Document:

Unassociated Document

 

ALLION
HEALTHCARE, INC.
1998
STOCK OPTION PLAN

 

I.   PURPOSES OF THE
PLAN

 

This 1998
Stock Option Plan is intended to promote the interests of Allion Healthcare,
Inc., a Delaware corporation, by providing a method whereby eligible individuals
who provide valuable services to the Corporation (or any Parent or Subsidiary)
may be offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation and continue to render services to the Corporation (or any Parent or
Subsidiary).

 

I.   DEFINITIONS

 

For the
purposes of this Plan, the following definitions shall be in
effect:

 

A.   Board shall
mean the Corporation's Board of Directors.

 

B.   Code
shall mean the Internal Revenue Code of 1986, as amended.

 

C.   Committee shall
mean a committee of two (2) or more Board members appointed by the Board to
exercise one or more administrative functions under the Plan.

 

D.   Common
Stock shall
mean the Corporation's common stock.

 

E.   Corporate
Transaction shall
mean either of the following shareholder-approved transactions to which the
Corporation is a party:

 

(i)    a merger
or consolidation in which more than fifty percent (50%) of the Corporation's
outstanding voting stock is transferred to a person or persons different from
those who held the stock immediately prior to such transaction, or

 

(ii)    the sale,
transfer or other disposition of all or substantially all of the Corporation's
assets in complete liquidation or dissolution of the Corporation.

 

F.   Corporation shall
mean Allion Healthcare, Inc., a Delaware corporation.

 

G.   Employee shall
mean an individual who is in the employ of the Corporation or any Parent or
Subsidiary, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of
performance.

 

H.   Exchange
Act shall
mean the Securities Exchange Act of 1934, as amended.

 

I.   Exercise
Date shall
mean the date on which the Corporation shall have received written notice of the
option exercise.

 

J.   Fair
Market Value per
share of Common Stock on any relevant date under the Plan shall be the value
determined in accordance with the following provisions:

 

(i)    If the
Common Stock is not at the time listed or admitted to trading on any Stock
Exchange but is traded on the NASDAQ National Market System, the Fair Market
Value shall be the mean between the highest bid and lowest asked prices (or, if
such information is available the closing selling price) per share of Common
Stock on the date in question, as such prices are reported by the National
Association of Securities Dealers through the NASDAQ National Market System or
any successor system. If there is no reported bid and asked prices (or closing
selling price) for the Common Stock on the date in question, then the Fair
Market Value shall be the mean between the highest bid price and lowest asked
price (or the closing selling price) on the last preceding date for which such
quotations exist.

 

(ii)    If the
Common Stock is at the time listed or admitted to trading on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotations exist.

 

(iii)    If the
Common Stock is at the time neither listed nor admitted to trading on any Stock
Exchange nor traded on the NASDAQ National Market System, then such Fair Market
Value shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate.

 

 K.   Incentive
Option shall
mean a stock option which satisfies the requirements of Code Section
422.

 

2

 L.   Non-Statutory
Option shall
mean a stock option not intended to meet the requirements of Code Section
422.

 

M.   Parent shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

N.   Permanent
Disability shall
have the meaning assigned to such term in Code Section 22(e)(3).

 

O.   Plan shall
mean the Corporation's 1994 Stock Option Plan, as set forth in this
document.

 

P.   Plan
Administrator shall
mean either the Board or the Committee, to the extent the Committee is at the
time responsible for the administration of the Plan in accordance with Article
III.

 

Q.   Service shall
mean the provision of services to the Corporation or any Parent or Subsidiary by
an individual in the capacity of an Employee, a non-employee member of the board
of directors or a consultant or independent contractor.

 

R.   Stock
Exchange shall
mean either the American Stock Exchange or the New York Stock
Exchange.

 

S.   Subsidiary shall
mean each corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each such corporation
(other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

T.   10%
Shareholder shall
mean the owner of stock (as determined under Code Section 424(d)) possessing ten
percent (10%) or more of the total combined voting power of all classes of stock
of the Corporation.

 

3

II.   ADMINISTRATION OF THE
PLAN

 

A.   The Plan
shall be administered by the Board. However, any or all administrative functions
otherwise exercisable by the Board may be delegated to the Committee. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.

 

B.   The Plan
Administrator shall have full power and authority (subject to the provisions of
the Plan) to establish such rules and regulations as it may deem appropriate for
proper administration of the Plan and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding options as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any outstanding
option.

