Document:

SUBSCRIPTION AGREEMENT

FOR

ALLION HEALTHCARE, INC.

Allion Healthcare, Inc.

1660 Walt Whitman Road

Suite 105

Melville, New York 11747

Ladies and Gentlemen:

1.    Subscription. The undersigned (the “Purchaser”), intending to be legally bound, hereby irrevocably agrees to purchase the amount of shares (the “Shares”) of the Series E Convertible Preferred Stock of Allion Healthcare, Inc., a Delaware corporation (the “Company”) set forth on the signature page hereto, at a purchase price of $6.25 per Share. The Shares are initially convertible into one (1) share of the Company’s common stock, par value $0.001 per share (the “Common Stock”). 

This subscription is submitted to you in accordance with and subject to the terms and conditions described in this Subscription Agreement, and the Confidential Investor Proposal of the Company dated September __, 2004, as amended or supplemented from time to time, including all documents incorporated by reference therein and all attachments, schedules and exhibits thereto (collectively, the “Investment Proposal”), relating to the offering (the “Offering”) by the Company of 1,000,000 Shares. There is no minimum amount of Shares that must be sold to effectuate one or more closings. 

The Company and Sands Brothers International, Inc. (the “Placement Agent”), reserve the right to have their respective officers, directors and affiliates purchase Shares in this Offering. 

The terms of the Offering are more completely described in the Investment Proposal and such terms are incorporated herein in their entirety. Certain capitalized terms used, but not otherwise defined herein, will have the respective meanings provided in the Investment Proposal.

2.    Payment. The Purchaser encloses herewith a check payable to, or will immediately make a wire transfer payment to, “Signature Bank, Escrow Agent for Allion Healthcare, Inc.,” in the full amount of the purchase price of the Shares being subscribed for. Together with the check for, or wire transfer of, the
full purchase price, the Purchaser is delivering a completed and executed Omnibus Signature Page to this Subscription Agreement and the Registration Rights Agreement.

3.    Deposit of Funds. All payments made as provided in Section 2 hereof will be deposited by the Company as soon as practicable with Signature Bank, as escrow agent (the “Escrow Agent”), in a non-interest bearing escrow account (the “Escrow Account”). All subscription proceeds representing subscriptions not accepted on or before _____ __, 2004, subject to an extension until ______ __, 2004, at the discretion of the Placement Agent and the Company, will be refunded, without interest accrued thereon or deduction therefrom, and will return the subscription documents to the Purchaser. If the Company rejects a Purchaser’s subscription, either in whole or in part (which decision is in the sole discretion of the Company), the rejected subscription funds or the rejected portion thereof will be returned promptly to the Purchaser without interest accrued thereon or deduction therefrom. The minimum subscription
for a Purchaser in the Offering is $100,000 (16,000 Shares; provided, however, that the Placement Agent and the Company, in their sole discretion, may waive such minimum subscription requirement from time to time.

	 
	 	 	 
	

	 

4.    Acceptance of Subscription. The Purchaser understands and agrees that the Company, in its sole discretion, reserves the right to accept or reject this or any other subscription for the Shares, in whole or in part, notwithstanding prior receipt by the Purchaser of notice of acceptance of this or any other subscription. The Company will have no obligation hereunder until the Company executes and delivers to the Purchaser an executed copy of this Subscription Agreement. If Purchaser’s
subscription is rejected in whole, or the Offering is terminated, all funds received from the Purchaser will be returned without interest, penalty, expense or deduction, and this Subscription Agreement will thereafter be of no further force or effect. If Purchaser’s subscription is rejected in part, the funds for the rejected portion of such subscription will be returned without interest, penalty, expense or deduction, and this Subscription Agreement will continue in full force and effect to the extent such subscription was accepted.

5.    Representations and Warranties of the Purchaser. The Purchaser hereby acknowledges, represents, warrants, and agrees as follows:

(a)    Neither the Shares nor the shares of Common Stock issuable upon conversion of the Shares (the “Conversion Shares,” and, collectively with the Shares, the “Securities”), offered pursuant to the Investment Proposal are registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws. The Purchaser understands that the offering and sale of the Shares is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) thereof and the provisions of Regulation D promulgated thereunder, based, in part, upon the representations, warranties and agreements of the Purchaser contained in this Subscription Agreement;

(b)    The Purchaser and the Purchaser’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, “Advisors”), have received the Investment Proposal and all other documents requested by the Purchaser or its Advisors, if any, have carefully reviewed them and understand the information contained therein, prior to the execution
of this Subscription Agreement;

(c)    Neither the United States Securities and Exchange Commission (the “Commission”) nor any state securities commission has approved the Securities or passed upon or endorsed the merits of the Offering or confirmed the accuracy or determined the adequacy of the Investment Proposal. The Investment Proposal has not been reviewed by any Federal, state or other
regulatory authority;

	 
	 	 	 
	

	 

(d)    All documents, records, and books pertaining to the investment in the Shares (including, without limitation, the Investment Proposal) have been made available for inspection by the Purchaser and its Advisors, if any;

(e)    The Purchaser and its Advisors, if any, have had a reasonable and satisfactory opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering, the Shares and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered by the Company in writing to the full satisfaction of the Purchaser and its Advisors, if any;

(f)    In evaluating the suitability of an investment in the Company, the Purchaser has not relied upon any representation or other information (oral or written) other than as stated in the Investment Proposal or as contained in documents so furnished to the Purchaser or its Advisors, if any, by the Company in writing;

(g)    The Purchaser is unaware of, is in no way relying on, and did not become aware of the offering of the Shares through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or over the Internet, in connection with the offering and sale of the Shares and is not subscribing for Shares and did not become aware of the offering of the Shares through or as a result
of any seminar or meeting to which the Purchaser was invited by, or any solicitation of a subscription by, a person not previously known to the Purchaser in connection with investments in securities generally;

(h)    The Purchaser has taken no action which would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Subscription Agreement or the transactions contemplated hereby (other than commissions to be paid by the Company to the Placement Agent as described in the Investment Proposal or as otherwise described in the Investment Proposal);

(i)    The Purchaser, either alone or together with its Advisors, if any, have such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable them to utilize the information made available to them in connection with the offering of the Shares to evaluate the merits and risks of an investment in the Shares and the Company and to make an informed investment decision with respect thereto; 

(j)    The Purchaser is not relying on the Company, the Placement Agent or any of their respective employees or agents with respect to the legal, tax, economic and related considerations of an investment in the Shares, and the Purchaser has relied on the advice of, or has consulted with, only its own Advisors;

	 
	 	 	 
	

	 

(k)    The Purchaser is acquiring the Shares solely for such Purchaser’s own account for investment and not with a view to resale or distribution thereof, in whole or in part. The Purchaser has no agreement or arrangement, formal or informal, with any person to sell or transfer all or any part of the Shares or the Conversion Shares and the Purchaser has no plans to enter into any such agreement or arrangement;

(l)    The purchase of the Shares represents high risk capital and the Purchaser is able to afford an investment in a speculative venture having the risks and objectives of the Company. The Purchaser must bear the substantial economic risks of the investment in the Shares indefinitely because none of the securities may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available. Legends will be placed on the Securities to the
effect that they have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereof will be made in the Company’s stock books. Stop transfer instructions will be placed with the transfer agent of the Securities. The Company has agreed that purchasers of the Shares will have, with respect to the Conversion Shares, the registration rights described in the Registration Rights Agreement in the form of Exhibit C attached to the Investment Proposal. Notwithstanding such registration rights, it is not anticipated that there will be any market for resale of the Shares, or the Conversion Shares, and such securities will not be freely transferable at any time in the foreseeable future;

(m)    The Purchaser has adequate means of providing for such Purchaser’s current financial needs and foreseeable contingencies and has no need for liquidity of the investment in the Shares for an indefinite period of time;

(n)    The Purchaser is aware that an investment in the Shares involves a number of very significant risks and has carefully read and considered the matters set forth in the Investment Proposal and, in particular, the matters under the caption “Risk Factors” therein and any of such risk may materially adversely affect the Company’s results of operations and future prospects;

