Re: Letter of Credit Facility

Re:            Letter of Credit Facility

BANK OF AMERICA, N.A. (the “ Lender ”) is pleased to make available to BIOSCRIP, INC., a Delaware corporation (the “ Borrower ”), a letter of credit facility on the terms and subject to the conditions set forth below.  Capitalized terms not defined herein have the meanings assigned to them in Exhibit A attached to this letter agreement (this “ Agreement ”).

(i)           Subject to the satisfaction of the requirements of subsection (g) below and the other terms and conditions set forth herein, the Lender agrees (A) from time to time on any Business Day during the period from July 8, 2009 until the Commitment Termination Date, to issue Letters of Credit for the account of the Borrower and its Subsidiaries, and to amend or renew Letters of Credit previously issued by it, in accordance with subsection (b) below, and (B) to honor drafts under Letters of Credit; provided that the Lender shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit if as of the date of such L/C Credit Extension (after giving effect to any requested L/C Credit Extension), (x) the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all unreimbursed drawings under all Letters of Credit would exceed the Commitment or (z) the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all unreimbursed drawings under all Letters of Credit would exceed the amount of Pledged Collateral maintained in the Cash Collateral Account (as defined in the Cash Collateral Agreement).  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.

(ii)           The Lender shall be under no obligation to issue any Letter of Credit if:

(A)           any order, judgment or decree of any governmental authority or arbitrator shall by its terms purport to enjoin or restrain the Lender from issuing such Letter of Credit, or any law applicable to the Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Lender shall prohibit, or request that the

(B)           subject to Section 1(b)(iii), the expiry date of such requested Letter of Credit would occur more than 364 days after the Commitment Termination Date; provided , that the issuance of any such Letter of Credit with an expiry date that would occur more than twelve months after the date of issuance or last renewal shall be subject to the approval of the Lender; provided , further , that the Lender shall be under no obligation to issue any Letter of Credit if the expiry date of such requested Letter of Credit would occur more than three years after the date of issuance; or

(C)           the issuance of such Letter of Credit would violate one or more policies of the Lender.

(iii)           The Lender shall be under no obligation to amend any Letter of Credit if (A) the Lender would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(b)            Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit .

(i)           Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the Lender in the form of a Letter of Credit Application in substantially the form attached hereto as Exhibit B hereto (an “ L/C Application ”), appropriately completed and signed by an authorized officer of the Borrower.  Such L/C Application must be received by the Lender not later than 1:00 p.m. (Boston, Massachusetts time), at least five Business Days (or such sooner date and time as the Lender may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such L/C Application shall specify in form and detail satisfactory to the Lender: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Lender may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such L/C Application shall specify in form and detail satisfactory to the Lender (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day);

(ii)           Upon the Lender’s determination that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to satisfaction of the requirements set forth in subsection (g) below and the other applicable terms and conditions hereof, the Lender shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the Lender's usual and customary business practices.

(iii)           If the Borrower so requests in any applicable L/C Application, the Lender may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an “ Auto-Renewal Letter of Credit ”); provided that any such Auto-Renewal Letter of Credit must permit (but not require) the Lender to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day in each such twelve-month period to be agreed upon by Lender and Borrower at the time such Letter of Credit is issued and which date shall be set forth in the Letter of Credit.  Unless otherwise directed by the Lender, the Borrower shall not be required to make a specific request to the Lender for any such renewal.  Once an Auto-Renewal Letter of Credit has been issued, the Lender shall, subject to the terms and conditions set forth herein, permit the renewal of such Letter of Credit to an expiry date not later than twelve months after the date of such renewal; provided , however , that the Lender shall have no obligation to permit the renewal of any Auto-Renewal Letter of Credit at any time if it has determined that it would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof (by reason of the provisions of Section 1(a)(ii) or otherwise).

(iv)           Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the Lender will also deliver to the Borrower a true and complete copy of such Letter of Credit or amendment.

(c)            Drawings and Reimbursements .  Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Lender shall notify the Borrower thereof.  Not later than 1:00 p.m. on the date of any payment by the Lender under a Letter of Credit (each such date, an “ Honor Date ”), the Borrower shall reimburse the Lender in an amount equal to the amount of such drawing at the Lender’s office in Boston, Massachusetts in immediately available funds.  If the Borrower fails to so reimburse the Lender, the Lender shall be entitled to, without notice to or demand upon the Borrower, debit the Cash Collateral Account in an amount equal to the amount of such unreimbursed drawing.

(d)            Obligations Absolute .  The obligation of the Borrower to reimburse the Lender for each drawing under each Letter of Credit shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(ii)           the existence of any claim, counterclaim, set-off, defense or other right that the Borrower or any of its Subsidiaries may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii)           any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv)           any payment by the Lender under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the Lender under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any law relating to bankruptcy, insolvency or reorganization or relief of debtors; or

(v)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any of its Subsidiaries.

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will promptly, but in any event within one (1) Business Day thereof, notify the Lender.  The Borrower shall be conclusively deemed to have waived any such claim against the Lender and its correspondents unless such notice is given as aforesaid.

(e)            Role of Lender .  The Borrower agrees that, in paying any drawing under a Letter of Credit, the Lender shall not have any responsibility to obtain any document (other than any sight draft, certificates and other documents, if any, expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided , however , that this assumption is not intended to, and shall not, preclude the Borrower from pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the Lender, any of its affiliates, any of the respective officers, directors, employees, agents or attorneys-in-fact of the Lender and its affiliates, nor any of the respective correspondents, participants or assignees of the Lender shall be liable or responsible for any of the matters described in clauses (i)

(f)            Letter of Credit Fees .

(i)           The Borrower shall pay to the Lender an annual Letter of Credit fee for each Letter of Credit equal to two percent (2.00%) times the daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit).  Such letter of credit fee shall be due and payable annually in advance on the date of the applicable L/C Credit Extension and on each anniversary thereof.

(ii)           The Borrower shall pay to the Lender a commitment fee equal to one half of one percent (0.50%) times the actual daily amount by which the Commitment exceeds the aggregate maximum amount available to be drawn under all Letters of Credit.  The commitment fee shall accrue at all times during the term of this Agreement, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the date hereof, and on the Commitment Termination Date.

The foregoing fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

(g)            Cash Collateral .

(i)           As a condition to the issuance of any Letter of Credit or any amendment to any Letter of Credit which shall increase the maximum amount available to be drawn under such Letter of Credit, the Borrower shall, prior to the issuance or amendment thereof, deposit in the Cash Collateral Account, cash balances in an amount equal to the maximum amount available to be drawn under such Letter of Credit (in addition to the aggregate amount of cash collateral, if any, required pursuant to clause (ii) below).