 

III.   ELIGIBILITY FOR OPTION
GRANTS

 

A.   The persons eligible to
receive option grants under the Plan are as follows.

 

(i)    Employees;

 

(ii)    non-employee
members of the Board or the non-employee members of the board of directors of
any Parent or Subsidiary; and 

 

(iii)    consultants
and other independent contractors who provide valuable services to the
Corporation (or any Parent or Subsidiary).

 

B.   The Plan
Administrator shall have full authority to determine which eligible individuals
are to receive option grants under the Plan, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain
outstanding.

 

IV.   STOCK SUBJECT TO THE
PLAN

 

A.   The stock
issuable under the Plan shall be shares of the Corporation's authorized but
unissued or reacquired Common Stock. The maximum number of shares which may be
issued over the term of the Plan shall not
exceed                               
shares,
subject to adjustment from time to time in accordance with the provisions of
this Article V.

 

B.   Shares
subject to outstanding options shall be available for subsequent option grants
under the Plan to the extent (i) the options expire or terminate for any reason
prior to exercise in full or (ii) the options are cancelled in accordance with
the cancellation-re grant provisions of Article IX of the Plan. All shares
issued under the Plan, whether or not those shares are subsequently repurchased
by the Corporation pursuant to its repurchase rights under the Plan, shall
reduce on a share-for-share basis the number of shares of Common Stock available
for subsequent option grants.

 

4

C.   In the
event any change is made to the Common Stock issuable under the Plan by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan and (ii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and
conclusive.

 

V.   TERMS AND CONDITIONS OF
OPTIONS

 

Options
granted pursuant to the Plan shall be authorized by action of the Plan
Administrator and may, at the Plan Administrator's discretion, be either
Incentive Options or Non-Statutory Options. Each granted option shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator, provided,
however, that each such instrument shall comply with the terms and conditions
specified below. Each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of Article VII.

 

A.   Exercise
Price.

 

1.   The
exercise price per share shall be fixed by the Plan Administrator. In no event,
however, shall the exercise price per share be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the date of the
option grant.

 

2.   The
exercise price shall become immediately due upon exercise of the option and
shall, subject to the provisions of Article X and the agreement evidencing the
grant, be payable in cash or check made payable to the Corporation. Should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
Exchange Act at the time the option is exercised, then the exercise price may
also be paid as follows:

 

(i)    in shares
of Common Stock held by the optionee for the requisite period necessary to avoid
a charge to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or

 

(ii)    through a
special sale and remittance procedure pursuant to which the optionee shall
concurrently provide irrevocable written instructions (a) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal and
state income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm in order to complete
the sale transaction.

 

5

Except to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.

 

A.   Term
and Exercise of Options.   Each option granted under
the Plan shall be exercisable at such time or times, during such period, and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the stock option agreement However, no option shall have a term in
excess of ten (10) years measured from the grant date. The option shall be
exercisable during the optionee's lifetime only by the optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the optionee's death.

 

B.   Effect
of Termination of Service.

 

1.   Except to
the extent otherwise provided pursuant to subsection C.2 below, the following
provisions shall govern the exercise period applicable to any options held by
the optionee at the time of cessation of Service or death:

 

(a)   Should
the optionee cease to remain in Service for any reason other than death or
Permanent Disability, then the period during which each outstanding option held
by such optionee is to remain exercisable shall be limited to the three
(3)-month period following the date of such cessation of Service.

 

(b)   Should
such Service terminate by reason of Permanent Disability, then the period during
which each outstanding option held by the optionee is to remain exercisable
shall be limited to the twelve (12)-month period following the date of such
cessation of Service.

 

(c)   Should
the optionee die while holding one or more outstanding options, then the period
during which each such option is to remain exercisable shall be limited to the
twelve (12)-month period following the date of the optionee’s death. During such
limited period, the option may be exercised by the personal representative of
the optionee’s estate or by the person or personas to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
descent and distribution.

 

6

(d)   Under no
circumstances, however, shall any such option be exercisable after the specified
expiration date of the option term.

 

(e)   During
the applicable limited post-Service exercise period, no option may be exercised
in the aggregate for more than the number of vested shares for which the option
is exercisable on the date of the optionee’s cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be exercisable for
any vested shares for which the option has not been exercised. However, the
option shall, immediately upon the optionee's cessation of Service, terminate
and cease to be outstanding with respect to any option shares for which the
option is not at that time exercisable or in which the optionee is not otherwise
at that time vested.

 

1.   The Plan
Administrator shall have full power and authority to extend the period of time
for which the option is to remain exercisable following the optionee’s cessation
of Service or death from the limited period in effect under subsection C.1 of
this Article VI to such greater period of time as the Plan Administrator shall
deem appropriate; provided, that in
no event shall such option be exercisable after the specified expiration date of
the option term.

