Unassociated Document




 

$6,000,000.00

 

AMENDMENT
NO. 5 AND CONSENT

 

TO

 

LOAN
AND SECURITY
AGREEMENT

 

originally
dated as of April 21, 1999

 

by and
among

 

ALLION
HEALTHCARE, INC.

f/k/a
THE CARE GROUP, INC.

MAIL
ORDER MEDS OF TEXAS, INC.

f/k/a
MAIL ORDER MEDS, INC.

MOMS
PHARMACY, INC. (NEW YORK)

f/k/a
MAIL ORDER MEDS OF NEW YORK, INC.

MOMS
PHARMACY, INC. (CALIFORNIA)

MOMS
PHARMACY, LLC

MEDICINE
MADE EASY

NORTH
AMERICAN HOME HEALTH SUPPLY, INC.

 

("Borrower")

 

and

 

GE
HFS HOLDINGS, INC.

f/k/a
HELLER HEALTHCARE FINANCE, INC.

 

("Lender")

 

Amended
as of January 4, 2005








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AMENDMENT
NO. 5 AND CONSENT TO LOAN AND SECURITY AGREEMENT

 

THIS
AMENDMENT NO. 5 AND CONSENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is made as of this 4th day of January, 2005, by and among
ALLION HEALTHCARE, INC. f/k/a THE CARE GROUP, INC., a Delaware
corporation ("Allion''), MAIL ORDER MEDS OF TEXAS, INC., a
Texas corporation ("Meds Texas”) , MOMS PHARMACY, INC. f/k/a MAIL ORDER
MEDS OF NEW YORK INC., a New York corporation, (“Moms New York" and,
collectively with Alien and Meds Texas, the "Existing Borrower”), MOMS
PHARMACY, INC., a California corporation, ("Moms California"),
MOMS PHARMACY, LLC, a Florida limited liability company ("Moms
Florida"), MEDICINE MADE EASY, a California corporation
("Medicine Made Ease”), NORTH AMERICAN HOME HEALTH SUPPLY,
INC., a California corporation ("North American" and, collectively with
Moms New York, Moms California and Moms Florida, the "Additional Borrower"; the
Existing Borrower and the Additional Borrower, collectively, the “Borrower"),
and GE HFS HOLDINGS, INC f/k/a HELLER HEALTHCARE FINANCE, a
Delaware corporation ("Lender”).

 

RECITALS

 

WHEREAS,
pursuant to that certain Loan and Security Agreement dated April 21, 1999 by and
between Existing Borrower and Lender (as previously amended, as amended hereby
and as further amended, modified and restated from time to time, the "Loan
Agreement”), Lender agreed to make available to Existing Borrower a revolving
credit loan (the "Loan");

 

WHEREAS,
Existing Borrower has informed Lender that Moms California “has entered into a
Stock Purchase Agreement, dated January 4, 2004 (the "North American Stock
Purchase Agreement"), with Michael Stone and Jonathan Spanner (collectively,
"North American Seller"), pursuant to which North American Seller will sell to
Moms California all of the issued and outstanding shares of capital stock of
North American Home Health Supply, Inc., a California corporation, for aggregate
consideration of $6,375,000 and warrants to purchase 150,000 shares of common
stock of Allion, payable in accordance with Section 1.5 and Section 1.6 of the
North American Stock Purchase Agreement, and subject to adjustment as set forth
in Section 1.7 of the North American Stock Purchase Agreement (such sale, the
"Proposed Transaction");

 

WHEREAS,
Section 7.4 of the Loan Agreement prohibits Existing Borrower from acquiring all
or substantially all of the capital stock of any Person (as defined in the Loan
Agreement) if the aggregate consideration payable in respect of any single
acquisition exceeds $1,000,000;

 

WHEREAS,
in connection with the closing of the North American Transaction, Existing
Borrower has requested that Lender provide its written consent to the North
American Transaction, permit the issuance of subordinated, unsecured promissory
notes in an aggregate principal amount of $1,375,000 by Moms California for the
purpose of funding a portion of the purchase price of the North American
Transaction, and make certain other modifications to the Loan Agreement; and


 







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WHEREAS,
Existing Borrower has requested that Additional Borrower join in and become
borrowers under the Loan Agreement, and Additional Borrower desires to join in
and become borrowers under the Loan Agreement;

 

NOW,
THEREFORE, in consideration of the foregoing, the terms and conditions
set forth in this Amendment, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
hereby agree as follows:

 

Section
1.   Definitions.   Unless otherwise defined
in this Amendment, all capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Loan Agreement.

