inpatient hospital, skilled nursing facility, home
nursing and certain other types of healthcare services; Medicare
Part B, which covers physicians services, outpatient
services, items and services provided by medical suppliers, and
a limited number of prescription drugs; Medicare Part C,
which generally allows beneficiaries to enroll in private
healthcare plans (known as Medicare Advantage plans); and
Medicare Part D, established by Medicare Modernization Act,
which provides for a voluntary prescription drug benefit.
The Medicaid Program provides medical benefits to groups of
low-income individuals, some who may have inadequate or no
medical insurance. Although the federal government establishes
general guidelines for the program, Medicaid is a state
administered program and each state sets its own guidelines
regarding eligibility and covered services, subject to certain
minimum federal requirements.
Congress often enacts legislation that affects, positively or
negatively, the reimbursement rates of Medicare providers and
that also may impact Medicaid providers. Generally, Medicare
provider payment modifications occur in the context of budget
reconciliation; however, Medicare changes also may occur in the
context of broader healthcare policy legislation, including the
healthcare reform legislation recently enacted currently under
consideration by Congress. In the last five years, Congress has
reduced Medicare reimbursement for various providers, including
Medicare Part A certified home health agencies, and
Medicare Part B suppliers. Recent legislation that has
affected our Medicare reimbursement rates for home infusion
therapy and Medicare reimbursement rates for home health
includes primarily the Medicare Modernization Act and the
Deficit Reduction Act of 2005, which we refer to as the Deficit
Reduction Act.
Approximately 29% and 33% of our pro forma revenues for the year
ended December 31, 2009 and the three months ended
March 31, 2010, respectively, were derived directly from
Medicare, Medicaid or other government-sponsored healthcare
programs. Also, we indirectly provide benefits to managed care
entities that provide services to beneficiaries of Medicare,
Medicaid and other government-sponsored healthcare programs.
Should there be material changes to federal or state
reimbursement methodologies, regulations or policies, our direct
reimbursements from government-sponsored healthcare programs, as
well as services fees that relate indirectly to such
reimbursements, could be adversely affected. In addition,
certain state Medicaid programs only allow for reimbursement to
pharmacies residing in the state or in a border state. While our
management
60
believes that we can service each companys current
Medicaid patients through existing pharmacies, there can be no
assurance that additional states will not enact in-state
dispensing requirements for their Medicaid programs. To the
extent such requirements are enacted, certain therapeutic
pharmaceutical reimbursements could be adversely affected.
Medicare Parts B and D.
We receive
reimbursement for infusion therapy under both Medicare
Part B and Medicare Part D. In connection with the
enactment of the Medicare Modernization Act, CMS promulgated a
substantial volume of new regulations implementing the federal
governments Voluntary Prescription Drug Benefit Program,
known as Medicare Part D. CMS has attempted to clarify
issues regarding coverage of infused drugs under Medicare
Part D and the relationship with existing coverage under
Medicare Part B. In certain cases, both Medicare Parts B
and D will cover identical infused drugs. CMS has stated that
coverage is generally determined by the diagnosis and the method
of drug delivery. For example, parenteral nutrition is covered
under Medicare Part B for patients with a non-functioning
digestive tract. In all other situations, Medicare Part D
covers parenteral nutrition. Confusion regarding the appropriate
coverage of infusion therapy could adversely affect our business.
Under Medicare Part D, the ingredient costs and dispensing
fees associated with the administration of home infusion
therapies are covered under Medicare. Under Medicare
Part B, no separate administration reimbursement is
available. For eligible Medicare beneficiaries, the cost of
equipment and supplies associated with infused covered Medicare
Part D drugs will continue to be reimbursed on a limited
basis under Medicare Part A or Part B, as applicable,
and the cost of professional services associated with infused
covered Medicare Part D drugs will continue to be
reimbursed on a limited basis under Medicare Part A. For
beneficiaries who are dually eligible for benefits under
Medicare and a state Medicaid program, Medicaid covered infused
drugs will be reimbursed under individual state coverage
guidelines if coverage is denied by Medicare.
Both the OIG and CMS continue to issue guidance with regard to
the Medicare Part D program and compliance with related
federal laws and regulations by Part D sponsors and their
subcontractors. The receipt of federal funds made available
through this program may be subject to compliance with these new
regulations as well as the established laws and regulations
governing the federal governments payment for healthcare
goods and services. There are many uncertainties about the
financial and regulatory risks of participating in the Medicare
Part D program and these risks could negatively impact our
business in future periods.
Current Medicare Reimbursement for Home Health
Agencies.
Home health agencies, including ours,
are reimbursed under the Medicare program on a prospective
payment system. Home health services include:
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skilled nursing care;
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physical, occupational, and speech therapy;
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medical social work; and
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home health aide services.
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Medicares home health prospective payment system is
comprised of a set payment for each
60-day
episode of care, a case-mix adjustment based on a patients
medical condition and service needs, an outlier payment for high
cost patients and a low-utilization adjustment for patients who
require only a few visits. Patients are assigned to case mix
resource groups based on clinical and functional status and
service use.
Payments under the home health prospective payment system are
updated annually by the increase in the home health market
basket. On August 29, 2007, CMS issued a final rule to
update and refine the home health prospective payment system for
calendar year 2008. Among its significant changes, the final
rule reduced the national standardized
60-day
episode rate for calendar year 2008 and also implemented similar
reductions to the
60-day
episode payment rate for 2009 through 2011. This rule also
implemented a reduction in the national standardized
60-day
episode payment rate of 2.75% in 2008 to account for changes in
case mix not attributable to a patients actual condition.
This reduction continued in 2009 and will continue through 2010.
We expect these changes to have an immaterial impact on our
business and results of operations.
61
The Patient Protection and Affordable Care Act, or PPACA, and
the Health Care and Education Reconciliation Act of 2010, which
amended PPACA, which we refer to collectively as the Health
Reform Law, include a number of additional changes to payment
for home health care services, including the following:
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reinstatement of the 3% home health rural add-on beginning
April 1, 2010 (expiring January 1, 2016);
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market basket adjustment for 2011 to be determined by CMS,
offset by a 1% reduction (1% reduction to market based updates
set also for 2012 and 2013;
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revised outlier payment policy beginning in 2011; and
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a negative 2.71% case mix adjustment.
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Legislative Changes to Medicare
Reimbursement.
The Medicare Modernization Act and
the Deficit Reduction Act have changed some of the medical
reimbursement rules applicable to our home infusion therapy
business. The Medicare Modernization Act set reimbursement for
inhalation drugs at 85% of AWP in 2004, set forth the ASP plus
6% methodology that has been in use since 2006, and also set
reimbursement for infusion drugs at 95% of AWP.
The Deficit Reduction Act capped monthly payments for oxygen
equipment at 36 months. In addition, the Medicare
Modernization Act authorized a competitive bidding program for
determining Medicare reimbursement rates for certain items of
durable medical equipment, including enteral nutrients, supplies
and equipment, and certain RT/HME products. CMS has the
discretion to determine which products will be subject to
competitive bidding. The statute requires that the first round
of competitive bidding occur in ten metropolitan areas around
the country. The second round of competitive bidding will be
conducted in 70 additional geographic areas. CMS released the
final rule implementing this program on April 10, 2007, and
the program was set to go into effect on July 1, 2008.
However, Medicare Improvements for Patients and Providers Act of
2008 further delayed the program by 18 months and required
CMS to rebid the first round of the program.
Legislation has been introduced in the House and Senate that
would establish Medicare coverage of home infusion therapy and
home infusion drugs under Medicare Part B and consolidate
coverage under Medicare Part D. Medicare currently covers
home infusion therapy for selected therapies primarily through
the durable medical equipment benefit. It is anticipated that
these bills would expand Medicare beneficiary access to the
majority of home infusion therapies but there can be no
guarantees as to what will be contained in any final
legislation, should it be passed. Healthcare reform legislation
currently before Congress does not change Medicare reimbursement
for home infusion therapy or home infusion drugs.
In the future, Congress could enact changes to Medicare
reimbursement affecting home health services, including reducing
the annual payment updates to below the current statutory
levels, making other modifications for home health agencies in
rural areas, adding beneficiary co-payments, requiring
additional quality reporting or performance requirements and
making broad-based changes to reimbursement for post-acute care
settings (which includes nursing homes, inpatient rehabilitation
facilities and long term care).
State Legislation and Other Matters Affecting Drug
Prices.
Medicaid regulation provides that a
pharmacy participating in the state Medicaid program must give
the state the best price that the pharmacy makes available to
any third party plan (most favored nation
legislation). Such legislation may adversely affect our ability
to negotiate discounts in the future from network pharmacies. At
least one state has enacted unitary pricing
legislation, which mandates that all wholesale purchasers of
drugs within the state be given access to the same discounts and
incentives. Such legislation has not yet been enacted in the
states where our mail service pharmacies are located. Such
legislation, if enacted in other states, could adversely affect
our ability to negotiate discounts on our purchase of
prescription drugs to be dispensed by the mail service
pharmacies.
Effective September 26, 2009, First DataBank and Medi-Span
agreed to reduce the
mark-up
factor applied to WAC, on which AWP is based, from 1.25 to 1.20
for the approximately 1,400 drug codes that were the subject of
the lawsuits. These AWP publishers also similarly reduced the
mark-up
factor on all other
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national drug codes on which they had marked up AWP. This
voluntary reduction affected approximately 18,000 national drug
codes. First DataBank and Medi-Span also have indicated that,
within the next two years, they will discontinue publication of
AWP information. See Risk Factors Risks
Related to Our Business Changes in industry pricing
benchmarks could adversely affect our financial
performance.
Home Nursing and Medicaid.
We are also
sensitive to possible changes in state Medicaid programs as it
does business with several state Medicaid programs. Budgetary
concerns in many states have resulted in, and may continue to
result in, reductions to Medicaid reimbursement and Medicaid
eligibility as well as delays in payment of outstanding claims.
Any reductions to or delays in collecting amounts reimbursable
by state Medicaid programs for our products or services, or
changes in regulations governing such reimbursements, could
cause our revenue and profitability to decline and increase its
working capital requirements.
As examples, effective August 1, 2008, CHSs contract
with Amerigroup was amended to reduce the private duty nursing
rate. Furthermore, TennCare, CHSs largest Medicaid
customer representing approximately 7.6% of CHSs net
revenue for the year ended December 31, 2009, has
experienced substantial financial challenges since its inception
in 1994. In 2002, the State of Tennessee proposed, but later
withdrew, limitations on home health services. Since mid-2005,
the State of Tennessee has restructured TennCare significantly
and has disenrolled approximately 323,000 persons not
required to be covered by federal Medicaid law. Additionally,
the State of Tennessee has recently mandated that certain
patients who were previously subject to traditional TennCare
private duty nursing benefits be shifted to an agency that
contracts with the DMRS. We have, to date, elected not to become
a provider under the DMRS benefit. Due to a lack of DMRS
providers and pending appeals that are underway, this change has
not had a significant impact on our business. This change or
similar changes in benefits designed to reduce Medicaid program
budgetary constraints may, however, have an adverse impact on
our patient population and results of operations in the future.
Regulation
of the Pharmacy Industry
Pharmacy Regulation.
Every states laws
require that our pharmacy locations be licensed as an in-state
pharmacy to dispense pharmaceuticals in that state. State
controlled substance laws require registration and compliance
with state pharmacy licensure, registration or permit standards
promulgated by the states pharmacy licensing authority.
Such standards often address the qualification of an
applicants personnel, the adequacy of its prescription
fulfillment and inventory control practices and the adequacy of
its facilities. In general, pharmacy licenses are renewed
annually. Our management believes that our pharmacy locations
materially comply with all state licensing laws applicable to
these businesses. If our pharmacy locations become subject to
additional licensure requirements, are unable to maintain their
required licenses or if states place burdensome restrictions or
limitations on pharmacies, our ability to operate in some states
would be limited, which could have an adverse impact on our
business. We believe the impact of any such requirements would
be mitigated by the ability to shift business among our numerous
locations.
Many of the states into which we deliver pharmaceuticals have
laws and regulations that require
out-of-state
mail service pharmacies to register with, or be licensed by, the
boards of pharmacy or similar regulatory bodies in those states.
These states generally permit the dispensing pharmacy to follow
the laws of the state within which the dispensing pharmacy is
located. However, various state pharmacy boards have enacted
laws
and/or
adopted rules or regulations directed at restricting or
prohibiting the operation of
out-of-state
pharmacies by, among other things, requiring compliance with all
laws of the states into which the
out-of-state
pharmacy dispenses medications, whether or not those laws
conflict with the laws of the state in which the pharmacy is
located, or requiring the
pharmacist-in-charge
to be licensed in that state. To the extent that such laws or
regulations are found to be applicable to our operations, we
comply with them. To the extent that any of the foregoing laws
or regulations prohibit or restrict the operation of mail
service pharmacies and are found to be applicable to us, they
could have an adverse effect on our prescription mail service
operations.
Laws enforced by the U.S. Drug Enforcement Administration,
or DEA, as well as some similar state agencies, require each of
our pharmacy locations to register with the DEA in order to
handle and dispense controlled substances. A separate
registration is required at each principal place of business
where we dispense
63
controlled substances. Federal and state laws also require that
we follow specific labeling, reporting and record- keeping
requirements for controlled substances. We maintain federal and
state controlled substance registrations for each of our
facilities that require such registration and follows procedures
intended to comply with all applicable federal and state
requirements regarding controlled substances.
Many states in which we operate also require home infusion
companies to be licensed as home health agencies. Our management
believes that we are in compliance with these laws.
Mail Order Operations.
There are other
statutes and regulations which may also affect our mail service
operations. The U.S. Federal Trade Commission requires mail
order sellers of goods generally to engage in truthful
advertising, to stock a reasonable supply of the products to be
sold, to fill mail orders within 30 days, and to provide
clients with refunds when appropriate.
Professional Licensure.
Nurses and pharmacists
employed by us are required to be individually licensed
and/or
certified under applicable state law. We perform criminal and
other background checks on employees and are required under
state licensure to ensure that their respective employees
possess all licenses and certifications required in order to
provide their relevant healthcare-related services. We believe
that our employees comply with applicable licensure laws.
Food, Drug and Cosmetic Act.
Certain
provisions of the federal Food, Drug and Cosmetic Act govern the
handling and distribution of pharmaceutical products. This law
exempts many pharmaceuticals and medical devices from federal
labeling and packaging requirements as long as they are not
adulterated or misbranded and are dispensed in accordance with,
and pursuant to, a valid prescription. We believe that we comply
in all material respects with all applicable requirements.
Quality Standards/Accreditation.
As mandated
by the Medicare Modernization Act, in August 2006, CMS issued
quality standards for suppliers, which are being applied by
independent accredited organizations approved by CMS. As
modified by MIPPA, all Medicare suppliers had to be accredited
before October 1, 2009. We have complied with this
requirement.
Antitrust Laws.
Numerous lawsuits have been
filed throughout the United States by retail pharmacies against
drug manufacturers challenging certain brand drug pricing
practices under various state and federal antitrust laws. A
settlement in one such suit would require defendant drug
manufacturers to provide the same types of discounts on
pharmaceuticals to retail pharmacies and buying groups as are
provided to managed care entities to the extent that their
respective abilities to affect market share are comparable, a
practice which, if generally followed in the industry, could
increase competition from pharmacy chains and buying groups and
reduce or eliminate the availability to us of certain discounts,
rebates and fees currently received in connection with our drug
purchasing and formulary administration programs. In addition,
to the extent that we or an associated business appear to have
actual or potential market power in a relevant market, business
arrangements and practices may be subject to heightened scrutiny
from an anti-competitive perspective and possible challenge by
state or federal regulators or private parties.
Regulation
of the Home Health Industry
Home health agencies operate under licenses granted by the
health authorities of their respective states. Home health
agencies are surveyed for compliance with licensure regulation
on a periodic basis, generally every 24 to 36 months.
Certain states, including some in which we operate, carefully
restrict new entrants into the market based on demographic
and/or
competitive changes. If our home health agencies become subject
to new licensure requirements, are unable to maintain required
licenses or if states place burdensome restrictions or
limitations on home health agencies or home nursing agencies,
our subsidiaries ability to operate in some states would
be limited, which could have an adverse impact on our business.
We, through our subsidiaries, operate our home health business
through Medicare certified, licensed agencies and believe we are
in material compliance with all current licensure laws and
regulations.
64
Fraud and
Abuse Laws
Anti-Kickback Laws.
Subject to certain
statutory and regulatory exceptions (including exceptions
relating to certain managed care, discount, bona fide employment
arrangements, group purchasing and personal services
arrangements), the federal anti-kickback law
prohibits the knowing and willful offer or payment of any
remuneration to induce the referral of an individual or the
purchase, lease or order (or the arranging for or recommending
of the purchase, lease or order) of healthcare items or services
paid for in whole or in part by Medicare, Medicaid or other
government-funded healthcare programs (including both
traditional Medicaid
fee-for-service
programs as well as Medicaid managed care programs). Violation
of the federal anti-kickback statute could subject us to
criminal
and/or
civil
penalties including suspension or exclusion from Medicare and
Medicaid programs and other government-funded healthcare
programs. A number of states also have enacted anti-kickback
laws that sometimes apply not only to state-sponsored healthcare
programs but also to items or services that are paid for by
private insurance and self-pay patients. State anti-kickback
laws can vary considerably in their applicability and scope and
sometimes have fewer statutory and regulatory exceptions than
does the federal law. Our management carefully considers the
importance of such anti-kickback laws when structuring each
companys operations, and believes that each of their
respective companies is in compliance therewith.
The federal anti-kickback law has been interpreted broadly by
courts, the OIG and other administrative bodies. Because of the
broad scope of those statutes, federal regulations establish
certain safe harbors from liability. Safe harbors exist for
certain properly reported discounts received from vendors,
certain investment interests held by a person or entity, and
certain properly disclosed payments made by vendors to group
purchasing organizations, as well as for other transactions or
relationships. Nonetheless, a practice that does not fall within
a safe harbor is not necessarily unlawful, but may be subject to
scrutiny and challenge. In the absence of an applicable
exception or safe harbor, a violation of the statute may occur
even if only one purpose of a payment arrangement is to induce
patient referrals or purchases. Among the practices that have
been identified by the OIG as potentially improper under the
statute are certain product conversion or
switching programs in which benefits are given by
drug manufacturers to pharmacists or physicians for changing a
prescription (or recommending or requesting such a change) from
one drug to another. Anti-kickback laws have been cited as a
partial basis, along with state consumer protection laws
discussed below, for investigations and multi-state settlements
relating to financial incentives provided by drug manufacturers
to retail pharmacies in connection with such programs.
Certain governmental entities have commenced investigations of
PBM companies and other companies having dealings with the PBM
industry and have identified issues concerning selection of drug
formularies, therapeutic substitution programs and discounts or
rebates from prescription drug manufacturers and whether best
pricing requirements are being complied with. Additionally, at
least one state has filed a lawsuit concerning similar issues
against a health plan. Governmental entities have also commenced
investigations against specialty pharmaceutical distribution
companies having dealings with pharmaceutical manufacturers
concerning retail distribution and sales and marketing practices
of certain products and therapies. There can be no assurance
that we will not receive subpoenas or be requested to produce
documents in pending investigations or litigation from time to
time. As well, we may be the target or subject of one or more
such investigations or named parties in corresponding actions.
We believe that we are in compliance with the legal requirements
imposed by the anti-kickback laws and regulations, and we
believe that there are material and substantial differences
between drug switching programs that have been challenged under
these laws and the generic substitution and therapeutic
interchange practices and formulary management programs offered
by us to our Plan Sponsors, since no remuneration or other
incentives are provided to patients, pharmacists or others.
However, there can be no assurance that we will not be subject
to scrutiny or challenge under such laws or regulations, or that
any such challenge would not have a material adverse effect on
us.
On April 18, 2003, the OIG released Compliance Program
Guidance for Pharmaceutical Manufacturers, which we refer to as
the Guidance, which is designed to provide voluntary, nonbinding
guidance in devising effective compliance programs to assist
companies that develop, manufacture, market and sell
pharmaceutical
65
products or biological products. The Guidance provides the
OIGs view of the fundamental elements of a pharmaceutical
manufacturers compliance program and principles that
should be considered when creating and implementing an effective
compliance program, or as a benchmark for companies with
existing compliance programs. We currently maintain a compliance
program that includes the key compliance program elements
described in the Guidance. We believe that the fundamental
elements of our compliance programs are consistent with the
principles, policies and intent of the Guidance.
The Stark Laws.
The federal self-referral law,
commonly known as the Stark Law, prohibits
physicians from referring Medicare patients for designated
health services (which include, among other things,
outpatient prescription drugs, durable medical equipment and
supplies and home health services) to an entity with which the
physician, or an immediate family member of the physician, has a
direct or indirect financial relationship, unless the financial
relationship is structured to meet an applicable exception.
Possible penalties for violation of the Stark Law include denial
of payment, refund of amounts collected in violation of the
statute, civil monetary penalties and program exclusion. Our
management carefully considers the Stark Law and its
accompanying regulations in structuring our financial
relationships with physicians and believes that we are in
compliance therewith.
State Self-Referral Laws.
We are subject to
state statutes and regulations that prohibit payments for the
referral of patients and referrals by physicians to healthcare
providers with whom the physicians have a financial
relationship. Some state statutes and regulations apply to
services reimbursed by governmental as well as private payors.
Violation of these laws may result in prohibition of payment for
services rendered, loss of pharmacy or health provider licenses,
fines and criminal penalties. The laws and exceptions or safe
harbors may vary from the federal Stark Law and vary
significantly from state to state. Certain of these state
statutes mirror the federal Stark Law while others may be more
restrictive. The laws are often vague, and in many cases, have
not been widely interpreted by courts or regulatory agencies;
however, we believe they are in compliance with such laws.
Statutes Prohibiting False Claims and Fraudulent Billing
Activities.
A range of federal civil and criminal
laws target false claims and fraudulent billing activities. One
of the most significant is the federal False Claims Act, which
we refer to as the False Claims Act, which imposes civil
penalties for knowingly making or causing to be made false
claims in order to secure a reimbursement from
government-sponsored programs, such as Medicare and Medicaid.
Investigations or actions commenced under the False Claims Act
may be brought either by the government or by private
individuals on behalf of the government, through a
whistleblower or qui tam action. The
False Claims Act authorizes the payment of a portion of any
recovery to the individual bringing suit. Such actions are
initially required to be filed under seal pending their review
by the Department of Justice. If the government intervenes in
the lawsuit and prevails, the whistleblower (or plaintiff filing
the initial complaint) may share with the federal government in
any settlement or judgment. If the government does not intervene
in the lawsuit, the whistleblower plaintiff may pursue the
action independently. The False Claims Act generally provides
for the imposition of civil penalties and for treble damages,
resulting in the possibility of substantial financial penalties
for small billing errors that are replicated in a large number
of claims, as each individual claim could be deemed to be a
separate violation of the False Claims Act. Significantly, the
Health Reform Law amended the False Claims Act to require that
an overpayment must be reported and returned to the government
within 60 days after an overpayment is identified. The
failure to comply with this requirement now constitutes a
violation of the federal False Claims Act.
Some states also have enacted statutes similar to the False
Claims Act which may include criminal penalties, substantial
fines, and treble damages. In recent years, federal and state
governments have launched several initiatives aimed at
uncovering practices that violate false claims or fraudulent
billing laws. Under Section 1909 of the Social Security
Act, which became effective January 1, 2007, if a state
false claim act meets certain requirements as determined by the
OIG in consultation with the U.S. Attorney General the
state is entitled to an increase of ten percentage points in the
state medical assistance percentage with respect to any amounts
recovered under a state action brought under such a law. Some of
the larger states in terms of population that have had the OIG
review such laws include: California, Florida, Illinois,
Indiana, Massachusetts, Michigan, Nevada, Tennessee and Texas.
We operate in all nine of these states and we submit claims for
66
Medicaid reimbursement to the respective state Medicaid
agencies. We expect the list of states that enact qualifying
false claims act to continue to grow. This legislation has led
to increased auditing activities by state healthcare regulators.
As such, we have been the subject of an increased number of
audits. Further, a number of states, including states in which
we operate, have adopted their own false claims statutes as well
as statutes that allow individuals to bring qui tam actions. We
believe that we have procedures in place to ensure the accuracy
of our claims. While we believe that we are in compliance with
Medicaid and Medicare billing rules and requirements, there can
be no assurance that regulators would agree with the methodology
employed by them in billing for our products and services and a
material disagreement between us, on the one hand, and these
governmental agencies, on the other hand, on the manner in which
we provide products or services could have a material adverse
effect on our business and operations, financial position and
results of operations.
The False Claims Act also has been used by the federal
government and private whistleblowers to bring enforcement
actions under so-called fraud and abuse laws like
the federal anti-kickback statute and the Stark Law. Such
actions are not based on a contention that an entity has
submitted claims that are facially invalid. Instead, such
actions are based on the theory that when an entity submits a
claim, it either expressly or impliedly certifies that it has
provided the underlying services in compliance with applicable
laws, and therefore that services provided and billed for during
an anti-kickback statute or Stark Law violation result in false
claims, even if such claims are billed accurately for
appropriate and medically necessary services. The availability
of the False Claims Act to enforce alleged fraud and abuse
violations has increased the potential for such actions to be
brought, and which often are costly and time-consuming to defend.
Regulation
of the PBM Industry
Licensure Laws.
Many states have licensure or
registration laws governing certain types of ancillary
healthcare organizations, including preferred provider
organizations, TPAs, discount cash card prescription drug
programs and companies that provide utilization review services.
The scope of these laws differs significantly from state to
state, and the application of such laws to the activities of
PBMs often is unclear. We have registered under such laws in
those states in which we have concluded that such registration
or licensure is required.