(o)    The Purchaser is an “accredited investor” as that term is defined in Regulation D under the Securities Act, and has truthfully and accurately completed the Accredited Investor Certification contained herein; 

(p)    The Purchaser: (i) if a natural person, represents that the Purchaser has reached the age of 21 and has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Shares, such entity is
duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Subscription Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the Securities, the execution and delivery of this Subscription Agreement has been duly authorized by all necessary action, this Subscription Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Subscription Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Subscription Agreement in such capacity and on behalf of the subscribing
individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Purchaser is executing this Subscription Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Subscription Agreement and make an investment in the Company, and represents that this Subscription Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Subscription Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Purchaser is a party or by which it is bound;

	 
	 	 	 
	

	 

(q)    The Purchaser and its Advisors, if any, have had the opportunity to obtain any additional information, to the extent the Company had such information in their possession or could acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information contained in the Investment Proposal and all documents received or reviewed in connection with the purchase of the Shares and have had the opportunity to have representatives of the Company provide them with such additional information regarding the terms and conditions of this
particular investment and the financial condition, results of operations, business and prospects of the Company deemed relevant by the Purchaser or its Advisors, if any, and all such requested information, to the extent the Company had such information in its possession or could acquire it without unreasonable effort or expense, has been provided by the Company in writing to the full satisfaction of the Purchaser and its Advisors, if any;

(r)    The Purchaser represents to the Company that any information which the undersigned has heretofore furnished or is furnishing herewith to the Company or the Placement Agent is complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration under Federal and state securities laws in connection with the offering of securities as described in the Investment Proposal. The Purchaser further represents and warrants that it will notify and supply corrective information to the Company and the Placement
Agent immediately upon the occurrence of any change therein occurring prior to the Company’s issuance of the securities contained in the Shares;

(s)    The Purchaser has significant prior investment experience, including investment in non-listed and non-registered securities. The Purchaser is knowledgeable about investment considerations in public companies and, in particular, public companies not traded or quoted on any medium. The Purchaser has a sufficient net worth to sustain a loss of its entire investment in the Company in the event such a loss should occur. The Purchaser’s overall commitment to investments which are not readily marketable is not excessive in view of the Purchaser’s net
worth and financial circumstances and the purchase of the Shares will not cause such commitment to become excessive. This investment is a suitable one for the Purchaser;

	 
	 	 	 
	

	 

(t)    The Purchaser is satisfied that it has received adequate information with respect to all matters which it or its Advisors, if any, consider material to its decision to make this investment;

(u)    The Purchaser acknowledges that any estimates or forward-looking statements or projections included in the Investment Proposal were prepared by the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed, will not be updated by the Company and should not be relied upon;

(v)    No oral or written representations have been made, or oral or written information furnished, to the Purchaser or its Advisors, if any, in connection with the offering of the Shares which are in any way inconsistent with the information contained in the Investment Proposal;

(w)    Within five (5) days after receipt of a request from the Company or the Placement Agent, the Purchaser will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Company or the Placement Agent is subject;

(x)    The Purchaser’s substantive relationship with the Placement Agent or subagent through which the Purchaser is subscribing for Shares predates the Placement Agent or such subagent’s contact with the Purchaser regarding an investment in the Shares;

(y)    THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL;

(z)    The Purchaser acknowledges that neither the Shares nor the Conversion Shares have been recommended by any Federal or state securities commission or regulatory authority. In making an investment decision, investors must rely on their own examination of the Company and the terms of the Offering, including the merits and risks involved. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Subscription Agreement. Any representation to the contrary is a criminal offense. The Shares and the Conversion Shares
are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act, and the applicable state securities laws, pursuant to registration or exemption therefrom. Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time; and

 

	 
	 	 	 
	

	 

(aa)    (For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the
Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Purchaser or Plan fiduciary (a) is responsible for the decision to invest in the Company; (b) is independent of the Company and any of its affiliates; (c) is qualified to make such investment decision; and (d) in making such decision, the Purchaser or Plan fiduciary has not relied on any advice or recommendation of the Company or any of its affiliates.

(bb)    The Purchaser hereby represents, warrants, agrees and covenants to and with the Company that the Subscriber has not, directly and/or indirectly, previously had and/or maintained and/or currently has, and/or in the future will not make or maintain a "short" position in the Company's securities and will not encourage and/or facilitate the same by any third party.

(cc)    The Purchaser has read, in its entirety, the Investment Proposal (including, but not limited to, the Section in the Investment Proposal entitled “Risk Factors”). The Investor has read, in their entirety, all filings the Company made with the SEC (the “SEC Reports”), and annexed to the Investment Proposal as Exhibit A, Exhibit B and Exhibit C. The Investor fully understands all information in the Investment Proposal and the SEC Reports.

(dd)    The Purchaser hereby acknowledges and understands that as of the date of the Investment Proposal, the Placement Agent and certain affiliates of the Placement Agent beneficially own in the aggregate ______________ shares of Common Stock (consisting of shares of Common Stock issuable upon exercise of Warrants to purchase ______ shares of Common Stock and ___________ shares of Common Stock issuable upon conversion of _______ preferred shares), which amount, collectively represents approximately ____% of the Company’s issued and outstanding Common Stock. Such ownership and certain compensation to
be received by the Placement Agent in the Offering creates a conflict of interest for the Placement Agent in acting in the best interests of itself as opposed to the best interests of investors in the Offering.

6.    Representations and Warranties of the Company. The Company hereby represents and warrants as of the date of acceptance hereof:

(a)    Other than as disclosed in SEC Reports (as defined in Section 6(h) below), the Company does not own or control, directly or indirectly, any interest in any other corporation, association or other business entity (a “Subsidiary” and collectively, the “Subsidiaries”). The Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any material lien, charge, security interest, encumbrance, right of first refusal or other restriction (collectively, “Liens”), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. 

	 
	 	 	 
	

	 

(b)    Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not result in (i) a material adverse effect on the legality, validity or enforceability of the Certificate of Designation of Series E Preferred Stock of Allion Healthcare, Inc. (the “E Certificate”), this Subscription Agreement, the Registration Rights Agreement (collectively, with the Investment Proposal, the “Transaction Documents”), (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).

(c)    The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further corporate action is required by the Company in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally.

(d)    The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby, do not and will not (i) conflict with or violate any provision of the Company’s Certificate of Incorporation, the E Certificate, any other Certificate of Designation of any Preferred Stock of the Company (the “Other Preferred Certificate”) or by-laws and/or any and all amendments thereto (collectively, the “Internal Documents”), (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise), or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected.

	 
	 	 	 
	

	 

(e)    The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind (a “Person”) in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing with the Commission of Form D and applicable Blue Sky filings.

(f)    All of the Shares and Conversion Shares, have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and required notice has been given with respect to applicable preemptive rights. The Company has reserved from its duly authorized capital stock such number of shares of Common Stock so as to permit the issuance of the Conversion Shares.

(g)    Other than as disclosed in the SEC Reports and/or the Investment Proposal (i)  there are no outstanding securities of the Company or any of its Subsidiaries which contain any preemptive, redemption or similar provisions, nor is any holder of securities of the Company or any Subsidiary entitled to preemptive or similar rights arising out of any agreement or understanding with the Company or any Subsidiary by virtue of any of the Transaction Documents, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (ii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (iii) there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, except as a result of the purchase and sale of the Securities, or rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or secur-ities or rights convertible or exchangeable into shares of Common Stock.

