AMENDMENT LETTER

AMENDMENT LETTER

To:	Allied Healthcare Holdings Limited Allied Healthcare Group Holdings Limited (formerly Allied Healthcare Group Limited) Stone Business Park Brooms Road Stone Staffordshire ST15 0TL

	Fax No: 00000 000000

Attention: Xxxx Xxxxxx

28 July 2006

Dear Sirs

Project Air: Amendment Letter

We refer to the £50,000,000 facility agreement dated 19 July 2004 between Allied Healthcare Group Limited (the ‘‘Company’’), Allied Healthcare Holdings Limited (the ‘‘Borrower’’), Allied Healthcare International Inc, the Guarantors listed therein, Barclays Capital and Lloyds TSB Bank PLC as Arrangers and Ancillary Lenders, the Original Lenders listed therein and Barclays Bank PLC as Agent and Security Agent (the ‘‘Original FacilityAgreement’’).

1	DEFINITIONS

Terms defined in the Original Facility Agreement have the same meaning in this Letter and:

‘‘Amended Agreement’’ means the Original Facility Agreement, as amended by this Letter.

‘‘Bank’’ means Barclays Bank PLC.

‘‘Effective Date’’ means the date on which the Agent notifies the Company that it has received:

	(i)	for the Parent and each of the Obligors, either a copy of their respective constitutional documents or a certificate of an authorised signatory of each of them certifying that the constitutional documents previously delivered to the Agent on or before 19 July 2004 for the purposes of the Original Facility Agreement have not been amended and remain in full force and effect;

	(ii)	a copy of a resolution of the board of directors of the Parent and each Obligor:

	(a)	approving the terms of, and the transactions contemplated by, this Letter and resolving that it execute this Letter; and

	(b)	authorising a specified person or persons to execute this Letter on its behalf.

	(iii)	a specimen of the signature of each person authorised by the resolution referred to in paragraph (ii) above.

	(iv)	a certificate of the Company (signed by a director) confirming that borrowing or guaranteeing, as appropriate, the Facility A Commitment and the Facility B Commitment under the Amended Agreement would not cause any borrowing, guaranteeing or similar limit binding on the Parent or any Obligor to be exceeded;

	(v)	a certificate of an authorised signatory of the Parent and the relevant Obligor certifying that each copy document listed at (i) to (iv) above is correct, complete and in full force and effect as at a date no earlier than the date of this Letter; and

	(vi)	a copy of an engagement letter, duly executed by all parties thereto and in form and substance satisfactory to the Agent, between the Reporting Accountants and the Company, pursuant to which the Reporting Accountants are appointed to conduct an independent business review of the Group (at the cost and expense of the Company).

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‘‘Overdraft Facility’’ means the uncommitted overdraft facility in a maximum amount of £3,000,000 made available by the Bank to the Borrower pursuant to the terms of this Letter.

‘‘Reporting Accountants’’ means Xxxxx Xxxxxxxx LLP, or such firm of accountants as the Agent may nominate.

2	OVERDRAFT

	2.1	The Bank agrees, subject to the terms and conditions of this Letter, to make the Overdraft Facility available to the Borrower from the Effective Date. The Overdraft Facility is made available on an uncommitted basis and may be cancelled by the Bank at any time by notice to the Borrower.

	2.2	The Overdraft Facility will be available for utilisation by way of overdraft on the current account of the Borrower held with the Bank.

	2.3	The total utilisations in respect of the Overdraft Facility at any time shall not exceed £3,000,000. The Bank may refuse any utilisation request that would result in this limit being exceeded.

	2.4	The Overdraft Facility shall be repayable by the Borrower on an ‘‘on demand basis’’, that is to say that the Bank may at any time and without giving any reason therefore demand immediate repayment of all or any part the Overdraft Facility or may by notice immediately cancel any part of the Overdraft Facility, whereupon it shall be immediately due and payable to the Bank.

	2.5	The Borrower shall apply all amounts borrowed under the Overdraft Facility for its general corporate purposes.

	2.6	To the extent that no demand is made in respect of the Overdraft Facility on or prior to 15 September 2006, the Borrower shall ensure that all amounts outstanding in respect of the Overdraft Facility are reduced to zero, and the Overdraft Facility shall be automatically cancelled, on 15 September 2006.

	2.7	Interest on the Overdraft Facility shall be charged at the same rate as is applicable to Facility B under the Amended Agreement and shall be computed on a 365 day basis and shall be payable on demand, or if no such demand is made, on or prior to 15 September 2006, on 15 September 2006.

	2.8	The provisions of Clause 13 of the Amended Agreement shall be incorporated into this Letter as if set out in full and shall apply in respect of the Overdraft Facility.

