$6,000,000.00
AMENDMENT NO. 3 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, INC.
MAIL ORDER MEDS OF NEW YORK, INC.
F/K/A CARE LINE OF NEW YORK, INC.
("BORROWER")
and
XXXXXX HEALTHCARE FINANCE, INC.
F/K/A HCFP FUNDING, INC.
("LENDER")
Amended as of May 28, 2003
AMENDMENT NO. 3 AND CONSENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 AND CONSENT TO LOAN AND SECURITY AGREEMENT (this
"AMENDMENT") is made as of this 28th day of May, 2003, by and among ALLION
HEALTHCARE, INC. F/K/A THE CARE GROUP, INC., a Delaware corporation ("ALLION"),
MAIL ORDER MEDS, INC., a Texas corporation ("MEDS") and MAIL ORDER MEDS OF NEW
YORK, INC. F/K/A CARE LINE OF NEW YORK, INC., a New York corporation, ("MOMS"
and, collectively with Allion and Meds, "BORROWER"), and XXXXXX HEALTHCARE
FINANCE F/K/A HCFP FUNDING, INC., a Delaware corporation ("LENDER").
RECITALS
WHEREAS, pursuant to that certain Loan and Security Agreement dated
April 21, 1999 by and between 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 Borrower a revolving
credit loan (the "LOAN");
WHEREAS, Borrower has informed Lender that Allion and its subsidiary,
Moms Pharmacy, Inc. ("MOMS"), have entered into a Stock Purchase Agreement,
dated May __, 2003 (the "STOCK PURCHASE AGREEMENT"), with Xxxxx X. Xxxxxxxx and
Xxxxx X. Xxxxxxxx (collectively, "SELLER"), pursuant to which Seller will sell
to Moms all of the issued and outstanding shares of capital stock (the "TARGET
SHARES") of Medicine Made Easy, a California corporation, for aggregate
consideration of $4,650,000 and warrants to purchase 227,273 shares of common
stock of Allion, payable in accordance with Section 1.5 and Section 1.6 of the
Stock Purchase Agreement, and subject to adjustment as set forth in Section 1.7
of the Stock Purchase Agreement (such sale, the "PROPOSED TRANSACTION");
WHEREAS, Section 7.4 of the Loan Agreement prohibits 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; and
WHEREAS, in connection with the closing of the Proposed Transaction,
Borrower has requested that Lender provide its written consent to the Proposed
Transaction, increase the Maximum Loan Amount (as defined in the Loan
Agreement), permit the issuance of subordinated, secured promissory notes in an
aggregate principal amount of $2,400,000 for the purpose of funding a portion of
the purchase price of the Proposed Acquisition, and make certain other
modifications to 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:
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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. EXTENSION OF TERM. As of the Effective Date (as defined
below), Lender shall extend the initial Term of the Loan Agreement by three (3)
years, to and including April 21, 2006, subject to the terms and conditions of
the Loan Agreement, including Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default.
SECTION 3. INCREASE IN MAXIMUM LOAN AMOUNT. As of the Effective Date
(as defined below), the Maximum Loan Amount shall be increased from Four Million
and No/100 Dollars ($4,000,000.00) to Six Million and No/100 Dollars
($6,000,000.00).
SECTION 4. AMENDMENTS TO LOAN AGREEMENT. As of the Effective Date, the
Loan Agreement shall be modified as follows:
(a) Section 1.36 of the Loan Agreement is hereby amended by
deleting the period at the end thereof and inserting the following:
"; (j) with respect to the Subordinated Obligations issued to
Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx, liens in existence on
the date such Subordinated Obligations are issued securing
indebtedness evidenced by such Subordinated Obligations,
provided that (i) such liens are subordinate to the liens and
encumbrances in favor of Lender, (ii) the principal amount of
the indebtedness so secured is not increased and (iii) such
liens do not attach to any other property; and (k) liens on
the assets of Medicine Made Easy ("MME") pursuant to the
Security Agreement dated November __, 2001, between Bergen
Xxxxxxxx Drug Company and MME, which shall be released or
subordinated to the liens and encumbrances in favor of Lender
no later than July 30, 2003."
(b) Article I of the Loan Agreement is hereby amended by
inserting the following:
"SECTION 1.47(A). STOCK PURCHASE AGREEMENT. `Stock
Purchase Agreement' means that certain Stock Purchase
Agreement, dated May 1, 2003, by and among Moms Pharmacy,
Inc., Allion, Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx.