(h)    The Company has filed all reports required to be filed by it under the Securities Act and the Securities Exchange Act of 1934, as amended (the “1934 Act”), including pursuant to Section 13(a) or Section 15(d) of the 1934 Act (the foregoing materials, including the exhibits thereto, being collectively referred to herein as the “SEC Reports”). As of their respective dates, [except to the extent set forth in the SEC Reports with respect to restatements of the Company’s financial statements], the SEC Reports complied in all material respects with the requirements of the Securities Act and the 1934 Act and the rules and regulations of the Commission promulgated thereunder, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits to the SEC Reports to the extent required. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing, except to the extent set forth in the SEC Reports with respect to restatements of the Company’s financial statements. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except to the extent set forth in the SEC Reports with respect to restatements of the Company’s financial statements, and except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Additionally, since the adoption of the Sarbanes-Oxley Act of 2002 (the “New Act”) and to the extent that the Company is subject to the New Act, the Company has complied in all material respects with the laws, rules and regulation under the New Act.

	 
	 	 	 
	

	 

(i)    Since June 30, 2004 (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission which have not been so disclosed, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made payment or distribution of any dividend or distribution of cash or other property to its holders of Common Stock or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.

(j)    There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, currently threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency and/or regulatory authority (federal, state, county, local or foreign), (collectively, an “Action”) which does and/or could
(i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents and/or the Securities or to consummate the transactions contemplated hereby or thereby or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the 1934 Act or the Securities Act. The foregoing includes, without limitation, actions, pending or threatened (or any basis therefor known to the Company), involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment, or decree of any court or government agency or instrumentality. 

	 
	 	 	 
	

	 

(k)    No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.

(l)    Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, mortgage, decree, lease, license, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business, except in the case of clauses (i), (ii) and (iii) as would not result in a Material Adverse Effect. Neither the Company nor any of the Subsidiaries has received any written notice of any violation of or noncompliance with, any federal, state, local or foreign laws, ordinances, regulations and orders (including, without limitation, those relating to environmental protection, occupational safety and health, federal securities laws, equal employment opportunity, consumer protection, credit reporting, “truth-in-lending”, and warranties and trade practices) applicable to its business or to the business of any Subsidiary, the violation of, or noncompliance with, which would have a materially adverse effect on either the
Company’s business or operations, or that of any Subsidiary, and the Company knows of no facts or set of circumstances which would give rise to such a notice. The execution, delivery, and performance of the Transaction Documents and the consummation of the transactions contemplated thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract, or an event which results in the creation of any lien, charge, or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture, or non-renewal of any material permit, license, authorization, or approval applicable to the Company, its business or operations, or any of its assets or properties, except as would not reasonably be expected to have a Material Adverse Effect.

	 
	 	 	 
	

	 

(m)    The Company and the Subsidiaries possess all licenses, certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits would not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

(n)    Other than as disclosed in the Investment Proposal and/or SEC Reports, the Company owns its property and assets free and clear of all mortgages, liens, loans, pledges, security interests, claims, equitable interests, charges, and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance in all material respects with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims, or encumbrances.

(o)    The Company and its Subsidiaries own, or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted, the lack of which could reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademarks, trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secrets or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and no claim, action or proceeding has been made or brought against, or to the Company's knowledge, has been threatened against, the Company or its Subsidiaries regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement, except where such infringement, claim, action or proceeding would not reasonably be expected to have either individually or in the aggregate a Material Adverse Effect. The Company is not aware that any of its employees, officers, or consultants are obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would
interfere with the use of such employee’s, officer’s, or consultant’s commercially reasonable efforts to promote the interests of the Company or that would conflict with the Company’s business as conducted. Neither the execution nor delivery of the Transaction Documents, nor the carrying on of the Company’s business by the employees of the Company, as is presently conducted, nor the conduct of the Company’s business, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees, officers or consultants are now obligated. 

	 
	 	 	 
	

	 

(p)    The Company has not entered into agreement to pay any brokerage or finder’s fees or commissions to any person including, but not limited to, any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement, other than with the Placement Agent.

(q)    Assuming the accuracy of the Purchaser’s representations and warranties set forth in this Subscription Agreement, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchaser as contemplated hereby.

(r)    The Company is not, and is not an affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

(s)    Neither the Company, its Subsidiaries, any of their affiliates nor any person acting on their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Shares.

(t)    Neither the Company, its Subsidiaries, any of their affiliates nor any person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the Securities Act or cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates and any person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the Securities Act or cause the Offering to be integrated with other offerings.

(t)    The Company and each of its Subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, except when the failure to do so would not have a Material Adverse Effect, and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations otherwise due and payable, except those being contested in good faith and has set aside on its books reserves in accordance with GAAP reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, statue or local tax. To the Company’s knowledge, none of the Company’s tax returns is presently being audited by any taxing authority.

	 
	 	 	 
	

	 

(u)    Except as disclosed in the Investment Proposal and/or the SEC Reports (i) the Company is not indebted in excess of $20,000, directly or indirectly, to any of its employees, officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with accrued but unpaid salary payments, expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees, officers and directors, nor is the Company contemplating such indebtedness as of the date of this Agreement, (ii) to the Company's knowledge, none of said employees, officers or directors, or any member of
their immediate families, is directly or indirectly indebted to the Company (other than in connection with purchases of the Company's stock) or have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship or any firm or corporation which competes with the Company, nor is the Company contemplating such indebtedness as of the date of this Agreement, except that employees, officers, directors and/or shareholders of the Company may own stock in publicly traded companies (not in excess of 1% of the outstanding capital stock thereof) which may directly compete with the Company and (iii) to the Company’s knowledge, no employee, shareholder, officer or director, or any member of their immediate families, is, directly or indirectly, interested in any material contract with the Company, nor does any such person own, directly or indirectly, in whole or in part, any material tangible or intangible property
that the Company uses or contemplates using in the conduct of its business. The Company is not a guarantor or indemnitor of any indebtedness of any other Person.

(w)    The Company has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed, and the Company has insurance against other hazards, risks, and liabilities to persons and property to the extent and in the manner customary for companies in similar businesses similarly situated.

(x)    The sale of the Shares by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, neither the Company nor any of its Subsidiaries (a) is a person whose property or interests in property are blocked pursuant to Section
1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages in any dealings or transactions, or be otherwise associated, with any such person. The Company and its Subsidiaries are in compliance with the USA Patriot Act of 2001 (signed into law October 26, 2001).

(y)    The Company has filed with the Secretary of State of the State of Delaware the E Certificate.

7.    Indemnification. The Purchaser agrees to indemnify and hold harmless the Company, the Placement Agent and each of their respective officers, directors, employees, agents, attorneys, control persons and affiliates from and against all losses, liabilities, claims, damages, costs, fees and expenses whatsoever (including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced or threatened) based upon or arising out of any actual
or alleged false acknowledgment, representation or warranty, or misrepresentation or omission to state a material fact, or breach by the Purchaser of any covenant or agreement made by the Purchaser herein or in any other document delivered in connection with this Subscription Agreement.

	 
	 	 	 
	

	 

8.    Irrevocability; Binding Effect. The Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, except as required by applicable law, and that this Subscription Agreement will survive the death or disability of the Purchaser and will be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns. If the Purchaser is more than one person, the obligations of
the Purchaser hereunder will be joint and several and the agreements, representations, warranties and acknowledgments herein will be deemed to be made by and be binding upon each such person and such person’s heirs, executors, administrators, successors, legal representatives and permitted assigns.

9.    Modification. This Subscription Agreement will not be modified or waived except by an instrument in writing signed by the party against whom any such modification or waiver is sought.

10.    Notices. Any notice or other communication required or permitted to be given hereunder will be in writing and will be mailed by certified mail, return receipt requested, or delivered against receipt to the party to whom it is to be given (a) if to the Company, at the address set forth above or (b) if to the Purchaser, at the address set forth on the signature page hereof (or, in either case, to
such other address as the party will have furnished in writing in accordance with the provisions of this Section 10). Any notice or other communication given by certified mail will be deemed given at the time of certification thereof, except for a notice changing a party’s address which will be deemed given at the time of receipt thereof.

11.    Assignability. This Subscription Agreement and the rights, interests and obligations hereunder are not transferable or assignable by the Purchaser and the transfer or assignment of the Shares or the shares of Common Stock issuable upon conversion of the Shares will be made only in accordance with all applicable laws.