	2.9	If the Bank does allow any utilisation resulting in the facility limit being exceeded in respect of the Overdraft Facility, it will not mean that such limit has changed or that the Bank will agree to any other utilisation which would have the effect of exceeding the limit and the right of the Bank to charge an unauthorised excess margin and / or unauthorised excess fee pursuant to Clause 2.10 below does not constitute an agreement by the Bank to permit borrowings in excess of any limit applicable to the Overdraft Facility.

	2.10	To the extent that any time the aggregate total utilisations under the Overdraft Facility exceed £3,000,000 without the prior written consent of the Bank (each such instance an ‘‘Excess’’), the Bank shall be entitled to charge the Borrower:

	2.10.1	a fee in the amount of £10,000 for each instance of such an Excess arising; and

	2.10.2	interest on the entire amount outstanding under the Overdraft Facility at the time of Excess calculated at a rate of 15% per annum above the Bank’s base rate from time to time, such default rate of interest to remain applicable until any relevant Excess has been repaid and the total utilisation under the Overdraft Facility have been reduced to below £3,000,000. Any interest payable pursuant to this Clause 2.10.2 shall be computed on a 365 day basis and shall be payable on demand, or if no such demand is made, on or prior to 15 September 2006, on 15 September 2006.

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	2.11	The Obligors hereby confirm that the Security granted in favour of the Security Agent pursuant to the Security Documents is granted as continuing security for present and future moneys, debts and liabilities due, owing or incurred by the Borrower under or in connection with any Finance Document, including by virtue of the designation of this Letter as a Finance Document, any present and moneys, debts and liabilities due, owing or incurred by the Borrower under or in connection with the Overdraft Facility.

3	COVENANTS

	3.1	Waiver of Clause 21.1(c) of the Original Facility Agreement

The parties to this letter hereby temporarily waive, subject to the terms of this Letter, the obligation of the Company, pursuant to Clause 2.1(c) of the Original Facility Agreement, to ensure that the ratio of EBIT to Interest Expense for the period of 12 months ending on 30 June 2006 (being the last day of the Company’s Accounting Quarter) will not be less than 4.0 to 1.0.

	3.2	Duration of Waiver

The temporary waiver set out in Clause 2.1 above of this Letter will have effect from the Effective Time and will cease to have effect on the earliest to occur of:

	3.2.1	5.30pm on 15 August 2007;

	3.2.2	occurrence of an Event of Default under the Amended Agreement

	3.2.3	any Obligor failing to comply with any terms of this Letter

	3.3	Resetting of EBIT to Interest Expense Covenant

The Lenders and the Company hereby undertake to use all reasonable endeavours to agree, on or prior to 15 September 2006, a revised Clause 21.1(c) of the Amended Facility Agreement, such revised Clause 21.1(c) to be in form and substance satisfactory to the Lenders.

	3.4	Acquisition Covenant

Notwithstanding the provisions of Clause 22.11 of the Original Facility Agreement, the Parent and each Obligor undertakes that it will not (and the Company undertakes that it will ensure that no other member of the Group will), on or prior to 15 September 2006:

	3.4.1	invest in or acquire any share in, or any security issued by, any person, or any interest therein or in the capital of any person, or make any capital contribution to any person (or agree to do any of the foregoing); or

	3.4.2	invest in or acquire any business or going concern, or the whole or substantially the whole of the assets or business of any person, or any assets that constitute a division or operating unit of the business of any person (or agree to do any of the foregoing); or

	3.4.3	enter into any joint venture agreement with any person; or

	3.4.4	acquire or agree to acquire any other assets other than in the ordinary course of trading,

without the prior written consent of the Lenders.

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4	AMENDMENTS

	4.1	Amendment to the Original Facility Agreement

The parties to the Letter agree that, with effect from the Effective Date, the Original Facility Agreement shall be amend as follows:

	(a)	the following definitions shall be added to Clause 1.1:

‘‘Amendment Letter’’ means the amendment letter dated 28 July 2006 between the parties to this Agreement, pursuant to which the Overdraft Facility was made available to the Borrower.

‘‘Amendment Letter Effective Date’’ has the meaning given to the term Effective Date in the Amendment Letter.

‘‘Overdraft Facility’’ means the overdraft facility in a maximum amount of £3,000,000 made available by Barclays Bank PLC to the Borrower pursuant to the terms of the Amendment Letter.

‘‘Required Form’’ means, in relation to any document, as agreed in respect of both form and substance by the Agent;

‘‘Reporting Accountants’’ means Xxxxx Xxxxxxxx LLP or such firm of accountants as the Agent may nominate;’’;

	(b)	Sub-clause 21.1 (c) shall be deleted and replaced as follows:

‘‘(c) the ratio of EBIT to Interest Expense for the Relevant Period ending on:

	(ii)	30 September 2006 will not be less than 2.5:1;

	(iii)	31 December 2006 will not be less than 2.4:1;

	(iv)	31 March 2007 will not be less than 2.75:1;

	(v)	30 June 2007 will not be less than 3.4:1; and

	(v)	any date other than those listed at (i) to (v) above will not be less than 4:1.’’