We dispense prescription drugs pursuant to orders received
through the BioScrip.com web site, as well as other affiliated
private label web sites. Accordingly, we may be subject to laws
affecting on-line pharmacies. Several states have proposed laws
to regulate on-line pharmacies and require on-line pharmacies to
obtain state pharmacy licenses. Additionally, federal regulation
by the FDA, or another federal agency of on-line pharmacies that
dispense prescription drugs has been proposed. To the extent
that such state or federal regulation could apply to our
operations, certain of those operations could be adversely
affected by such licensure legislation. Our management does not
believe that the adoption of any of these internet related laws
would have a material adverse effect on our business or
operations.
FDA Regulation.
The FDA generally has
authority to regulate drug promotional information and materials
that are disseminated by a drug manufacturer or by other persons
on behalf of a drug manufacturer. In January 1998, the FDA
issued Draft Guidance regarding its intent to regulate certain
drug promotion and switching activities of pharmaceutical
manufacturers that control, directly or indirectly, a PBM. The
FDA effectively withdrew the Draft Guidance and has indicated
that it would not issue new draft guidance. However, there can
be no assurance that the FDA will not assert jurisdiction over
certain aspects of our PBM business, including the internet sale
of prescription drugs.
Legislation Imposing Plan Design
Mandates.
Some states have enacted legislation
that prohibits Plan Sponsors from implementing certain
restrictions on design features, and many states have introduced
legislation to regulate various aspects of managed care plans
including legislation that prohibits or restricts therapeutic
substitution, requires coverage of all drugs approved by the
FDA, or prohibits denial of coverage for non-FDA approved uses.
For example, some states provide that members may not be
required to use network providers, but that they must instead be
provided with benefits even if they choose to use
non-network
providers (freedom of choice legislation), or
provide that a member may sue his or her health plan if care is
denied. Some states have enacted, and other states have
introduced, legislation regarding plan design mandates. Some
states mandate coverage of certain benefits or conditions. Such
legislation does not generally apply to
67
our business, but it may apply to certain of our customers
(generally, HMOs and health insurers). We do not believe the
widespread enactment of these regulations would have a material
adverse effect on our PBM business.
Consumer Protection Laws.
Most states have
consumer protection laws that have been the basis for
investigations and multi-state settlements relating to financial
incentives provided by drug manufacturers to pharmacies in
connection with drug switching programs. No assurance can be
given that we will not be subject to scrutiny or challenge under
one or more of these laws.
Comprehensive PBM Regulation.
Although no
state has passed legislation regulating PBM activities in a
comprehensive manner, such legislation has been introduced in
the past in several states. Since we do not derive significant
PBM revenues from business in any particular state, such
legislation, if currently enacted in a state, would not have a
material adverse impact on our operations.
Confidentiality,
Privacy and HIPAA
Most of our activities involve the receipt, use and disclosure
of confidential medical, pharmacy or other health-related
information concerning individual members, including the
disclosure of the confidential information to the members
health benefit plan. In addition, we use aggregated and blinded
(anonymous) data for research and analysis purposes.
On April 14, 2003 the final regulations issued by HHS
regarding the privacy of individually identifiable health
information, which we refer to as the Privacy Regulations,
pursuant to HIPAA took effect. The Privacy Regulations are
designed to protect the medical information of a healthcare
patient or health plan enrollee that could be used to identify
the individual. We refer to this information as protected health
information, which we refer to as PHI. The Privacy Regulations
apply directly to certain entities known as covered
entities, which include Plan Sponsors and most healthcare
providers. In addition, the Privacy Regulations require covered
entities to enter into contracts requiring their business
associates to agree to certain restrictions regarding the
use and disclosure of PHI. The Privacy Regulations apply to PHI
maintained in any format, including both electronic and paper
records, and impose extensive restrictions on the way in which
covered entities (and indirectly their business associates) may
use and disclose PHI. In addition, the Privacy Regulations also
give patients significant rights to understand and control how
their PHI is used and disclosed. Often, use and disclosure of
PHI must be limited to the minimum amount necessary to achieve
the purpose of the use or disclosure. Certain of our businesses
are covered entities directly subject to the Privacy
Regulations, and other of their businesses are business
associates of covered entities, such as Plan Sponsors.
Since October 16, 2003, we have been subject to compliance
with the rules governing transaction standards and code sets
issued by HHS pursuant to HIPAA, which we refer to as the
Transactions Standards. The Transactions Standards establish
uniform standards to be utilized by covered entities in the
electronic transmission of health information in connection with
certain common healthcare financing transactions, such as
healthcare claims. Under the new Transactions Standards, any
party transmitting or receiving health transactions
electronically must send and receive data in a single format,
rather than the large number of different data formats currently
used. The Transactions Standards apply to us in connection with
submitting and processing healthcare claims. The Transactions
Standards also apply to many of our payors and to our
relationships with those payors.
In addition, in February 2003, HHS issued final regulations
governing the security of PHI pursuant to HIPAA, which we refer
to as the Security Standards. The Security Standards impose
substantial requirements on covered entities and their business
associates regarding the storage, utilization of, access to and
transmission of electronic PHI.
The requirements imposed by the Privacy Regulations, the
Transactions Standards, and the Security Standards are extensive
and have required substantial cost and effort to assess and
implement. We have taken and will continue to take steps that we
believe are reasonable to ensure that their policies and
procedures are in compliance with the Privacy Regulations, the
Transactions Standards and the Security Standards. The
requirements imposed by HIPAA have increased our burden and
costs of regulatory compliance (including
68
their health improvement programs and other information-based
products), altered our reporting and reduced the amount of
information we can use or disclose if members do not authorize
such uses or disclosures.
Most states also have enacted health information privacy laws
which restrict the use and disclosure of patient health
information. In addition, several states recently have enacted
pharmacy-related privacy legislation that applies not only to
patient records but that also prohibits the transfer or use for
commercial purposes of pharmacy data that identifies
prescribers. In response to concerns about identity theft, many
states also have adopted so-called security breach
notification laws that may impose requirements regarding the
safeguarding of personal information such as social security
numbers and bank and credit card account numbers, and that
impose an obligation to notify persons when their personal
information has or may have been accessed by an unauthorized
person. Many of these laws apply to our business and have and
will continue to increase our burden and costs of privacy and
security related regulatory compliance.
On February 17, 2009, the American Recovery and
Reinvestment Act of 2009 was enacted and included
Title XIII, the HITECH Act. The HITECH Act modified certain
provisions of the HIPAA Privacy Regulations and Security
Standards, and included additional requirements meant to protect
the privacy and security of health information, including, but
not limited to, a new federal breach notification obligation
applicable to HIPAA covered entities and their business
associates. HHS, as required by the HITECH Act, has issued a
regulation setting forth the breach notification obligations
applicable to covered entities and their business associates.
The various requirements of the HITECH Act have different
compliance dates, some of which have passed and some of which
will occur in the future. With respect to those requirements
whose compliance dates have passed, we believe that we are in
compliance with these provisions. With respect to those
requirements whose compliance dates are in the future, we are in
the process of implementing these new requirements or have done
so already, and believe that we will be in compliance with these
requirements on or before the applicable compliance date.
Healthcare
Reform Legislation
In March 2010, President Obama signed into law the Health Reform
Law. The Health Reform Law will result in sweeping changes to
the existing U.S. system for the delivery and financing of
health care. In general, among other things, the reforms will
increase the number of persons covered under government program
and private insurance; furnish economic incentives for
measurable improvements in health care quality outcomes; promote
a more integrated health care delivery system and the creation
of new health care delivery models; revise payment for health
care services under the Medicare and Medicaid programs; and
increase government enforcement tools and sanctions for
combating fraud and abuse by health care providers. In
particular, among other things, the Health Reform Law will
reduce cost sharing for Medicare beneficiaries under the
Part D prescription drug benefit program and provide
funding for medication management services by licensed
pharmacists to individuals with chronic conditions. In addition,
subject to promulgation of regulations by the Secretary of the
U.S. Department of Health and Human Services, or the HHS
Secretary, PBMs will be required to begin reporting to the HHS
Secretary information regarding the percentage of prescriptions
provided through retail as opposed to mail order pharmacies;
percentage of prescriptions for which a generic drug was
available and dispensed; the aggregate amount of rebates,
discounts and other price concessions that the PBM negotiates
and the aggregate amount of such price concessions that are
passed through to the plan sponsor; and the aggregate amount of
the difference between the amount the health benefits plan pays
the PBM, and the amount the PBM pays retail and mail order
pharmacies.
The details for implementation of many of the requirements under
the Health Reform Law will depend on the promulgation of
regulations by a number of federal government agencies,
including the U.S. Department of Health and Human Services.
It is impossible to predict what many of the final requirements
will be, and the net effect of those requirements on us. There
is likely to be considerable uncertainty as health industry
stakeholders absorb and adapt to the profound changes embodied
in the Health Reform Law.
69
DESCRIPTION
OF CERTAIN INDEBTEDNESS
The following discussion provides summary information about some
of our indebtedness and does not purport to be a complete
description of all the information that might be important to
you. For a more complete understanding of such indebtedness, we
encourage you to review the more detailed summary of our
indebtedness under the heading Managements
Discussion and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources
and in the notes to our consolidated financial statements,
each contained in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the three months ended March 31, 2010, which are
incorporated by reference into this prospectus.
Concurrently with the acquisition, we entered into the New
Credit Facility, which consists of the $100.0 million Term
Loan and the $50.0 million Revolver. The Term Loan was
fully funded at the closing of the acquisition. The Revolver
remains undrawn since the closing of the acquisition on
March 25, 2010. The Term Loan matures five years after
funding and has a repayment schedule with quarterly amortization
equal to 2.5%, 5.0%, 7.5%, 10.0% and 12.5% per annum of its
principal amount in years one through five, with the balance due
at maturity. The Revolver may be drawn upon for five years after
the closing of the merger. The amount of borrowings which may be
made under the Revolver is based on a borrowing base comprised
of specified percentages of eligible receivables and eligible
inventory, up to a maximum of $50.0 million. If the amount
of borrowings outstanding under the Revolver exceeds the
borrowing base then in effect, then we are required to repay
such borrowings in an amount sufficient to eliminate such
excess. Additionally, if there are no borrowings outstanding
under the Revolver, and the principal amount of the Term Loan
then outstanding exceeds the borrowing base then in effect, then
we are required to repay the Term Loan in an amount sufficient
to eliminate such excess. The Revolver includes
$5.0 million of availability for letters of credit and
$5.0 million of availability for swing line loans. Interest
on both the Term Loan and advances under the Revolver is based
on a base rate or Eurodollar rate plus an applicable margin of
3.0% and 4.0%, respectively, and with the base rate and
Eurodollar rate having floors of 3.0% and 2.0%, respectively. In
the event of any default, the interest rate may be increased to
2.0% over the rate applicable to base rate loans. The Revolver
also carries a commitment fee of 0.75% per annum, payable
quarterly in arrears, on the unused portion of the credit line.
Borrowings under the New Credit Facility are subject to
mandatory prepayment upon the occurrence of certain events,
including the issuance of certain securities, the incurrence of
certain debt and the sale or other disposition of certain
assets. In addition, borrowings under the New Credit Facility
are subject to mandatory prepayment in the event we have excess
cash flow, as defined in the credit agreement. Both the Term
Loan and the Revolver have been guaranteed by substantially all
of our domestic subsidiaries and secured by first priority
security interests in substantially all of our assets (including
the capital stock of our subsidiaries) and all such subsidiary
guarantors. The New Credit Facility includes customary
affirmative and negative covenants and events of default, as
well as financial covenants relating to a maximum total leverage
ratio and a minimum fixed charge coverage ratio. Negative
covenants include, among others, limitations on additional debt,
liens, negative pledges, investments, dividends, stock
repurchases, asset sales and affiliate transactions. Events of
default include, among others, non-performance of covenants,
breach of representations, cross-default to other material debt,
bankruptcy and insolvency, material judgments and changes in
control.
Jefferies Finance LLC acts as lead arranger, as book manager, as
administrative agent for the lenders, as collateral agent for
the secured parties and as syndication agent. Healthcare Finance
Group, LLC acts as collateral manager and issuing bank for the
lenders. An affiliate of Healthcare Finance Group, LLC acts as
swingline lender for the lenders.
70
DESCRIPTION
OF NOTES
You can find the definitions of certain terms used in this
description under the subheading Certain
Definitions. In this description, BioScrip
refers only to BioScrip, Inc. and not to any of its
Subsidiaries. Upon consummation of the Transactions, Critical
Homecare Solutions Holdings, Inc. and its Subsidiaries became
Subsidiaries of BioScrip.
BioScrip issued the old notes, and will issue the new notes,
under an indenture among itself, the Guarantors and
U.S. Bank National Association, as trustee. The terms of
the notes include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture
Act of 1939, as amended. Unless the context otherwise requires,
all references to the notes in this
Description of Notes include the old notes and the
new notes. The old notes and the new notes will be treated as a
single class for all purposes of the indenture.
The following description is a summary of the material
provisions of the indenture and the registration rights
agreement. It does not restate those agreements in their
entirety. We urge you to read the indenture and the registration
rights agreement because they, and not this description, define
your rights as holders of the notes. Copies of the indenture and
the registration rights agreement are filed as Exhibit 4.1
to the registration statement of which this prospectus forms a
part and Exhibit 10.5 to our Current Report on
Form 8-K
filed with the SEC on March 31, 2010, which is incorporated
by reference into this prospectus, and are available as set
forth below under Additional
Information, respectively. Certain defined terms used in
this description but not defined below under
Certain Definitions have the meanings
assigned to them in the indenture.
The registered holder of a note will be treated as the owner of
it for all purposes. Only registered holders will have rights
under the indenture.
Brief
Description of the Notes and the Note Guarantees
The
Notes
The notes:
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are general unsecured obligations of BioScrip;
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rank
pari passu
in right of payment to all existing and
future senior unsecured indebtedness of BioScrip;
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rank senior in right of payment to all future subordinated
indebtedness of BioScrip; and
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are unconditionally guaranteed on a senior unsecured basis by
the Guarantors.
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The notes are effectively subordinated to all borrowings under
the senior credit facility, which are secured by substantially
all of the assets of BioScrip, and to all other existing and
future secured indebtedness of BioScrip, in each case to the
extent of the assets securing such indebtedness, and are
structurally subordinated to all indebtedness and other
liabilities of any non-Guarantor Subsidiaries. See Risk
Factors Risks Related to the New Notes
The new notes are not secured by our assets or those of our
guarantor subsidiaries. As of March 31, 2010, we had
$100.0 million of borrowings outstanding, and up to
$50.0 million of additional borrowings available, under the
senior credit facility. We do not have any non-Guarantor
Domestic Subsidiaries. Under certain circumstances, we will be
able to incur additional secured debt and create non-Guarantor
Subsidiaries in the future.
The
Note Guarantees
The notes were initially guaranteed by all of BioScrips
Domestic Subsidiaries in existence on the date of the indenture.
Each guarantee of the notes:
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is a general unsecured obligation of the Guarantor;
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ranks
pari passu
in right of payment to all existing and
future senior unsecured indebtedness of the Guarantor; and
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ranks senior in right of payment to all future subordinated
indebtedness of the Guarantor.
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The guarantees of the notes are effectively subordinated to the
Guarantors guarantees of borrowings under the senior
credit facility, which are secured by substantially all of the
assets of the Guarantors, and to all other existing and future
secured indebtedness of the Guarantors, in each case to the
extent of the assets securing such indebtedness. See Risk
Factors Risks Related to the New Notes
The new notes are not secured by our assets or those of our
guarantor subsidiaries.
Restricted
and Unrestricted Subsidiaries
As of the date of the indenture, all of our Subsidiaries were
Restricted Subsidiaries. However, under the
circumstances described below under the caption
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries, we will be
permitted to designate certain of our Subsidiaries as
Unrestricted Subsidiaries. Our Unrestricted
Subsidiaries are not subject to many of the restrictive
covenants in the indenture and do not guarantee the notes.
Principal,
Maturity and Interest
BioScrip issued $225.0 million in aggregate principal
amount of notes in the offering of the old notes. BioScrip may
issue additional notes under the indenture from time to time
after this offering. Any issuance of additional notes, including
the new notes, will be subject to all of the covenants in the
indenture, including the covenant described below under the
caption Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred
Stock. The notes and any additional notes subsequently
issued under the indenture will be treated as a single class for
all purposes under the indenture, including, without limitation,
waivers, amendments, redemptions and offers to purchase.
BioScrip will issue notes in denominations of $2,000 and
integral multiples of $1,000 in excess thereof. The notes will
mature on October 1, 2015.
Interest on the notes accrues at the rate of
10
1
/
4
%
per annum and is payable semi-annually in arrears on April 1 and
October 1 of each year, commencing on October 1, 2010.
Interest on overdue principal and interest and Liquidated
Damages, if any, accrues at a rate that is 2% higher than the
then applicable interest rate on the notes. BioScrip will make
each interest payment to the holders of record on the
immediately preceding March 15 and September 15.
Interest on the notes accrues from the date of original issuance
or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a
360-day
year
comprised of twelve
30-day
months.
Methods
of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to
BioScrip, BioScrip will pay all principal of, and interest,
premium and Liquidated Damages, if any, on, that holders
notes in accordance with those instructions. All other payments
on the notes will be made at the office or agency of the paying
agent and registrar unless BioScrip elects to make interest
payments by check mailed to the noteholders at their address set
forth in the register of holders.
Paying
Agent and Registrar for the Notes
The trustee acts as paying agent and registrar until changed in
accordance with the indenture. BioScrip may change the paying
agent or registrar without prior notice to the holders of the
notes, and BioScrip or any of its Subsidiaries may act as paying
agent or registrar.
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Transfer
and Exchange
A holder may transfer or exchange notes in accordance with the
provisions of the indenture. The registrar and the trustee may
require a holder, among other things, to furnish appropriate
endorsements and transfer documents in connection with a
transfer of notes. Holders will be required to pay all taxes due
on transfer. BioScrip will not be required to transfer or
exchange any note selected for redemption. Also, BioScrip will
not be required to transfer or exchange any note for a period of
15 days before a selection of notes to be redeemed.
Note
Guarantees
The notes are guaranteed by each of BioScrips Domestic
Subsidiaries in existence on the date of the indenture,
including Critical Homecare Solutions Holdings, Inc. and its
Subsidiaries. Domestic Subsidiaries created or acquired by
BioScrip in the future also will be required to become
Guarantors, subject to certain limited exceptions. See
Certain Covenants Additional Note
Guarantees. The Note Guarantees are joint and several
obligations of the Guarantors. The obligations of each Guarantor
under its Note Guarantee are limited as necessary to prevent
that Note Guarantee from constituting a fraudulent conveyance
under applicable law. See Risk Factors Risks
Related to the New Notes A subsidiary guarantee
could be voided if it constitutes a fraudulent transfer under
U.S. bankruptcy or similar state law, which would prevent
the holders of the new notes from relying on that subsidiary to
satisfy claims.
A Guarantor may not sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another Person, other than BioScrip or another
Guarantor, unless:
(1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that
Guarantor under the indenture, its Note Guarantee and the
registration rights agreement pursuant to a supplemental
indenture satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are
applied in accordance with the provisions of the indenture
described under Repurchase at the Option of
Holders Asset Sales.
The Note Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all
or substantially all of the assets of that Guarantor (including
by way of merger or consolidation) to a Person that is not
(either before or after giving effect to such transaction)
BioScrip or a Restricted Subsidiary of BioScrip, if the sale or
other disposition does not violate the Asset Sale
provisions of the indenture;
(2) in connection with any sale or other disposition of all
of the Capital Stock of that Guarantor to a Person that is not
(either before or after giving effect to such transaction)
BioScrip or a Restricted Subsidiary of BioScrip, if the sale or
other disposition does not violate the Asset Sale
provisions of the indenture;
(3) if BioScrip designates that Guarantor to be an
Unrestricted Subsidiary in accordance with the applicable
provisions of the indenture; or
(4) upon legal defeasance or satisfaction and discharge of
the indenture as provided below under the captions
Legal Defeasance and Covenant Defeasance
and Satisfaction and Discharge.
Optional
Redemption
At any time prior to April 1, 2013, BioScrip may on any one
or more occasions redeem up to 35% of the aggregate principal
amount of notes issued under the indenture at a redemption price
of 110.250% of the
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principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net
cash proceeds of a sale of Equity Interests (other than
Disqualified Stock) of BioScrip or a contribution to
BioScrips common equity capital;
provided
that:
(1) at least 65% of the aggregate principal amount of notes
originally issued under the indenture (excluding notes held by
BioScrip and its Subsidiaries) remains outstanding immediately
after the occurrence of such redemption; and
(2) the redemption occurs within 45 days of the date
of the closing of such sale or contribution.
At any time prior to April 1, 2013, BioScrip may also
redeem all or a part of the notes, upon not less than 30 nor
more than 60 days prior notice mailed by first-class
mail to each holders registered address, at a redemption
price equal to 100% of the principal amount of notes redeemed
plus the Applicable Premium as of, and accrued and unpaid
interest and Liquidated Damages, if any, to the date of
redemption (the
Redemption Date
),
subject to the rights of holders of notes on the relevant record
date to receive interest due on the relevant interest payment
date.
Except pursuant to the preceding paragraphs, the notes will not
be redeemable at BioScrips option prior to April 1,
2013.
On or after April 1, 2013, BioScrip may redeem all or a
part of the notes upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, on the notes
redeemed to the applicable redemption date, subject to the
rights of holders of notes on the relevant record date to
receive interest on the relevant interest payment date:
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Period
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Percentage
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On or after April 1, 2013 and before October 1, 2014
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105.125
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On or after October 1, 2014
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100.000
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Unless BioScrip defaults in the payment of the redemption price,
interest will cease to accrue on the notes or portions thereof
called for redemption on the applicable redemption date.
Mandatory
Redemption
BioScrip is not required to make mandatory redemption or sinking
fund payments with respect to the notes.
Repurchase
at the Option of Holders
Change
of Control
If a Change of Control occurs, each holder of notes will have
the right to require BioScrip to repurchase all or any part
(equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of that holders notes pursuant to a Change of
Control Offer on the terms set forth in the indenture. In the
Change of Control Offer, BioScrip will offer a Change of Control
Payment in cash equal to 101% of the aggregate principal amount
of notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, on the notes repurchased to the date
of purchase, subject to the rights of holders of notes on the
relevant record date to receive interest due on the relevant
interest payment date. Within 30 days following any Change
of Control, BioScrip will mail a notice to each holder
describing the transaction or transactions that constitute the
Change of Control and offering to repurchase notes on the Change
of Control Payment Date specified in the notice, which date will
be no earlier than 30 days and no later than 60 days
from the date such notice is mailed, pursuant to the procedures
required by the indenture and described in such notice. BioScrip
will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with the repurchase of the notes as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the indenture, BioScrip will
comply with the applicable securities laws and
74
regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the
indenture by virtue of such compliance.
On the Change of Control Payment Date, BioScrip will, to the
extent lawful:
(1) accept for payment all notes or portions of notes
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the
Change of Control Payment in respect of all notes or portions of
notes properly tendered; and
(3) deliver or cause to be delivered to the trustee the
notes properly accepted together with an officers
certificate stating the aggregate principal amount of notes or
portions of notes being purchased by BioScrip.
The paying agent will promptly mail to each holder of notes
properly tendered the Change of Control Payment for such notes,
and the trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each holder a new note equal in
principal amount to any unpurchased portion of the notes
surrendered, if any. BioScrip will publicly announce the results
of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require BioScrip to make a
Change of Control Offer following a Change of Control will be
applicable whether or not any other provisions of the indenture
are applicable. Except as described above with respect to a
Change of Control, the indenture does not contain provisions
that permit the holders of the notes to require that BioScrip
repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
BioScrip will not be required to make a Change of Control Offer
upon a Change of Control if (1) a third party makes the
Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by
BioScrip and purchases all notes properly tendered and not
withdrawn under the Change of Control Offer, or (2) notice
of redemption has been given pursuant to the indenture as
described above under the caption Optional
Redemption, unless and until there is a default in payment
of the applicable redemption price.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, lease, transfer, conveyance or
other disposition of all or substantially all of the
assets of BioScrip and its Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the
phrase substantially all, there is no precise
established definition of the phrase under applicable law.
Accordingly, the ability of a holder of notes to require
BioScrip to repurchase its notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of
the assets of BioScrip and its Subsidiaries taken as a whole to
another Person or group may be uncertain.
The Credit Agreement contains and future agreements may contain,
prohibitions of certain events, including events that would
constitute a Change of Control. The exercise by the holders of
notes of their right to require BioScrip to repurchase the notes
upon a Change of Control could cause a default under these other
agreements, even if the Change of Control itself does not, due
to the financial effect of such repurchases on BioScrip. In the
event a Change of Control occurs at a time when BioScrip is
prohibited from purchasing notes, BioScrip could seek the
consent of its lenders to the purchase of notes or could attempt
to refinance the borrowings that contain such prohibition. If
BioScrip does not obtain a consent or repay those borrowings,
BioScrip will remain prohibited from purchasing notes. In that
case, BioScrips failure to purchase tendered notes would
constitute a Default under the indenture which could, in turn,
constitute a default under the other indebtedness. Finally,
BioScrips ability to pay cash to the holders of notes upon
a repurchase may be limited by BioScrips then existing
financial resources. See Risk Factors Risks
Related to the New Notes We may not be able to
satisfy our obligations to holders of the new notes upon a
Change of Control or Asset Sale.