12.    Applicable Law.  This Subscription Agreement will be governed by and construed under the laws of the State of New York as applied to agreements among New York residents entered
into and to be performed entirely within New York. Each of the parties hereto (1) agree that any legal suit, action or proceeding arising out of or relating to this Agreement will be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (2) waive any objection which the Company may have now or hereafter to the venue of any such suit, action or proceeding, and (3) irrevocably consent to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the parties hereto further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern
District of New York and agree that service of process upon it mailed by certified mail to its address will be deemed in every respect effective service of process upon it, in any such suit, action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

 

	 
	 	 	 
	

	 

13.    Blue Sky Qualification. The purchase of Shares under this Subscription Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Shares from applicable Federal and state securities laws. The Company will not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company will be
released from any and all obligations to maintain its offer, and may rescind any sale contracted, in the jurisdiction. 

14.    Use of Pronouns. All pronouns and any variations thereof used herein will be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require.

15.    Confidentiality. The Purchaser acknowledges and agrees that any information or data the Purchaser has acquired from or about the Company, not otherwise properly in the public domain, was received in confidence. The Purchaser agrees not to divulge, communicate or disclose, except as may be required by law or for the performance of this Subscription Agreement, or use to the detriment of the
Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company, including any scientific, technical, trade or business secrets of the Company and any scientific, technical, trade or business materials that are treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given to the Company about or belonging to third parties.

16.    Miscellaneous.

(a)    This Subscription Agreement, together with the Shares and the Registration Rights Agreement, constitute the entire agreement between the Purchaser and the Company with respect to the subject matter hereof and supersede all prior oral or written agreements and understandings, if any, relating to the subject matter hereof. The terms and provisions of this Subscription Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.

(b)    Each of the Purchaser’s and the Company’s representations and warranties made in this Subscription Agreement will survive the execution and delivery hereof and delivery of the Shares and the Conversion Shares.

	 
	 	 	 
	

	 

(c)    Each of the parties hereto will pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Subscription Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.

(d)    This Subscription Agreement may be executed in one or more counterparts each of which will be deemed an original, but all of which will together constitute one and the same instrument.

(e)    Each provision of this Subscription Agreement will be considered separable and, if for any reason any provision or provisions hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality will not impair the operation of or affect the remaining portions of this Subscription Agreement.

(f)    Paragraph titles are for descriptive purposes only and will not control or alter the meaning of this Subscription Agreement as set forth in the text.

17.    Omnibus Signature Page. This Subscription Agreement is intended to be read and construed in conjunction with the Registration Rights Agreement. Accordingly, pursuant to the terms and conditions of this Subscription Agreement and such related agreements it is hereby agreed that the execution by the Purchaser of this Subscription Agreement, in the place set forth herein, will constitute agreement
to be bound by the terms and conditions hereof and the terms and conditions of the Registration Rights Agreement, with the same effect as if each of such separate, but related agreement, were separately signed.

[REMAINDER OF THIS PAGE IS BLANK]REGISTRATION RIGHTS AGREEMENT: SERIES E

THIS REGISTRATION RIGHTS AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into as of this 17th day of December, 2004 by and between ALLION HEALTHCARE, INC., a Delaware corporation (together with its successors and assigns, the “Corporation”), and the persons who are signatories hereto (together with their successors and assigns, the “Securityholders”).

RECITALS

WHEREAS, the Corporation and the Securityholders will enter into a Subscription Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Subscription Agreement”), pursuant to which the Securityholders have agreed, inter alia, to purchase, and the Corporation have agreed, inter alia, to issue and sell to the Securityholders, certain shares of Series E Preferred Stock (as defined below);

WHEREAS, the Corporation and the Securityholders deem it in their respective best interests to provide for certain arrangements with respect to the registration of shares of Series E Preferred Stock (as defined below) under the United States Securities Act of 1933, as amended (the “Securities Act”); and

WHEREAS, the execution and delivery of this Agreement is a condition precedent to the consummation of the transactions contemplated by the Subscription Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1. Definitions. (a) As used herein, each of the following terms shall have the meaning set forth or referred to below:

“Affiliate” shall mean (i) with respect to any individual, (A) a spouse or first generation descendant of such individual and (B) any trust, limited liability company or family partnership whose beneficiaries shall solely be such individual and/or such individual’s spouse and/or any other individual related to the first degree by blood or adoption to such individual or such individual’s spouse and (ii) with respect to any Person which is not an individual, a director, officer, general partner or managing member of such Person, and any other Person that, directly
or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with, such Person. For purposes hereof, “Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Business Day” shall mean any day that is not a Saturday, Sunday or legal holiday on which banking institutions in the State of New York are authorized or obligated to close.

	 
	 	 	 
	

	 

“Common Stock” shall mean the common stock, par value $0.001 per share, of the Corporation, as constituted on the date hereof, and any stock into which such Common Stock shall have been changed or any stock resulting from any recapitalization, reorganization, merger, sale of assets or reclassification.

“Corporation” shall have the meaning set forth in the first paragraph of this Agreement.

“Delay Period” shall have the meaning set forth in Section 2(d) hereof.

“Demand Notice” shall have the meaning set forth in Section 2(a) hereof.

“Demand Registration” shall have the meaning set forth in Section 2(a) hereof. 

“Exchange Act” shall mean the United States Securities Exchange Act of 1934, as amended.

“Hold Back Period” shall have the meaning set forth in Section 4(a) hereof.

“Holder” or “Holders” shall mean the Securityholders and/or any successors thereto or assignees or transferees thereof who or which comply with the second sentence of Section 10 hereof.

“Inspectors” shall have the meaning set forth in Section 5(j) hereof.

“Interruption Period” shall have the meaning set forth in Section 5(k) hereof.

“Losses” shall have the meaning set forth in Section 8(a) hereof.

“NASD” shall mean the National Association of Securities Dealers, Inc., or any successor thereof.

“Other Shares” shall mean, at any time, those shares of Common Stock or other securities convertible into Common Stock which do not constitute Primary Shares or Registrable Shares. 

“Person” shall mean any natural person, corporation, limited partnership, limited liability company, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization whether or not a legal entity, and any government or agency or political subdivision thereof.

“Piggyback Registration” shall have the meaning set forth in Section 3(a) hereof.

“Primary Shares” shall mean, at any time, the authorized but unissued shares of Common Stock or shares of Common Stock held by the Corporation in its treasury. 

“Prospectus” shall mean the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Shares covered by such Registration Statement and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.

	 
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“Subscription Agreement” shall have the meaning set forth in the first recital to this Agreement.

“Records” shall have the meaning set forth in Section 5(j) hereof.

“Registrable Shares” shall mean, at any time, with respect to any Holder (i) any Shares and (ii) any other securities issued and issuable with respect to any such Shares or the Series E Preferred Stock by way of a stock dividend, stock distribution or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, sale of assets or other reorganization, in each case in clauses (i) and (ii) which at any time are held by Holders (it being understood that, for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable
Shares whenever such Person has the right to acquire or obtain from the Corporation any Registrable Shares, whether or not such acquisition has actually been effected), if and so long as (x) such Shares have not been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction and (y) such Shares have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such Shares are removed upon the consummation of such sale and the seller and purchaser of such shares of Common Stock shall have received an opinion of counsel for the Corporation, which shall be in form and content reasonably satisfactory to the seller and purchaser and their respective counsel, to the effect that such Shares in the hands of the purchaser are freely transferable without restriction or registration under the Securities
Act in any public or private transaction.

“Registration” shall mean registration under the Securities Act of an offering of Registrable Shares or Other Shares pursuant to a Demand Registration or a Piggyback Registration.

“Registration Statement” shall mean any registration statement of the Corporation under the Securities Act that covers any of the Registrable Shares pursuant to the provisions of this Agreement, including the related Prospectus, all amendments and supplements to such registration statement (including pre- and post-effective amendments), all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“SEC” shall mean the United States Securities and Exchange Commission, or any successor thereof.