 

Section
2.   Amendments
to Loan Agreement.   As of the Effective Date, the
Loan Agreement shall be modified as follows:

 

(a)   Article I
of the Loan Agreement is hereby amended by inserting the following:

 

"Section
1.34(a).   Outstanding
Balance.   'Outstanding Balance', means,
with respect to any Account and as of any date of determination thereof, the
amount (which amount shall not be less than zero dollars) equal to the amount
originally billed by Borrower for such Account to the Account Debtor thereunder
minus (a) all cash collections and other Proceeds (as such term is defined in
the Uniform Commercial Code as the same may, from to time, be in effect in the
State of Maryland) of such Account received from or on behalf of the Account
Debtor there under, and (b) all discounts or other modifications that reduce the
amount due on such Account, all as determined by Lender.

 

(b)   Section
1.42 of the Loan Agreement is hereby amended by adding at the end thereof the
following sentence:

 

"Notwithstanding
the foregoing, the Accounts of North American Home Health Supply, Inc. shall not
be Qualified Accounts until such time as Lender has completed an audit and
appraisal with respect to such Accounts with results satisfactory to Lender in
its sole discretion.”

 

(c)   Section
1.47(a) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"Section
1.47(a).   Stock Purchase
Agreement. 'Stock Purchase Agreement' means,
collectively, (i) that certain Stock Purchase Agreement, dated May 1, 2003, by
and among Moms Pharmacy, Inc., a California corporation, Allion, Darin A.
Peterson and Allan H. Peterson, and (ii) that certain Stock Purchase Agreement,
dated January 4, 2005, by and among Moms Pharmacy, Inc., a California
corporation, Michael Stone and Jonathan Spanier."

 







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(d)   Section
1.47(b) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"Section
1.47(b).   Subordinated
Obligations.   'Subordinated Obligations'
means, collectively, (i) those certain Subordinated Secured Promissory Notes due
May 1, 2005 issued by Allion on May 1, 2003 to Darin A. Peterson and Allan H.
Peterson, in an aggregate principal amount of $1,250,000, (ii) that certain
Indemnity Agreement between Borrower and John Pappajohn dated as of November 1,
2000, (iii) those certain Promissory Notes due January 1, 2006 issued by Moms
Pharmacy, Inc., a California corporation, on January 4, 2005 to Michael Stone
and Jonathan Spanier, in an aggregate principal amount of $675,000, and (iv)
those certain Promissory Notes due January 1, 2007 issued by Moms Pharmacy,
Inc., a California corporation, on January 4, 2005 to Michael Stone and Jonathan
Spanier, in an aggregate principal amount of $700,000."

 

(e)   Section
1.47(c) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"Section,
1.47(c).   Subordination
Agreement.   'Subordination Agreements'
means, collectively, (i) that certain Subordination Agreement, dated as of
January 31, 2003, by and among Borrower, Lender and John Pappajohn, (ii) that
certain Subordination Agreement, dated as of May 1, 2003, by and among Borrower,
Lender, Darin A. Peterson and Allan H. Peterson, and (iii) that certain
Subordination Agreement, dated as of January 4, 2005, by and among Borrower,
Lender, Michael Stone and Jonathan Spanier."

 

(f)   Section
2.1(d) of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"(d)  Subject to the terms and
conditions of this Agreement, advances of Revolving Credit Loans shall be made
to Borrower against a borrowing base equal to eighty-five percent (85%) of the
aggregate Outstanding Balance at such time of the Qualified Accounts due and
owing to Borrower from any Medicaid/Medicare Account Debtor, Insurer or other
Account Debtor (the "Borrowing Base"). The Borrowing Base (including the
eligibility of Accounts) shall be determined by Lender based on the most recent
Borrowing Base certificate delivered to Lender in accordance with this Agreement
and such other information as may be available to Lender. Without limiting any
other rights and remedies of Lender hereunder or under the other Loan Documents,
Lender shall have the continuing right to impose on the Borrowing Base reserves,
and to increase or decrease such reserves, from time to time if and to the
extent that, in Lender's good faith credit judgment, such reserves are
necessary, including to protect Lender's interest in the Collateral or to
protect Lender against possible non-payment of Accounts for any reason by
Account Debtors or possible diminution of the value of any Collateral or
possible non-payment of any of the Obligations or for any taxes or customs
duties or in respect of any state of facts which may constitute a default under
this Agreement. Lender may, at its option, impose reserves by designating as
ineligible a sufficient amount of Accounts, which would otherwise be Qualified
Accounts, so as to reduce the Borrowing Base by the amount of the intended
reserve(s). Lender, in its good faith credit judgment, may further adjust the
Borrowing Base by applying percentages (known as "Liquidity Factors") to
Qualified Accounts by payor class based upon Borrower's actual recent collection
history for each such payer class (i.e., Medicare, commercial insurance, etc.)
in a manner consistent with Lender's underwriting practices and procedures, and
Lender may adjust such Liquidity Factors throughout the Term. Without limiting
the generality of the foregoing, any determination as to whether there is
availability within the Borrowing Base for advances or extensions of credit
shall be made by Fender in its good faith discretion, consistent with Lender's
underwriting practices and procedures, and is final and binding upon
Borrower."