SECTION 1.47(B). SUBORDINATED OBLIGATIONS.
`Subordinated Obligations' means, collectively, (i) those
certain Subordinated Secured Promissory Notes due May 1, 2004
issued by Allion on May 1, 2003 to Xxxxx X. Xxxxxxxx and
Xxxxx X. Xxxxxxxx, in an aggregate original principal amount
of $1,150,000, (ii) those certain Subordinated Secured
Promissory Notes due May 1, 2005 issued by Allion on May 1,
2003 to Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx, in an
aggregate principal amount of $1,250,000 and (iii) that
certain Indemnity Agreement between Borrower and Xxxx
Xxxxxxxxx dated as of November 1, 2000.
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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 Xxxx Xxxxxxxxx and (ii) that
certain Subordination Agreement, dated as of May 1, 2003, by
and among Borrower, Lender, Xxxxx X. Xxxxxxxx and Xxxxx X.
Xxxxxxxx."
(c) The penultimate sentence of Section 2.3 of the Loan
Agreement is hereby amended and restated in its entirety to read as follows:
"All funds transferred from the Concentration Account for
application to Borrower's indebtedness to Lender shall be
applied to reduce the Loan balance, but for purposes of
calculating interest shall be subject to a five (5) Business
Day clearance period."
(d) Section 2.8(a) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(a) Subject to Lender's right to cease making
Revolving Credit Loans to Borrower upon or after any Event of
Default, this Agreement shall be in effect for a period of
seven (7) years from the Closing Date, unless terminated as
provided in this Section 2.8 (the "Term"), and this Agreement
shall be renewed for one-year periods thereafter upon the
mutual written agreement of the parties."
(e) Section 2.8(c) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(c) Upon at least fifteen (15) days prior written
notice to Lender (the "Termination Notice Period"), Borrower
may terminate this Agreement before the end of the Term,
provided that, at the effective date of such termination,
Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations
owing under the terms of this Agreement and any other Loan
Documents) as liquidated damages for the loss of bargain and
not as a penalty, an amount equal to (i) two percent (2%) of
the Maximum Loan Amount if the effective date of such
termination is on or before May 28, 2004 and (ii) one percent
(1%) of the Maximum Loan Amount if the effective date of such
termination is after May 28, 2004 and before the end of the
Term."
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(f) Article IV of the Loan Agreement is hereby amended by
inserting the following:
"SECTION 4.25. SUBORDINATED DEBT. Borrower has
delivered to Lender a complete and correct copy of the
Subordinated Obligations (including all schedules, exhibits,
amendments, supplements, modifications, assignments and all
other documents delivered pursuant thereto or in connection
therewith). Borrower has the corporate power and authority to
incur the indebtedness evidenced by the Subordinated
Obligations. The subordination provisions of the Subordinated
Obligations and the Subordination Agreements are enforceable
against the holders of the Subordinated Obligations by Lender.
All Obligations constitute senior indebtedness entitled to the
benefits of the subordination provisions contained in the
Subordinated Obligations and the Subordination Agreements.
Borrower acknowledges that Lender is permitting the
indebtedness evidenced by the Subordinated Obligations in
reliance upon the subordination provisions of the Subordinated
Obligations, the Subordination Agreements and this Section
4.25."
(g) Section 6.1 of the Loan Agreement is hereby amended by
deleting clause (ix) thereof in its entirety and inserting the
following:
"(ix) as soon as available, copies of all financial statements
and notices provided or received by Borrower with respect to
the Subordinated Obligations, and, within two (2) Business
Days after Borrower obtains knowledge of any matured or
unmatured event of default with respect to the Subordinated
Obligations, notice of such event of default; and (x) such
additional information, reports or statements as Lender may
from time to time request."
(h) Section 6.23 of the Loan Agreement is hereby amended and
0restated in its entirety to read as follows:
"SECTION 6.23. NET WORTH. Borrower will not at any
time allow its consolidated net worth, as computed in
accordance with GAAP, to fall below -$1,000,000. Lender shall
verify Borrower's compliance with this section by review of
Borrower's annual audited financial statements, which are
required to be delivered to Lender pursuant to Section 6.1."
(i) Section 7.1 of the Loan Agreement is hereby amended by (i)
deleting the amount "$50,000.00" in clause (iv) thereof and inserting the amount
"$250,000.00" and (ii) deleting the period at the end of clause (vii) thereof
and inserting the following:
"; and (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 Xxxx Xxxxxxxxx) or $2,400,000 (in the
case of such Subordinated Obligations issued to Xxxxx X.