“Securities Act” shall have the meaning set forth in the second recital to this Agreement.

“Securityholders” shall have the meaning set forth in the first paragraph of this Agreement.

“Series E Preferred Stock” shall mean the Series E Convertible Preferred Stock of the Corporation.

	 
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“Shares” shall mean shares of Common Stock issuable upon conversion of the Series E Preferred Stock. 

“Underwritten Offering” shall mean a registration under the Securities Act in which securities of the Corporation are sold to an underwriter for reoffering to the public.

(b) Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. The word “or” is not exclusive and the word “including” means “including without limitation.” Unless
otherwise specified, all accounting terms used in this Agreement shall be interpreted in accordance with generally accepted accounting principles in the United States as in effect from time to time, applied on a consistent basis.

Section 2. Demand Registration. (a) At any time, and from time to time after the one year anniversary of the Subscription Agreement, the Holders of a majority in number of the Registrable Shares, shall have the right, by written notice (the “Demand Notice”) given to the Corporation, to request that the Corporation register (a
“Demand Registration”) under and in accordance with the provisions of the Securities Act all or any portion of such Holders’ Registrable Shares. Upon receipt of any such Demand Notice, the Corporation shall promptly, but in no event more than five (5) business days after receipt thereof, notify each other Holder of the receipt of such Demand Notice and, subject to the limitations set forth below, shall include in the proposed registration all Registrable Shares. In connection with any Demand Registration in which more than one Holder or holders of Other Shares of the Corporation participates, whether directly or through exercise of piggyback rights, in the event that such Demand Registration involves an underwritten offering and the managing underwriter or underwriters
participating in such offering advise in writing the Holders of Registrable Shares to be included in such offering that the total amount of Shares to be included in such offering exceeds the amount that can be sold in (or during the time of) such offering without delaying or jeopardizing the success of such offering (including the price per share of the Shares to be sold), then the number of Registrable Shares, Primary Shares and Other Shares (which have registration rights with respect to such offering) shall be reduced on a pro rata basis (based upon the number of shares requested or proposed to be registered by each such holder and the Corporation) to a number deemed satisfactory by such managing underwriter or underwriters, provided, that the securities to be excluded shall be determined in the sequence reflected in Section 3(b)(A). The Holders as a group shall be entitled to one Demand Registration on Form S-1, and, as a group, up to three Demand Registrations on Form S-2 or Form S-3 (or any
successor form thereto); provided, that any Demand Registration that does not become effective or is not maintained for the time period required in accordance with Section 2(c) hereof shall not count as one of such Demand Registrations. 

(b) The Corporation shall as soon as practicable, but in no event more than 90 days after the date on which the Corporation receives a Demand Notice given by the Holders in accordance with Section 2(a) hereof, file with the SEC, and the Corporation shall thereafter use its best efforts to cause to be declared effective within 180 days following the date the Corporation receives such Demand Notice, a Registration Statement on the appropriate form for the registration and sale, in accordance with the intended method or methods of distribution, of the total number of Registrable Shares specified by the Holders in such Demand Notice together with any other Registrable Shares with respect to which the Corporation has received a written request for inclusion in accordance with Section 2(a) hereof,
subject to reduction as set forth in Section 2(a) hereof.

	 
	 	- 4 -	 
	

	 

(c) The Corporation shall keep each Registration Statement filed pursuant to this Section 2 continuously effective and usable for the resale of the Registrable Shares covered therebyuntil all the Registrable Shares covered by such Registration Statement have been sold pursuant to such Registration Statement, or until such time, as in the written opinion of counsel to the Corporation, all Registrable Shares are eligible for resale under paragraph (k) of Rule 144.

(d) The Corporation shall be entitled to postpone the filing of any Registration Statement otherwise required to be prepared and filed by the Corporation pursuant to this Section 2, or suspend the use of any effective Registration Statement under this Section 2, for a reasonable period of time which shall be as short as practicable, but in any event not in excess of 60 days (a “Delay Period”), if the Corporation determines in good faith that the registration and distribution of the Registrable Shares covered or to be covered by such Registration Statement would materially
interfere with any pending material financing, acquisition, disposition or corporate reorganization or other material corporate development involving the Corporation or any of its subsidiaries or would require premature disclosure thereof and promptly gives the Holders written notice of such determination, containing a statement of the reasons for such postponement and an approximation of the period of the anticipated delay; provided, however, that (i) the aggregate number of days included in all Delay Periods during any consecutive 12 months shall not exceed the aggregate of (x) 120 days minus (y) the number of days occurring during all Hold Back Periods and Interruption Periods during such consecutive 12 months and (ii) a period of at least 60 days shall elapse between the termination of any
Delay Period, Hold Back Period or Interruption Period and the commencement of the immediately succeeding Delay Period. If the Corporation shall so postpone the filing of a Registration Statement, the Holders of Registrable Shares to be registered shall have the right to withdraw the request for registration by written notice given by the Holders of a majority of the Registrable Shares that were to be registered to the Corporation within 45 days after receipt of the notice of postponement or, if earlier, the termination of such Delay Period. The time period for which the Corporation is required to maintain the effectiveness of any Registration Statement shall be extended by the aggregate number of days of all Delay Periods, all Hold Back Periods and all Interruption Periods occurring during such Registration. The Corporation shall not be entitled to initiate a Delay Period unless it shall (A) concurrently prohibit sales by other securityholders under registration statements covering securities held by
such other securityholders and (B) forbid purchases and sales in the open market by all officers and executives of the Corporation.

(e) The Holders of a majority in number of the Registrable Shares to be included in a Registration Statement pursuant to this Section 2 may, at any time prior to the effective date of the Registration Statement relating to such Demand Registration, revoke such request by providing a written notice to the Corporation revoking such request, in which case such request will not count, except as provided below, towards the quota of Demand Registrations to which the Holders are entitled pursuant to this Agreement. In the event of such revocation, the Holders of the Registrable Shares to be included in such Demand Registration shall reimburse the Corporation for their pro rata share (based upon the number of Shares requested or proposed to be registered in such Registration) of the out-of-pocket registration expenses referred to in Section 6 hereof incurred by the Corporation in connection with the preparation, filing and processing of the Registration Statement, unless (i) there has been a material adverse change in the business, assets, properties, condition (financial or other) or results of operations of the Corporation and its subsidiaries taken as a whole, since the time of the Demand Notice, (ii) such revocation was based on the Corporation’s failure to comply in any material respect with its obligations hereunder or (iii) the Holders of a majority in number of the Registrable Shares to be included in such Demand Registration choose to count the Demand Registration as one of the Demand Registrations to which the Holders are entitled pursuant to this Agreement.

	 
	 	- 5 -	 
	

	 

Section 3. Piggyback Registration. (a) If at any time the Corporation proposes to file a registration statement under the Securities Act with respect to a public offering of Shares for its own account (other than a registration statement (i) on Form S-8 or any successor form thereto, (ii) filed solely in connection with a dividend reinvestment plan or employee benefit plan covering officers or directors of the Corporation or its Affiliates or (iii) on Form S-4 or any successor form thereto, in connection with a merger, acquisition, exchange offer or similar
corporate transaction) or for the account of any holder of Other Shares, then the Corporation shall give written notice of such proposed filing to each Holder at least 30 days before the anticipated filing date and, subject to Section 3(b), shall register for resale all Registrable Shares (a “Piggyback Registration”). Subject to Section 3(b) hereof, the Corporation shall include in each such Piggyback Registration all Registrable Shares. Each Holder shall be permitted to withdraw all or any portion of the Registrable Shares of such Holder from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. The Holders shall be entitled to an unlimited number of Piggyback Registrations.