	(c)	a new Clause 20.7 shall be added as follows:

‘‘20.7 Reporting Accountants

The Agent may, at any time prior to the date falling 12 months after the Amendment Letter Effective Date, appoint the Reporting Accountants to conduct an independent business review of the Group or to monitor the financial and operational performance of the Obligors on an ongoing basis. The Obligors hereby undertake to co-operate in such a review and agree that such review shall be at the cost and expense of the Company.’’;

	(d)	A new Clause 20.8 shall be added as follows:

‘‘20.8 Cashflow Forecasts

The Company shall supply to the Agent (in sufficient quantities for all the Lenders, if the Agent so requests), on a monthly basis until 15 September 2006, a rolling 13 week cashflow forecast for the Group (for each 13 week period commencing on the Monday of each week on and from the Amendment Letter Effective Date). The first such cashflow forecast shall be provided on the first Monday following the Amendment Letter Effective Date and subsequent cashflow forecasts shall be provided on each day on which monthly management accounts are provided to the Lender pursuant to the terms of Clause 20.9 below (however no such cashflow forecast is required to be provided on the date on which monthly management accounts are delivered in respect of June 2006);’’

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	(e)	a new Clause 20.9 shall be added as follows:

‘‘20.9 Monthly Reporting

The Company shall supply to the Agent (in sufficient quantities for all the Lenders, if the Agent so requests), on a monthly basis until 15 September 2006, as soon as the same are available (and in any event within 30 days of the end of each month), its monthly management accounts (with accompanying management commentary) for the Group in the Required Form. The first such monthly management accounts shall be delivered on or prior to 30 July 2006 in respect of the month of June 2006’’.

	4.2	Continuing obligations

The provisions of the Original Facility Agreement and the other Finance Documents shall, save as amended by this Letter, continue in full force and effect. Where there is any inconsistency between the terms of this Letter and the Amended Agreement, the terms of this Letter will apply.

5	Financial Projections

The Company shall, on or prior to 14 August 2006, provide to the Agent (in sufficient quantities for all the Lenders, if the Agent so requests), a re-forecast budget for the period from the Effective Date to 20 September 2008 (the ‘‘Re-forecast’’), such Re-forecast to in form and substance satisfactory to the Agent. Such Re-forecast shall include, but not be limited to:

	(i)	a projected cash flow statement and profit and loss account of the Group;

	(ii)	a projected balance sheet of the Group;

	(iii)	capital expenditure, investments, acquisitions and disposals projected to be made by the Group;

	(iv)	projected levels of the financial ratios required to be met by the Company pursuant to Clause 21.1 of the Amended Agreement; and

	(v)	a management commentary on the proposed activities of the Group, the principal assumptions underlying the projections in the Re-forecast and any material variations from the last budget provided to the Agent pursuant to Clause 20.1(e) of the Amended Agreement.

6	FEES

On the Effective Date, the Borrower shall pay to the Agent (for the account of each Lender) a fee in the Base Currency in the amount of £102,500.

7	COSTS AND EXPENSES

	7.1	Transaction costs

The Company shall within three Business Days of demand reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in connection with the negotiation, preparation, printing and execution of this Letter and any other documents referred to in this Letter.

	7.2	Ongoing incidental costs

Without prejudice to the generic costs and expenses provisions in Clause 17 of the Original Facility Agreement and elsewhere in the Finance Documents the Company shall, for the period from the Effective Date to 15 September 2006,    within seven Business Days of demand reimburse the Secured Party for the amount of all travel costs and incidental expenses reasonably incurred by that Secured Party at any time after the Effective Date in connection with any meetings required with the Company or other Group members to

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discuss the protection or preservation of rights under this Letter and any other document referred to in this Letter and in connection with the consideration and or discussion of the independent business review with the Company and/or other Group members and/or with the Reporting Accountants.

	7.3	Payment of Fees, Costs and Expenses

The Company hereby irrevocably authorises the Lender to cause the Company to satisfy any payment obligations arising pursuant to Clause 6 above and this Clause 7 by debiting any bank account of the Company held with the Lender.

8	LOSS SHARE

	8.1	In consideration of the Bank providing the Overdraft Facility, each of the Lenders agrees that, to the extent that the Bank does not recover within 30 days of making demand all amounts owing to it in connection with the Overdraft Facility, they shall pay to the Bank within 5 Business Days of demand, the proportion of such shortfall as is equal to each Lenders’ percentage participation in the Total Facility Commitments (any such payment a ‘‘Loss Share Payment’’).