 

(g)   Section
6.23 of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"Section
6.23.   Net
Worth.   Borrower will not at any time
allow its consolidated tangible net worth, as computed in accordance with GAAP,
to fall below the sum of (a) (-$7,800,000) (i.e., negative $7,800,000) (until
the financial statements for Borrower as of March 31, 2005 are delivered
pursuant to Section 6.1(iii), at which time the amount of this clause (a) shall
equal the greater (calculated in terms of absolute number) of (i) (-$7,800,000)
(i.e., negative $7,800,000) and (ii) Borrower's consolidated tangible net worth,
as computed in accordance with GAAP, as of March 31, 2005 based on such
financial statements, but in any event not less than (-$8,500,000) (i.e.,
negative $8,500,000) minus $500,000, plus (b)
fifty percent (50%) of Borrower's consolidated net income (as computed in
accordance with GAAP) for each fiscal quarter of Borrower (beginning with the
fiscal quarter ending June 30, 2005) for which consolidated net income is
positive, plus (c) one hundred percent (100%) of the net cash
proceeds of any offering by Borrower of common equity consummated after January
1, 2005, plus (d) 100% of any capital contribution made to Borrower or any of
its subsidiaries after January 1, 2005 by any holder of Borrower's capital stock
and plus (e) one hundred percent (100%) of any increase in
stockholders' equity on the consolidated balance sheet of Borrower that results
from any adjustment to stockholders' equity during any fiscal month of Borrower.
‘Tangible net worth’ means assets (excluding intangible assets) less
liabilities. ‘Intangible assets’ means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, intellectual
property, licenses, organizational costs, deferred amounts, covenants not to
compete, unearned income and restricted funds. Lender shall verify Borrower's
compliance with this section by review of Borrower's internally prepared monthly
financial statements and annual audited financial statements, which are required
to be delivered to Lender pursuant to Section 6.1."

 

(h)   Section
7.1 of the Loan Agreement is hereby amended by deleting clause (viii) thereof in
its entirety and inserting the following:

 

"(viii)  indebtedness of Allion in
respect of the Subordinated Obligations in an aggregate principal amount not to
exceed $3,000,000 (in the case of such Subordinated Obligations issued to John
Pappajohn) or $1,250,000 (in the case of such Subordinated Obligations issued to
Darin A. Peterson and Allan H. Peterson); and (ix) unsecured indebtedness of
Moms Pharmacy, Inc., a California corporation, in respect of the Subordinated
Obligations in an aggregate principal amount not to exceed $6,375,000 (in the
case of such Subordinated Obligations issued to Michael Stone and Jonathan
Spanier) less any reduction in such amount pursuant to the Stock Purchase
Agreement executed by Michael Stone and Jonathan Spanier."

 

(i)   Section
7.19 of the Loan Agreement is hereby amended and restated in its entirety to
read as follows:

 