(b) The Corporation shall permit the Holders to include all such Registrable Shares on the same terms and conditions as the Shares or Other Shares, if any, of the Corporation included therein. Notwithstanding the foregoing, in the event that any Piggyback Registration involves an underwritten offering and the managing underwriter or underwriters participating in such offering advise in writing the Holders requesting registration that the total amount of securities requested to be included in such Piggyback Registration exceeds the amount which can be sold in (or during the time of) such offering without delaying or jeopardizing the success of the offering (including the price per share of the securities to be sold), then the number of Primary Shares, Registrable Shares and Other Shares (which
have registration rights with respect to such offering) requested or proposed to be registered in such offering shall be reduced to a number deemed satisfactory by such managing underwriter or underwriters, provided, that the securities to be excluded shall be determined in the following sequence:

(A)    in the event the offering was proposed by or for the account of any holder of Shares: (i) first, the Primary Shares; and (ii) second, the Other Shares and the Registrable Shares on a pro rata basis (based upon the number of Shares requested to be registered by each such holder); 

	 
	 	- 6 -	 
	

	 

(B)    in the event the offering was proposed by or for the account of the Corporation: (i) first, the Other Shares and the Registrable Shares on a pro rata basis (based upon the number of Shares requested to be
registered by each such holder); and (ii) second, the Primary Shares.

(c) Nothing in this Agreement shall create any liability on the part of the Corporation to the Holders if the Corporation in its sole discretion should decide not to file a Registration Statement proposed to be filed pursuant to Section 3(a) hereof or to withdraw such Registration Statement subsequent to its filing, regardless of any action whatsoever that a Holder may have taken, whether as a result of the issuance by the Corporation of any notice hereunder or otherwise.

Section 4. Holdback Agreement. (a) If (x) the Corporation shall file a Registration Statement (other than a registration statement (i) on Form S-8 or any successor form thereto, (ii) filed solely in connection with a dividend reinvestment plan or employee benefit plan covering officers or directors of the Corporation or its Affiliates or (iii) on Form S-4 or any successor form thereto, in connection with a merger, acquisition, exchange offer or similar corporate transaction) with respect to an underwritten offering of Shares or similar securities or securities
convertible into, or exchangeable or exercisable for, such securities and (y) with reasonable prior notice, the managing underwriter or underwriters advise the Corporation in writing (in which case the Corporation shall notify the Holders with a copy of such underwriter’s notice) that a public sale or distribution of Registrable Shares would materially adversely affect such offering, then, each Holder shall, to the extent not inconsistent with applicable law and unless such managing underwriter or underwriters otherwise agree, refrain from, directly or indirectly, effecting any public sale, distribution or short sale of any Registrable Shares (except as part of such underwritten offering) during the period beginning ten days prior to the effective date of such Registration Statement and continuing until the earliest of (A) the abandonment of such offering, (B) such period of time as is sufficient and appropriate in the opinion of the managing underwriter or underwriters in order to complete the
sale and distribution of securities included in such registration (but in no event in excess of 90 days following the effective date of any offering) and (C) the termination in whole or in part of any “hold back” period obtained by the underwriter or underwriters in such offering from the Corporation in connection therewith (each such period, a “Hold Back Period”); provided, that the Holders shall not be subject to the restrictions contained in this Section 4(a) unless each officer and director of the Corporation (regardless of the number of Shares then owned by
such officer or director) and each beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of at least 5% of the issued and outstanding shares of Common Stock also agree to be bound by such restrictions. 

(b) If (x) the Corporation shall file a Registration Statement (other than a registration statement (i) on Form S-8 or any successor form thereto, (ii) filed solely in connection with a dividend reinvestment plan or employee benefit plan covering officers or directors of the Corporation or its Affiliates or (iii) on Form S-4 or any successor form thereto, in connection with a merger, acquisition, exchange offer or similar corporate transaction) with respect to an underwritten offering of Shares or similar securities or securities convertible into, or exchangeable or exercisable for, such securities and (y) with reasonable prior notice, the managing underwriter or underwriters advise the Corporation in writing (in which case the Corporation shall notify the Holders with a copy of such underwriter’s notice)
that a public sale or distribution of securities of the Corporation would materially adversely affect such offering, then, the Corporation shall, to the extent not inconsistent with applicable law and unless such managing underwriter or underwriters otherwise agree, refrain from, directly or indirectly, effecting any public sale, distribution or short sale of any securities of the Corporation (except as part of such underwritten offering) during the applicable Hold Back Period.

	 
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Section 5. Registration Procedures. In connection with the registration obligations of the Corporation pursuant to and in accordance with Section 2 and Section 3 hereof (and subject to Section 2 and Section 3 hereof), the Corporation shall use reasonable best efforts to effect such registration to permit the sale of such Registrable Shares in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Corporation shall as expeditiously as possible (but subject to Section 2 and Section 3 hereof):

(a) prepare and file with the SEC a Registration Statement for the sale of the Registrable Shares on any form for which the Corporation then qualifies or which counsel for the Corporation shall deem appropriate, in accordance with such Holders’ intended method or methods of distribution thereof, subject to Section 2(b) hereof, and use reasonable best efforts to cause such Registration Statement to become effective and remain effective as provided herein;

(b) prepare and file with the SEC such amendments (including post-effective amendments) to such Registration Statement, and such supplements to the related Prospectus, as may be required by the applicable rules, regulations or instructions under the Securities Act during the applicable period, in accordance with the intended methods of disposition specified by the Holders of the Registrable Shares covered by such Registration Statement, make generally available earnings statements satisfying the provisions of Section 11(a) of the Securities Act (provided that the Corporation shall be deemed to have complied with this clause if it has complied with Rule 158 under the Securities Act), and cause the related Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act, if necessary;
provided, however, that before filing a Registration Statement or Prospectus, or any amendments or supplements thereto (other than reports required to be filed by it under the Exchange Act), the Corporation shall furnish to the Holders of Registrable Shares covered by such Registration Statement and each counsel for such Holders and each managing underwriter, if any, for review and comment, copies of all documents required to be filed;

(c) notify the Holders of any Registrable Shares covered by such Registration Statement promptly and (if requested) confirm such notice in writing, (i) when the Registration Statement, a Prospectus or Prospectus supplement or pre-effective or post-effective amendment thereto has been filed, and, with respect to such Registration Statement or any post-effective amendment, when the same has become effective, (ii) of the receipt by the Corporation of any notification with respect to any comments by the SEC with respect to such Registration Statement or Prospectus or any amendment or supplement thereto or of any request by the SEC for amendments or supplements to such Registration Statement or the related Prospectus or for additional information regarding such Holders, (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by the Corporation of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (v) of the happening of any event that requires the making of any changes in such Registration Statement, Prospectus or documents incorporated or deemed incorporated therein by reference so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading;

	 
	 	- 8 -	 
	

	 

(d) use best efforts to obtain the withdrawal of any order suspending the effectiveness of such Registration Statement, or the lifting of any suspension of the qualification or exemption from qualification of any Registrable Shares for sale in any jurisdiction in the United States;

(e) furnish to the Holder of any Registrable Shares covered by such Registration Statement, each counsel for such Holders and each managing underwriter, if any, without charge, one conformed copy of such Registration Statement, as declared effective by the SEC, and of each post-effective amendment thereto, in each case including financial statements and schedules and all exhibits and reports incorporated or deemed to be incorporated therein by reference; and deliver, without charge, such number of copies of the preliminary prospectus, any amended preliminary prospectus, each final Prospectus and any post-effective amendment or supplement thereto, as such Holder may reasonably request in order to facilitate the disposition of the Registrable Shares of such Holder covered by such Registration Statement in
conformity with the requirements of the Securities Act;

(f) prior to any public offering of Registrable Shares covered by such Registration Statement, use best efforts to register or qualify such Registrable Shares for offer and sale under the securities or “blue sky” laws of such jurisdictions as the Holders of such Registrable Shares shall reasonably request in writing and to keep such registrations or qualifications in effect for so long as the Registration Statement covering such Registrable Shares remains in effect; provided, however, that the Corporation shall in no event be
required to qualify generally to do business as a foreign corporation or as a dealer in any jurisdiction where it is not at the time so qualified or to take any action that would subject it to taxation in any such jurisdiction where it is not then subject;