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Asset
Sales
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) BioScrip (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of the Asset Sale at
least equal to the Fair Market Value of the assets or Equity
Interests issued or sold or otherwise disposed of; and
(2) at least 75% of the consideration received in the Asset
Sale by BioScrip or such Restricted Subsidiary is in the form of
cash or Cash Equivalents. For purposes of this provision, each
of the following will be deemed to be cash:
(a) any liabilities, as shown on BioScrips most
recent consolidated balance sheet, of BioScrip or any Restricted
Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the notes or any Note
Guarantee) that are assumed by the transferee of any such assets
and with respect to which BioScrip or such Restricted Subsidiary
is released from further liability;
(b) any securities, notes or other obligations received by
BioScrip or any such Restricted Subsidiary from such transferee
that are converted by BioScrip or such Restricted Subsidiary
into cash within 60 days, to the extent of the cash
received in that conversion;
(c) any stock or assets of the kind referred to in
clauses (2) or (4) of the next paragraph of this
covenant; and
(d) any cash received under any earn-out or similar
provision, to the extent of the cash received.
Within 360 days after the receipt of any Net Proceeds from
an Asset Sale, BioScrip (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Proceeds:
(1) to repay Indebtedness and other Obligations under a
Credit Facility, and if the Indebtedness repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with
respect thereto;
(2) to acquire all or substantially all of the assets of,
or any Capital Stock of, another Permitted Business, if, after
giving effect to any such acquisition of Capital Stock, the
Permitted Business is or becomes, or is merged into, a
Restricted Subsidiary of BioScrip;
(3) to make a capital expenditure; or
(4) to acquire other assets that are not classified as
current assets under GAAP and that are used or useful in a
Permitted Business.
Pending the final application of any Net Proceeds, BioScrip may
temporarily reduce revolving credit borrowings or otherwise
invest the Net Proceeds in any manner that is not prohibited by
the indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the second paragraph of this covenant
will constitute
Excess Proceeds.
When the
aggregate amount of Excess Proceeds exceeds $15.0 million,
BioScrip will, within 30 days thereof, make an Asset Sale
Offer to all holders of notes and all holders of other
Indebtedness that is
pari passu
with the notes containing
provisions similar to those set forth in the indenture with
respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of
notes and such other
pari passu
Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any
Asset Sale Offer will be equal to 100% of the principal amount
plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after the consummation of an Asset Sale
Offer (whether or not any notes have been tendered), BioScrip
may use those Excess Proceeds for any purpose not otherwise
prohibited by the indenture. If the aggregate principal amount
of notes and other
pari passu
Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee will select the notes and such other
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pari passu
Indebtedness to be purchased on a
pro rata
basis. Upon completion of each Asset Sale Offer, the amount
of Excess Proceeds will be reset at zero.
BioScrip will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the indenture, BioScrip will comply
with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the Asset Sale
provisions of the indenture by virtue of such compliance.
Selection
and Notice
If less than all of the notes are to be redeemed at any time,
the trustee will select notes for redemption on a pro rata basis
unless otherwise required by law or applicable stock exchange
requirements.
No notes of $2,000 or less can be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
holder of notes to be redeemed at its registered address, except
that redemption notices may be mailed more than 60 days
prior to a redemption date if the notice is issued in connection
with a defeasance of the notes or a satisfaction and discharge
of the indenture. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of
redemption that relates to that note will state the portion of
the principal amount of that note that is to be redeemed. A new
note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on notes or
portions of notes called for redemption unless BioScrip defaults
in the payment of the redemption price.
Certain
Covenants
Restricted
Payments
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment
or distribution on account of BioScrips Equity Interests
(including, without limitation, any payment in connection with
any merger or consolidation involving BioScrip) or to the direct
or indirect holders of BioScrips Equity Interests in their
capacity as such (other than dividends or distributions payable
in Equity Interests (other than Disqualified Stock) of BioScrip);
(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving BioScrip) any Equity Interests
of BioScrip or any direct or indirect parent of BioScrip (other
than any such Equity Interests owned by BioScrip or any of its
Restricted Subsidiaries);
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness of BioScrip or any Guarantor that is contractually
subordinated to the notes or to any Note Guarantee (excluding
any intercompany Indebtedness between or among BioScrip and any
of its Restricted Subsidiaries), except (a) a payment of
interest or principal at the Stated Maturity thereof or
(b) payments in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each
case within six months of the due date thereof (but only to the
extent such due date is not on or after the date on which the
notes mature); or
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(4) make any Restricted Investment
(all such payments and other actions set forth in these
clauses (1) through (4) above being collectively
referred to as Restricted Payments), unless, at the
time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted
Payment;
(2) BioScrip would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant
described below under the caption Incurrence
of Indebtedness and Issuance of Preferred Stock; and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by BioScrip and its
Restricted Subsidiaries since the date of the indenture
(excluding Restricted Payments permitted by clauses (2)
through (8) of the next succeeding paragraph, is less than
the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of BioScrip for the
period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the date of the
indenture to the end of BioScrips most recently ended
fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100%
of such deficit);
plus
(b) 100% of the aggregate net cash proceeds received by
BioScrip since the date of the indenture as a contribution to
its common equity capital or from the issue or sale of Equity
Interests of BioScrip (other than Disqualified Stock) or from
the issue or sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities of BioScrip
that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of BioScrip);
plus
(c) 100% of the net reduction in Restricted Investments
after the date of the indenture, in any Person, resulting from
(i) payments of interest on Indebtedness, dividends,
repayments of loans or advances, or any sale or disposition of
such Investments (but only to the extent such items are not
included in the calculation of Consolidated Net Income), in each
case to the Company or any Restricted Subsidiary from any
Person, or (ii) the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, not to exceed in the case
of any Person the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Person after the
date of the indenture;
plus
(d) 100% of any dividends received by BioScrip or a
Restricted Subsidiary of BioScrip after the date of the
indenture from an Unrestricted Subsidiary of BioScrip, to the
extent that such dividends were not otherwise included in the
Consolidated Net Income of BioScrip for such period.
The preceding provisions will not prohibit:
(1) the payment of any dividend or the consummation of any
irrevocable redemption within 60 days after the date of
declaration of the dividend or giving of the redemption notice,
as the case may be, if at the date of declaration or notice, the
dividend or redemption payment would have complied with the
provisions of the indenture;
(2) the making of any Restricted Payment in exchange for,
or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of BioScrip) of, Equity
Interests of BioScrip (other than Disqualified Stock) or from
the substantially concurrent contribution of common equity
capital to BioScrip;
provided
that the amount of any such
net cash proceeds that are utilized for any such Restricted
Payment will be excluded from clause (3)(b) of the preceding
paragraph;
78
(3) the repurchase, redemption, defeasance or other
acquisition or retirement for value of Indebtedness of BioScrip
or any Guarantor that is contractually subordinated to the notes
or to any Note Guarantee with the net cash proceeds from a
substantially concurrent incurrence of Permitted Refinancing
Indebtedness;
(4) so long as no Default has occurred and is continuing,
the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of BioScrip or any Restricted
Subsidiary of BioScrip held by any current or former officer,
director or employee of BioScrip or any of its Restricted
Subsidiaries pursuant to any equity subscription agreement,
stock option agreement, shareholders agreement or similar
agreement;
provided
that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests
may not exceed $2.0 million in any calendar year;
provided
,
however
, that any unused amounts in any
calendar year may be carried forward to one or more future
periods, subject to a maximum aggregate amount of repurchases
made pursuant to this clause (4) not to exceed
$4.0 million in any calendar year;
(5) the repurchase of Equity Interests deemed to occur upon
the exercise of stock options, warrants or other convertible or
exchangeable securities to the extent such Equity Interests
represent a portion of the exercise price of those securities,
and any cash paid in lieu of fractional shares in connection
with the exercise of stock options, warrants or other
convertible or exchangeable securities;
(6) the declaration and payment of regularly scheduled or
accrued dividends to holders of any class or series of
Disqualified Stock of BioScrip or any Restricted Subsidiary of
BioScrip issued after the date of the indenture in accordance
with the Fixed Charge Coverage Ratio test described below under
the caption Incurrence of Indebtedness and
Issuance of Preferred Stock;
(7) upon the occurrence of a Change of Control or Asset
Sale, the defeasance, redemption, repurchase or other
acquisition of any Indebtedness of BioScrip that is
contractually subordinated to the notes pursuant to provisions
substantially similar to those described under
Repurchase at the Option of
Holders Change of Control and
Repurchase at the Option of
Holders Asset Sales,
provided
that
BioScrip has first complied with the provisions described under
such sections; and
(8) so long as no Default has occurred and is continuing,
other Restricted Payments in an aggregate amount not to exceed
$15.0 million since the date of the indenture.
The amount of all Restricted Payments (other than cash) will be
the Fair Market Value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
by BioScrip or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. The Fair Market Value of any
assets or securities that are required to be valued by this
covenant will be determined by the Board of Directors of
BioScrip whose resolution with respect thereto will be delivered
to the trustee. The Board of Directors determination must
be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if the
Fair Market Value exceeds $15.0 million.
Incurrence
of Indebtedness and Issuance of Preferred Stock
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to
(collectively,
incur
) any Indebtedness
(including Acquired Debt), and BioScrip will not issue any
Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock;
provided, however
, that BioScrip may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock, and the
Guarantors may incur Indebtedness (including Acquired Debt) or
issue preferred stock, if the Fixed Charge Coverage Ratio for
BioScrips most recently ended four full fiscal quarters
for which internal financial statements are available
immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or such
preferred stock is issued, as the case may be, would have been
at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or the Disqualified
Stock or the preferred stock had been issued, as the case may
be, at the beginning of such four-quarter period.
79
The first paragraph of this covenant will not prohibit the
incurrence of any of the following (collectively,
Permitted Debt
):
(1) the incurrence by BioScrip and its Restricted
Subsidiaries of Indebtedness and letters of credit under Credit
Facilities in an aggregate amount at any one time outstanding
under this clause (1) (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability
of BioScrip and its Restricted Subsidiaries thereunder) not to
exceed the greater of (a) $150.0 million, less the
aggregate amount of all Net Proceeds of Asset Sales applied by
BioScrip or any of its Restricted Subsidiaries since the date of
the indenture to repay any term Indebtedness under a Credit
Facility or to repay any revolving credit Indebtedness under a
Credit Facility and effect a corresponding commitment reduction
thereunder pursuant to the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales, and (b) the sum of
80% of the book value of accounts receivable inventory plus 50%
of the book value of inventory, in each case of BioScrip and its
Restricted Subsidiaries as shown on the most recent balance
sheet of BioScrip and its Restricted Subsidiaries;
(2) Existing Indebtedness of BioScrip and its Restricted
Subsidiaries;
(3) the incurrence by BioScrip and the Guarantors of
Indebtedness represented by the old notes and the related Note
Guarantees and the new notes and the related Note Guarantees;
(4) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations,
in each case, incurred for the purpose of financing all or any
part of the purchase price or cost of design, construction,
installation or improvement of property, plant or equipment used
in the business of BioScrip or any of its Restricted
Subsidiaries, in an aggregate amount, including all Permitted
Refinancing Indebtedness incurred to renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant
to this clause (4), not to exceed $10.0 million at any time
outstanding;
(5) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to renew, refund,
refinance, replace, defease or discharge any Indebtedness (other
than intercompany Indebtedness) that was permitted by the
indenture to be incurred under the first paragraph of this
covenant or clauses (2), (3), (4), (5), (13), (14), (15) or
(16) of this paragraph;
(6) the incurrence by BioScrip or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
BioScrip and any of its Restricted Subsidiaries;
provided,
however
, that:
(a) if BioScrip or any Guarantor is the obligor on such
Indebtedness and the payee is not BioScrip or a Guarantor, such
Indebtedness must be expressly subordinated to the prior payment
in full in cash of all Obligations then due with respect to the
notes and the Note Guarantees; and
(b) any (i) subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than BioScrip or a Restricted Subsidiary of
BioScrip, or (ii) sale or other transfer of any such
Indebtedness to a Person that is not either BioScrip or a
Restricted Subsidiary of BioScrip, will be deemed, in each case,
to constitute an incurrence of such Indebtedness by BioScrip or
such Restricted Subsidiary, as the case may be, that is not
permitted by this clause (6);
(7) the issuance by any of BioScrips Restricted
Subsidiaries to BioScrip or to any of its Restricted
Subsidiaries of shares of preferred stock;
provided, however,
that any (a) subsequent issuance or transfer of Equity
Interests that results in any such preferred stock being held by
a Person other than BioScrip or a Restricted Subsidiary of
BioScrip, or (b) sale or other transfer of any such
preferred stock to a Person that is not either BioScrip or a
Restricted Subsidiary of BioScrip, will be deemed, in each case,
to constitute an issuance of such preferred stock by such
Restricted Subsidiary that is not permitted by this clause (7);
(8) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Hedging Obligations in the ordinary course of
business;
80
(9) the guarantee by BioScrip or any of the Guarantors of
Indebtedness of BioScrip or a Restricted Subsidiary of BioScrip
that was permitted to be incurred by another provision of this
covenant;
provided
that if the Indebtedness being
guaranteed is subordinated to or
pari passu
with the
notes, then the Guarantee shall be subordinated or
pari
passu
, as applicable, to the same extent as the Indebtedness
guaranteed;
(10) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Indebtedness (including by means of the issuance
of letters of credit) in respect of workers compensation
claims, self-insurance obligations, bankers acceptances,
performance, surety and similar bonds (or letters of credit
performing a similar function) and completion guarantees in the
ordinary course of business;
(11) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds, so
long as such Indebtedness is extinguished within five business
days;
(12) the incurrence of Indebtedness arising from agreements
of BioScrip or a Restricted Subsidiary providing for
indemnification, contribution, earnout, adjustment of purchase
price or similar obligations, in each case, incurred or assumed
in connection with the acquisition or disposition of any
business, assets or Equity Interests of a Restricted Subsidiary
otherwise permitted under the indenture;
(13) the incurrence by BioScrip or any of its Restricted
Subsidiaries of Indebtedness resulting from the acquisition of
assets or a new Restricted Subsidiary;
provided
that such
Indebtedness was incurred prior to such acquisition and was not
incurred in connection with, or in contemplation of, such
acquisition;
provided, further,
that the amount of such
Indebtedness, together with any other outstanding Indebtedness
incurred pursuant to this clause (13), and Permitted Refinancing
Indebtedness in respect thereof, does not exceed
$10.0 million;
(14) the incurrence by BioScrip or any Guarantor of
Indebtedness in respect of the Cisco Lease in an aggregate
amount at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant
to this clause (14), not to exceed $10.0 million;
(15) the incurrence by BioScrips Foreign Subsidiaries
of Indebtedness in an aggregate amount at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
renew, refund, refinance, replace, defease or discharge any
Indebtedness incurred pursuant to this clause (15), not to
exceed $2.0 million.
(16) the incurrence by BioScrip or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate amount
at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to renew, refund, refinance, replace,
defease or discharge any Indebtedness incurred pursuant to this
clause (16), not to exceed $15.0 million.
BioScrip will not incur, and will not permit any Guarantor to
incur, any Indebtedness (including Permitted Debt) that is
contractually subordinated in right of payment to any other
Indebtedness of BioScrip or such Guarantor unless such
Indebtedness is also contractually subordinated in right of
payment to the notes and the applicable Note Guarantee on
substantially identical terms;
provided, however
, that no
Indebtedness will be deemed to be contractually subordinated in
right of payment to any other Indebtedness of BioScrip solely by
virtue of being unsecured or by virtue of being secured on a
first or junior Lien basis.
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1)
through (16) above, or is entitled to be incurred pursuant
to the first paragraph of this covenant, BioScrip will be
permitted to classify such item of Indebtedness on the date of
its incurrence, or later reclassify all or a portion of such
item of Indebtedness, in any manner that complies with this
covenant. Indebtedness under Credit Facilities outstanding on
the date on which notes are first issued and authenticated under
the indenture will initially be deemed to have been incurred on
such date in reliance on the exception provided by
clause (1) of the definition of Permitted Debt. The accrual
of interest, the accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the
81
form of additional Indebtedness with the same terms, the
reclassification of preferred stock as Indebtedness due to a
change in accounting principles, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same
class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this covenant;
provided
, in each such
case, that the amount of any such accrual, accretion or payment
is included in Fixed Charges of BioScrip as accrued.
Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that BioScrip or any Restricted
Subsidiary may incur pursuant to this covenant shall not be
deemed to be exceeded solely as a result of fluctuations in
exchange rates or currency values.
The amount of any Indebtedness outstanding as of any date will
be:
(1) the accreted value of the Indebtedness, in the case of
any Indebtedness issued with original issue discount;
(2) the principal amount of the Indebtedness, in the case
of any other Indebtedness; and
(3) in respect of Indebtedness of another Person secured by
a Lien on the assets of the specified Person, the lesser of:
(a) the Fair Market Value of such assets at the date of
determination; and
(b) the amount of the Indebtedness of the other Person.
Liens
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien of any kind on any asset now owned
or hereafter acquired, except Permitted Liens, and except Liens
securing Indebtedness if all payments due under the indenture
and the notes are secured equally and ratably with (or prior to)
the Indebtedness secured by such Liens until such time as such
Indebtedness is no longer secured by such Liens;
provided
that if the Indebtedness so secured is subordinated by its
terms to the notes or a Note Guarantee, the Liens securing such
Indebtedness will also be so subordinated by their terms to the
notes and the Note Guarantees at least to the same extent.
Dividend
and Other Payment Restrictions Affecting
Subsidiaries
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
consensual restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its
Capital Stock to BioScrip or any of its Restricted Subsidiaries,
or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to
BioScrip or any of its Restricted Subsidiaries;
(2) make loans or advances to BioScrip or any of its
Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets
to BioScrip or any of its Restricted Subsidiaries.
However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit
Facilities as in effect on the date of the indenture and any
amendments, restatements, modifications, renewals, supplements,
refundings, replacements or refinancings of those agreements;
provided
that the amendments, restatements,
modifications, renewals, supplements, refundings, replacements
or refinancings are not materially more restrictive, taken as a
whole, with respect to such dividend and other payment
restrictions than those contained in those agreements on the
date of the indenture;
(2) the indenture, the notes and the Note Guarantees;
(3) applicable law, rule, regulation or order;
82
(4) any instrument governing Indebtedness or Capital Stock
of a Person acquired by BioScrip or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Capital Stock was
incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so
acquired;
provided
that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the indenture to
be incurred;
(5) customary non-assignment provisions in contracts and
licenses entered into in the ordinary course of business;
(6) purchase money obligations for property acquired in the
ordinary course of business and Capital Lease Obligations that
impose restrictions on the property purchased or leased of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of the
assets or Equity Interests of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending
the sale or other disposition;
(8) Permitted Refinancing Indebtedness;
provided
that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced;
(9) Liens permitted to be incurred under the provisions of
the covenant described above under the caption
Liens that limit the right of the debtor
to dispose of the assets subject to such Liens;
(10) provisions limiting the disposition or distribution of
assets or property in joint venture agreements, asset sale
agreements, sale-leaseback agreements, stock sale agreements and
other similar agreements entered into with the approval of
BioScrips Board of Directors, which limitation is
applicable only to the assets that are the subject of such
agreements;
(11) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business;
(12) any instrument governing Indebtedness of a Foreign
Subsidiary;
provided
that such Indebtedness was permitted
by the terms of the indenture to be incurred; and
(13) any other agreement governing Indebtedness or
Disqualified Stock entered into after the date of the indenture
that contains encumbrances and restrictions that are not
materially more restrictive, taken as a whole, with respect to
any Restricted Subsidiary that those in effect on the date of
the indenture with respect to that Restricted Subsidiary
pursuant to agreements in effect on the date of the indenture.
Merger,
Consolidation or Sale of Assets
BioScrip will not, directly or indirectly: (1) consolidate
or merge with or into another Person (whether or not BioScrip is
the surviving entity); or (2) sell, assign, lease,
transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of BioScrip and its Restricted
Subsidiaries taken as a whole, in one or more related
transactions, to another Person, unless:
(1) either: (a) BioScrip is the surviving entity; or
(b) the Person formed by or surviving any such
consolidation or merger (if other than BioScrip) or to which
such sale, assignment, lease, transfer, conveyance or other
disposition has been made is a corporation, limited liability
company or partnership organized or existing under the laws of
the United States, any state of the United States or the
District of Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than BioScrip) or the Person
to which such sale, assignment, lease, transfer, conveyance or
other disposition has been made assumes all the obligations of
BioScrip under the notes, the indenture and the registration
rights agreement pursuant to agreements reasonably satisfactory
to the trustee;
provided
that if the Person formed by or
surviving any such consolidation or merger is not a corporation,
the Person formed by or
83
surviving any such consolidation or merger shall cause a wholly
owned corporate Subsidiary to become a co-obligor under the
notes, the indenture and the registration rights agreement;
(3) immediately after such transaction, no Default or Event
of Default exists; and
(4) BioScrip or the Person formed by or surviving any such
consolidation or merger (if other than BioScrip), or to which
such sale, assignment, lease, transfer, conveyance or other
disposition has been made would, on the date of such transaction
after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the
applicable four-quarter period, (a) be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock, or (b) have a Fixed Charge Coverage
Ratio at least equal to BioScrips Fixed Charge Coverage
Ratio immediately prior to such transaction.
This Merger, Consolidation or Sale of Assets
covenant will not apply to:
(1) a merger of BioScrip with an Affiliate solely for the
purpose of reincorporating BioScrip in another
jurisdiction; or
(2) any consolidation or merger, or any sale, assignment,
transfer, conveyance, lease or other disposition of assets
between or among BioScrip and its Restricted Subsidiaries.
Transactions
with Affiliates
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate
of BioScrip (each, an
Affiliate Transaction
),
unless:
(1) the Affiliate Transaction is on terms that are no less
favorable to BioScrip or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction
by BioScrip or such Restricted Subsidiary with an unaffiliated
Person; and
(2) BioScrip delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $5.0 million, a resolution of the Board of
Directors of BioScrip set forth in an officers certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of
Directors of BioScrip; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million, an opinion as to the fairness
to BioScrip or such Subsidiary of such Affiliate Transaction
from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) any employment agreement, employee benefit plan,
officer or director indemnification agreement or any similar
arrangement entered into by BioScrip or any of its Restricted
Subsidiaries in the ordinary course of business and payments
pursuant thereto;
(2) transactions between or among BioScrip
and/or
its
Restricted Subsidiaries;
(3) transactions with a Person (other than an Unrestricted
Subsidiary of BioScrip) that is an Affiliate of BioScrip solely
because BioScrip owns, directly or through a Restricted
Subsidiary, an Equity Interest in, or controls, such Person;
84
(4) payment of directors fees and the provision of
indemnities and other benefits to Persons who are not otherwise
Affiliates of BioScrip;
(5) any issuance of Equity Interests (other than
Disqualified Stock) of BioScrip to Affiliates of BioScrip;
(6) Restricted Payments that do not violate the provisions
of the indenture described above under the caption
Restricted Payments; and
(7) any agreement or arrangement as in effect on the date
of the indenture and any amendment or modification thereto, and
the performance of obligations thereunder, so long as such
amendment or modification is not more disadvantageous to the
holders of the notes in any material respect.
Business
Activities
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to
BioScrip and its Restricted Subsidiaries taken as a whole.
Additional
Note Guarantees
If BioScrip or any of its Restricted Subsidiaries acquires or
creates another Domestic Subsidiary after the date of the
indenture, then BioScrip will (1) cause that newly acquired
or created Domestic Subsidiary to (a) execute a
supplemental indenture pursuant to which it becomes a Guarantor
and (b) if any obligations remain under the Registration
Rights Agreement, execute an amendment to the Registration
Rights Agreement pursuant to which it becomes subject to the
obligations of a Guarantor thereunder, and (2) deliver an
opinion of counsel satisfactory to the trustee;
provided
that any Domestic Subsidiary that constitutes an Immaterial
Subsidiary need not become a Guarantor until such time as it
ceases to be an Immaterial Subsidiary.
Designation
of Restricted and Unrestricted Subsidiaries
The Board of Directors of BioScrip may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if that designation
would not cause a Default. If a Restricted Subsidiary is
designated as an Unrestricted Subsidiary, the aggregate Fair
Market Value of all outstanding Investments owned by BioScrip
and its Restricted Subsidiaries in the Subsidiary designated as
Unrestricted will be deemed to be an Investment made as of the
time of the designation and will reduce the amount available for
Restricted Payments under the covenant described above under the
caption Restricted Payments or under one
or more clauses of the definition of Permitted Investments, as
determined by BioScrip. That designation will only be permitted
if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors of BioScrip may
redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if that redesignation would not cause a Default.
If, at any time, any Unrestricted Subsidiary would fail to meet
the preceding requirements as an Unrestricted Subsidiary, it
will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such
Subsidiary will be deemed to be incurred by a Restricted
Subsidiary of BioScrip as of such date and, if such Indebtedness
is not permitted to be incurred as of such date under the
covenant described under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock, BioScrip will be in default of such
covenant. The Board of Directors of BioScrip may at any time
designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of BioScrip;
provided
that such designation
will be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of BioScrip of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such
designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock, calculated on a pro forma basis as if
such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
85
Payments
for Consent
BioScrip will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any holder of notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to
all holders of the notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Consummation
of the Transactions
Notwithstanding anything to the contrary in the indenture, the
consummation of the Transactions was deemed not to violate any
provision of the indenture or constitute a Change of Control.
For all purposes under the indenture, the Acquisition will be
deemed to have occurred immediately prior to entering into the
indenture.
Reports
So long as any notes are outstanding, BioScrip will furnish to
the holders of notes or cause the trustee to furnish to the
holders of notes, within the time periods specified in the
SECs rules and regulations:
(1) all quarterly and annual reports that would be required
to be filed with the SEC on
Forms 10-Q
and
10-K
if
BioScrip were required to file such reports; and
(2) all current reports that would be required to be filed
with the SEC on
Form 8-K
if BioScrip were required to file such reports.