"Section
7.19.   Restricted
Payments.   Borrower will not make any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, or any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any of the Subordinated Obligations, except (a) scheduled payments
of principal and interest with respect thereto and payments of principal with
respect to the Subordinated Obligations issued to Darin A. Peterson and Allan H.
Peterson upon the occurrence of an Early Maturity Date thereunder (and as
defined therein); (b) payments of principal in an aggregate amount of $675,000
(less any reduction in such amount pursuant to the Stock Purchase Agreement
executed by Michael Stone and Jonathan Spanier) and interest with respect
thereto on January 1, 2006 with respect to the Subordinated Obligations issued
to Michael Stone and Jonathan Spanier that mature on such date, and (c) payments
of principal in an aggregate amount of $700,000 (less any reduction in such
amount pursuant to the Stock Purchase Agreement executed by Michael Stone and
Jonathan Spanier) and interest with respect thereto on January 1, 2007 with
respect to the Subordinated Obligations issued to Michael Stone and Jonathan
Spanier that mature on such date; provided that, in each such case
(i.e., clauses (a) through (c) above), both before and after giving
effect to any such payment and any Loans funded in connection therewith, (i) no
default or Event of Default has occurred and is continuing or would result after
giving effect thereto and (ii) such payment shall be made at such times as will
permit the delivery of financial statements necessary to determine current
compliance with the financial covenants set forth herein prior to each such
payment; provided, further, that in the case of clauses (b) and
(c) above, both before and after giving effect to any such payment and any Loans
funded in connection therewith, the aggregate unrestricted cash of Borrower and
availability in the Borrowing Base shall equal or exceed
$1,000,000."

 

(j)   All the
schedules to the Loan Agreement are hereby amended and restated in their
entirety in the form of the schedules attached to this Amendment (the "Updated
Schedules"). The Updated Schedules update all information as necessary to make
the schedules previously delivered correct. Borrower hereby represents and
warrants that the information set forth on the Updated Schedules is true and
correct as of the date of this Amendment. The Updated Schedules are hereby
incorporated into the Loan Agreement as if originally set forth
therein.

 

Section
3.   Consent.   In reliance on the
information previously provided by Borrower to Lender regarding the Proposed
Transaction, including but not limited to the fully executed Stock Purchase
Agreement (together with any and all exhibits and schedules thereto), Lender
hereby consents to the Proposed Transaction on the terms and conditions set
forth in the Stock Purchase Agreement as in effect on the date
hereof.

 

Section
4.   Additional
Borrower.   The Additional Borrower shall
from and hereafter be a "Borrower" for all purposes of the Loan Agreement and
all other Loan Documents and, by its execution hereof, hereby joins in as a
co-maker (with all other Borrowers) of and borrower under the Note. The terms of
the Note, as so amended, are incorporated herein by this reference and made a
part hereof. Accordingly, the Additional Borrower hereby agrees to be bound by
all of the terms, conditions, covenants, representations, warranties, and other
agreements set forth in the Loan Agreement with the same force and effect as if
the Additional Borrower had been named a Borrower in the Loan Agreement. Without
limiting the generality of the foregoing, the Additional Borrower hereby grants
to Lender a continuing first priority lien on and security interest in, upon,
and to the Collateral, pursuant to and in accordance with the terms of the Loan
Agreement.

 

Section
5.   Confirmation
of Representations and Warranties.   Each Borrower hereby (a) confirms
that all of the representations and warranties set forth in Article IV of the
Loan Agreement are true and correct with respect to such entity (except to the
extent such representation or warranty relates to a particular date, in which
case, such confirmation relates to such date), and (b) specifically represents
and warrants to Lender that it has good and marketable title to all of its
Collateral, free and clear of any lien or security interest in favor of any
other person or entity.

 

Section
6.   Fees;
Expenses.

 

Notwithstanding
anything in this Amendment to the contrary, Borrower shall be responsible for
payment of legal fees for the services of Lender's in-house counsel in
connection with the preparation of this Amendment. Lender shall be entitled to
deduct, and Borrower by its signature below hereby authorizes Lender to deduct,
the full amount of the fees set forth in this Section 6 from the proceeds of the
next subsequent Revolving Credit Loan made by Lender under the Loan Agreement
(as amended hereby).

 

Section
7.   Enforceability.   This Amendment
constitutes the legal, valid and binding obligation of each Borrower and Lender,
and is enforceable against each Borrower and Lender in accordance with its
terms.

 

Section
8.   Conditions
to Effectiveness.   This Amendment shall become
effective on the date that all of the following conditions are satisfied in
Lender's sole discretion (such date, the "Effective Date"):

 

(a)   Lender
shall have received two (2) originals of this Amendment duly executed by an
authorized officer of each entity comprising Borrower;

 

(b)   Lender
shall have received a Second Amended and Restated Revolving Credit Note duly
executed by an authorized officer of each entity comprising
Borrower;

 

(c)   Lender's
receipt of a (i) Secretary's Certificate, (ii) Incumbency Certificate, (iii)
Board of Directors Resolution and (iv) Certificate of Chief Financial Officer,
in substantially the form provided to Additional Borrower by Lender, for each
entity comprising Additional Borrower and duly executed as required by the terms
of each such document;