 

B.   Shareholder
Rights.   An optionee shall have no
shareholder rights with respect to the shares subject to the option until such
individual shall have exercised the option and paid the exercise
price.

 

C.   Unvested
Shares.   The Plan Administrator
shall have the discretion to authorize the issuance of unvested shares of Common
Stock under the Plan. Should the optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the optionee) any of those unvested shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the agreement evidencing such repurchase right. All outstanding repurchase
rights under the Plan shall terminate automatically upon the occurrence of any
Corporate Transaction, except to the extent the repurchase rights are expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

 

D.   First
Refusal Rights.   Until such time as the
Corporation's outstanding shares of Common Stock are first registered under
Section 12(g) of the Exchange Act, the Corporation shall have the right of first
refusal with respect to any proposed sale or other disposition by the optionee
(or any successor in interest by reason of purchase, ,gift or other transfer) of
any shares of Common Stock issued under the Plan. Such right of first refusal
shall be exercisable in accordance with the terms and conditions established by
the Plan Administrator and set forth in the agreement evidencing such
right.

 

 

7

II.   INCENTIVE
OPTIONS

 

The terms
and conditions specified below shall be applicable to all Incentive Options
granted under the Plan. Except as modified by the provisions of this Article
VII, all the provisions of the Plan shall be applicable to Incentive Options.
Incentive Options may only be granted to individuals who are Employees. Options
which are specifically designated as Non-Statutory shall not be
subject to such terms and conditions.

 

A.   Exercise
Price.   The exercise price per
share of the Common Stock subject to an Incentive Option shall in no event be
less than one hundred percent (100%) of Fair Market Value on the date of grant.
If the individual to whom an Incentive Option is granted is a 10% Shareholder,
then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the grant
date.

 

B.   Dollar
Limitation.   The aggregate Fair Market
Value of the Common Stock (determined as of the respective date or dates of
grant) for which one (1) or more options granted to any Employee under this Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the excercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted. Should the
applicable One Hundred Thousand Dollar ($100,000) limitation in fact be exceeded
in any calendar year, then the option shall nevertheless become exercisable for
the excess number of shares in such calendar year as a Non-Statutory
Option.

 

C.   10%
Shareholder.   If any
individual to whom an Incentive Option is granted is a 10% Shareholder, then the
option term shall not exceed five (5) years measured from the grant
date.

 

8

II
..   CORPORATE
TRANSACTION

 

A.   Upon the
occurrence of a Corporate Transaction, the exercisability of each option
outstanding under the Plan shall automatically accelerate so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable with respect to the total number
of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. However, an outstanding option
shall not so accelerate
if and
to the
extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation or parent thereof or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, (ii) such option is to be replaced by a comparable cash incentive
program of the successor corporation based on the option spread at the time of
the Corporate Transaction, or (iii) the acceleration of such option is subject
to other limitations imposed by the Plan Administrator at the time of grant. The
determination of comparability under clause (i) or (ii) above shall be made by
the Plan Administrator, and its determination shall be final, binding and
conclusive.

 

B.   Each
outstanding option which is assumed in connection with a Corporate Transaction
or is otherwise to remain outstanding shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issuable to the optionee in the
consummation of such Corporate Transaction, had the option been exercised
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to (i) the exercise price payable per share, provided the
aggregate exercise price payable for such securities shall remain the same, and
(ii) the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.

 

C.   The grant
of options under this Plan shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

 

III.   CANCELLATION AND RE GRANT
OF OPTIONS

 

The Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under the Plan and to grant in substitution therefor
new options under the Plan covering the same or different numbers of shares of
Common Stock but with an exercise price per share not less than (i) one hundred
percent (l00%) of the Fair Market Value per share of Common Stock on the new
grant date in the case of a grant of an Incentive Option, (ii) one hundred ten
percent (110%) of such Fair Market Value in the case of an Incentive Option
grant to a 10% Shareholder or (iii) eighty-five percent (85%) of such Fair
Market Value in the case of all other grants.

 

9

I
..   LOANS

 

A.   The Plan
Administrator may assist any optionee in the exercise of one or more options
granted to the optionee by:

 

(i)    authorizing
the extension of a loan from the Corporation to the optionee, or

 

(ii)    permitting
the optionee to pay the exercise price in installments over a period of
years.