The availability of the foregoing materials on the SECs
EDGAR service shall be deemed to satisfy BioScrips
delivery obligation.
All such reports will be prepared in all material respects in
accordance with all of the rules and regulations applicable to
such reports. Each annual report on
Form 10-K
will include a report on BioScrips consolidated financial
statements by BioScrips certified independent accountants.
In addition, unless the reports are available on the SECs
EDGAR service, BioScrip will post the reports on its website
within the time periods specified in the rules and regulations
applicable to such reports and, following the consummation of
the exchange offer contemplated by the registration rights
agreement, BioScrip will file a copy of each of the reports
referred to in clauses (1) and (2) above with the SEC
for public availability within those time periods (unless the
SEC will not accept such a filing).
If, at any time after consummation of the exchange offer
contemplated by the registration rights agreement, BioScrip is
no longer subject to the periodic reporting requirements of the
Exchange Act for any reason, BioScrip will nevertheless continue
filing the reports specified in the preceding paragraphs of this
covenant with the SEC within the time periods specified above
unless the SEC will not accept such a filing. BioScrip will not
take any action for the purpose of causing the SEC not to accept
any such filings.
If BioScrip has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraphs will
include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in
Managements Discussion and Analysis of Financial Condition
and Results of Operations, of the financial condition and
results of operations of BioScrip and its Restricted
Subsidiaries separate from the financial condition and results
of operations of the Unrestricted Subsidiaries of BioScrip.
BioScrip will also arrange and participate in quarterly
conference calls open to the public to discuss its results of
operations no later than 10 Business Days following the date on
which each of the quarterly and annual financial statements are
made available as provided above. Dial-in conference call
information will be provided in advance by press release.
In addition, BioScrip and the Guarantors agree that, for so long
as any notes remain outstanding, if at any time they are not
required to file with the SEC the reports required by the
preceding paragraphs, they will
86
furnish to the holders of notes and to securities analysts and
prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
Events of
Default and Remedies
Each of the following is an
Event of Default
:
(1) default for 30 days in the payment when due of
interest on, or Liquidated Damages, if any, with respect to, the
notes;
(2) default in the payment when due (at maturity, upon
redemption or otherwise) of the principal of, or premium, if
any, on, the notes;
(3) failure by BioScrip or any of its Restricted
Subsidiaries to comply with the provisions described under the
caption Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) failure by BioScrip or any of its Restricted
Subsidiaries for 30 days to comply with the provisions
described under the captions Repurchase at the
Option of Holders Change of Control,
Repurchase at the Option of
Holders Asset Sales, Certain
Covenants Restricted Payments, or
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock;
(5) failure by BioScrip or any of its Restricted
Subsidiaries for 60 days after notice to BioScrip by the
trustee or the holders of at least 25% in aggregate principal
amount of the notes then outstanding voting as a single class to
comply with any of the other agreements in the indenture;
(6) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by BioScrip or
any of its Restricted Subsidiaries (or the payment of which is
guaranteed by BioScrip or any of its Restricted Subsidiaries),
whether such Indebtedness or Guarantee now exists, or is created
after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest
or premium, if any, on, such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on
the date of such default (a
Payment
Default
); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity, and, in each case the principal amount
of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates to $20.0 million or more;
(7) failure by BioScrip or any of its Restricted
Subsidiaries to pay final judgments entered by a court or courts
of competent jurisdiction aggregating in excess of
$20.0 million (net of any amounts that a reputable and
credit-worthy insurance company has acknowledged liability for
in writing), which judgments are not paid, discharged or stayed
for a period of 60 days;
(8) except as permitted by the indenture, any Note
Guarantee is held in any judicial proceeding to be unenforceable
or invalid or ceases for any reason to be in full force and
effect, or any Guarantor, or any Person acting on behalf of any
Guarantor, denies or disaffirms its obligations under its Note
Guarantee; and
(9) certain events of bankruptcy or insolvency described in
the indenture with respect to BioScrip or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary.
In the case of an Event of Default arising under clause (9)
above, all outstanding notes will become due and payable
immediately without further action or notice. If any other Event
of Default occurs and is continuing, the trustee or the holders
of at least 25% in aggregate principal amount of the then
outstanding notes may declare all the notes to be due and
payable immediately.
87
Subject to certain limitations, holders of a majority in
aggregate principal amount of the then outstanding notes may
direct the trustee in its exercise of any trust or power. The
trustee may withhold from holders of the notes notice of any
continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or
Event of Default relating to the payment of principal, interest,
premium or Liquidated Damages, if any.
Subject to the provisions of the indenture relating to the
duties of the trustee, in case an Event of Default occurs and is
continuing, the trustee will be under no obligation to exercise
any of the rights or powers under the indenture at the request
or direction of any holders of notes unless such holders have
offered to the trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to
receive payment of principal, interest, premium, or Liquidated
Damages, if any, when due, no holder of a note may pursue any
remedy with respect to the indenture or the notes unless:
(1) such holder has previously given the trustee notice
that an Event of Default is continuing;
(2) holders of at least 25% in aggregate principal amount
of the then outstanding notes have requested the trustee to
pursue the remedy;
(3) such holders have offered the trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the trustee has not complied with such request within
60 days after the receipt of the request and the offer of
security or indemnity; and
(5) holders of a majority in aggregate principal amount of
the then outstanding notes have not given the trustee a
direction inconsistent with such request within such
60-day
period.
The holders of a majority in aggregate principal amount of the
then outstanding notes by notice to the trustee may, on behalf
of the holders of all of the notes, rescind an acceleration or
waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or
Event of Default in the payment of principal, interest, premium
or Liquidated Damages, if any.
BioScrip is required to deliver to the trustee annually a
statement regarding compliance with the indenture. Within five
business days of becoming aware of any Default or Event of
Default, BioScrip is required to deliver to the trustee a
statement specifying such Default or Event of Default.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
BioScrip or any Guarantor, as such, will have any liability for
any obligations of BioScrip or the Guarantors under the notes,
the indenture or the Note Guarantees or for any claim based on,
in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and
releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not
be effective to waive liabilities under the federal securities
laws.
Legal
Defeasance and Covenant Defeasance
BioScrip may at any time, at the option of its Board of
Directors evidenced by a resolution set forth in an
officers certificate, elect to have all of its obligations
discharged with respect to the outstanding notes and all
obligations of the Guarantors discharged with respect to their
Note Guarantees
(Legal Defeasance)
except for:
(1) the rights of holders of outstanding notes to receive
payments in respect of the principal of, and interest, premium
and Liquidated Damages, if any, on, such notes when such
payments are due from the trust referred to below;
(2) BioScrips obligations with respect to the notes
concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
88
(3) the rights, powers, trusts, duties and immunities of
the trustee, and BioScrips and the Guarantors
obligations in connection therewith; and
(4) the Legal Defeasance and Covenant Defeasance provisions
of the indenture.
In addition, BioScrip may, at its option and at any time, elect
to have the obligations of BioScrip and the Guarantors released
with respect to certain covenants (including its obligation to
make Change of Control Offers and Asset Sale Offers) that are
described in the indenture
(Covenant Defeasance)
and thereafter any omission to comply with those covenants
will not constitute a Default or Event of Default with respect
to the notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under
Events of Default and Remedies will no
longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) BioScrip must irrevocably deposit with the trustee, in
trust, for the benefit of the holders of the notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized investment bank, appraisal
firm or firm of independent public accountants selected by
BioScrip, to pay the principal of, and interest, premium and
Liquidated Damages, if any, on, the outstanding notes on the
stated date for payment thereof or on the applicable redemption
date, as the case may be, and BioScrip must specify whether the
notes are being defeased to such stated date for payment or to a
particular redemption date;
(2) in the case of Legal Defeasance, BioScrip must deliver
to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that (a) BioScrip has received from,
or there has been published by, the Internal Revenue Service a
ruling or (b) since the date of the indenture, there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion
of counsel will confirm that, the holders of the outstanding
notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, BioScrip must
deliver to the trustee an opinion of counsel reasonably
acceptable to the trustee confirming that the holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is
continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit) and the deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which BioScrip or any Guarantor is a party or by
which BioScrip or any Guarantor is bound;
(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
indenture) to which BioScrip or any of its Subsidiaries is a
party or by which BioScrip or any of its Subsidiaries is bound;
(6) BioScrip must deliver to the trustee an officers
certificate stating that the deposit was not made by BioScrip
with the intent of preferring the holders of notes over the
other creditors of BioScrip with the intent of defeating,
hindering, delaying or defrauding any creditors of BioScrip or
others; and
(7) BioScrip must deliver to the trustee an officers
certificate and an opinion of counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
89
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
indenture, the notes or the Note Guarantees may be amended or
supplemented with the consent of the holders of at least a
majority in aggregate principal amount of the notes then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer
for, notes), and any existing Default or Event of Default or
compliance with any provision of the indenture, the notes or the
Note Guarantees may be waived with the consent of the holders of
a majority in aggregate principal amount of the then outstanding
notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer
for, notes).
Without the consent of each holder of notes affected, an
amendment, supplement or waiver may not (with respect to any
notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any note or alter the provisions with respect to the redemption
of the notes (other than provisions relating to the covenants
described above under the caption Repurchase
at the Option of Holders);
(3) reduce the rate of or change the time for payment of
interest, including default interest, on any note;
(4) waive a Default or Event of Default in the payment of
principal of, or interest, premium or Liquidated Damages, if
any, on, the notes (except a rescission of acceleration of the
notes by the holders of at least a majority in aggregate
principal amount of the then outstanding notes and a waiver of
the payment default that resulted from such acceleration);
(5) make any note payable in currency other than that
stated in the notes;
(6) make any change in the provisions of the indenture
relating to waivers of past Defaults or the rights of holders of
notes to receive payments of principal of, or interest, premium
or Liquidated Damages, if any, on, the notes;
(7) waive a redemption or repurchase payment with respect
to any note (other than a payment required by one of the
covenants described above under the caption
Repurchase at the Option of Holders);
(8) release any Guarantor from any of its obligations under
its Note Guarantee or the indenture, except in accordance with
the terms of the indenture; or
(9) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any holder
of notes, BioScrip, the Guarantors and the trustee may amend or
supplement the indenture, the notes and the Note Guarantees:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or
in place of certificated notes;
(3) to provide for the assumption of BioScrips or a
Guarantors obligations to holders of notes and Note
Guarantees in the case of a merger or consolidation or sale of
all or substantially all of BioScrips or such
Guarantors assets, as applicable;
(4) to make any change that would provide any additional
rights or benefits to the holders of notes or that does not
adversely affect the legal rights under the indenture of any
such holder;
(5) to comply with requirements of the SEC in order to
effect or maintain the qualification of the indenture under the
Trust Indenture Act;
90
(6) to conform the text of the indenture, the notes, or the
Note Guarantees to any provision of the Description of
Notes section of the final offering memorandum relating to
the offering of the old notes to the extent that such provision
in such Description of Notes was intended to be a verbatim
recitation of a provision of the indenture, the notes or the
Note Guarantees;
(7) to provide for the issuance of additional notes in
accordance with the limitations set forth in the indenture as of
the date of the indenture;
(8) to allow any Guarantor to execute a supplemental
indenture
and/or
a
Note Guarantee with respect to the Notes; or
(9) to evidence and provide for the acceptance of
appointment under the indenture by a successor trustee.
Satisfaction
and Discharge
The indenture will be discharged and will cease to be of further
effect as to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost,
stolen or destroyed notes that have been replaced or paid and
notes for whose payment money has been deposited in trust and
thereafter repaid to BioScrip following the expiration of the
period for holding unclaimed funds set forth in the indenture,
have been delivered to the trustee for cancellation; or
(b) all notes that have not been delivered to the trustee
for cancellation have (i) become due and payable,
(ii) will become due and payable at their Stated Maturity
within one year, or (iii) are to be called for redemption
within one year under arrangements satisfactory to the trustee
for the giving of notice of redemption in the name, and at the
expense, of BioScrip, and, in any such case, BioScrip or any
Guarantor has irrevocably deposited or caused to be deposited
with the trustee as trust funds in trust solely for the benefit
of the holders, cash in U.S. dollars, non-callable
Government Securities, or a combination of cash in
U.S. dollars and non-callable Government Securities, in
amounts as will be sufficient, without consideration of any
reinvestment of interest, to pay and discharge the entire
Indebtedness on the notes not delivered to the trustee for
cancellation for principal, interest, premium and Liquidated
Damages, if any, to the date of maturity or redemption;
(2) no Default or Event of Default has occurred and is
continuing on the date of the deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit) and the deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which BioScrip or any Guarantor is a party or by
which BioScrip or any Guarantor is bound;
(3) BioScrip or any Guarantor has paid or caused to be paid
all other sums payable by it under the indenture; and
(4) BioScrip has delivered irrevocable instructions to the
trustee under the indenture to apply the deposited money toward
the payment of the notes at maturity or on the redemption date,
as the case may be.
In addition, except in the case of satisfaction and discharge of
the indenture resulting from repayment of the notes at their
Stated Maturity, BioScrip must deliver an officers
certificate and an opinion of counsel to the trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Governing
Law
The indenture provides that the indenture, the notes and the
Note Guarantees are governed by the laws of the State of New
York.
91
Concerning
the Trustee
If the trustee becomes a creditor of BioScrip or any Guarantor,
the indenture limits the right of the trustee to obtain payment
of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise.
The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC
for permission to continue as trustee (if the indenture has been
qualified under the Trust Indenture Act) or resign.
The holders of a majority in aggregate principal amount of the
then outstanding notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any
remedy available to the trustee, subject to certain exceptions.
The indenture provides that in case an Event of Default occurs
and is continuing, the trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee
security and indemnity satisfactory to it against any loss,
liability or expense.
Additional
Information
Anyone who receives this prospectus may obtain a copy of the
indenture and registration rights agreement without charge by
writing to BioScrip, Inc., 100 Clearbrook Road, Elmsford, New
York 10523, Attention: Corporate Secretary.
Book-Entry,
Delivery and Form
The new notes will be issued in the form of one or more
registered notes in global form without interest coupons (the
Global Notes
) in minimum denominations of
$2,000 and integral multiples of $1,000 in excess thereof. Upon
issuance, each of the Global Notes will be deposited with the
trustee as custodian for The Depository Trust Company
(DTC)
, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the
Global Notes may not be exchanged for definitive notes in
registered certificated form
(Certificated
Notes)
except in the limited circumstances described
below. See Exchange of Global Notes for
Certificated Notes. Except in the limited circumstances
described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of notes
in certificated form. Transfers of beneficial interests in the
Global Notes will be subject to the applicable rules and
procedures of DTC and its direct and indirect participants
(including, if applicable, those of Euroclear and Clearstream,
each as defined below), which may change from time to time.
Depository
Procedures
The following description of the operations and procedures of
DTC, Euroclear System
(Euroclear)
and
Clearstream Banking, N.A.
(Clearstream)
are
provided solely as a matter of convenience. Euroclear and
Clearstream are indirect participants in DTC, as described
below. These operations and procedures are solely within the
control of the respective settlement systems and are subject to
changes by them. BioScrip takes no responsibility for these
operations and procedures and urges investors to contact the
system or their participants directly to discuss these matters.
DTC has advised BioScrip that DTC is a limited-purpose trust
company created to hold securities for its participating
organizations (collectively, the
Participants
) and to facilitate the clearance
and settlement of transactions in those securities between the
Participants through electronic book-entry changes in accounts
of its Participants. The Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and
certain other organizations. Access to DTCs system is also
available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly
(collectively, the
Indirect Participants
),
such as Euroclear and
92
Clearstream. Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership
interests in, and transfers of ownership interests in, each
security held by or on behalf of DTC are recorded on the records
of the Participants and Indirect Participants.
DTC has also advised BioScrip that, pursuant to procedures
established by it:
(1) upon deposit of each Global Note with DTCs
custodian, DTC will credit portions of the principal amount of
the Global Note to the accounts of the Participants; and
(2) ownership of beneficial interests in each Global Note
will be shown on, and transfer of ownership of those interests
will be effected only through, records maintained by DTC (with
respect to interests of Participants) and the records of
Participants (with respect to other owners of beneficial
interests in the Global Note).
Investors in the Global Notes who are Participants may hold
their interests therein directly through DTC. Investors in the
Global Notes who are not Participants may hold their interests
therein indirectly through organizations (including Euroclear
and Clearstream) which are Participants. From March 25,
2010 through May 4, 2010, investors in the old notes
offered and sold in offshore transactions in reliance on
Regulation S (the
Regulation S
Notes
) had to initially hold their interests therein
through Euroclear or Clearstream, if they were participants in
such systems, or indirectly through organizations that were
participants in such systems. After May 4, 2010, investors
could hold interests in the registered, global form (without
interest coupons) of the Regulation S Notes through
Participants other than Euroclear and Clearstream. All interests
in a Global Note, including those held through Euroclear or
Clearstream, may be subject to the procedures and requirements
of DTC. Those interests held through Euroclear or Clearstream
may also be subject to the procedures and requirements of such
systems. The laws of some states require that certain Persons
take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to
that extent. Because DTC can act only on behalf of the
Participants, which in turn act on behalf of the Indirect
Participants, the ability of a Person having beneficial
interests in a Global Note to pledge such interests to Persons
that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global
Notes will not have notes registered in their names, will not
receive physical delivery of notes in certificated form and will
not be considered the registered owners or holders
thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest, premium
and Liquidated Damages, if any, on, a Global Note registered in
the name of DTC or its nominee will be payable to DTC in its
capacity as the registered holder under the indenture. Under the
terms of the indenture, BioScrip and the trustee will treat the
Persons in whose names the notes, including the Global Notes,
are registered as the owners of the notes for the purpose of
receiving payments and for all other purposes. Consequently,
neither BioScrip, the trustee nor any agent of BioScrip or the
trustee has or will have any responsibility or liability for:
(1) any aspect of DTCs records or any
Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or
reviewing any of DTCs records or any Participants or
Indirect Participants records relating to the beneficial
ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices
of DTC or any of its Participants or Indirect Participants.
DTC has advised BioScrip that its current practice, upon receipt
of any payment in respect of securities such as the notes
(including principal and interest), is to credit the accounts of
the relevant Participants with the payment on the payment date
unless DTC has reason to believe that it will not receive
payment on such payment date. Each relevant Participant is
credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the relevant
security as shown on the records of DTC. Payments by the
93
Participants and the Indirect Participants to the beneficial
owners of notes will be governed by standing instructions and
customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the
responsibility of DTC, the trustee or BioScrip. Neither BioScrip
nor the trustee will be liable for any delay by DTC or any of
the Participants or the Indirect Participants in identifying the
beneficial owners of the notes, and BioScrip and the trustee may
conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between the Participants will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds, and transfers between the participants in Euroclear and
Clearstream will be effected in accordance with their respective
rules and operating procedures.
Subject to compliance with the transfer restrictions applicable
to the notes described herein, cross-market transfers between
the Participants, on the one hand, and Euroclear or Clearstream
participants, on the other hand, will be effected through DTC in
accordance with DTCs rules on behalf of Euroclear or
Clearstream, as the case may be, by their respective
depositaries; however, such cross-market transactions will
require delivery of instructions to Euroclear or Clearstream, as
the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear
or Clearstream, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement
on its behalf by delivering or receiving interests in the
relevant Global Note in DTC, and making or receiving payment in
accordance with normal procedures for
same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
DTC has advised BioScrip that it will take any action permitted
to be taken by a holder of notes only at the direction of one or
more Participants to whose account DTC has credited the
interests in the Global Notes and only in respect of such
portion of the aggregate principal amount of the notes as to
which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the
notes, DTC reserves the right to exchange the Global Notes for
Certificated Notes, and to distribute such notes to its
Participants.
Although DTC, Euroclear and Clearstream have agreed to the
foregoing procedures to facilitate transfers of interests in the
Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such
procedures at any time. None of BioScrip, the trustee and any of
their respective agents will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective
participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
Exchange
of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
(1) DTC (a) notifies BioScrip that it is unwilling or
unable to continue as depositary for the Global Notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act and, in either case, BioScrip fails to appoint a
successor depositary;
(2) BioScrip, at its option, notifies the trustee in
writing that it elects to cause the issuance of the Certificated
Notes; or
(3) there has occurred and is continuing a Default or Event
of Default with respect to the notes.
In addition, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon prior written notice given
to the trustee by or on behalf of DTC in accordance with the
indenture. In all cases, Certificated Notes delivered in
exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
94
Same
Day Settlement and Payment
BioScrip will make payments in respect of the notes represented
by the Global Notes (including principal, interest, premium and
Liquidated Damages, if any) by wire transfer of immediately
available funds to the accounts specified by DTC or its nominee.
BioScrip will make all payments of principal, interest, premium
and Liquidated Damages, if any, with respect to Certificated
Notes by wire transfer of immediately available funds to the
accounts specified by the holders of the Certificated Notes or,
if no such account is specified, by mailing a check to each such
holders registered address. The notes represented by the
Global Notes are expected trade in DTCs
Same-Day
Funds Settlement System, and any permitted secondary market
trading activity in such notes will, therefore, be required by
DTC to be settled in immediately available funds. BioScrip
expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in a
Global Note from a Participant will be credited, and any such
crediting will be reported to the relevant Euroclear or
Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC.
DTC has advised BioScrip that cash received in Euroclear or
Clearstream as a result of sales of interests in a Global Note
by or through a Euroclear or Clearstream participant to a
Participant will be received with value on the settlement date
of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for
Euroclear or Clearstream following DTCs settlement date.
Certain
Definitions
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all
defined terms used therein, as well as any other capitalized
terms used herein for which no definition is provided.
Acquired Debt
means, with respect to any
specified Person:
(1) Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Subsidiary
of such specified Person, whether or not such Indebtedness is
incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Restricted Subsidiary
of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation
of, such other Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person.
Acquisition
means the transactions
contemplated by the Acquisition Agreement.
Acquisition Agreement
means the agreement and
plan of merger, dated as of January 24, 2010, among
BioScrip, Camelot Acquisition Corp. (now known as CHS Holdings,
Inc.), Critical Homecare Solutions Holdings, Inc., Kohlberg
Investors V, L.P., Kohlberg Partners V, L.P., Kohlberg
Offshore Investors V, L.P., Kohlberg TE Investors V,
L.P., KOCO Investors V, L.P., Robert Cucuel, Mary Jane
Graves, Nitin Patel, Joey Ryan, Blackstone Mezzanine
Partners II L.P., Blackstone Mezzanine Holdings II
L.P. and S.A.C. Domestic Capital Funding, Ltd.
Affiliate
of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control, as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided
that beneficial ownership of 20% or more of the
Voting Stock of a Person will be deemed to be control. For
purposes of this definition, the terms controlling,
controlled by and under common control
with have correlative meanings.
95
Applicable Premium
means, with respect to any
note on any redemption date, the greater of:
(1) 1.0% of the principal amount of the note; or
(2) the excess of:
(a) the present value at such redemption date of
(i) the redemption price of the note at April 1, 2013,
(such redemption price being set forth in the table appearing
above under the caption Optional
Redemption) plus (ii) all required interest payments
due on the note through April 1, 2013 (excluding accrued
but unpaid interest to the redemption date), computed using a
discount rate equal to the Treasury Rate as of such redemption
date plus 50 basis points; over
(b) the principal amount of the note.
Asset Sale
means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights;
provided
that the sale, lease,
conveyance or other disposition of all or substantially all of
the assets of BioScrip and its Restricted Subsidiaries taken as
a whole will be governed by the provisions of the indenture
described above under the caption Repurchase
at the Option of Holders Change of Control
and/or
the
provisions described above under the caption
Certain Covenants Merger,
Consolidation or Sale of Assets and not by the provisions
of the Asset Sale covenant; and
(2) the issuance of Equity Interests in any of
BioScrips Restricted Subsidiaries or the sale of Equity
Interests in any of its Subsidiaries.
Notwithstanding the preceding, none of the following items will
be deemed to be an Asset Sale:
(1) any single transaction or series of related
transactions that involves assets or Equity Interests having a
Fair Market Value of less than $15.0 million;
(2) a transfer of assets to BioScrip or any of its
Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted
Subsidiary of BioScrip to BioScrip or to a Restricted Subsidiary
of BioScrip;
(4) the sale or lease of products, services or accounts
receivable in the ordinary course of business and any sale or
other disposition of damaged, worn-out or obsolete assets;
(5) the sale or other disposition of cash or Cash
Equivalents;
(6) a Restricted Payment that does not violate the covenant
described above under the caption Certain
Covenants Restricted Payments or a Permitted
Investment;
(7) the sale and leaseback of any assets within
90 days of the acquisition thereof;
(8) any trade-in of equipment in exchange for other
equipment;
provided
that in the good faith judgment of
BioScrip, BioScrip or such Restricted Subsidiary receives
equipment having a fair market value equal to or greater than
the equipment being traded in;
(9) the concurrent purchase and sale or exchange of assets
or a combination of assets between BioScrip or any of its
Restricted Subsidiaries and another person to the extent that
the assets received by BioScrip or its Restricted Subsidiaries
are of equivalent or better market value than the assets
transferred;
(10) leases or subleases in the ordinary course of business
to third persons that do not otherwise limit or restrict the
ability of BioScrip or any of its Restricted Subsidiaries to
engage in Permitted Businesses and otherwise in accordance with
the provisions of the indenture;
(11) the creation of a Lien (but not the sale or other
disposition of the property subject to such Lien) to the extent
it is a Permitted Lien;
(12) licensing or sublicensing of intellectual property or
other general intangibles in accordance with industry practice
in the ordinary course of business; and
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(13) foreclosures on assets to the extent it would not
otherwise result in a Default or Event of Default.