(g) upon the occurrence of any event contemplated by Section 5(c)(v) above, prepare a supplement or post-effective amendment to such Registration Statement or the related Prospectus or any document incorporated or deemed to be incorporated therein by reference and file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares being sold thereunder (including upon the termination of any Delay Period), such Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(h) use its best efforts to cause all Registrable Shares covered by such Registration Statement to be listed on each securities exchange, if any, on which similar securities issued by the Corporation are then listed or if no such securities are so listed, to use its best efforts to cause all such Registrable Shares to be listed or quoted on a national securities exchange, the NASD Over The Counter Bulletin Board, or the Nasdaq Stock Market and, if quoted on the Nasdaq Stock Market, use its best efforts to secure designation of all such Registrable Shares as “NASDAQ Securities” within the meaning of Rules 11Aa2-1 and 11Aa3-1 promulgated under the Exchange Act or, failing that, to secure Nasdaq Stock
Market authorization for such Registrable Shares and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Shares with the NASD;

	 
	 	- 9 -	 
	

	 

(i) on or before the effective date of such Registration Statement, provide the transfer agent of the Corporation for the Registrable Shares with printed certificates for the Registrable Shares covered by such Registration Statement, which are in a form eligible for deposit with The Depository Trust Company;

(j) make available for inspection by any Holder of Registrable Shares included in such Registration Statement, any underwriter participating in any offering pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such Holder or underwriter (collectively, the “Inspectors”), all financial and other records and other information, pertinent corporate documents and properties of any of the Corporation, its subsidiaries and Affiliates (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibilities; provided, however, that the Records that the Corporation determines, in good faith, to be confidential and which it notifies the Inspectors in writing are confidential shall not be disclosed by any Inspector, unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement in, or omission from, such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) such Records have been made generally available to the
public; provided further, however, that (A) any decision regarding the disclosure of information pursuant to subclause (i) shall be made only after consultation with counsel for the applicable Inspectors and the Corporation and (B) with respect to any release of Records pursuant to subclause (ii), each holder of Registrable Shares agrees that it shall, promptly after learning that disclosure of such Records is sought in a court having jurisdiction, give notice to the Corporation so that the Corporation, at the Corporation’s expense, may undertake appropriate action to prevent disclosure of such Records; and

	 
	 	- 10 -	 
	

	 

(k) if such offering is an underwritten offering, enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other appropriate and reasonable actions requested by the managing underwriters or the Holders of a majority of the Registrable Shares being sold in connection therewith in order to expedite or facilitate the disposition of such Registrable Shares, and in such connection, (i) cause its counsel to provide opinions and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters and counsel to the Holders of the Registrable Shares being sold), addressed to each selling Holder of Registrable Shares covered by such Registration Statement
and each of the underwriters as to the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and underwriters, (ii) cause its independent certified public accountants to provide “cold comfort” letters and updates thereof (and, if necessary, any other independent certified public accountants of any subsidiary of the Corporation or of any business acquired by the Corporation for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Registrable Shares covered by the Registration Statement (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten
offerings and (iii) if requested and if an underwriting agreement is entered into, provide indemnification provisions and procedures reasonably requested by such underwriters. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required under such agreements. The Corporation may require each Holder of Registrable Shares covered by a Registration Statement to furnish such information in writing regarding such Holder and such Holder’s intended method of disposition of such Registrable Shares as it may from time to time reasonably request in writing. If any such information is not furnished by a Holder of Registrable Shares within a reasonable period of time after receipt of such request, the Corporation may exclude such Holder’s Registrable Shares from such Registration Statement. Each Holder of Registrable Shares covered by a Registration Statement agrees that, upon receipt of any notice from the Corporation of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, that such Holder shall forthwith discontinue disposition of any Registrable Shares covered by such Registration Statement or the related Prospectus until receipt of the copies of the supplement or amendment to such Prospectus or any document incorporated or deemed to be incorporated therein by reference, contemplated by Section 5(g) hereof, or until such Holder is advised in writing by the Corporation that the use of the applicable Prospectus may be resumed (such period during which disposition is discontinued being an “Interruption Period”) and, if requested by the Corporation, the Holder shall deliver to the Corporation (at the expense of the Corporation) all copies then in its possession, other than permanent file copies
then in such Holder’s possession, of the Prospectus covering such Registrable Shares at the time of receipt of such request. Each Holder of Registrable Shares covered by a Registration Statement further agrees not to utilize any material other than the applicable current preliminary prospectus or Prospectus in connection with the offering and/or sale of such Registrable Shares.

	 
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Section 6. Registration Expenses. Whether or not any Registration Statement is filed or becomes effective, but subject to Section 2(e) hereof, the Corporation shall pay all costs, fees and expenses incident to the Corporation’s performance of or compliance with this Agreement, including (i) all registration and filing fees, including NASD filing fees, (ii) all fees and expenses of compliance with securities or “blue sky” laws, including reasonable fees and disbursements of counsel in connection therewith, (iii) printing expenses (including expenses of printing certificates for Registrable
Shares and of printing prospectuses if the printing of prospectuses is requested by the Holders of the Registrable Shares being sold or the managing underwriters, if any), (iv) messenger, telephone and delivery expenses, (v) fees and disbursements of counsel for the Corporation, (vi) fees and disbursements of all independent certified public accountants of the Corporation (including expenses of any “cold comfort” letters required in connection with this Agreement) and all other persons retained by the Corporation in connection with such Registration Statement, (vii) reasonable fees and disbursements of one counsel, per Registration, selected by the Holders of a majority of the Registrable Shares being registered, to represent all such Holders; provided, however, that, in the case of a Registration pursuant to Section
3 hereof, the Corporation shall only be required to pay such fees and disbursements of one counsel, per Registration, to represent all holders of securities exercising “piggyback” registration rights in such Registration (which counsel shall be Gusrae, Kaplan & Bruno, PLLC), (viii) fees and disbursements of underwriters customarily paid by the issuers or sellers of securities and (ix) all other costs, fees and expenses incident to the Corporation’s performance or compliance with this Agreement. Notwithstanding the foregoing, any discounts, commissions or brokers’ fees or fees of similar securities industry professionals and any transfer taxes relating to the disposition of the Registrable Shares by a Holder, will be payable by such Holder and the Corporation will have no obligation to pay any such amounts.

Section 7. Underwriting Requirements. (a) Subject to Section 7(b) hereof, the Holders shall have the right, by written notice, to require that any Demand Registration provide for an underwritten offering.

(b) In the case of any underwritten offering pursuant to a Demand Registration, the Holders of a majority of the Registrable Shares to be registered in connection therewith shall select the institution or institutions that shall manage or lead such offering, which institution or institutions shall be satisfactory to the Corporation, in its sole and absolute discretion. In the case of any underwritten offering pursuant to a Piggyback Registration in connection with a public offering of Shares for the account of the Corporation, the Corporation shall select the institution or institutions that shall manage or lead such offering. No Holder shall be entitled to participate in an underwritten offering unless and until such Holder has entered into an underwriting or other agreement with such institution or
institutions for such offering in such form as the Corporation and such institution or institutions shall determine. 

Section 8. Indemnification.

(a) Indemnification by the Corporation. The Corporation shall, without limitation as to time, indemnify and hold harmless, to the full extent permitted by law, each Holder of Registrable Shares whose Registrable Shares are covered by a Registration Statement or Prospectus, the shareholders, members, partners, officers, directors and agents and employees of each of them, any other Person acting on behalf of each such Holder, each Person who controls each such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the shareholders, members, partners, officers, directors, agents and employees of
each such controlling Person, to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, costs (including, without limitation, costs of investigation, preparation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in such Registration Statement or Prospectus or any amendment or supplement thereto, or any preliminary prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in the light of the circumstances under which they were made) not misleading, except insofar as the same are based upon
information furnished in writing to the Corporation by or on behalf of any such Holder expressly for use therein.