 

B.   The terms
of any loan or installment method of payment (including the interest rate and
terms of repayment) shall be established by the Plan Administrator in its sole
discretion. Loans or installment payments may be authorized with or without
security or collateral. However, any loan made to a consultant or other
non-employee advisor must be secured by property other than the purchased shares
of Common Stock. In all events, the maximum credit available to each optionee
may not exceed the sum of (i)
the aggregate exercise price payable far the purchased shares plus (ii) any
Federal and state income and employment tax liability incurred by the optionee
in connection with such exercise.

 

C.   The Plan.
Administrator may, in its absolute discretion, determine that one or more loans
extended under this Article X shall be subject to forgiveness by the Corporation
in whole or in part upon such terms and conditions as the Plan Administrator may
in its discretion deem appropriate.

 

II.   NO EMPLOYMENT OR
SERVICE
RIGHTS

 

Nothing
in the Plan shall confer upon the optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary) or of the
optionee, which rights are hereby expressly reserved by each, to terminate the
optionee's Service at any time for any reason, with or without
cause.

 

I.   AMENDMENT OF THE
PLAN

 

A.   The Board
shall have complete and exclusive power and authority to amend or modify the
Plan in any or all respects whatsoever. However, no such amendment or
modification shall, without the consent of the holders, adversely affect their
rights and obligations under their outstanding options. In addition, the Board
shall not, without the approval of the Corporation’s shareholders, (i) increase
the maximum number of shares issuable under the Plan, except for permissible
adjustments under Article V, (ii) materially modify the eligibility requirements
for option grants or (iii) otherwise materially increase the benefits accruing
to option holders.

 

B.   Options
may be granted under this Plan to purchase shares of Common Stock in excess of
the number of shares then available for issuance under the Plan, provided an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan is approved by the Corporation's shareholders within
twelve (12) months after the date the excess grants are first made.

 

10

II.   EFFECTIVE DATE AND TERM
OF PLAN

 

A.   The Plan
shall become effective when adopted by the Board, but no option granted under
the Plan shall become exercisable unless and until the Plan shall have been
approved by the Corporation's shareholders. If such shareholder approval is not
obtained within twelve (12) months after the date of the Board's adoption of the
Plan, then all options previously granted under the Plan shall terminate and no
further options shall be granted. Subject to such limitation, the Plan
Administrator may grant options under the Plan at any time after the effective
date and before the date fixed herein for termination of the Plan.

 

B.   Unless
sooner terminated in accordance with Article VIII, the Plan shall terminate upon
the earlier of (i)
the expiration of the ten (10) year period measured from the date the Plan is
adopted by the Board or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise of options
granted under the Plan. Upon such plan termination, each option and unvested
share issuance outstanding under the Plan shall continue to have force and
effect in accordance with the provisions of the agreements evidencing that
option or share issuance.

 

III.   USE OF
PROCEEDS

 

Any cash
proceeds received by the Corporation from the sale of shares pursuant to options
granted under the Plan shall be used for general corporate
purposes.

 

I.   WITHHOLDING

 

The
Corporation's obligation to deliver shares upon the exercise of any options
granted under the Plan shall be subject to the satisfaction by the optionee of
all applicable Federal and state income and employment tax withholding
requirements.

 

I.   REGULATORY
APPROVALS

 

The
implementation of the Plan, the granting of any option hereunder, and the
issuance of Common Stock upon the exercise of any option shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the Common Stock issued pursuant to it.

11Unassociated Document

 

$6,000,000.00

 

AMENDMENT
NO. 5 AND CONSENT

 

TO

 

LOAN
AND SECURITY
AGREEMENT

 

originally
dated as of April 21, 1999

 

by and
among

 

ALLION
HEALTHCARE, INC.

f/k/a
THE CARE GROUP, INC.

MAIL
ORDER MEDS OF TEXAS, INC.

f/k/a
MAIL ORDER MEDS, INC.

MOMS
PHARMACY, INC. (NEW YORK)

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

MOMS
PHARMACY, INC. (CALIFORNIA)

MOMS
PHARMACY, LLC

MEDICINE
MADE EASY

NORTH
AMERICAN HOME HEALTH SUPPLY, INC.

 

("Borrower")

 

and

 

GE
HFS HOLDINGS, INC.

f/k/a
HELLER HEALTHCARE FINANCE, INC.

 

("Lender")

 

Amended
as of January 4, 2005

1

 

AMENDMENT
NO. 5 AND CONSENT TO LOAN AND SECURITY AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

2

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
6.   Fees;
Expenses.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[SIGNATURES
ON NEXT PAGE]

4

 

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

 

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

 

5

 

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

 

6

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