Asset Sale Offer
has the meaning assigned to
that term in the indenture governing the notes.
Beneficial Owner
has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
that term is used in Section 13(d)(3) of the Exchange Act),
such person will be deemed to have beneficial
ownership of all securities that such person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable
only after the passage of time. The terms Beneficially
Owns and Beneficially Owned have a
corresponding meaning.
BioScrip
means BioScrip, Inc. and not any of
its Subsidiaries.
Board of Directors
means:
(1) with respect to a corporation, the board of directors
of the corporation or any committee thereof duly authorized to
act on behalf of such board;
(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership;
(3) with respect to a limited liability company, the
managing member or members or any controlling committee of
managing members thereof; and
(4) with respect to any other Person, the board or
committee of such Person serving a similar function.
Capital Lease Obligation
means, at the time
any determination is to be made, the amount of the liability in
respect of a capital lease that would at that time be required
to be capitalized on a balance sheet prepared in accordance with
GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be prepaid by
the lessee without payment of a penalty.
Capital Stock
means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or
membership interests; and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person, but
excluding from all of the foregoing any debt securities
convertible into Capital Stock, whether or not such debt
securities include any right of participation with Capital Stock.
Cash Equivalents
means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or
instrumentality of the United States government (
provided
that the full faith and credit of the United States is
pledged in support of those securities) having maturities of not
more than six months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of
acquisition, bankers acceptances with maturities not
exceeding six months and overnight bank deposits, in each case,
with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Fitch Ratings Bank Group
rating of B or better;
97
(4) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in
clauses (2) and (3) above entered into with any
financial institution meeting the qualifications specified in
clause (3) above;
(5) commercial paper having one of the two highest ratings
obtainable from Moodys or S&P and, in each case,
maturing within six months after the date of
acquisition; and
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in
clauses (1) through (5) of this definition.
Change of Control
means the occurrence of any
of the following:
(1) the direct or indirect sale, lease, transfer,
conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the assets of BioScrip and its
Subsidiaries taken as a whole to any person (as that
term is used in Section 13(d) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or
dissolution of BioScrip;
(3) any person or group (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act), including any group acting for the purpose of acquiring,
holding, voting or disposing of securities within the meaning of
Rule 13d-5(b)(1)
under the Exchange Act, becomes the Beneficial Owner, directly
or indirectly, of more than 50% of the total voting power of the
Voting Stock of BioScrip (for purposes of this clause (a), such
person or group shall be deemed to Beneficially Own any Voting
Stock of an entity held by any other entity (the parent
entity) so long as such person or group Beneficially Owns,
directly or indirectly, in the aggregate a majority of the total
voting power of the Voting Stock of such parent entity);
(4) during any period of two consecutive years commencing
after the date of the indenture, individuals who on the
beginning of such period constituted the Board of Directors of
BioScrip (together with any new directors whose election or
appointment by such Board of Directors or whose nomination for
election by the shareholders of BioScrip was approved by a vote
of at least a majority of the members of such Board of Directors
then in office who were either directors at the beginning of
such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(5) BioScrip consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into,
BioScrip, other than any such transaction where the holders of a
majority of the outstanding Voting Stock of BioScrip immediately
prior to such transaction are holders of a majority of the
outstanding shares of Voting Stock of the surviving or
transferee Person immediately following such transaction.
Notwithstanding the foregoing, the creation of a holding company
that owns 100% of the capital stock of BioScrip, or of multiple
holding companies each of which owns 100% of the capital stock
of another holding company or of BioScrip (including any related
merger transactions to consummate the creation of such
structure), will be deemed not to be a Change of Control.
Change of Control Offer
has the meaning
assigned to that term in the indenture governing the notes.
Cisco Lease
means the Master Agreement to
Lease Equipment, dated as of January 15, 2010, between
BioScrip and Cisco Systems Capital Corporation, as it may be
amended from time to time.
Consolidated Cash Flow
means, with respect to
any specified Person for any period, the Consolidated Net Income
of such Person for such period
plus
, without duplication:
(1) an amount equal to any extraordinary loss plus any net
loss realized by such Person or any of its Restricted
Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net
Income;
plus
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(2) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income;
plus
(3) the Fixed Charges of such Person and its Restricted
Subsidiaries for such period, to the extent that such Fixed
Charges were deducted in computing such Consolidated Net Income;
plus
(4) fees and expenses of the Company and its Restricted
Subsidiaries payable in connection with the Transactions;
plus
(5) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash items
(excluding any such non-cash items to the extent that it
represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash items were
deducted in computing such Consolidated Net Income;
plus
(6) the amount of any non-recurring restructuring charge or
reserve deducted in accordance with GAAP (and not added back) in
calculating Consolidated Net Income in such period;
plus
(7) any non-recurring expenses or charges (including
reasonable legal, accounting, financing, consulting, advisory
and other
out-of-pocket
fees and expenses) incurred in connection with any equity
offering, Permitted Investment, acquisition, recapitalization,
any issuance or repayment of Indebtedness, amendment or
modification of any debt instrument (in each case, including
such transaction consummated prior to the date of the indenture
and any such transaction undertaken and not completed) and any
non-recurring merger costs incurred during such period as a
result of any such transaction, in each case deducted in
accordance with GAAP (and not added back) in calculating
Consolidated Net Income;
plus
(8) (i) any integration costs, expenses or reserves
deducted in accordance with GAAP (and not added back) in
calculating Consolidated Net Income relating to retention,
severance, systems establishment cost, excess pension charges,
contract termination costs, future lease commitments and costs
to consolidate facilities and relocate employees or equipment
and similar costs, expenses or reserves and (ii) the amount
of net cost savings projected by BioScrip in good faith to be
realized as a result of specified actions taken or to be taken
(calculated on a pro forma basis as though such cost savings had
been realized on the first day of such period), net of the
amount of actual benefits realized during such period from such
actions, in each case described in clauses (i) and
(ii) in connection with any acquisition, recapitalization
or Permitted Investment;
provided
that (a) any such
cost savings are reasonably identifiable and factually
supportable, and (b) any such actions referred to in
clause (ii) have been taken or are to be taken within six
months after the date of determination to take such action;
minus
(9) non-cash items increasing such Consolidated Net Income
for such period, other than the accrual of revenue in the
ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation, amortization and
other non-cash expenses of, a Restricted Subsidiary of BioScrip
will be added to Consolidated Net Income to compute Consolidated
Cash Flow of BioScrip only to the extent that a corresponding
amount would be permitted at the date of determination to be
dividended to BioScrip by such Restricted Subsidiary without
prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable
to that Restricted Subsidiary or its stockholders.
Consolidated Net Income
means, with respect
to any specified Person for any period, the aggregate of the Net
Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with
GAAP;
provided
that:
(1) the Net Income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of
99
dividends or similar distributions paid in cash to the specified
Person or a Restricted Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be
excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the cumulative effect of a change in accounting
principles will be excluded;
(4) any non-cash expense recorded from issuances of Equity
Interests in connection with the early extinguishment of debt,
and non-cash compensation expense from grants of stock
appreciation or similar rights, stock options, restricted stock
or other rights will, in each case, be excluded; and
(5) notwithstanding clause (1) above, the Net Income
of any Unrestricted Subsidiary will be excluded, whether or not
distributed to the specified Person or one of its Subsidiaries.
Credit Agreement
means that certain Credit
Agreement, dated March 25, 2010, by and among BioScrip and
the lenders from time to party thereto and Jefferies Finance
LLC, as administrative agent, including any related notes,
Guarantees, collateral documents, instruments and agreements
executed in connection therewith, and, in each case, as amended,
restated, modified, renewed, refunded, replaced (whether upon or
after termination or otherwise) or refinanced (including by
means of sales of debt securities to institutional investors) in
whole or in part from time to time.
Credit Facilities
means, one or more debt
facilities (including, without limitation, the Credit Agreement)
or commercial paper facilities, in each case, with banks or
other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced (whether upon or
after termination or otherwise) or refinanced (including by
means of sales of debt securities to institutional investors) in
whole or in part from time to time.
Default
means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock
means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each
case, at the option of the holder of the Capital Stock), or upon
the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder of the Capital Stock,
in whole or in part, in each case on or prior to the date that
is 91 days after the date on which the notes mature.
Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders
of the Capital Stock have the right to require BioScrip to
repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock
if the terms of such Capital Stock provide that BioScrip may not
repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with
the covenant described above under the caption
Certain Covenants Restricted
Payments. The amount of Disqualified Stock deemed to be
outstanding at any time for purposes of the indenture will be
the maximum amount that BioScrip and its Restricted Subsidiaries
may become obligated to pay upon the maturity of, or pursuant to
any mandatory redemption provisions of, such Disqualified Stock,
exclusive of accrued dividends.
Domestic Subsidiary
means any Restricted
Subsidiary of BioScrip that was formed under the laws of the
United States or any state of the United States or the District
of Columbia, or that guarantees or otherwise provides direct
credit support for any Indebtedness of BioScrip.
Equity Interests
means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
100
Existing Indebtedness
means Indebtedness of
BioScrip and its Subsidiaries (other than Indebtedness under the
Credit Agreement) in existence on the date of the indenture,
until such amounts are repaid.
Fair Market Value
means the value that would
be paid by a willing buyer to an unaffiliated willing seller in
a transaction not involving distress or necessity of either
party, determined in good faith by the Board of Directors of
BioScrip (unless otherwise provided in the indenture).
Fixed Charge Coverage Ratio
means with
respect to any specified Person for any period, the ratio of the
Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries
incurs, assumes, guarantees, repays, repurchases, redeems,
defeases or otherwise discharges any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or
redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being
calculated and on or prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made
(the
Calculation Date
), then the Fixed Charge
Coverage Ratio will be calculated giving pro forma effect to
such incurrence, assumption, Guarantee, repayment, repurchase,
redemption, defeasance or other discharge of Indebtedness, or
such issuance, repurchase or redemption of preferred stock, and
the use of the proceeds therefrom, as if the same had occurred
at the beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
(1) acquisitions that have been made by the specified
Person or any of its Restricted Subsidiaries, including through
mergers or consolidations, or any Person or any of its
Restricted Subsidiaries acquired by the specified Person or any
of its Restricted Subsidiaries, and including any related
financing transactions and including increases in ownership of
Restricted Subsidiaries, during the four-quarter reference
period or subsequent to such reference period and on or prior to
the Calculation Date will be given pro forma effect as if they
had occurred on the first day of the four-quarter reference
period;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded;
(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded, but
only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the specified Person or
any of its Restricted Subsidiaries following the Calculation
Date;
(4) any Person that is a Restricted Subsidiary on the
Calculation Date will be deemed to have been a Restricted
Subsidiary at all times during such four-quarter period;
(5) any Person that is not a Restricted Subsidiary on the
Calculation Date will be deemed not to have been a Restricted
Subsidiary at any time during such four-quarter period; and
(6) if any Indebtedness bears a floating rate of interest,
the interest expense on such Indebtedness will be calculated as
if the rate in effect on the Calculation Date had been the
applicable rate for the entire period (taking into account any
Hedging Obligation applicable to such Indebtedness if such
Hedging Obligation has a remaining term as at the Calculation
Date in excess of 12 months).
Fixed Charges
means, with respect to any
specified Person for any period, the sum, without duplication,
of:
(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or
bankers acceptance financings, and
101
net of the effect of all payments made or received pursuant to
Hedging Obligations in respect of interest rates;
plus
(2) the consolidated interest expense of such Person and
its Restricted Subsidiaries that was capitalized during such
period;
plus
(3) any interest on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien
is called upon;
plus
(4) the product of (a) all dividends, whether paid or
accrued and whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries,
other than dividends on Equity Interests payable solely in
Equity Interests of BioScrip (other than Disqualified Stock) or
to BioScrip or a Restricted Subsidiary of BioScrip,
times
(b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, determined on a
consolidated basis in accordance with GAAP.
Foreign Subsidiary
means any Restricted
Subsidiary of BioScrip that is not a Domestic Subsidiary.
GAAP
means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in
effect from time to time.
Guarantee
means a guarantee other than by
endorsement of negotiable instruments for collection in the
ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness (whether arising
by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take or pay or to maintain financial statement conditions or
otherwise).
Guarantors
means (1) each Domestic
Subsidiary of BioScrip on the date of the indenture and
(2) each other Subsidiary of BioScrip that executes a Note
Guarantee in accordance with the provisions of the indenture, in
each case, together with their respective successors and assigns
until the Note Guarantee of such Person has been released in
accordance with the provisions of the indenture.
Hedging Obligations
means, with respect to
any specified Person, the obligations of such Person under:
(1) interest rate swap agreements (whether from fixed to
floating or from floating to fixed), interest rate cap
agreements and interest rate collar agreements;
(2) other agreements or arrangements designed to manage
interest rates or interest rate risk; and
(3) other agreements or arrangements designed to protect
such Person against fluctuations in currency exchange rates or
commodity prices.
Immaterial Subsidiary
means, as of any date,
any Restricted Subsidiary whose total assets, as of that date,
are less than $100,000 and whose total revenues for the most
recent
12-month
period do not exceed $100,000;
provided
that a Restricted
Subsidiary will not be considered to be an Immaterial Subsidiary
if it, directly or indirectly, guarantees or otherwise provides
direct credit support for any Indebtedness of BioScrip.
Indebtedness
means, with respect to any
specified Person, any indebtedness of such Person (excluding
accrued expenses and trade payables), whether or not contingent:
(1) in respect of borrowed money;
102
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof);
(3) in respect of bankers acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the
purchase price of any property or services due more than six
months after such property is acquired or such services are
completed; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than
letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of the specified Person prepared
in accordance with GAAP. In addition, the term
Indebtedness includes all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether
or not such Indebtedness is assumed by the specified Person)
and, to the extent not otherwise included, the Guarantee by the
specified Person of any Indebtedness of any other Person.
Investments
means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the forms of loans
(including Guarantees or other obligations), advances or capital
contributions (excluding (i) commission, travel and similar
advances to officers and employees made in the ordinary course
of business, (ii) advances or extensions of credit to
customers in the ordinary course of business, and (iii) any
debt or extension of credit represented by a bank deposit other
than a time deposit), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP. If BioScrip or any Subsidiary of BioScrip
sells or otherwise disposes of any Equity Interests of any
direct or indirect Subsidiary of BioScrip such that, after
giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of BioScrip, BioScrip will be deemed to have
made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of BioScrips Investments in
such Subsidiary that were not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant
described above under the caption Certain
Covenants Restricted Payments. The acquisition
by BioScrip or any Subsidiary of BioScrip of a Person that holds
an Investment in a third Person will be deemed to be an
Investment by BioScrip or such Subsidiary in such third Person
in an amount equal to the Fair Market Value of the Investments
held by the acquired Person in such third Person in an amount
determined as provided in the final paragraph of the covenant
described above under the caption Certain
Covenants Restricted Payments. Except as
otherwise provided in the indenture, the amount of an Investment
will be determined at the time the Investment is made and
without giving effect to subsequent changes in value.
Lien
means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
Liquidated Damages
means all liquidated
damages then owing pursuant to the registration rights agreement.
Net Income
means, with respect to any
specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in
connection with (a) any Asset Sale or (b) the
disposition of any securities by such Person or any of its
Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with
any related provision for taxes on such extraordinary gain (but
not loss).
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Net Proceeds
means the aggregate cash
proceeds received by BioScrip or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition
of any non-cash consideration received in any Asset Sale), net
of (1) the direct costs relating to such Asset Sale,
including, without limitation, legal, accounting and investment
banking fees, sales commissions, relocation expenses incurred as
a result of the Asset Sale, and taxes paid or payable as a
result of the Asset Sale after taking into account any available
tax credits or deductions and any tax sharing arrangements,
(2) amounts required to be applied to the repayment of
Indebtedness, other than Indebtedness under a Credit Facility,
secured by a Lien on the asset or assets that were the subject
of such Asset Sale, (3) any reserve for adjustment in
respect of the sale price of such asset or assets established in
accordance with GAAP, and (4) all distributions and other
payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Sale.
Non-Recourse Debt
means Indebtedness:
(1) as to which neither BioScrip nor any of its Restricted
Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly
liable as a guarantor or otherwise, or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights
that the holders of the Indebtedness may have to take
enforcement action against an Unrestricted Subsidiary) would
permit upon notice, lapse of time or both any holder of any
other Indebtedness of BioScrip or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or
cause the payment of the Indebtedness to be accelerated or
payable prior to its Stated Maturity.
Note Guarantee
means the Guarantee by each
Guarantor of BioScrips obligations under the indenture and
the notes.
Obligations
means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Permitted Business
means a business in which
BioScrip and its Restricted Subsidiaries were engaged on the
date of the indenture, as described in the offering memorandum
distributed in connection with the private offering of the old
notes, and any business reasonably related, ancillary or
complementary thereto.
Permitted Investments
means:
(1) any Investment in BioScrip or in a Restricted
Subsidiary of BioScrip;
(2) any Investment in Cash Equivalents;
(3) any Investment by BioScrip or any Restricted Subsidiary
of BioScrip in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of
BioScrip; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, BioScrip or a Restricted Subsidiary
of BioScrip;
(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales;
(5) Investments the payment for which consists solely of
Equity Interests (other than Disqualified Stock) of BioScrip;
(6) any Investments received in compromise or resolution of
(a) obligations of trade creditors or customers that were
incurred in the ordinary course of business of BioScrip or any
of its Restricted Subsidiaries, including pursuant to any plan
of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer; or
(b) litigation, arbitration or other disputes;
(7) Investments represented by Hedging Obligations;
104
(8) loans or advances to employees made in the ordinary
course of business of BioScrip or any Restricted Subsidiary of
BioScrip in an aggregate principal amount not to exceed
$2.0 million at any one time outstanding;
(9) repurchases of the notes;
(10) Investments in existence on the date of the indenture;
(11) Investments in joint ventures in an amount not to
exceed $500,000 per joint venture or $5.0 million in the
aggregate; and
(12) other Investments in any Person having an aggregate
Fair Market Value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to
this clause (11) that are at the time outstanding, not to
exceed $10.0 million.
Permitted Liens
means:
(1) Liens on assets of BioScrip or any of its Restricted
Subsidiaries securing Indebtedness and other Obligations under
Credit Facilities that was permitted by the terms of the
indenture to be incurred
and/or
securing Hedging Obligations related thereto;
(2) Liens in favor of BioScrip or the Guarantors;
(3) Liens on property of a Person existing at the time such
Person is acquired, merged with or into or consolidated with
BioScrip or any Subsidiary of BioScrip;
provided
that
such Liens were not created in contemplation of such
acquisition, merger or consolidation and do not extend to any
assets other than those of the Person merged into or
consolidated with BioScrip or the Subsidiary;
(4) Liens on property (including Capital Stock) existing at
the time of acquisition of the property by BioScrip or any
Subsidiary of BioScrip;
provided
that such Liens were in
existence prior to, such acquisition, and not incurred in
contemplation of, such acquisition;
(5) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business;
(6) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) or clause (14) of
the second paragraph of the covenant entitled
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock covering only
the assets acquired with or financed by such Indebtedness;
(7) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (15) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock covering only the assets of Foreign
Subsidiaries;
(8) Liens existing on the date of the indenture;
(9) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested
in good faith by appropriate proceedings promptly instituted and
diligently concluded;
provided
that any reserve or other
appropriate provision as is required in conformity with GAAP has
been made therefor;
(10) Liens imposed by law, such as carriers,
warehousemens, landlords and mechanics Liens,
in each case, incurred in the ordinary course of business;
(11) encumbrances, ground leases, survey exceptions,
easements or reservations of, or rights of others for, licenses,
rights-of-way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real property that were not incurred in connection with
Indebtedness and that do not in the aggregate materially
adversely affect the value of said properties or materially
impair their use in the operation of the business of such Person;
105
(12) Liens created for the benefit of (or to secure) the
notes or the Note Guarantees;
(13) Liens to secure any Permitted Refinancing Indebtedness
permitted to be incurred under the indenture;
provided,
however,
that:
(a) the new Lien is limited to all or part of the same
property and assets that secured or, under the written
agreements pursuant to which the original Lien arose, could
secure the original Indebtedness (plus improvements and
accessions to such property, or proceeds or distributions
thereof); and
(b) the Indebtedness secured by the new Lien is not
increased to any amount greater than the sum of (i) the
outstanding principal amount, or, if greater, committed amount,
of the original Indebtedness and (ii) an amount necessary
to pay any fees and expenses, including premiums, related to
such renewal, refunding, refinancing, replacement, defeasance or
discharge; and
(14) Liens in favor of customs or revenue authorities
arising as a matter of law to secure payment of custom duties in
connection with the importation of goods incurred in the
ordinary course of business;
(15) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Persons
obligation in respect of bankers acceptances issued or
created in the ordinary course of business for the account of
such Person to facilitate the purchase, shipment, or storage of
such inventory or other goods;
(16) Liens (i) that are contractual rights of set-off
(a) relating to the establishment of depository relations
with banks not given in connection with the issuance of
Indebtedness, (b) relating to pooled deposit or sweep
accounts of BioScrip or any of its Restricted Subsidiaries to
permit satisfaction of overdraft or similar obligations and
other cash management activities incurred in the ordinary course
of business of BioScrip and or any of its Restricted
Subsidiaries or (c) relating to purchase orders and other
agreements entered into with customers of BioScrip or any of its
Restricted Subsidiaries in the ordinary course of business and
(ii) of a collection bank arising under
Section 4-210
of the Uniform Commercial Code on items in the course of
collection, (a) encumbering reasonable customary initial
deposits and margin deposits and attaching to commodity trading
accounts or other brokerage accounts incurred in the ordinary
course of business, and (b) in favor of banking
institutions arising as a matter of law or pursuant to customary
account agreements encumbering deposits (including the right of
set-off) and which are within the general parameters customary
in the banking industry;
(17) Liens securing judgments for the payment of money not
constituting an Event of Default so long as such Liens are
adequately bonded and any appropriate legal proceedings that may
have been duly initiated for the review of such judgment have
not been finally terminated or the period within which such
proceedings may be initiated has not expired;
(18) leases, subleases, licenses or sublicenses of real or
personal property (including intellectual property) granted to
others in the ordinary course of business which do not
materially interfere with the ordinary conduct of the business
of BioScrip or any Restricted Subsidiaries and do not secure any
Indebtedness;
(19) any interest of title of an owner of equipment or
inventory on loan or consignment to BioScrip or any of its
Restricted Subsidiaries and Liens arising from Uniform
Commercial Code financing statement filings regarding operating
leases entered into by BioScrip or any Restricted Subsidiary in
the ordinary course of business;
(20) deposits in the ordinary course of business to secure
liability to insurance carriers;
(21) Liens securing Hedging Obligations so long as any
related Indebtedness is permitted to be incurred under the
indenture;
(22) options, put and call arrangements, rights of first
refusal and similar rights relating to Investments in joint
ventures, partnerships and the like permitted to be made under
the indenture;
(23) Liens granted to prime vendors on inventory, accounts
receivable and the proceeds thereof in connection with prime
vendor agreements in the ordinary course of business;
106
(24) Liens arising from filing Uniform Commercial Code
financing statements regarding leases or other transactions that
are not secured transactions;
(25) Liens securing reimbursement obligations with respect
to letters of credit that are cash collateralized; and
(26) Liens incurred in the ordinary course of business of
BioScrip or any Subsidiary of BioScrip with respect to
obligations that do not exceed $12.5 million at any one
time outstanding.
Permitted Refinancing Indebtedness
means any
Indebtedness or Disqualified Stock of BioScrip or any of its
Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to renew, refund, refinance, replace,
defease or discharge other Indebtedness of BioScrip or any of
its Restricted Subsidiaries (other than intercompany
Indebtedness);
provided
that:
(1) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness renewed, refunded, refinanced, replaced, defeased
or discharged (plus all accrued interest on the Indebtedness and
the amount of all fees and expenses, including premiums,
incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
renewed, refunded, refinanced, replaced, defeased or discharged;
(3) if the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged is subordinated in
right of payment to the notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to,
the notes on terms at least as favorable to the holders of notes
as those contained in the documentation governing the
Indebtedness being renewed, refunded, refinanced, replaced,
defeased or discharged; and
(4) such Indebtedness is incurred either by BioScrip or by
the Restricted Subsidiary who is the obligor on the Indebtedness
being renewed, refunded, refinanced, replaced, defeased or
discharged.
Person
means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Restricted Investment
means an Investment
other than a Permitted Investment.
Restricted Subsidiary
of a Person means any
Subsidiary of the referent Person that is not an Unrestricted
Subsidiary.
Significant Subsidiary
means any Subsidiary
that would be a significant subsidiary as defined in
Article 1,
Rule 1-02
of
Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date of the indenture.
Stated Maturity
means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the documentation
governing such Indebtedness as of the date of the indenture, and
will not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
Subsidiary
means, with respect to any
specified Person:
(1) any corporation, limited liability company, association
or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency and after giving effect to
any voting agreement or stockholders agreement that
effectively transfers voting power) to vote in the election of
directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person (or a combination
thereof); and
107
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are that Person or one or more Subsidiaries of that
Person (or any combination thereof).
Transactions
means the Acquisition, the
issuance of the notes, entering into and incurring the initial
borrowings under the Credit Agreement, and the other
transactions related thereto, in each case substantially as
described in the offering memorandum distributed in connection
with the private offering of the old notes under the caption
The Transactions.
Treasury Rate
means, as of any redemption
date, the yield to maturity as of such redemption date of United
States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at
least two business days prior to the redemption date (or, if
such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to
the period from the redemption date to April 1, 2013;
provided
,
however
, that if the period from the
redemption date to April 1, 2013, is less than one year,
the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year
will be used.