 

(d)   Lender's
receipt of the Updated Schedules;

 

(e)   Lender's
receipt of an executed third party legal opinion substantially in substantially
the form previously provided to Borrower,

 

(f)   Lender
shall have received fully executed copies of the Stock Purchase Agreement and
the Subordinated Obligations, and all other agreements and instruments executed
in connection therewith;

 

(g)   (i) The
Proposed Transaction shall have been consummated in accordance with the terms
and conditions of the Stock Purchase Agreement as in effect on the date hereof,
(ii) the issuance of the Subordinated Obligations shall have been consummated in
accordance with the terms of the Subordinated Obligations as in effect on the
date hereof and (iii) Borrower shall have received net cash proceeds of at least
$3,500,000 in connection with the issuance of capital stock of
Allion;

 

(h)   Lender
shall have received the Subordination Agreements, duly executed by an authorized
officer of each entity comprising Borrower and each of the holders of the
Subordinated Obligations;

 

(i)   there
shall have occurred and be continuing no Event of Default and no event which,
with the giving of notice or the lapse of time or both, could constitute such an
Event of Default and, after giving effect to this Amendment, there shall have
occurred no Event of Default and no Event which, with the giving of notice or
lapse of time or both, could constitute an Event of Default; and

 

(j)   the
representations and warranties set forth in Section 5 of this Amendment and in
Article IV of the Loan Agreement shall be true and correct as of the date hereof
and after giving effect to this Amendment (unless any such representation or
warranty by its terms is intended to refer specifically to any earlier date, in
which case such representation or warranty shall have been true and correct as
of such date).

 

This
Amendment shall be effective on the date hereof notwithstanding Borrower's
failure to satisfy the conditions set forth in clauses (c), (d) and (e),
provided that each and every one of those conditions is satisfied in Lender's
sole discretion on or before January 14, 2005, and Borrower
acknowledges and agrees that Borrower's failure to satisfy each and every one of
those conditions on or before such date shall constitute an immediate Event of
Default under the Loan Agreement.

 

Section
9.   Reference
to the Effect on the Loan Agreement.

 

(a)   Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of similar import shall
mean and be a reference to the Loan Agreement as amended by this
Amendment.

 

(b)   Except as
specifically amended above, the Loan Agreement, and all other Loan Documents,
shall remain in full force and effect, and are hereby ratified and
confirmed.

 

(c)   The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided in this Amendment, operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other documents, instruments and agreements executed or
delivered in connection with the Loan Agreement.

 

Section
10.   Governing
Law.   This Amendment shall be governed
by and construed in accordance with the laws of the State of Maryland without
regard to any otherwise applicable conflicts of law principles.

 

Section
11.   Headings.   Section headings in this
Amendment are included for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.

 

Section
12.   Counterparts.   This Amendment may be
executed in counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument

 

[SIGNATURES
ON NEXT PAGE]








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IN
WITNESS WHEREOF, the parties have caused this Amendment No. 5 and
Consent to Loan and Security Agreement to be exited as of the date first written
above. 

 





	 	LENDER:	 
	 	 	 
	 	GE HFS HOLDINGS, INC.,
      	 
	 	a Delaware corporation	 
	 	 	 
	 	By:
      /s/ R. Hanes Whiteley	 
	 	Name: R. Hanes Whiteley	 
	 	Title: Duly Authorized Signatory	 
	 	 	 
	 	BORROWERS:	 
	 	 	 
	 	ALLION HEALTHCARE, INC.,
      	 
	 	a Delaware corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 
	 	MAIL ORDER MEDS OF TEXAS,
      INC., 
	 	a Texas corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 
	 	MOMS PHARMACY, INC.,
    	 
	 	a New York corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 



 








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	 	MOMS PHARMACY, INC.,
    	 
	 	a California corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 
	 	MOMS PHARMACY,
LLC,	 
	 	a Florida limited liability company	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 
	 	MEDICINE MADE EASY,
    	 
	 	a California corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	Title: President & CEO	 
	 	 	 
	 	NORTH AMERICAN HOME HEALTH
      SUPPLY, INC.,
	 	a California corporation	 
	 	 	 
	 	By:
      /s/ Michael P. Moran	 
	 	Name: Michael P. Moran	 
	 	
      Title:
      President & CEO
	 
	 	 	 
	 	 	 



 







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