	8.2	For the avoidance of doubt, no Lender shall be required to make any Loss Share Payment(s) pursuant to Clause 8.1 above in an aggregate amount in excess of £1,500,000.

	8.3	To the extent that any Loss Share Payment is made pursuant to Clause 8.1 above, such Lender shall be subrogated to the extent possible to that part of the Bank’s claim under the Overdraft Facility against the Borrower which corresponds to the relevant Loss Share Payment. However, for the avoidance of doubt, no such Lender shall receive any payment from or exercise any rights against the Borrower as a result of such subrogation until after the Bank has received the relevant Loss Share Payment from it.

9	AMENDMENT AND RESTATEMENT

The Lenders hereby confirm that it is their current intention to enter into negotiations with the Company with a view to agreeing, on terms acceptable to all parties, an amendment and restatement to the Amended Facility Agreement on or prior to 15 September 2006. For the avoidance of doubt, this Clause 9 does not constitute a legally binding commitment to enter into any such amendment and restatement agreement.

10	MISCELLANEOUS

	10.1	Guarantors

Each of the Guarantors and the Parent agree to each of the provisions of this Letter, including without limitation, the provision of the Overdraft Facility and the amendments to the Original Facility Agreement contemplated by this Letter and each agrees that (i) nothing in this Letter effects its obligations as a Guarantor or in the case of the Parent as the Parent and (ii) its obligations as a Guarantor or in the case of the Parent as the Parent, extend to the Overdraft Facility.

	10.2	Reservation of Rights

This Letter is provided by the Finance Parties strictly on the basis that the Finance Parties reserve all rights and remedies of the Agent, the Security Agent and the Finance Parties under the Original Facility Agreement and the Amended Agreement. Other than as set out in this Letter, nothing in this Letter or done pursuant to this Letter, will constitute an amendment to or is intended to operate as a release or waiver of any breach or potential breach of, or any obligations under any Finance Document.

	10.3	Third Party Rights

A person who is not a party to this Letter has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of the provisions of this Letter.

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	10.4	Counterparts

This Letter may be signed in a number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Letter.

	10.5	Joint and Several Obligations

The obligations of the Finance Parties under this Letter are several. The obligations of the Obligors under this Letter are joint and several.

	10.6	Finance Documents

In accordance with the Amended Agreement, each of the Company and the Agent designate this Letter as a Finance Document.

11	GOVERNING LAW

This Letter will be governed and construed in accordance with English law.

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We hereby agree to the terms of this Letter:

The Original Lenders

Barclays Bank PLC

By:    /s/ Xxxx Xxxxxxx

Lloyds TSB Bank plc

By:    /s/ Xxxxxxx Xxxxxxx

Ancillary Lenders

Barclays Bank PLC

By:    /s/ Xxxx Xxxxxxx

Lloyds TSB Bank plc

By:    /s/ Xxxxxxx Xxxxxxx

The Bank

Barclays Bank PLC

By:    /s/ Xxxx Xxxxxxx

The Agent

Barclays Bank PLC

By:    /s/ Xxxxxx Xxxx

The Security Agent

Barclays Bank PLC

By:    /s/ Xxxxxx Xxxx

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Agreed and Accepted by: The Company

Allied Healthcare Group Holdings Limited (formerly Allied Healthcare Group Limited)

By:    /s/ Xxxxxxx Xxxxxx

The Parent

Allied Healthcare International, Inc.

By:    /s/ Xxxxxxx Xxxxxx

The Original Borrower

Allied Healthcare Holdings Limited

By:    /s/ Xxxxxxx Xxxxxx

The Original Guarantors

Allied Healthcare Group Holdings Limited (formerly Allied Healthcare Group Limited)

By:    /s/ Xxxxxxx Xxxxxx

Allied Healthcare Holdings Limited

By:    /s/ Xxxxxxx Xxxxxx

Allied Healthcare Group Limited (formerly Allied Healthcare (UK) Limited)

By:    /s/ Xxxx Xxxxxx

Allied Respiratory Limited (formerly Allied Oxycare Limited)

By:    /s/ Xxxx Xxxxxx

Balfor Medical Limited

By:    /s/ Xxxx Xxxxxx

Crystalglen Limited

By:    /s/ Xxxx Xxxxxx

Medigas Limited

By:    /s/ Xxxx Xxxxxx

Xxxxxxxxxxx Nursing Bureau Limited

By:    /s/ Xxxx Xxxxxx

Omnicare Limited

By:    /s/ Xxxx Xxxxxx

Allied Staffing Professionals Limited (formerly Staffing Enterprise Limited)

By:    /s/ Xxxx Xxxxxx

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