Unrestricted Subsidiary
means any Subsidiary
of BioScrip that is designated by the Board of Directors of
BioScrip as an Unrestricted Subsidiary pursuant to a resolution
of the Board of Directors, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) except as permitted by the covenant described above
under the caption Certain
Covenants Transactions with Affiliates, is not
party to any agreement, contract, arrangement or understanding
with BioScrip or any Restricted Subsidiary of BioScrip unless
the terms of any such agreement, contract, arrangement or
understanding are no less favorable to BioScrip or such
Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of BioScrip;
(3) is a Person with respect to which neither BioScrip nor
any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Persons financial
condition or to cause such Person to achieve any specified
levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of BioScrip or any
of its Restricted Subsidiaries.
Voting Stock
of any specified Person as of
any date means the Capital Stock of such Person that is at the
time entitled to vote in the election of the Board of Directors
of such Person.
Weighted Average Life to Maturity
means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect of the
Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the
making of such payment;
by
(2) the then outstanding principal amount of such
Indebtedness.
108
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of old notes for new notes in the exchange offer
will not constitute a taxable event to holders for
U.S. federal income tax purposes. Consequently, no gain or
loss will be recognized by a holder upon receipt of a new note,
the holding period of the new note will include the holding
period of the old note exchanged therefor, and the basis of the
new note will be the same as the basis of the old note
immediately before the exchange.
In any event, persons considering the exchange of old notes for
new notes should consult their own tax advisors concerning the
U.S. federal income tax consequences in light of their
particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction.
109
PLAN OF
DISTRIBUTION
Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must, in the absence of an
exemption, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with secondary
resales of new notes and cannot rely on the position of the
staff of the SEC set forth in Exxon Capital Holdings
Corporation, Morgan Stanley & Co., Incorporated or
similar no-action letters. This prospectus, as it may be amended
or supplemented from time to time, may be used by a
broker-dealer in connection with resales of new notes received
in exchange for old notes only where such old notes were
acquired as a result of market-making activities or other
trading activities.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their
own account pursuant to the exchange offer may be sold from time
to time in one or more transactions in the
over-the-counter
market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of
resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any new notes. Any
broker-dealer that resells new notes that were received by it
for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such new
notes may be deemed to be an underwriter within the
meaning of the Securities Act and any profit on any such resale
of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under
the Securities Act.
We will provide a reasonable number of copies of this prospectus
and any amendment or supplement to this prospectus to any
broker-dealer that requests such documents. We have agreed to
pay all expenses incident to the exchange offer, other than
commissions or concessions of any broker-dealers, and will
indemnify the holders of the notes, including any
broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
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LEGAL
MATTERS
The validity of the issuance of the new notes and guarantees of
the new notes will be passed on for us by King &
Spalding LLP, New York, New York.
EXPERTS
The consolidated financial statements of BioScrip appearing in
BioScrips Annual Report on
Form 10-K
for the year ended December 31, 2009 (including the
schedule appearing therein), and the effectiveness of
BioScrips internal control over financial reporting as of
December 31, 2009, have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set
forth in their reports thereon, included therein, and
incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon
such reports given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of CHS and its
subsidiaries as of December 31, 2009 and for the year ended
December 31, 2009 incorporated by reference into this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
The consolidated financial statements of CHS and its
subsidiaries as of December 31, 2008 and 2007 and for the
years then ended, incorporated by reference into this prospectus
from our Definitive Proxy Statement on Schedule 14A filed
with the SEC on February 24, 2010, have been audited by
Deloitte & Touche LLP, independent auditors, as stated
in their report, which is incorporated herein by reference. Such
financial statements have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in
accounting and auditing.
On January 15, 2010, Deloitte informed CHS, by notice to a
CHS director at that time, that Deloitte had concluded that it
was no longer independent with respect to CHS. CHS understood
from Deloitte that this conclusion by Deloitte was a result of a
communication to Deloitte from Kohlberg Capital Corporation.
Thus, Deloittes notification did not relate to any action
or activity of CHS. Prior to our acquisition of CHS, the Former
CHS Stockholders associated with Kohlberg controlled CHS through
their ownership of a majority of all of the equity of CHS. Two
of CHSs directors prior to the acquisition are Partners of
Kohlberg and also serve on the board of directors and own shares
of Kohlberg Capital Corporation. On January 20, 2010, as a
result of Deloittes conclusion regarding its independence,
CHS dismissed Deloitte as its registered public accounting firm.
Both the Board of Directors of CHS and the Boards Audit
Committee approved the decision to dismiss Deloitte.
Deloittes reports on CHSs financial statements for
each of the fiscal years ended December 31, 2007 and
December 31, 2008 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. Furthermore,
during CHSs two most recent fiscal years and the
subsequent interim period preceding the dismissal of Deloitte,
there were no disagreements with Deloitte on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of Deloitte, would have
caused Deloitte to make reference thereto in connection with its
reports on the consolidated financial statements of CHS for the
fiscal year ended December 31, 2007 or the fiscal year
ended December 31, 2008.
CHS subsequently retained PricewaterhouseCoopers LLP as its
independent registered public accounting firm.
111
INCORPORATION
OF CERTAIN DOCUMENTS
This prospectus incorporates important information about us that
is not included in or delivered with this prospectus. The
information incorporated by reference is considered to be part
of this prospectus. Any statement contained in this prospectus
or in a document incorporated by reference into this prospectus
will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in
any other subsequently filed document that is also incorporated
by reference herein modifies or supersedes such statement. Any
statement so modified or superseded will not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus. The following documents filed by us under the
Exchange Act, and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
(other than Current Reports on
Form 8-K
furnished under Item 2.02 or Item 7.01 (including any
financial statements or exhibits relating thereto furnished
pursuant to Item 9.01) of
Form 8-K)
prior to the earlier of the date of consummation of the exchange
offer or such time as broker-dealers no longer own any new
notes, are incorporated by reference into this prospectus as of
their respective dates of filing:
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Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, filed with the
SEC on March 2, 2010, as amended by our Annual Report on
Form 10-K/A
for the fiscal year ended December 31, 2009, filed with the
SEC on May 5, 2010;
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Our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2010, filed with the
SEC on May 5, 2010, as amended by our Annual Report on
Form 10-Q/A
for the three months ended March 31, 2010, filed with the
SEC on June 17, 2010;
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Audited Consolidated Financial Statements of CHS, and the notes
thereto, as of and for the fiscal year ended December 31,
2009, filed with the SEC as Exhibit 99.1 to our Current
Report on
Form 8-K
on March 16, 2010;
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Audited Consolidated Financial Statements of CHS, and the notes
thereto, as of and for the fiscal years ended December 31,
2008 and 2007, filed with the SEC on February 24, 2010 as
pages F-2 F-26 of our Definitive Proxy Statement on
Schedule 14A; and
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|
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Our Current Reports on
Form 8-K
filed with the SEC on January 27, 2010, March 16,
2010, March 31, 2010 and June 10, 2010.
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As explained below in Where You Can Find More
Information, these incorporated documents (as well as
other documents filed by us under the Exchange Act) are
available at the SEC and may be accessed in a number of ways,
including online via the Internet. In addition, we will provide
without charge to each recipient of this prospectus, upon
written request, a copy of any or all of the documents
incorporated herein by reference. Exhibits to a document will
not be provided unless they are specifically incorporated by
reference into that document. Requests should be directed to:
BioScrip,
Inc.
100 Clearbrook Road
Elmsford, NY 10523
Attention: Corporate Secretary
(914) 460-1600
In order to obtain timely delivery, you must request the
information no later
than ,
2010, which is five business days before the expiration date of
the exchange offer.
Statements contained in this prospectus as to the contents of
any contract or other document referred to in this prospectus do
not purport to be complete and, where reference is made to the
particular provisions of such contract or other document, such
provisions are qualified in all respects to all of the
provisions of such contract or other document.
You should rely only on the information provided in this
prospectus or incorporated into this prospectus by reference. We
have not authorized anyone to provide you with different
information. You should not assume that the information in this
prospectus is accurate as of any date other than that on the
front cover of this prospectus. You should not assume that the
information in the documents incorporated by reference is
accurate as of any date other than their respective dates.
112
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC under the Exchange Act. The
public may read and copy any materials we file with the SEC at
the SECs Public Reference Room at 100 F Street
NE, Washington, DC 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding
issuers that file electronically with the SEC
(http://www.sec.gov).
We will provide you, free of charge, with a copy of the new
notes and the indenture governing the new notes, as well as a
copy of each of our filings upon request. Exhibits to a document
will not be provided unless they are specifically incorporated
by reference into that document. You may request a copy of these
documents in writing or by telephone at the following address:
BioScrip,
Inc.
100 Clearbrook Road
Elmsford, NY 10523
Attention: Corporate Secretary
(914) 460-1600
We also maintain an Internet website at
http://bioscrip.com,
which provides additional information about us through which you
can also access our SEC filings.
The information set forth
on our website is not part of this prospectus.
113
Offer to Exchange
Up to $225,000,000 aggregate principal amount
of our
10
1
/
4
% Senior
Notes due 2015
and the guarantees thereof which have been registered
under the Securities Act of 1933, as amended,
for a like amount of our outstanding
10
1
/
4
% Senior
Notes due 2015
and the guarantees thereof.
PROSPECTUS
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification
of Directors and Officers.
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Delaware
Corporations
Section 145 of the Delaware General Corporation Law
(DGCL) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than
an action by or in the right of the corporation) by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor, against expenses (including attorneys fees)
actually and reasonably incurred in connection with the defense
or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation, in its
certificate of incorporation, to limit or eliminate the
liability of directors to the corporation or its stockholders
for monetary damages for breaches of fiduciary duty, except for
liability (i) for any breach of the directors duty of
loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (relating to unlawful payment of
dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an
improper personal benefit.
BioScrip,
Inc.
The Second Amended and Restated Certificate of Incorporation, as
amended, of BioScrip, Inc. (BioScrip) provides that
BioScrips directors shall not be personally liable for
monetary damages to the company or its stockholders for breach
of fiduciary duty as a director, except for liability arising
out of clauses (i) through (iv) of
Section 102(b)(7) of the DGCL. BioScrips Amended and
Restated By-Laws further provide that BioScrip shall indemnify
its directors and officers to the fullest extent permitted by
the DGCL.
CHS
Holdings, Inc.
The Certificate of Incorporation of CHS Holdings, Inc. provides
that its directors shall not be personally liable for monetary
damages to CHS Holdings or its stockholders for breach of
fiduciary duty as a director, except for liability arising out
of clauses (i) through (iv) of Section 102(b)(7)
of the DGCL. The Certificate of Incorporation and By-Laws of CHS
Holdings further provide that CHS Holdings shall indemnify its
directors and officers to the fullest extent permitted by the
DGCL, as amended (but only to the extent that such amendment
permits CHS Holdings to provide broader indemnification rights
than permitted prior to such amendment), provided that CHS
Holdings shall indemnify its directors and officers in
connection with a proceeding initiated by such person only if
such proceeding was authorized by its board of directors.
II-1
Critical
Homecare Solutions, Inc.
The Certificate of Incorporation of Critical Homecare Solutions,
Inc. provides that its directors shall not be personally liable
for monetary damages to Critical Homecare Solutions or its
stockholders for breach of fiduciary duty as a director, except
for liability arising out of clauses (i) through
(iv) of Section 102(b)(7) of the DGCL. The Certificate
of Incorporation and By-Laws of Critical Homecare Solutions
further provide that Critical Homecare Solutions shall indemnify
its directors and officers to the fullest extent permitted by
the DGCL, as amended (but only to the extent that such amendment
permits Critical Homecare Solutions to provide broader
indemnification rights than permitted prior to such amendment),
provided that Critical Homecare Solutions shall indemnify its
directors and officers in connection with a proceeding initiated
by such person only if such proceeding was authorized by its
board of directors.
Professional
Home Care Services, Inc.
The Amended and Restated Certificate of Incorporation of
Professional Home Care Services, Inc. provides that its
directors shall not be personally liable for monetary damages to
Professional Home Care Services or its stockholders for breach
of fiduciary duty as a director, except for liability arising
out of clauses (i) through (iv) of
Section 102(b)(7) of the DGCL. The Amended and Restated
By-Laws of Professional Home Care Services further provide that
Professional Home Care Services shall indemnify its directors
and officers to the fullest extent permitted by the DGCL, as
amended (but only to the extent that such amendment permits
Professional Home Care Services to provide broader
indemnification rights than permitted prior to such amendment),
provided that Professional Home Care Services shall indemnify
its directors and officers in connection with a proceeding
initiated by such person only if such proceeding was authorized
by its board of directors.
Specialty
Pharma, Inc.
The Amended and Restated Certificate of Incorporation of
Specialty Pharma, Inc. provides that its directors shall not be
personally liable for monetary damages to Specialty Pharma or
its stockholders for breach of fiduciary duty as a director,
except for liability arising out of clauses (i) through
(iv) of Section 102(b)(7) of the DGCL. The Amended and
Restated By-Laws of Specialty Pharma further provide that
Specialty Pharma shall indemnify its directors and officers to
the fullest extent permitted by the DGCL, as amended (but only
to the extent that such amendment permits Specialty Pharma to
provide broader indemnification rights than permitted prior to
such amendment), provided that Specialty Pharma shall indemnify
its directors and officers in connection with a proceeding
initiated by such person only if such proceeding was authorized
by its board of directors.
Delaware
Limited Liability Companies
Section 18-108
of the Delaware Limited Liability Company Act provides that a
limited liability company (LLC) may, and shall have
the power to, indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands
whatsoever, subject to the standards and restrictions, if any,
set forth in its LLC agreement.
Applied
Health Care, LLC
The Limited Liability Company Agreement of Applied Health Care,
LLC provides that Applied Health Care shall indemnify, to the
fullest extent permitted by law, its officers, the members of
its board of managers, and each of its members and their
respective officers, directors, employees, agents and
controlling persons from and against all losses, costs,
liabilities, damages and expenses (including reasonable costs of
suit and attorneys fees) incurred in performing the
obligations to Applied Health Care, including any matter arising
out of or resulting from the indemnified persons own
simple, partial or concurrent negligence, except for any such
loss, cost, liability, damage or expense primarily attributable
to such persons reckless disregard of fiduciary duties,
gross negligence, willful misconduct or fraud.
II-2
Deaconess
HomeCare, LLC
The Limited Liability Company Agreement of Deaconess HomeCare,
LLC provides that Deaconess HomeCare shall indemnify, to the
fullest extent permitted by law, its officers, the members of
its board of managers, and each of its members and their
respective officers, directors, employees, agents and
controlling persons from and against all losses, costs,
liabilities, damages and expenses (including reasonable costs of
suit and attorneys fees) incurred in performing the
obligations to Deaconess HomeCare, including any matter arising
out of or resulting from the indemnified persons own
simple, partial or concurrent negligence, except for any such
loss, cost, liability, damage or expense primarily attributable
to such persons reckless disregard of fiduciary duties,
gross negligence, willful misconduct or fraud.
BioScrip
Infusion Management, LLC
The BioScrip Infusion Management, LLC Limited Liability Company
Agreement provides that BioScrip Infusion Management shall
indemnify the members of its management committee and its
officers to the fullest extent permitted under Delaware law.
BioScrip
Infusion Services, LLC
The BioScrip Infusion Services, LLC Third Amended and Restated
Limited Liability Company Agreement provides that BioScrip
Infusion Services shall indemnify the members of its management
committee and its officers to the fullest extent permitted under
Delaware law.
BioScrip
PBM Services, LLC
The BioScrip PBM Services, LLC Limited Liability Company
Agreement provides that BioScrip PBM Services shall indemnify
the members of its management committee and its officers to the
fullest extent permitted under Delaware law.
California
Corporations
Section 317 of the California General Corporation Law (the
CGCL) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation to procure
a judgment in its favor) by reason of the fact that the person
is or was a director, officer or other agent of the corporation,
against expenses (including attorneys fees and any
expenses of establishing a right to indemnification), judgments,
fines, settlements and other amounts actually and reasonably
incurred in connection with the proceeding if that person acted
in good faith and in a manner the person reasonably believed to
be in the best interests of the corporation and, in the case of
a criminal proceeding, had no reasonable cause to believe the
conduct of the person was unlawful.
A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the corporation to
procure a judgment in its favor, by reason of the fact that the
person is or was an agent of the corporation, against expenses
(including attorneys fees and any expenses of establishing
a right to indemnification) actually and reasonably incurred by
that person in connection with the defense or settlement of the
action if the person acted in good faith and in a manner the
person believed to be in the best interests of the corporation
and its shareholders. However, no indemnification of this type
may be made (a) with respect to matters for which the agent
shall have been adjudged to be liable to the corporation unless
the court shall determine that such person is entitled to
indemnification or (b) of amounts paid or expenses incurred
in connection with a matter that is settled or otherwise
disposed of without court approval.
To the extent that an agent is successful on the merits in
defense of any proceeding referred to above or in defense of any
claim, issue or matter therein, the corporation shall indemnify
such agent against expenses (including attorneys fees and
any expenses of establishing a right to indemnification)
actually and reasonably incurred by that person in connection
therewith.
II-3
Section 204(a)(10) of the CGCL permits a corporation, in
its articles of incorporation, to limit or eliminate the
liability of directors to the corporation or its stockholders
for monetary damages for breaches of fiduciary duty, except for
liability (a) for acts or omissions that involve
intentional misconduct or a knowing and culpable violation of
law, (b) for acts or omissions that a director believes to
be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the
part of the director, (c) for any transaction from which a
director derived an improper personal benefit, (d) for acts
or omissions that show a reckless disregard for the
directors duty to the corporation or its shareholders in
circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a
directors duties, of a risk of serious injury to the
corporation or its shareholders, (e) for acts or omissions
that constitute an unexcused pattern of inattention that amounts
to an abdication of the directors duty to the corporation
or its shareholders, (f) under Section 310 (regarding
conflicts of interest) or (g) under Section 316
(relating to unlawful distributions).
BioScrip
Infusion Services, Inc.
The Articles of Incorporation of BioScrip Infusion Services,
Inc. provide that the liability of directors for monetary
damages shall be eliminated to the fullest extent permissible
under California law. Further, the Articles provide that
BioScrip Infusion Services is authorized to provide
indemnification of agents (including directors and officers) for
breach of duty to BioScrip Infusion Services and its
stockholders through its By-Laws or other agreements, in excess
of the indemnification otherwise permitted by Section 317
of the CGCL, subject to the limits on excess indemnification
under Section 204 of the CGCL. The By-Laws of BioScrip
Infusion Services provide indemnification for directors and
officers made a party or involved in any proceeding to the
fullest extent permitted by the CGCL, as amended (but only to
the extent that such amendment permits BioScrip Infusion
Services to provide broader indemnification rights than
permitted prior to such amendment) against all expenses,
liability and loss (including attorneys fees, judgments,
fines, Employee Retirement Income Security Act excise taxes and
penalties, settlement payments, any interest, assessments, or
other charges imposed thereof, and any federal, state, or
foreign taxes imposed on such person as a result of the actual
or deemed receipt of any indemnification payments) reasonably
incurred or suffered in connection with investigating,
defending, being a witness in or participating in (including on
appeal), or preparing for any of the foregoing in, any
proceeding; provided that BioScrip Infusion Services shall
indemnify its directors and officers in connection with a
proceeding initiated by such person (other than one to establish
a right to indemnification) only if such proceeding was
authorized by its board of directors.
Florida
Corporation (National Health Infusion, Inc.)
The Articles of Incorporation and the By-Laws of National Health
Infusion, Inc. provide that National Health Infusion shall
indemnify any director or officer to the full extent of the law.
Section 607.0850(1) of the Florida Business Corporation Act
(the FBCA) provides that a corporation may indemnify
any person who was or is a party to any threatened, pending, or
completed action, suit or other type of proceeding (other than
an action by, or in the right of, the corporation), whether
civil, criminal, administrative or investigative and whether
formal or informal, by reason of the fact that he or she is or
was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
judgment, settlement, penalty, fine (including an excise tax
assessed with respect to any employee benefit plan) and expenses
(including attorneys fees) incurred in connection with
such proceeding, including any appeal thereof, if he or she
acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
The FBCA provides further that a corporation may indemnify any
person, who was or is a party to any proceeding by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director,
officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees) and amounts paid in settlement
not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to
II-4
conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any
appeal thereof. Such indemnification shall be authorized if such
person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made under
this subsection in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless,
and only to the extent that, the court in which such proceeding
was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
To the extent that a director, officer, employee or agent is
successful, on the merits or otherwise, in defense of any
proceeding referred to above or in defense of any claim, issue
or matter therein, the corporation shall indemnify such person
against expenses (including attorneys fees) actually and
reasonably incurred by that person in connection therewith.
However, indemnification shall not be made to or on behalf of
any director, officer, employee or agent if a judgment or other
final adjudication establishes that his or her actions, or
omissions to act, were material to the cause of action so
adjudicated and constitute: (a) a violation of the criminal
law, unless the director, officer, employee or agent had
reasonable cause to believe his or her conduct was lawful or had
no reasonable cause to believe his or her conduct was unlawful,
(b) a transaction from which the director, officer,
employee or agent derived an improper personal benefit,
(c) in the case of a director, a circumstance under which
the liability provisions of Section 607.0834 of the FBCA
(relating to unlawful distributions) are applicable or
(d) willful misconduct or a conscious disregard for the
best interests of the corporation in a proceeding by or in the
right of the corporation to procure a judgment in its favor or
in a proceeding by or in the right of a shareholder.
Georgia
Limited Liability Companies
Section 14-11-306
of the Georgia Limited Liability Company Act provides that an
LLC may, and shall have the power to, indemnify and hold
harmless any member or manager or other person from and against
any and all claims and demands whatsoever arising in connection
with the LLC, subject to the standards and restrictions, if any,
set forth in its articles of organization or a written operating
agreement; provided, however, that no limited liability company
shall have the power to indemnify any member or manager for any
liability that may not be eliminated or limited for
(a) intentional misconduct or a knowing violation of law or
(b) any transaction for which the person received a
personal benefit in violation or breach of any provision of a
written operating agreement.
Infusion
Partners of Brunswick, LLC
The Limited Liability Company Agreement of Infusion Partners of
Brunswick, LLC provides that Infusion Partners of Brunswick
shall indemnify, to the fullest extent permitted by law, its
officers, the members of its board of managers and each of its
members and their respective officers, directors, employees,
agents and controlling persons from and against all losses,
costs, liabilities, damages and expenses (including reasonable
costs of suit and attorneys fees) incurred in performing
the obligations to Infusion Partners of Brunswick, including any
matter arising out of or resulting from the indemnified
persons own simple, partial or concurrent negligence,
except for any such loss, cost, liability, damage or expense
primarily attributable to such persons reckless disregard
of fiduciary duties, gross negligence, willful misconduct or
fraud.
Infusion
Partners of Melbourne, LLC
The Limited Liability Company Agreement of Infusion Partners of
Melbourne, LLC provides that Infusion Partners of Melbourne
shall indemnify, to the fullest extent permitted by law, its
officers, the members of its board of managers and each of its
members and their respective officers, directors, employees,
agents and controlling persons from and against all losses,
costs, liabilities, damages and expenses (including reasonable
costs of suit and attorneys fees) incurred in performing
the obligations to Infusion Partners of Melbourne, including any
matter arising out of or resulting from the indemnified
persons own simple, partial or concurrent negligence,
except for any such loss, cost, liability, damage or expense
primarily attributable to such persons reckless disregard
of fiduciary duties, gross negligence, willful misconduct or
fraud.
II-5
Illinois
Corporation (Option Health, Ltd.)
The By-Laws of Option Health, Ltd. provide that Option Health
shall indemnify its directors and officers to the fullest extent
permitted by applicable law.
Section 8.75(a) of the Illinois Business Corporation Act of
1983 (the ILBCA) provides that a corporation may
indemnify any person who was or is a party, or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or who
is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding,
if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful.
Section 8.75(b) of the ILBCA provides that a corporation
may indemnify any person who was or is a party, or is threatened
to be made a party to any proceeding by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees)
actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, if such
person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation; provided that no indemnification shall be made with
respect to any claim, issue, or matter as to which such person
has been adjudged to have been liable to the corporation,
unless, and only to the extent that the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court
shall deem proper.
Section 8.75(c) of the ILBCA requires that, to the extent
that such person is successful, on the merits or otherwise, in
defense of any proceeding referred to above or in defense of any
claim, issue or matter therein, the corporation shall indemnify
such person against expenses (including attorneys fees and
any expenses of establishing a right to indemnification)
actually and reasonably incurred by that person in connection
therewith, if the person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best
interests of the corporation.
Under Section 2.10(b)(3) of the ILBCA, a corporation may,
in its articles of incorporation, limit or eliminate the
liability of directors to the corporation or its stockholders
for monetary damages for breaches of fiduciary duty as a
director, except for liability (i) for any breach of the
directors duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 8.65 of the ILBCA (relating
to unlawful distributions) or (iv) for any transaction from
which the director derived an improper personal benefit.
Kentucky
Corporation (Scott-Wilson, Inc.)
The By-Laws of Scott-Wilson, Inc. provide that Scott-Wilson
shall indemnify its directors and officers against judgments,
penalties, fines, settlements and reasonable expenses, including
legal expenses and attorneys fees, actually incurred in
connection with any proceeding to the full extent permitted by
the Kentucky Business Corporation Act (the KBCA),
provided that if such proceeding was by or in the right of
Scott-Wilson, indemnification shall be made only against such
reasonable expenses and provided further, that no
indemnification shall be made in respect to any proceeding in
which the director or officer is adjudged to be liable to
Scott-Wilson.