Xxxxxxxx and Xxxxx X. Xxxxxxxx)."
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(j) Article VII of the Loan Agreement is hereby amended by
inserting the following:
"SECTION 7.18. CHANGES RELATING TO SUBORDINATED DEBT.
Until the Obligations have been satisfied in full and the
Agreement has been terminated in accordance with its terms,
Borrower shall not agree to any amendment or waiver of any
document in connection with the Subordinated Obligations.
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
scheduled payments of principal and interest with respect
thereto and payments of principal with respect to the
Subordinated Obligations issued to Xxxxx X. Xxxxxxxx and Xxxxx
X. Xxxxxxxx upon the occurrence of an Early Maturity Date
thereunder (and as defined therein); PROVIDED that, both
before and after giving effect to any such payment, (i) no
default or Event of Default has occurred and is continuing 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."
(k) Article VIII of the Loan Agreement is hereby amended by
inserting the following:
"(s) (i) any representation, warranty, certification
or statement made by Borrower in the Subordinated Obligations,
the Subordination Agreements or the Stock Purchase Agreement
or in any certificate, disclosure schedule, financial
statement or other document delivered pursuant thereto shall
prove to have been incorrect in any respect (or in any
material respect if such representation, warranty,
certification or statement is not by its terms already
qualified as to materiality) when made (or deemed made); (ii)
any material provision of the Subordinated Obligations, the
Subordination Agreements or the Stock Purchase Agreement shall
for any reason cease to be valid, binding and enforceable
against Borrower or any other party thereto for any reason, or
Borrower or such other party shall so assert in writing; or
(iii) the Subordinated Obligations, the Subordination
Agreements or the Stock Purchase Agreement shall for any
reason fail to constitute the valid and binding agreement of
any party thereto, or any such party shall so assert in
writing, or refuse or fail to perform in any material respect
its obligations thereunder;"
(l) 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.
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SECTION 5. 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 (including the issuance of the
Subordinated Obligations and the Subordinated Security Agreement, dated May 1,
2003 relating thereto in favor of Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxxx),
which consent is expressly subject to and conditioned on the Borrower's
agreement, promptly following consummation of the Proposed Transaction, to
execute and deliver to Lender any and all additional agreements, instruments or
documents requested by Lender, and in form and substance satisfactory to Lender,
for the purpose of enabling Borrower to grant to Lender and Lender to secure and
perfect a first lien on and security interest in all of Borrower's right, title
and interest in and to the Target Shares.
SECTION 6. 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 7. FEES; EXPENSES.
(a) In consideration of Lender's agreement to enter into this
Amendment, including but not limited to its agreement to increase the Maximum
Loan Amount hereunder, Borrower unconditionally agrees to pay to Lender a
commitment fee (the "Fee") equal to Thirty Thousand and No/100 Dollars
($30,000.00), which Fee shall (a) be due and payable by Borrower on the date of
the execution and delivery of this Amendment by Borrower, and (b) constitute a
portion of the Obligations evidenced by the Note and secured by the Loan
Agreement and other Loan Documents. Lender shall be entitled to deduct, and
Borrower by its signature below hereby authorizes Lender to deduct, the full
amount of the Fee from the proceeds of the next subsequent Revolving Credit Loan
made by Lender under the Loan Agreement (as amended hereby).
(b) Notwithstanding anything in this Amendment to the
contrary, in addition to the Fee, 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 5(b) from the proceeds of the next subsequent
Revolving Credit Loan made by Lender under the Loan Agreement (as amended
hereby).
SECTION 8. 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.
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SECTION 9. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective, as of April 21, 2003, 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 an 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 Borrower by
Lender, for each entity comprising 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 $4,250,000 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).
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SECTION 10. 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 11. 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 12. 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 13. COUNTERPARTS. This Amendment may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 and
Consent to Loan and Security Agreement to be executed as of the date first
written above.
LENDER:
XXXXXX HEALTHCARE FINANCE, INC.,
a Delaware corporation
By: /s/ X. XXXXX WHITELEY
-----------------------------
Name: X. Xxxxx Xxxxxxxx
Title: Vice President
BORROWERS:
ALLION HEALTHCARE, INC.,
a Delaware corporation
By: /S/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and CEO
MAIL ORDER MEDS, INC.,
a Texas corporation
By: /S/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and CEO
MAIL ORDER MEDS OF NEW YORK, INC.,
a New York corporation
By: /S/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and CEO
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