	 
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(b) Indemnification by Holders. In connection with any Registration Statement in which a Holder is participating, such Holder shall, without limitation as to time, severally and not jointly and severally indemnify and hold harmless, to the full extent permitted by law, the Corporation, its shareholders, directors, officers, agents and employees, any other Person acting on behalf of the Corporation, each Person who controls the Corporation (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the shareholders, members, partners, directors, officers, agents or employees of such controlling Persons,
from and against any and all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in such Registration Statement or the related Prospectus or any amendment or supplement thereto, or any preliminary prospectus, or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement or omission or alleged omission is based upon any information furnished in writing by or on behalf of such Holder to the Corporation expressly for use in such Registration Statement or Prospectus. Each Holder’s indemnity obligations under this Section 8 shall be limited to the total sales proceeds (net of all underwriting discounts and commissions) actually received by such Holder in connection
with the applicable offering.

(c) Conduct of Indemnification Proceedings. If any Person shall be entitled to indemnity hereunder (an “indemnified party”), such indemnified party shall give prompt notice to the party from which such indemnity is sought (the “indemnifying party”) of any
claim or of the commencement of any proceeding with respect to which such indemnified party seeks indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so notify the indemnifying party shall not relieve the indemnifying party from any obligation or liability except to the extent that the indemnifying party has been prejudiced by such delay or failure. The indemnifying party shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such claim or proceeding, to assume, at the indemnifying party’s expense, the defense of any such claim or proceeding, with counsel reasonably satisfactory to such indemnified party; provided, however, that (i) an indemnified party shall have the right to employ separate counsel in any such claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless: (1) the indemnifying party agrees to pay such fees and expenses; (2) the indemnifying party fails promptly to assume the defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such indemnified party; or (3) the named parties to any proceeding (including impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it that are inconsistent with those available to the indemnifying party or that a conflict of interest is likely to exist among such indemnified
party and any other indemnified parties (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party); and (ii) subject to clause (3) above, the indemnifying party shall not, in connection with any one such claim or proceeding or separate but substantially similar or related claims or proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not patently unreasonable. Whether or not such defense is assumed by the indemnifying party, such indemnified party shall not be subject to any liability for any settlement made without its consent. The indemnifying party shall not consent to entry of any judgment or enter into any settlement without the consent of the indemnified party unless (i) there is
no finding or admission of any violation of any rights of any Person and no effect on any other claims that may be made against the indemnified party, (ii) the sole relief provided is monetary damages that are paid in full by the indemnifying party and (iii) such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release, in form and substance reasonably satisfactory to the indemnified party, from all liability in respect of such claim or litigation for which such indemnified party would be entitled to indemnification hereunder.

	 
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(d) Contribution. If the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any Losses (other than in accordance with its terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 8(d), an indemnifying party that is a Holder shall not be required to contribute any amount which is in excess of the amount by which the total proceeds (net of all underwriting discounts and commissions) received by such Holder from the sale of the Registrable Shares sold by such Holder in the applicable offering exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Section 9. Additional Registration Rights. The Corporation shall not, without the consent of all of the Holders, grant to any Person any registration rights which have priority over or are otherwise inconsistent with the registration rights granted pursuant to this Agreement.

Section 10. Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable to any transferee or purchaser of Registrable Shares, subject to compliance with any transfer restrictions contained in any agreement with the Corporation. Each such transferee or purchaser of Registrable Shares must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement. Notwithstanding anything contained herein to the contrary, the registration rights set forth in this Agreement may be transferred to
any Affiliate of the Securityholders by the Securityholders providing written notice of such transfer to the Corporation. 

 

	 
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Section 11. Miscellaneous. (a) Rules 144 and 144A. The Corporation covenants that it will timely file any reports required to be filed by it under the Securities Act and the Exchange Act so as to enable Holders holding Registrable Shares to sell such Registrable Shares (i) without registration under the Securities Act within the
limitation of the exemptions provided by (A) Rules 144 and 144A under the Securities Act, as each such Rule may be amended from time to time or (B) any similar rule or rules hereafter adopted by the SEC, so long as the exemptions provided for in such Rules would otherwise be available to such Holders at such time and/or (ii) pursuant to a registration statement on Form S-3 (or any successor form thereto). Upon the request of any such Holder, the Corporation will forthwith deliver to such Holder a written statement as to whether it has complied with the reporting requirements of Rules 144 and 144A or whether it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (or any successor form thereto).

(b) Termination. This Agreement and the obligations of the Corporation and the Holders hereunder (other than Section 8 hereof and except with respect to rights previously exercised in connection with a public offering pursuant to Section 2 or Section 3 hereof) shall terminate on the first date on which all of the Holders’ shares of Common Stock can be sold, in the written opinion of counsel for the Corporation, pursuant to subsection (k) of Rule 144 under the Securities Act. 

(c) Notices. All notices, demands, requests or other communications that may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery (including delivery by internationally recognized overnight courier), or facsimile transmission, addressed as follows:

(i)    If to the Corporation:

Allion Healthcare, Inc.

1660 Walt Whitman Road

Suite 105

Melville, NY 11747

with a copy to:

Belin Lamson McCormick Zumbach Flynn

A Professional Corporation

The Financial Center

666 Walnut, Suite 2000

Des Moines, IA 50309

Attention: Garth D. Adams, Esq.

Facsimile: (515) 558-0664

	 
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(ii)    If to any Holder, at such Holder’s address appearing on the signature pages hereof.

Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request or communication shall be deemed to have been duly given at the earlier of its receipt or five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; when delivered by hand, if personally delivered; at the earlier of its receipt or three Business Days following dispatch, if delivered by internationally recognized overnight courier; or upon receipt, if sent by facsimile (followed by a confirmation copy sent by either overnight or two-day courier).

(d) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other
provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by law.

(e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and, subject to Section 10 hereof, their respective heirs, devisees, legatees, legal representatives, successors and assigns.

(f) No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto, their respective successors or assigns and any other holder of Registrable Shares, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Section 8.

(g) Entire Agreement. This Agreement represents the entire agreement of the parties and shall supersede any and all previous contracts, arrangements or understandings between the parties hereto with respect to the subject matter hereof.

(h) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Corporation has obtained the written consent of the Holders of at least a majority in number of the Registrable Shares.

(i) Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

	 
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(h) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be one and the same agreement, and shall become effective when counterparts have been signed by each of the parties and delivered to each other party.

(i) Remedies. 

(a) No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of any one or more remedies by any party hereto shall not constitute a waiver by any such party of the right to pursue any other available remedies.

(b) It is acknowledged that a breach of the provisions of this Agreement could not be compensated adequately by money damages. Accordingly, any party hereto shall be entitled, in addition to any other right or remedy available to it, to an injunction restraining such breach or threatened breach and to specific performance of any provisions of this Agreement, and in either case no bond or other security shall be required in connection therewith. If any action shall be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law and each of the parties hereto waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such injunction or other equitable relief.
The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity which such Person may have.

(k) Governing Law; Consent to Jurisdiction and Venue. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. The parties to this Agreement agree that jurisdiction and venue in any action brought by any party hereto pursuant to this Agreement shall properly (but not exclusively) lie in any New York State court located in the City of New York or any federal court of the United States sitting in the Southern District of New York, located in New York County. By execution and delivery of this Agreement, each of the parties hereto irrevocably submits to the jurisdiction of such courts for itself or himself and in respect of its or his property with respect to such action. THE PARTIES HERETO IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN ANY SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without
necessity for service by any other means provided by statute or rule of court. Nothing herein shall preclude any party hereto from bringing suit or taking other legal action in any other jurisdiction.

	 
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(l) Calculation of Time Periods. Except as otherwise indicated, all periods of time referred to herein shall include all Saturdays, Sundays and holidays; provided, however, that if the date to perform the act or give any notice with respect to this Agreement shall fall on a day other than a Business Day, such act or notice may be timely performed or given if performed or given on the next succeeding Business Day.

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date and year first written above.

ALLION HEALTHCARE, INC.

By: /s/ James G. Spencer

       Name: James G. Spencer

       Title: Chief Financial Officer, Secretary and Treasurer

SECURITYHOLDERS:

 

	 
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