II-6
Sections 271B.8-500
to 271B.8-580 of the KBCA provide that a corporation may
indemnify an individual made a party to any threatened, pending,
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or
informal, because he is or was a director of a corporation or an
individual who, while a director, officer, employee or agent of
a corporation, is or was serving at the corporations
request as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise,
against liability incurred in the proceeding if he conducted
himself in good faith and he reasonably believed (a) in the
case of conduct in his official capacity with the corporation
that his conduct was in its best interests and (b) in all
other cases, that his conduct was at least not opposed to its
best interests. In the case of any criminal proceeding, he must
have had no reasonable cause to believe his conduct was
unlawful. A corporation may not indemnify such individual
(i) in connection with a proceeding by or in the right of
the corporation in which such individual was adjudged liable to
the corporation or (ii) in connection with any other
proceeding charging improper personal benefit to him, whether or
not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was
improperly received by him. Indemnification permitted in
connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 271B.8-520
of the KBCA provides that, unless a corporations articles
of incorporation provide otherwise, a corporation shall
indemnify an individual who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which such
individual was a party because he is or was a director or
officer of a corporation or an individual who, while a director
of a corporation, is or was serving at the corporations
request as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise,
against reasonable expenses incurred by him in connection with
the proceeding.
Under
Section 271B.2-020(2)(d)
of the KBCA, a corporations articles of organization may
limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of his duties
as a director, provided that such provision shall not eliminate
or limit the liability of a director (1) for any
transaction in which the directors personal financial
interest is in conflict with the financial interests of the
corporation or its shareholders, (2) for acts or omissions
not in good faith or which involve intentional misconduct or are
known to the director to be a violation of law, (3) for any
vote for or assent to an unlawful distribution to shareholders
as prohibited under
Section 271B.8-330
or (4) for any transaction from which the director derived
an improper personal benefit.
Massachusetts
Corporation (New England Home Therapies, Inc.)
The Articles of Organization of New England Home Therapies, Inc.
eliminate the personal liability of directors to the corporation
or its shareholders for monetary damages for breach of their
duties as a director to the fullest extent permitted by the
Massachusetts Business Corporation Act (the MABCA).
The By-Laws of New England Home Therapies provide that New
England Home Therapies shall indemnify its directors and
officers against judgments, penalties, fines, settlements and
reasonable expenses, including legal expenses and
attorneys fees, actually incurred in connection with any
proceeding to the full extent permitted by the MABCA, provided
that no indemnification shall be made in respect to any
proceeding in which it is adjudged that (a) the director or
officer did not act in good faith in the reasonable belief that
his action was in New England Home Therapiess best
interests or (b) that the director or officer derived an
improper personal benefit.
Sections 8.50 to 8.59 of the MABCA provide that a
corporation may indemnify an individual made a party to any
threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative and
whether formal or informal, because he is or was a director of a
corporation or an individual, while a director, officer,
employee or agent of a corporation, is or was serving at the
corporations request as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against liability incurred in the
proceeding if he conducted himself in good faith and he
reasonably believed that his conduct was in the
corporations best interests or that his conduct was at
least not opposed to its best interests. In the case of any
criminal proceeding, he must have had no reasonable cause to
believe his conduct was unlawful.
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Section 8.52 of the MABCA provides that a corporation shall
indemnify an individual who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which such
individual was a party because he was a director or officer of a
corporation or an individual, while a director of a corporation,
is or was serving at the corporations request as a
director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise,
against reasonable expenses incurred by him in connection with
the proceeding.
Under Section 2.02(b)(4) of the MABCA, a corporations
articles of organization may limit the personal liability of a
director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability,
provided that the corporation cannot limit or eliminate the
liability of a director (i) for breach of the
directors duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) for improper distributions under
Section 6.40 of the MABCA or (iv) for any transaction
from which the director derived an improper personal benefit.
Minnesota
Corporation (BioScrip Pharmacy, Inc.)
The Articles of Incorporation of BioScrip Pharmacy, Inc. provide
that a director shall not be personally liable to BioScrip
Pharmacy or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for (a) liability
based on a breach of the duty of loyalty to BioScrip Pharmacy or
its shareholders; (b) liability for acts or omissions not
in good faith or that involve intentional misconduct or a
knowing violation of law; (c) liability based on the
payment of an improper dividend or an improper repurchase of
BioScrip Pharmacys stock under Section 302A.559 of
the Minnesota Business Corporation Act (the MNBCA)
or on the sale of unregistered securities or securities fraud
under Section 80A.23 of the MNBCA; or (d) liability
for any transaction from which the director derived an improper
personal benefit. If the MNBCA is later amended to authorize the
further elimination or limitation of the liability of directors,
then the liability of a director of BioScrip Pharmacy, in
addition to the limitation on personal liability provided in the
Articles of Incorporation, shall be limited to the fullest
extent permitted by the MNBCA, as amended. The By-Laws of
BioScrip Pharmacy do not contain provisions regarding
indemnification.
Section 302A.521 of the MNBCA provides that, unless the
articles of incorporation or bylaws prohibit such
indemnification, a corporation shall indemnify a person made or
threatened to be made a party to a proceeding by reason of the
former or present official capacity of the person with respect
to the corporation against judgments, penalties, fines,
including, without limitation, excise taxes assessed against the
person with respect to an employee benefit plan, settlements and
reasonable expenses, including attorneys fees and
disbursements, incurred by the person in connection with the
proceeding, if, with respect to the acts or omissions of the
person complained of in the proceeding, the person: (a) has
not been indemnified therefor by another organization or
employee benefit plan; (b) acted in good faith;
(c) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of
interest), if applicable, has been satisfied; (d) in the
case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and (e) in the case of
acts or omissions occurring in the persons official
capacity for the corporation, reasonably believed that the
conduct was in the best interests of the corporation or, in the
case of acts or omissions occurring in the persons
official capacity for another affiliated organization,
reasonably believed that the conduct was not opposed to the best
interests of the corporation. If the persons acts or
omissions complained of in the proceeding relate to conduct as a
director, officer, trustee, employee or agent of an employee
benefit plan, the conduct is not considered to be opposed to the
best interests of the corporation if the person reasonably
believed that the conduct was in the best interests of the
participants or beneficiaries of the employee benefit plan.
Under Section 302A.251 subd. 4, a corporations
articles of incorporation may eliminate or limit a
directors personal liability to the corporation or its
shareholders for monetary damages for breach of fiduciary duty
as a director, but may not eliminate or limit the liability of a
director (a) for any breach of the directors duty of
loyalty to the corporation or its shareholders, (b) for
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (c) under
Sections 302A.559 or 80A.23 or (d) for any transaction
from which the director derived an improper personal benefit.
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Minnesota
Limited Liability Company (Chronimed, LLC)
The Amended and Restated Articles of Organization for Chronimed,
LLC eliminate the personal liability of a governor to the LLC or
its members for monetary damages for breach of fiduciary duty as
a governor. The Chronimed Operating Agreement provides that
Chronimed shall indemnify its governors, managers and officers
to the fullest extent permitted by applicable law.
Section 322B.699 of the Minnesota Limited Liability Company
Act (the MNLLCA) provides that, unless prohibited or
limited in the articles of organization, a member control
agreement, or bylaws, an LLC shall indemnify a person made or
threatened to be made a party to a proceeding by reason of the
former or present official capacity of the person with respect
to the LLC against judgments, penalties, fines, including,
without limitation, excise taxes assessed against the person
with respect to an employee benefit plan, settlements, and
reasonable expenses, including attorneys fees and
disbursements, incurred by the person in connection with the
proceeding, if, with respect to the acts or omissions of the
person complained of in the proceeding, the person (a) has
not been indemnified therefor by another organization or
employee benefit plan; (b) acted in good faith;
(c) received no improper personal benefit and
Section 322B.666 of the MNLLCA (with respect to governor
conflicts of interest), if applicable, has been satisfied;
(d) in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful; and (e) in the
case of acts or omissions occurring in the official capacity for
the LLC reasonably believed that the conduct was in the best
interests of the LLC, or in the case of acts or omissions
occurring in the official capacity for another affiliated
organization, reasonably believed that the conduct was not
opposed to the best interests of the LLC. If the persons
acts or omissions complained of in the proceeding relate to
conduct as a director, officer, trustee, employee, or agent of
an employee benefit plan, the conduct is not considered to be
opposed to the best interests of the LLC if the person
reasonably believed that the conduct was in the best interests
of the participants or beneficiaries of the employee benefit
plan.
Under Section 322B.115 subd. 4(18) of the MNLLCA, in the
articles of organization or a member control agreement, an LLC
may eliminate or limit the personal liability of a governor to
the LLC or its members for monetary damages for breach of
fiduciary duty as a governor.
Mississippi
Corporations
Section 79-4-8.51
of the Mississippi Business Corporation Act (the
MSBCA) provides that a corporation may indemnify an
individual made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative and whether formal
or informal, because he is or was a director or officer, of the
corporation or who, while a director or officer of the
corporation, is or was serving at the corporations request
as a director, officer, partner, trustee, employee or agent of
another domestic or foreign corporation, partnership, joint
venture, trust, employee benefit plan or other entity, against
liability incurred in the proceeding if he conducted himself in
good faith and he reasonably believed (a) in the case of
conduct in his official capacity with the corporation that his
conduct was in its best interests and (b) in all other
cases, that his conduct was at least not opposed to its best
interests. In the case of any criminal proceeding, he must have
had no reasonable cause to believe his conduct was unlawful.
Unless ordered by a court under
Section 79-4-8.54(a)(3)
of the MSBCA, a corporation may not indemnify a director
(a) in connection with a proceeding by or in the right of
the corporation except for reasonable expenses incurred in
connection with the proceeding if it is determined that the
director has met the relevant standard of conduct under
Section 79-4-8.51
or (b) in connection with any proceeding with respect to
conduct for which he was adjudged liable on the basis that he
received a financial benefit to which he was not entitled,
whether or not involving action in his official capacity.
Section 79-4-8.52
of the MSBCA provides that a corporation shall indemnify an
individual who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which such
individual was a party because he was a director or officer of a
corporation or an individual, while a director of a corporation,
is or was serving at the corporations request as a
director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise,
against reasonable expenses incurred by him in connection with
the proceeding.
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Section 79-4-2.02(b)(4)
of the MSBCA provides that a corporations articles of
organization may limit the liability of a director to the
corporation or its shareholders for money damages for any action
taken, or any failure to take any action, as a director, except
liability for (a) the amount of a financial benefit
received by a director to which he is not entitled; (b) an
intentional infliction of harm on the corporation or the
shareholders; (c) a violation of
Section 79-4-8.33
(relating to unlawful distributions); or (d) an intentional
violation of criminal law.
Section 79-4-2.02(b)(5)
of the MSBCA provides that a corporation may also provide
broader indemnification to an individual for any action taken,
or any failure to take any action, as a director, except
liability for: (a) receipt of a financial benefit to which
he is not entitled; (b) an intentional infliction of harm
on the corporation or its shareholders; (c) a violation of
Section 79-4-8.33
(relating to unlawful distributions); or (d) an intentional
violation of criminal law.
South
Mississippi Home Health, Inc.
The By-Laws of South Mississippi Home Health, Inc. provide that
South Mississippi Home Health shall indemnify its directors and
officers against judgments, penalties, fines, settlements and
reasonable expenses, including attorneys fees, actually
and reasonably incurred in connection with any threatened,
pending, or completed civil, criminal, administrative, or
investigative proceeding (other than an action by or on behalf
of South Mississippi Home Health), provided that such director
or officer acted in good faith and in a manner he reasonably
believed to be not opposed to South Mississippi Home
Healths best interests, and with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was
unlawful. If such proceeding was by or on behalf of South
Mississippi Home Health, indemnification shall be made only
against such reasonable expenses and provided further, that no
indemnification shall be made in respect to any proceeding in
which the director or officer is adjudged to be liable for
negligence or misconduct in the performance of his duty to South
Mississippi Home Health unless and only to the extent that the
court determines that such person is fairly and reasonably
entitled to indemnification for such expenses. South Mississippi
Home Health shall indemnify a director or officer that has been
successful, on the merits or otherwise, in defense of any such
proceeding or in defense of any claim, issue or matter in such
proceeding, against expenses (including attorneys fees)
actually and reasonably incurred by him in connection with the
proceeding.
South
Mississippi Home Health, Inc. Region I
The By-Laws of South Mississippi Home Health, Inc.
Region I provide that South Mississippi Home Health
Region I shall indemnify its directors and officers against
judgments, penalties, fines, settlements and reasonable
expenses, including attorneys fees, actually and
reasonably incurred in connection with any threatened, pending,
or completed civil, criminal, administrative, or investigative
proceeding (other than an action by or on behalf of South
Mississippi Home Health Region I), provided that
such director or officer acted in good faith and in a manner he
reasonably believed to be not opposed to South Mississippi Home
Health Region Is best interests, and with
respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. If such proceeding was by or
on behalf of South Mississippi Home Health
Region I, indemnification shall be made only against such
reasonable expenses and provided further, that no
indemnification shall be made in respect to any proceeding in
which the director or officer is adjudged to be liable for
negligence or misconduct in the performance of his duty to South
Mississippi Home Health Region I unless and only to
the extent that the court determines that such person is fairly
and reasonably entitled to indemnification for such expenses.
South Mississippi Home Health Region I shall
indemnify a director or officer that has been successful, on the
merits or otherwise, in defense of any such proceeding or in
defense of any claim, issue or matter in such proceeding,
against expenses (including attorneys fees) actually and
reasonably incurred by him in connection with the proceeding.
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South
Mississippi Home Health, Inc. Region
II
The By-Laws of South Mississippi Home Health, Inc.
Region II provide that South Mississippi Home
Health Region II shall indemnify its directors
and officers against judgments, penalties, fines, settlements
and reasonable expenses, including attorneys fees,
actually and reasonably incurred in connection with any
threatened, pending, or completed civil, criminal,
administrative, or investigative proceeding (other than an
action by or on behalf of South Mississippi Home
Health Region II), provided that such director or
officer acted in good faith and in a manner he reasonably
believed to be not opposed to South Mississippi Home
Health Region IIs best interests, and with
respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. If such proceeding was by or
on behalf of South Mississippi Home Health Region
II, indemnification shall be made only against such reasonable
expenses and provided further, that no indemnification shall be
made in respect to any proceeding in which the director or
officer is adjudged to be liable for negligence or misconduct in
the performance of his duty to South Mississippi Home
Health Region II unless and only to the extent
that the court determines that such person is fairly and
reasonably entitled to indemnification for such expenses. South
Mississippi Home Health Region II shall
indemnify a director or officer that has been successful, on the
merits or otherwise, in defense of any such proceeding or in
defense of any claim, issue or matter in such proceeding,
against expenses (including attorneys fees) actually and
reasonably incurred by him in connection with the proceeding.
South
Mississippi Home Health, Inc. Region
III
The By-Laws of South Mississippi Home Health, Inc.
Region III provide that South Mississippi Home
Health Region III shall indemnify its directors
and officers against judgments, penalties, fines, settlements
and reasonable expenses, including attorneys fees,
actually and reasonably incurred in connection with any
threatened, pending, or completed civil, criminal,
administrative, or investigative proceeding (other than an
action by or on behalf of South Mississippi Home
Health Region III), provided that such director or
officer acted in good faith and in a manner he reasonably
believed to be not opposed to South Mississippi Home
Health Region IIIs best interests, and with
respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. If such proceeding was by or
on behalf of South Mississippi Home Health Region
III, indemnification shall be made only against such reasonable
expenses and provided further, that no indemnification shall be
made in respect to any proceeding in which the director or
officer is adjudged to be liable for negligence or misconduct in
the performance of his duty to South Mississippi Home
Health Region III unless and only to the extent
that the court determines that such person is fairly and
reasonably entitled to indemnification for such expenses. South
Mississippi Home Health Region III shall
indemnify a director or officer that has been successful, on the
merits or otherwise, in defense of any such proceeding or in
defense of any claim, issue or matter in such proceeding,
against expenses (including attorneys fees) actually and
reasonably incurred by him in connection with the proceeding.
New
Hampshire Corporation (Infusion Solutions, Inc.)
The Amended and Restated By-Laws of Infusion Solutions, Inc.
provide that Infusion Solutions shall indemnify its directors
and officers to the fullest extent permitted by applicable law.
Sections 293-A:8.51
and 8.56 of the New Hampshire Business Corporation Act (the
NHBCA) provide that a corporation may indemnify an
individual who was, is, or is threatened to be made a named
defendant or respondent in any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal,
because he is or was a director, officer, employee or agent of a
corporation or an individual who, while a director, officer,
employee or agent of a corporation, is or was serving at the
corporations request as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise,
II-11
against judgment, settlement, penalty, fine, including an excise
tax assessed with respect to an employee benefit plan, or
reasonable expenses (including attorneys fees) incurred in
the proceeding if (a) he conducted himself in good faith;
(b) he reasonably believed, in the case of conduct in his
official capacity with the corporation, that his conduct was in
its best interests, and in all other cases, that his conduct was
at least not opposed to its best interests; and (c) in the
case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. However, a corporation may not
indemnify a director (i) in connection with a proceeding by
or in the right of the corporation in which the director was
adjudged liable to the corporation or (ii) in connection
with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity,
in which he was adjudged liable on the basis that personal
benefit was improperly received by him.
Section 293-A:8.52
of the NHBCA provides that a corporation, unless limited by its
articles of incorporation, shall indemnify such a person who was
wholly successful, on the merits or otherwise, in the defense of
any such proceeding to which he was a party because he is or was
a director, officer, employee or agent of the corporation
against reasonable expenses incurred by him in connection with
the proceeding.
Under
Section 293-A:2.02(b)(4)
of the NHBCA, a corporations articles of incorporation may
eliminate or limit the liability of a director, an officer or
both, to the corporation or its shareholders for money damages
for any action taken, or any failure to take any action, as a
director or an officer, except liability for (i) the amount
of a financial benefit received by a director or an officer to
which he is not entitled, (ii) an intentional infliction of
harm on the corporation or the shareholders, (iii) a
violation of
Section 293-A:8.33
(relating to unlawful distributions) or (iv) an intentional
violation of criminal law.
New
York Corporations
Section 722(a) of the New York Business Corporation Law
(the NYBCL) provides that a corporation may
indemnify any person made, or threatened to be made, a party to
an action or proceeding (other than one by or in the right of
the corporation to procure a judgment in its favor), whether
civil or criminal, including an action by or in the right of any
other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the
corporation served in any capacity at the request of the
corporation, by reason of the fact that he, his testator or
intestate, was a director or officer of the corporation or
served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any
capacity, against judgments, fines, amounts paid in settlement
and reasonable expenses, including attorneys fees actually
and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer
acted, in good faith, for a purpose which he reasonably believed
to be in or, in the case of service for any other corporation or
any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the
corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his conduct
was unlawful.
Section 722(c) of the NYBCL also provides that a
corporation may indemnify any person made, or threatened to be
made, a party to an action by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that
he, his testator or intestate, is or was a director or officer
of the corporation, or is or was serving at the request of the
corporation as a director or officer of any other corporation of
any type or kind, domestic or foreign, of any partnership, joint
venture, trust, employee benefit plan or other enterprise,
against amounts paid in settlement and reasonable expenses,
including attorneys fees, actually and necessarily
incurred by him in connection with the defense or settlement of
such action, or in connection with an appeal therein, if such
director or officer acted, in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any
other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the
best interests of the corporation, except that no
indemnification under this paragraph shall be made in respect of
(a) a threatened action or a pending action which is
settled or otherwise disposed of or (b) any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that
the court in which the action was brought or, if no action was
brought, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for
such portion of the settlement amount and expenses as the court
deems proper.
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Section 402(b) of the NYBCL provides that the
corporations Certificate of Incorporation may set forth a
provision eliminating or limiting the personal liability of
directors to the corporation or its shareholders for damages for
any breach of duty in such capacity, provided that no such
provision shall eliminate or limit (1) the liability of any
director if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or
that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled or that his acts
violated Section 719 or (2) the liability of any
director for any act or omission prior to the adoption of a
provision authorized by the provision.
BioScrip
Pharmacy (NY), Inc.
The Certificate of Incorporation of BioScrip Pharmacy (NY), Inc.
provides that the personal liability of its directors is
eliminated other than the liability set forth in
Section 402(b) of the NYBCL as described above. The By-Laws
of BioScrip Pharmacy (NY) provide that BioScrip Pharmacy (NY)
will indemnify its directors and officers as described above
under the current NYBCL, as amended (but only to the extent that
such amendment permits BioScrip Pharmacy (NY) to provide broader
indemnification rights than permitted prior to such amendment).
Bradhurst
Specialty Pharmacy, Inc. d/b/a The Atrium Pharmacy
The Certificate of Incorporation of Bradhurst Specialty
Pharmacy, Inc. provides that the personal liability of its
directors is eliminated other than the liability set forth in
Section 402(b) of the NYBCL as described above. The By-Laws
of Bradhurst Specialty Pharmacy provide that Bradhurst Specialty
Pharmacy will indemnify directors and officers to the fullest
extent permitted by the NYBCL.
Natural
Living, Inc. d/b/a BioScrip Pharmacy
The By-Laws of Natural Living, Inc. provide that Natural Living
will indemnify its directors and officers to the fullest extent
permitted by the law.
New
York Limited Liability Company (BioScrip Nursing Services, LLC
d/b/a American Disease Management Associates)
The Amended and Restated Operating Agreement of BioScrip Nursing
Services provides that of BioScrip Nursing Services shall
indemnify its members, managers and officers to the fullest
extent permitted by law, subject to clauses (a) and
(b) of Section 420 of the New York Limited Liability
Company Law (the NYLLCL), as described below.
Section 420 of the NYLLCL provides that an LLC may
indemnify and hold harmless, and advance expenses to, any
member, manager or other person, or any testator or intestate of
such member, manager or other person, from and against any and
all claims and demands whatsoever; provided, however, that no
indemnification may be made to or on behalf of any member,
manager or other person if a judgment or other final
adjudication adverse to such member, manager or other person
establishes (a) that his or her acts were committed in bad
faith or were the result of active and deliberate dishonesty and
were material to the cause of action so adjudicated or
(b) that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally
entitled.
Ohio
Corporations
Under Section 1701.59(D) of the Ohio Revised Code (the
ORC), a director shall be liable in damages for any
action that the director takes or fails to take as a director
only if it is proved by clear and convincing evidence in a court
of competent jurisdiction that the directors action or
failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the
corporation, unless the Articles of Incorporation or Code of
Regulations states by specific reference that this section
division does not apply.
II-13
Section 1701.13(E)(1) of the ORC provides that a
corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason
of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, trustee, officer, employee,
member, manager or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company or
a partnership, joint venture, trust or other enterprise, against
expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, if he had no
reasonable cause to believe his conduct was unlawful.
Under Section 1701.13(E)(2) of the ORC, in the case of an
action by or in the right of the corporation, the corporation
may indemnify or agree to indemnify a person in that position
against expenses, including attorneys fees, actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation except that a corporation
may not indemnify a director or officer if either (a) the
director or officer has been adjudged to be liable for
negligence or misconduct in the performance of the
directors or officers duty to the corporation unless
and only to the extent that the court in which the proceeding
was brought determines that, in view of all the circumstances of
the case, the director or officer is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper or (b) any action or suit in which the only
liability asserted against a director is pursuant to
Section 1701.95 (relating to unlawful distributions).
To the extent that a director or officer has been successful on
the merits or otherwise in defense of a proceeding as described
above, the corporation shall indemnify the director or officer
against expenses actually and reasonably incurred by him or her
in connection with that proceeding.
BioScrip
Pharmacy Services, Inc.
The Amended and Restated Code of Regulations of BioScrip
Pharmacy Services, Inc. provides that BioScrip Pharmacy Services
will indemnify its directors and officers to the fullest extent
permitted by the ORC as described above.
Regional
Ambulatory Diagnostics, Inc.
The Amended and Restated Code of Regulations of Regional
Ambulatory Diagnostics, Inc. provides that Regional Ambulatory
Diagnostics will indemnify its directors and officers to the
fullest extent permitted by the ORC as described above.
Ohio
Limited Liability Companies
Section 1705.32(A) of the ORC provides that an LLC may
indemnify or agree to indemnify any person who was or is a
party, or who is threatened to be made a party, to any
threatened, pending or completed civil, criminal,
administrative, or investigative action, suit or proceeding,
other than an action by or in the right of the company, because
he is or was a manager, member, partner, officer, employee or
agent of the company or is or was serving at the request of the
company as a manager, director, trustee, officer, employee or
agent of another LLC, corporation, partnership, joint venture,
trust or other enterprise. The company may indemnify or agree to
indemnify a person in that position against expenses, including
attorneys fees, judgments, fines and amounts paid in
settlement that actually and reasonably were incurred by him in
connection with the action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the company and, in
connection with any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
II-14
Under Section 1705.32(B) of the ORC, in the case of an
action by or in the right of the LLC, the LLC may indemnify or
agree to indemnify a person in that position against expenses,
including attorneys fees, that were actually and
reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the company, except that an
indemnification shall not be made in respect of any claim, issue
or matter as to which the person is adjudged to be liable for
negligence or misconduct in the performance of his duty to the
company unless and only to the extent that the court of common
pleas or the court in which the action or suit was brought
determines, upon application, that, despite the adjudication of
liability but in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnification for
expenses that the court considers proper.
To the extent that a manager, officer, employee, or agent of an
LLC has been successful on the merits or otherwise in defense of
any action, suit, or proceeding as described above or has been
successful in defense of any claim, issue, or matter in such a
proceeding, he shall be indemnified against expenses, including
attorneys fees, that were actually and reasonably incurred
by him in connection with the action, suit or proceeding.
Deaconess
Enterprises, LLC
The Limited Liability Company Agreement of Deaconess Enterprises
provides that Deaconess Enterprises shall indemnify, to the
fullest extent permitted by law, its officers, the members of
its board of managers and each of its members and their
respective officers, directors, employees, agents and
controlling persons from and against all losses, costs,
liabilities, damages and expenses (including reasonable costs of
suit and attorneys fees) incurred in performing the
obligations to Deaconess Enterprises, including any matter
arising out of or resulting from the indemnified persons
own simple, partial or concurrent negligence, except for any
such loss, cost, liability, damage or expense primarily
attributable to such persons reckless disregard of
fiduciary duties, gross negligence, willful misconduct or fraud.
Infusion
Partners, LLC
The Limited Liability Company Agreement of Infusion Partners
provides that Infusion Partners shall indemnify, to the fullest
extent permitted by law, its officers, the members of its board
of managers and each of its members and their respective
officers, directors, employees, agents and controlling persons
from and against all losses, costs, liabilities, damages and
expenses (including reasonable costs of suit and attorneys
fees) incurred in performing the obligations to Infusion
Partners, including any matter arising out of or resulting from
the indemnified persons own simple, partial or concurrent
negligence, except for any such loss, cost, liability, damage or
expense primarily attributable to such persons reckless
disregard of fiduciary duties, gross negligence, willful
misconduct or fraud.
Pennsylvania
Corporation (East Goshen Pharmacy, Inc.)
The Amended and Restated By-Laws of East Goshen Pharmacy, Inc.
eliminate the personal liability of its directors except for
liability set forth in Section 1713 of the Pennsylvania
Business Corporation Law (the PBCL) and provide that
East Goshen Pharmacy shall indemnify its directors and officers
to the fullest extent permitted by the PBCL, as amended (but
only to the extent that such amendment permits East Goshen
Pharmacy to provide broader indemnification rights than
permitted prior to such amendment), provided that East Goshen
Pharmacy shall indemnify its directors and officers in
connection with a proceeding initiated by such person only if
such proceeding was authorized by its board of directors.
Section 1741 of the PBCL provides that a corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a
representative of the corporation, or is or was serving at the
request of the corporation as a representative of another
domestic or foreign corporation for profit or
not-for-profit,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with the action or proceeding if he acted in
good faith and
II-15
in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 1742 of the PBCL provides that a corporation may
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action
by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a
representative of the corporation or is or was serving at the
request of the corporation as a representative of another
domestic or foreign corporation for profit or
not-for-profit,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys fees) actually and
reasonably incurred by him in connection with the defense or
settlement of the action if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation. Indemnification shall not be
made under this section in respect of any claim, issue or matter
as to which the person has been adjudged to be liable to the
corporation unless and only to the extent that the court of
common pleas of the judicial district embracing the county in
which the registered office of the corporation is located or the
court in which the action was brought determines upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for the expenses that the
court of common pleas or other court deems proper.
To the extent that a representative of a business corporation
has been successful on the merits or otherwise in defense of any
action or proceeding referred to in Section 1741 or 1742 or
in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney fees) actually
and reasonably incurred by him in connection with the proceeding.
Section 1713 of the PBCL provides that a corporation may
have a bylaw adopted by the shareholders that eliminates a
directors personal liability for monetary damages for any
action taken unless (a) the director has breached or failed
to perform the duties of his office and (b) the breach or
failure to perform constitutes self-dealing, willful misconduct
or recklessness, provided that such a elimination or limitation
of liability shall not apply to the responsibility or liability
of a director pursuant to any criminal statute or the liability
of a director for the payment of taxes pursuant to federal,
state or local law.
Tennessee
Corporations
Section 48-18-502
and
48-18-506
of
the Tennessee Business Corporation Act (the TBCA)
provides that a corporation may indemnify an individual who was,
is or is threatened to be made a named defendant or respondent
in any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, because he is or
was a director, officer, employee or agent of a corporation or
an individual who, while a director, officer, employee or agent
of a corporation, is or was serving at the corporations
request as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise,
against judgment, settlement, penalty, fine, including an excise
tax assessed with respect to an employee benefit plan or
reasonable expenses (including attorneys fees) incurred in
the proceeding if (a) he conducted himself in good faith;
(b) he reasonably believed, in the case of conduct in his
official capacity with the corporation, that his conduct was in
its best interests and, in all other cases, that his conduct was
at least not opposed to its best interests; and (c) in the
case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. However, a corporation may not
indemnify a director (i) in connection with a proceeding by
or in the right of the corporation in which the director was
adjudged liable to the corporation or (ii) in connection
with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity,
in which he was adjudged liable on the basis that personal
benefit was improperly received by him.
Section 48-18-503
of the TBCA provides that a corporation, unless limited by its
charter, shall indemnify such a person who was wholly
successful, on the merits or otherwise, in the defense of any
such proceeding to which he was a party because he is or was a
director, officer, employee or agent of the corporation against
reasonable expenses incurred by him in connection with the
proceeding.
Under
Section 48-12-102(b)(3)
of the TBCA, a corporations charter may eliminate or limit
the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of fiduciary duty
II-16
as a director except liability (A) for any breach of the
directors duty of loyalty to the corporation or its
shareholders, (B) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law or (C) under
Section 48-18-304
(relating to unlawful distributions). Under
Section 48-18-509
of the TBCA, the corporation shall also not indemnify the
director if a judgment or other final adjudication adverse to
the director establishes the directors liability under
clause (A), (B) or (C) above.
Cedar
Creek Home Health Care Agency, Inc.
The Amended and Restated Charter of Cedar Creek Home Health Care
Agency, Inc. eliminates the personal liability of a director to
the extent permitted under
Section 48-12-102(b)(3)
of the TBCA. The By-Laws of Cedar Creek Home Health Care Agency
provide that Cedar Creek Home Health Care Agency shall indemnify
its directors and officers to the fullest extent permitted by
applicable law as then in effect.
Elk
Valley Health Services, Inc.
The By-Laws of Elk Valley Health Services provide that Elk
Valley Health Services shall indemnify directors and officers to
the fullest extent permitted by applicable law as then in effect.
Elk
Valley Home Health Care Agency, Inc.
The By-Laws of Elk Valley Home Health Care Agency provide that
Elk Valley Home Health Care Agency shall indemnify directors and
officers to the fullest extent permitted by applicable law as
then in effect.
Elk
Valley Professional Affiliates, Inc.
The Amended and Restated Charter of Elk Valley Professional
Affiliates, Inc. eliminates the personal liability of a director
to the extent permitted under
Section 48-12-102(b)(3)
of the TBCA. The By-Laws of Elk Valley Professional Affiliates
provide that Elk Valley Professional Affiliates shall indemnify
its directors and officers to the fullest extent permitted by
applicable law as then in effect.
Gericare,
Inc.
The By-Laws of Gericare provide that Gericare shall indemnify
its directors and officers to the fullest extent permitted by
applicable law as then in effect.
Tennessee
Limited Liability Company (Knoxville Home Therapies,
LLC)
The Amended and Restated Operating Agreement of Knoxville Home
Therapies provides that Knoxville Home Therapies will indemnify
its officers, managers and each of its members and their
respective officers, directors, employees, agents and
controlling persons to the fullest extent permitted by law,
including any matter arising out of or resulting from such
persons own simple, partial or concurrent negligence,
except if the loss, cost, liability damage or expense is
primarily attributable to such persons breach or reckless
disregard of fiduciary duties, gross negligence, willful
misconduct or fraud.
Section 48-249-115(b)
of the Tennessee Revised Limited Liability Company Act (the
TRLLCA) provides that a manager-managed LLC may
indemnify an individual who was, is or is threatened to be made
a named defendant or respondent in a proceeding, because such
individual is or was a manager, officer, employee or agent or an
individual who, while a manager, officer, employee or agent, is
or was serving at the LLCs request as a director, manager,
officer, partner, trustee, employee or agent of an employee
benefit plan or any other foreign or domestic entity, against
judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable
expenses incurred with respect to a proceeding, if the
individual acted in good faith and he reasonably believed
(a) in the case of conduct in his official capacity with
the LLC that his conduct was in its best interests and
(b) in all other cases, that his conduct was at least not
opposed to its best interests. In the case of any criminal
proceeding, he must have had no reasonable cause to believe his
conduct was unlawful. However, an LLC may not indemnify such a
II-17
person if (i) in connection with a proceeding by or in the
right of the LLC in which the responsible person was adjudged
liable to the LLC or (ii) in connection with any other
proceeding charging improper personal benefit to such person,
whether or not involving action in such persons official
capacity, in which such person was adjudged liable on the basis
that personal benefit was improperly received by such person.
Section 48-249-115(c)
of the TRLLCA provides that an LLC shall indemnify a manager,
officer, employee or agent or an individual who, while a
manager, officer, employee or agent, is or was serving at the
LLCs request as a director, manager, officer, partner,
trustee, employee or agent of an employee benefit plan or any
other foreign or domestic entity, who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to
which the person was a party, because the person is or was held
such a position, against reasonable expenses (including
attorneys fees) incurred by the person in connection with
the proceeding.
Vermont
Corporation (Wilcox Medical, Inc.)
The Amended and Restated By-Laws of Wilcox Medical, Inc. provide
that Wilcox Medical shall indemnify its directors and officers
to the fullest extent permitted by applicable law.
Section 8.51 of the Vermont Business Corporation Act (the
VBCA) provides that a corporation may indemnify an
individual made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal,
because he is or was a director of a corporation or an
individual, while a director, officer, employee or agent of a
corporation, is or was serving at the corporations request
as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise,
against liability incurred in the proceeding if he conducted
himself in good faith and he reasonably believed (a) in the
case of conduct in his official capacity with the corporation
that his conduct was in its best interests and (b) in all
other cases, that his conduct was at least not opposed to its
best interests. In the case of any proceeding brought by a
governmental entity, the director had no reasonable cause to
believe his or her conduct was unlawful, and the director is not
finally found to have engaged in a reckless or intentional
unlawful act. A corporation may not indemnify such individual
(i) in connection with a proceeding by or in the right of
the corporation in which such individual was adjudged liable to
the corporation or (ii) in connection with any other
proceeding charging improper personal benefit to him, whether or
not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was
improperly received by him. Indemnification permitted in
connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 8.52 of the VBCA provides that, unless a
corporations articles of incorporation provide otherwise,
a corporation shall indemnify an individual who was wholly
successful, on the merits or otherwise, in the defense of any
proceeding to which such individual was a party because he is or
was a director or officer of a corporation or an individual,
while a director of a corporation, is or was serving at the
corporations request as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against reasonable expenses incurred
by him in connection with the proceeding.
Under Section 2.02(b)(4) of the VBCA, a corporations
articles of organization may limit the liability of a director
to the corporation or its shareholders for money damages for any
action taken, or any failure to take any action, solely as a
director, based on a failure to discharge his or her own duties
in accordance with Section 8.30 of the VBCA, except
liability for (i) the amount of a financial benefit
received by a director to which the director is not entitled,
(ii) an intentional or reckless infliction of harm on the
corporation or the shareholders, (iii) a violation of
Section 8.33 of the VBCA (relating to unlawful
distributions) or (iv) an intentional or reckless criminal
act.
Director
and Officer Insurance
BioScrip maintains director and officer liability insurance
policies under which the directors and officers of BioScrip and
the directors, managers and officers of its subsidiaries are
insured, within the limits and
II-18
subject to the limitations of the policies, against certain
expenses in connection with the defense of actions, suits or
proceedings, and certain liabilities which might be imposed as a
result of such actions, suits or proceedings, to which they are
parties by reason of being or having been directors or officers,
which could include liabilities under the U.S. Securities
Act of 1933, as amended, or the U.S. Securities Exchange
Act of 1934, as amended.
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Item 21.
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Exhibits
and Financial Statement Schedules.
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(a) Exhibits.
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|
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|
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Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
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Agreement and Plan of Merger, dated as of August 9, 2004,
among MIM Corporation, Chronimed Acquisition Corp. and Chronimed
Inc. (incorporated by reference to Exhibit 99.2 to the
Companys Current Report on
Form 8-K
filed on August 9, 2004, SEC Accession
No. 0001089355-04-000197).
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|
2
|
.2
|
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Amendment No. 1 dated January 3, 2005 to Agreement and
Plan of Merger dated August 9, 2004 by and among MIM
Corporation, Chronimed Acquisition Corp. and Chronimed Inc.
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on January 5, 2005, SEC Accession
No. 0001014739-05-000007).
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|
2
|
.3
|
|
Agreement and Plan of Merger, dated as of January 24, 2010,
by and among BioScrip, Inc., Camelot Acquisition Corp. (now
known as CHS Holdings, Inc.), Critical Homecare Solutions
Holdings, Inc., Kohlberg Investors V, L.P., Kohlberg
Partners V, L.P., Kohlberg Offshore Investors V, L.P.,
Kohlberg TE Investors V, L.P., KOCO Investors V, L.P.,
Robert Cucuel, Mary Jane Graves, Nitin Patel, Joey Ryan,
Blackstone Mezzanine Partners II L.P., Blackstone Mezzanine
Holdings II L.P., and S.A.C. Domestic Capital Funding, Ltd.
(incorporated by reference to Exhibit 2.1 to the
Companys Current Report on
Form 8-K
dated January 24, 2010, SEC Accession
No. 0000950123-10-005446).*
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|
3
|
.1
|
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Second Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
filed on March 17, 2005, SEC Accession
No. 0000950123-05-003294).
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3
|
.2
|
|
Amendment to Second Amended and Restated Certificate of
Incorporation of BioScrip, Inc. (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form
8-K
filed on
June 10, 2010, SEC Accession No.
0000950123-10-057214).
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|
3
|
.3
|
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Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on
Form 8-K
filed on July 30, 2009, SEC Accession
No. 0001014739-09-000029).
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|
4
|
.1
|
|
Indenture, dated as of March 25, 2010, by and among
BioScrip, Inc., the guarantors party thereto and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
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|
4
|
.2
|
|
Form of
10
1
/
4
% Senior
Note due 2015 (included in the Indenture, filed as
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906,
which is incorporated by reference).
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|
4
|
.3
|
|
Form of Guarantee (included in the Indenture, filed as
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906,
which is incorporated by reference).
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|
4
|
.4
|
|
Registration Rights Agreement, dated as of March 25, 2010,
by and among BioScrip, Inc., the guarantors party thereto and
Jefferies & Company, Inc. (incorporated by reference
to Exhibit 10.5 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
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II-19
|
|
|
|
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Exhibit
|
|
|
No.
|
|
Description
|
|
|
4
|
.5
|
|
Credit Agreement, dated as of March 25, 2010, by and among
BioScrip, Inc., as borrower, the subsidiary guarantors party
thereto, the lenders party thereto, Jefferies Finance LLC, as
lead arranger, as book manager, as administrative agent for the
lenders, as collateral agent for the secured parties and as
syndication agent, Compass Bank, as a co-documentation agent, GE
Capital Corporation, a co-documentation agent, Healthcare
Finance Group, LLC, as collateral manager, HFG Healthco-4, LLC,
as swingline lender for the lenders, and Healthcare Finance
Group, LLC, as issuing bank for the lenders (incorporated by
reference to Exhibit 10.1 to the Companys Current
Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
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|
5
|
.1
|
|
Opinion of King & Spalding LLP.
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|
12
|
.1
|
|
Statement Regarding Computation of Ratio of Earnings to Fixed
Charges and Pro Forma Ratio of Earnings to Fixed Charges of
BioScrip, Inc.
|
|
23
|
.1
|
|
Consent of King & Spalding LLP (included in
Exhibit 5.1 hereto).
|
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23
|
.2
|
|
Consent of Ernst & Young LLP.
|
|
23
|
.3
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
23
|
.4
|
|
Consent of Deloitte & Touche LLP.
|
|
25
|
.1
|
|
Statement of Eligibility of Trustee on
Form T-1.
|
|
99
|
.1
|
|
Form of Letter of Transmittal.
|
|
99
|
.2
|
|
Form of Notice of Guaranteed Delivery.
|
|
99
|
.3
|
|
Form of Instructions to Registered Holders.
|
|
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*
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Pursuant to Item 601(b)(2) of
Regulation S-K,
certain schedules and similar attachments to the Agreement and
Plan of Merger have been omitted. The registrant hereby agrees
to furnish supplementally a copy of any omitted schedule or
similar attachment to the Securities and Exchange Commission
upon request.
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Filed herewith.
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(b)
|
Financial
Statement Schedules.
|
The following financial statement schedule is included in
BioScrips Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, filed with the
SEC on March 2, 2010, which is incorporated by reference
into this registration statement:
Valuation and Qualifying Accounts for the years ended
December 31, 2009, 2008 and 2007
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate
II-20
offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration
statement; and
(B) Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii), or (x) for
the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
Provided, however,
that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective
date; or
(ii) If the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness.
Provided, however,
that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, the undersigned
registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned
II-21
registrant will be a seller to the purchaser and will be
considered to offer or sell securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(6) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and
|
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Charlotte
W. Collins
Charlotte
W. Collins
|
|
Director
|
|
|
|
/s/ Louis
T. DiFazio, Ph.D.
Louis
T. DiFazio, Ph.D.
|
|
Director
|
|
|
|
/s/ Samuel
P. Frieder
Samuel
P. Frieder
|
|
Director
|
|
|
|
/s/ Myron
Z. Holubiak
Myron
Z. Holubiak
|
|
Director
|
|
|
|
/s/ David
R. Hubers
David
R. Hubers
|
|
Director
|
|
|
|
/s/ Richard
L. Robbins
Richard
L. Robbins
|
|
Director
|
|
|
|
/s/ Stuart
A. Samuels
Stuart
A. Samuels
|
|
Director
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President, Chief Operating Officer and Director
|
|
|
|
/s/ Gordon
H. Woodward
Gordon
H. Woodward
|
|
Director
|
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP INFUSION MANAGEMENT, LLC
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
President and Manager
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Manager
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Manager
|
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP INFUSION SERVICES, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President and Director
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Director
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Chairman of the Board of Directors
|
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP INFUSION SERVICES, LLC
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Joseph
Smith
Joseph
Smith
|
|
President
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Member of the Management Committee
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Member of the Management Committee
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Member of Management Committee
|
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP NURSING SERVICES, LLC
Name: Barry A. Posner
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Tasha
Scott
Tasha
Scott
|
|
Manager of BioScrip Nursing Services, LLC
|
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP PBM SERVICES, LLC
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
President and Member of the Management Committee (Principal
Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Member of the Management Committee
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Member of Management Committee
|
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
BIOSCRIP PHARMACY (NY), INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
President and Director
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Director
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Director
|
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
of the undersigned registrants has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Elmsford, State of New
York, on June 21, 2010.
BIOSCRIP PHARMACY SERVICES, INC.
BIOSCRIP PHARMACY, INC.
BRADHURST SPECIALTY PHARMACY, INC.
NATURAL LIVING, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
President and Director
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel and Director
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Director
|
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
CHRONIMED, LLC
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
President and Governor
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Governor
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
Governor
|
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
CRITICAL HOMECARE SOLUTIONS, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President and Director
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Director
|
II-32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Elmsford, State of New York, on
June 21, 2010.
CHS HOLDINGS, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Director
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President and Director
|
II-33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
of the undersigned registrants has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Elmsford, State of New
York, on June 21, 2010.
APPLIED HEALTH CARE, LLC
DEACONNESS ENTERPRISES, LLC
DEACONESS HOMECARE, LLC
INFUSION PARTNERS, LLC
INFUSION PARTNERS OF BRUNSWICK, LLC
INFUSION PARTNERS OF MELBOURNE, LLC
KNOXVILLE HOME THERAPIES, LLC
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and General Counsel
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President and Manager
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Manager
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Manager
|
II-34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
of the undersigned registrants has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Elmsford, State of New
York, on June 21, 2010.
CEDAR CREEK HOME HEALTH CARE AGENCY, INC.
EAST GOSHEN PHARMACY, INC.
ELK VALLEY HEALTH SERVICES, INC.
ELK VALLEY HOME HEALTH CARE AGENCY, INC.
ELK VALLEY PROFESSIONAL AFFILIATES, INC.
GERICARE, INC.
INFUSION SOLUTIONS, INC.
NATIONAL HEALTH INFUSION, INC.
NEW ENGLAND HOME THERAPIES, INC.
OPTION HEALTH, LTD.
PROFESSIONAL HOME CARE SERVICES, INC.
REGIONAL AMBULATORY DIAGNOSTICS, INC.
SCOTT-WILSON, INC.
SOUTH MISSISSIPPI HOME HEALTH, INC.
SOUTH MISSISSIPPI HOME HEALTH, INC. REGION I
SOUTH MISSISSIPPI HOME HEALTH, INC. REGION II
SOUTH MISSISSIPPI HOME HEALTH, INC. REGION III
SPECIALTY PHARMA, INC.
WILCOX MEDICAL, INC.
Name: Barry A. Posner
|
|
|
|
Title:
|
Executive Vice President, Secretary and
|
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the date indicated above.
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
M. Smith
Richard
M. Smith
|
|
President and Director
(Principal Executive Officer)
|
|
|
|
/s/ Stanley
G. Rosenbaum
Stanley
G. Rosenbaum
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
II-35
|
|
|
|
|
Signature
|
|
Title(s)
|
|
|
|
|
/s/ Richard
H. Friedman
Richard
H. Friedman
|
|
Director
|
|
|
|
/s/ Barry
A. Posner
Barry
A. Posner
|
|
Executive Vice President, Secretary, General Counsel
and Director
|
II-36
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of August 9, 2004,
among MIM Corporation, Chronimed Acquisition Corp. and Chronimed
Inc. (incorporated by reference to Exhibit 99.2 to the
Companys Current Report on
Form 8-K
filed on August 9, 2004, SEC Accession
No. 0001089355-04-000197).
|
|
2
|
.2
|
|
Amendment No. 1 dated January 3, 2005 to Agreement and
Plan of Merger dated August 9, 2004 by and among MIM
Corporation, Chronimed Acquisition Corp. and Chronimed Inc.
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on January 5, 2005, SEC Accession
No. 0001014739-05-000007).
|
|
2
|
.3
|
|
Agreement and Plan of Merger, dated as of January 24, 2010,
by and among BioScrip, Inc., Camelot Acquisition Corp. (now
known as CHS Holdings, Inc.), Critical Homecare Solutions
Holdings, Inc., Kohlberg Investors V, L.P., Kohlberg
Partners V, L.P., Kohlberg Offshore Investors V, L.P.,
Kohlberg TE Investors V, L.P., KOCO Investors V, L.P.,
Robert Cucuel, Mary Jane Graves, Nitin Patel, Joey Ryan,
Blackstone Mezzanine Partners II L.P., Blackstone Mezzanine
Holdings II L.P., and S.A.C. Domestic Capital Funding, Ltd.
(incorporated by reference to Exhibit 2.1 to the
Companys Current Report on
Form 8-K
dated January 24, 2010, SEC Accession
No. 0000950123-10-005446).
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4.1 to the
Companys Current Report on
Form 8-K
filed on March 17, 2005, SEC Accession
No. 0000950123-05-003294).
|
|
3
|
.2
|
|
Amendment to Second Amended and Restated Certificate of
Incorporation of BioScrip, Inc. (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form
8-K
filed on
June 10, 2010, SEC Accession No.
0000950123-10-057214).
|
|
3
|
.3
|
|
Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on
Form 8-K
filed on July 30, 2009, SEC Accession
No. 0001014739-09-000029).
|
|
4
|
.1
|
|
Indenture, dated as of March 25, 2010, by and among
BioScrip, Inc., the guarantors party thereto and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
|
|
4
|
.2
|
|
Form of
10
1
/
4
% Senior
Note due 2015 (included in the Indenture, filed as
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906,
which is incorporated by reference).
|
|
4
|
.3
|
|
Form of Guarantee (included in the Indenture, filed as
Exhibit 4.1 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906,
which is incorporated by reference).
|
|
4
|
.4
|
|
Registration Rights Agreement, dated as of March 25, 2010,
by and among BioScrip, Inc., the guarantors party thereto and
Jefferies & Company, Inc. (incorporated by reference
to Exhibit 10.5 to the Companys Current Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
|
|
4
|
.5
|
|
Credit Agreement, dated as of March 25, 2010, by and among
BioScrip, Inc., as borrower, the subsidiary guarantors party
thereto, the lenders party thereto, Jefferies Finance LLC, as
lead arranger, as book manager, as administrative agent for the
lenders, as collateral agent for the secured parties and as
syndication agent, Compass Bank, as a co-documentation agent, GE
Capital Corporation, a co-documentation agent, Healthcare
Finance Group, LLC, as collateral manager, HFG Healthco-4, LLC,
as swingline lender for the lenders, and Healthcare Finance
Group, LLC, as issuing bank for the lenders (incorporated by
reference to Exhibit 10.1 to the Companys Current
Report on
Form 8-K
filed on March 31, 2010, SEC Accession
No. 0000950123-10-030906).
|
|
5
|
.1
|
|
Opinion of King & Spalding LLP.
|
|
12
|
.1
|
|
Statement Regarding Computation of Ratio of Earnings to Fixed
Charges and Pro Forma Ratio of Earnings to Fixed Charges of
BioScrip, Inc.
|
|
23
|
.1
|
|
Consent of King & Spalding LLP (included in
Exhibit 5.1 hereto).
|
|
23
|
.2
|
|
Consent of Ernst & Young LLP.
|
|
23
|
.3
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
23
|
.4
|
|
Consent of Deloitte & Touche LLP.
|
|
25
|
.1
|
|
Statement of Eligibility of Trustee on
Form T-1.
|
|
99
|
.1
|
|
Form of Letter of Transmittal.
|
|
99
|
.2
|
|
Form of Notice of Guaranteed Delivery.
|
|
99
|
.3
|
|
Form of Instructions to Registered Holders.
|
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